A TCI Book Review

Broadway Books, New York, 1997 Evan Schwartz Webonomics - Nine Essential Principles for Growing Your Business on the World Wide Web

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Evan Schwartz is a contributing editor for Wired magazine and a former editor for Business Week. It follows that he knows his stuff when it comes to the business and commercial applications of the World Wide Web.

Schwartz defines "Webonomics" as "the study of the production, distribution, and consumption of goods, services and ideas over the World Wide Web. It differs from ‘traditional economics’ in the following manner:

"Traditional economics is based on the notion of scarcity - that human desires will always exceed available resources such as food, clothing and shelter. It was Thomas Malthus, the English economist, who first postulated that populations will always increase faster than their food supply. This pessimistic focus on the allocation of scarce resources is what earned economics the reputation as "the dismal science".

Webonomics is anything but dismal. On the Web, precisely the reverse is true. Since the Web is a fast-growing world of intellectual property that can be copied and downloaded ad infinitum, its supply of resources will continue to soar past human demand for these resources. Instead of a scarcity of supply, the Web economy exhibits a scarcity of demand. Indeed, one of the main complaints about the Web is that it is "mind boggling" and "too overloaded" with information. On the Web, the main commodity in limited supply is the attention of the busy people using it. The underlying battle in the Web economy is the ability to command and sustain that attention." (pp. 1,2)

According to Schwartz, there are nine "essential principles" for doing business successfully on the Web. These are:

1. the quantity of people visiting your site is less important than the quality of their experience — Here Schwartz argues that what is truly important from the perspective of building a long-term business on the Web is to create and sustain a community of users who refer to your site again and again, because they derive value from it, rather than to maximize the number of ‘hits’ through flashy site design. He argues that to create this community of users, one must recognize that the Web is not a broadcast medium, it is an interactive one, and its capabilities in this regard must be used.
2. marketers shouldn’t be on the Web for exposure, but for results — Mere exposure of a product or service on the Web is insufficient, and does not take advantage of the capability of the Web for developing detailed information about a prospect, and providing them with information that will enhance the likelihood of a buy decision. Schwartz argues that the Web should be regarded more like a salesman than an advertising medium — where specific results are expected.
3. consumers must be compensated for disclosing data about themselves — Schwartz maintains that "consumers are concerned about data privacy but resigned to the fact that they won’t get it. They will trade valuable information about themselves — if the deal is favorable." (p.91) In other words, consumers will provide you with data about themselves and their preference and behavior patters, but only if they get something in return, such as personalized news, a discount on purchase, etc.
4. consumers will shop on-line only for information-rich products — "Information is what sells products on the Web. Marketers and online retailers must stock their site with facts, news, knowledge, wisdom and advice about their products." (p.116) In particular, retailers on the Web can only gain competitive advantage through the provision of broader selection, superior product expertise or (that old standby) lower price.
5. self-service provides for the highest level of customer comfort — Increasingly, the comfort, convenience and control of self-service on the Web (think, for example, of the ability to track a courier parcel along all points of its journey) will become a standard demanded by consumers. The interactive nature of the Web is ideally suited to cater to this demand, and web site designers and marketers should respond accordingly.
6. "value-based currencies" enable you to create your own monetary system — "Value-based currencies" are monetary systems in which corporations reward loyal customers with points that can be redeemed later for real goods and services. These new currency systems will reach way beyond airline frequent flyer miles, spreading to nearly every industry." (p.154) Schwartz makes the point that the Web is the ideal environment in which to create and track such currencies.
7. trusted brand names matter even more on the Web — Schwartz makes the point that in the Web economy, all brand names are all up for reevaluation. Those that are attached to sites that provide good value and information will be enhanced; those that do not may be in danger of fading. Brand names themselves will still be important, as they will act (as they always have) as a short form of identification that can cut through the advertising clutter.
8. even the smallest companies can compete in the Web’s global "marketplace" — "Well designed Web storefronts enable small companies to act as if they are big and big companies to act as if they are as flexible and responsive as start-ups." (p.189)
9. agility rules — Web sites must continually adapt to the market — "The Web economy is a world in which a competitive advantage may only last a few months, if not weeks. Those running Web ventures must act quickly and take a proactive stance toward deploying new technologies before competitors do. Your customers are your best judges. Let your most loyal customers test, troubleshoot, debug and try out new Web services before you formally introduce them." (p. 200)

There is a Web site devoted to Webonomics; it can be found at www.webonomics.com, and the visitor there can obtain further details on the topics contained in the book, as well as undertake a diagnostic assessment of their own site. Also, in an Appendix to the book, Schwartz lists the addresses of a few hundred of what he considers to be "important and intriguing" Web sites, in the following areas: