“Most Web-Based Businesses Lose Money”

While Spring hasn’t really thought about showing up in New England yet, tax season has come with it’s usual painful  side-effects. One plus I always get from the experience is chatting with the partner in our CPA firm that services our account. If you really want to know how the economy and business are doing, talk to the people doing the taxes.

Anyway, this year the partner we work with at our CPA firm made an interesting comment. He observed that while one of my web-based businesses had done well in 2013, “most never turn a profit.” How can that be? The web and Internet are supposed to be the driving force of the new economy, right? The web allows you to reach to millions of customers all of whom are eager to find out about you because of all time you spend creating social media content, paying for SEO, and paying for clicks, yes?

Here are some observations as to why it doesn’t work out that way.

  1. Social media is turning into a collection of mostly junk. With fake users, fake news, fake product endorsements, and search engines bogged down by bogus content, people are more skeptical of what they see online or receive via email than of a used car salesman. Most users now expect that every click is just data for future marketers. I’m predicting that in 5 years social media will be unrecognizable from its present form. Could be bad news for the major search engines.
  2. Websites without content. I use the web constantly and I’m amazed by how bad some sites are – and I’m not talking about a mom-and-pop business with limited funds and knowledge, but large corporate sites that shouldn’t have an excuse. In some cases the sites have become so complex that they have reached beyond what might make them useful, but in other cases the corporate owners really don’t care.
  3. Websites with the same products as everyone else. This one is easy – if you’re just selling the exact same product or service that’s already available on Amazon or from Walmart.com, give up now. It’s not to say you can’t add value to make your web presence distinctive, but it requires a plan and some effort.
  4. A Web presence without a plan. Simply having a website doesn’t mean you’ll do more business or make any profits, yet it’s amazing how many business owners and executives think so. How does your website fit into your business plan? I tell business owners a website is like a hammer. If you buy and hammer and put it in a drawer, nothing will ever be built.
  5. Fuzzy Math. In some cases businesses just don’t do the math. Look at your margin then realistically look at revenue you can generate from the website or assign a value to the leads you’ll create. Are you being realistic about the payback? Especially when you consider that to keep your site relevant you’ll be constantly investing time and money.

In a future post I’ll talk about some of the secrets for websites that do work.



Author: Glenn Mores

President & CEO MicroData