SMEs and Sites: Crossing the 50% Threshold

Event: Kelsey Group Drilling Down on Local Search 2005

Session Title: SMEs and Sites: Crossing the 50% Threshold

Session Date: April 19, 2005

Session Time: 2:00 pm – 2:45 pm

Session Description:
As recently as two years ago there was still ambivalence and skepticism among small businesses about the importance of a Web site. The rise of broadband, search engines and Internet marketing has largely put that to rest. Kelsey Group data now reflects that almost 40% of U.S.-based SMEs have Web sites. Has this increasing adoption of Web sites by SMEs resulted in more customers and local revenues? What are the leading small-business Web hosts finding about the changing needs and attitudes in the SME marketplace and how those needs are being addressed? When do they believe that 50% of U.S.-based SMEs will have Web sites—later this year, next year or longer?

Session Participants:
Rich Cannon, Area VP, Strategy, Interland
Jim Collins, CMO, Affinity Internet
Warren Kay, SVP, Business Development,
Rich Riley, VP & General Manager, Yahoo! Small Business

Related Posts: buzzhit!’s Drilling Down on Local Search 2005 Index Page

Session Details[*]:

Projected growth of SME websites
– 2004: 42% say they have
– 2009: project 63%

Q: Are these numbers right? Are they first or second generation sites?

Cannon: I use a 7.8MM number (those that are larger than sole propriterorship); Yankee has a number that says 62%. About 70% of our customers already have web sites and are looking for a gen 2 website. Our goal is to help make the websites generate value rather than just being a marketing site. Business owners are involved vs. techies. Our data shows that 68% of small biz have generated ROI+ results from their web site. All about leads and sales.

Collins: Really depends on how you slice the market. Our approach is that a small biz is a group with 20 or less. 20% compound YOY market growth is good, but might not represent “success”. Most site owners are dissatisfied with their sites.

Kay: Same question we’ve been asking for years, along with what’s the right entry level price point. A9 is doing some really cool stuff; that’s what it’s going to take. If the audience is there, the small biz’s will come. Believe that the number of small biz w/ site is less than 50%; amongst Sam’s Club crowd, less than 50%, those that are online are doing 1st gen sites.

Riley: We look at the 26MM+ businesses, believe there are 12MM+ small business sites. The primary issue is credibility and a professional web site. Most businesses are embarrased that they don’t yet have a web site, domain and email address. Focusing on ease of use, removing barriers, and driving traffic to their site.

Q: IDC says webhosting will be a $16.2B industry by EOY 2005, but it seems like the prices are falling (free at Yahoo!, low cost via Vista and Sam’s Club). What does that mean for hosting co’s, what value added services do you need to offer.

Kay: Website part of it is a commodity. Financial opportunity exists in helping them succeed online (vs. getting them online).

Collins: We’ve been raising our prices like crazy. Raising from $6 to $24 (selling through costCo at $18); small businesses telling them there’s no difference between those two price points. Misconception that small biz’s are cheap, poor, struggling to get buy. The issue isn’t money, it’s //time//. If you can create confidence that you’ll help them be successful, you’ll be successful.

Q: Are you raising it across the board?

Collins: Yes. 70k customers. 114 churned out when they raised the price.

Cannon: There’s no pricing elasticity below $20; that’s the floor. What we’ve done is gone and bundled the solution. We’re making it simpler and simpler, because they don’t know how to ask the “right” questions. We’ll give you clicks, marketing solutions, etc. as part of a $200/mth bundle. Services businesses are leading because a $20 retail sale is nothing compared to a $20K lead for a lawyer.

Q: Sounds you’re happy that Yahoo! went free

Collins: I think they’re doing a great thing for the marketplace. Providing education, getting people on board. We say go to Yahoo!, then come to us when you get serious

Riley: Our strategy is to be the essential online partner to millions of businesses, because we think over time the Internet will become increasingly important to these businesses over time. We want to market a slew of services (Yahoo search marketing, payroll, etc) to them. Multi-year relationship. Remove all barriers (price and ease of use), get these guys online.

Q: How many people signed-up last week

Riley: It exceeded our expectations

Kay: Not a direct relationship between low cost and low value. We’d rather use their spend on acquiring customers and building their business, rather than web site design.

Q: What are these SMEs funding these websites from? Is it coming from other media? Part 2, how do you sell this to Kay Lemming (morning session: no web site, pressed for time)

Riley: We do have 100K’s of customers paying us for hosting. $150/year isn’t really coming from another budget; ROI is a no-brainer. Kay would find us through word-of-mouth or search.

Collins: Massive misconception. The dollars are irrelevant

Q: Let’s go to the time question then

Collins: Getting our message out that a small biz can have a “professional” (emphasis) web site is the tough part. 73% aren’t happy with their first site. Our message is “call us”.

Cannon: She might trip over an Interland “I” (on another site); might come through TMP or another partner; might call us or find us in search; might receive a call from our sales reps.

Q: How much training do you give to reps selling SMEs

Cannon: Quite a bit. We sell the same message that we use for YP; we’re going to get you targeted leads.

Kay: The problem is there hasn’t been an effective outlet for them to spend their money. It has to deliver value.

Q: We ask how many measure the performance of their advertising. 50% say they do; if you drill down, it’s really only 10-20%. Who’s proving the value?

Cannon: One of the core values we provide is a feedback loop that alerts them to what’s working and encourage them to increase spend in those areas. Email reporting.

Kay: We’re focused on understanding what results mean to a small biz (it isn’t page views); people perceive value if they can find themselves (or their cousin, etc), see their ad.

Collins: We have reporting, but most people don’t get it. We call and explain it after a month.

Audience Q: What % are paid vs. free, and how do you upsell

Riley: 100k’s of paying customers; not talking about free sites yet. Do have 10MM’s of free sites on GeoCities. We upsell with own domain name, email address. We market via email and in-product marketing

Audience Q: What do you see as future must have services to bundle with hosting?

Collins: You’ve gotta solve the whole problem. A trusted online resource for small businesses.

Cannon: There are two apps driving small businesses. First is email; giving them business class email (ala corporate email) is a win. Second, some people rely on web for leads; more every year… generating leads is the killer app; //customers who get leads don’t churn.//

Kay: I agree that leads are a critical component. Next step is tying in inventory management.

* These are raw, unproofed notes taken in real-time. Nothing attributed to any speaker should be assumed to be an exact quote. Rather, my goal was to capture and communicate the essence of what was said. If there is a significant mistake, please post a comment or email me; I will make a correction at my earliest opportunity.

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