Small and Mid-Sized Business Web Sites: Early Signals and Emerging Trends

By Bob Yovovich
October 2004 marks the tenth anniversary of the first ecommerce transaction, and small and mid-sized businesses (SMBs) are continuing to rapidly evolve the ways in which they make use of their Web sites.

Over the previous decade, SMBs have accepted a striking amount of expense and pain in order to "wire" their businesses. This has included repeated equipment upgrades, major "sweat equity" investments, and significant changes in their basic business processes. And now, an important new generation of Web-delivered and Web-based service and business solutions is getting ready to be delivered by building on top of the hosting layer and Internet infrastructure.

Drawing on information from Hostway's 300,000 hosting customers on four continents, the following key developments and emerging trends have been identified:

. 1. Sharp increase in the number of Web domain registrations in 2004

. 2. Changing characteristics of SMB Web sites

. 3. Surprising impact that U.S. broadband penetration is having on overseas Web sites,       and other international developments

. 4. Significant barriers that are keeping SMBs from taking full advantage of their Web       sites

. 5. New Web services that are poised to leverage the expansion of the Internet, the       enhancements in hosting infrastructure, and the major IT investments by SMBs


New domain registrations reached their highest-ever quarterly level during 1Q2004, beating previous peak in 2Q2000, according to figures from VeriSign.

. 4.7 million new domain names were added in 1Q2004.

. Domain names now total 63 million, up 21% from 1Q2003 and up 5% from 3Q2003.

. Two years ago, registration cost $35 and required a 2-year contract.

. Registration now can cost less than $8 and requires only a one-year commitment,   making it feasible for SMBs to be very aggressive in registering domain names.



The jump in domain registrations also has gotten a boost from the continuing growth in U.S. broadband penetration.

. For the first time, broadband connections accounted for more than half (51%) of the American online population

For the first time, broadband connections accounted for more than half (51%) of the American online population at-home during July 2004.

at-home during July 2004, as compared to 38 percent a year earlier, according to figures from Nielsen//NetRatings. This translated into 63 million Web users connecting to the Internet via broadband during July 2004, a year-over-year increase of 47 percent.

. In turn, this growth in the population that is using always-on, broadband Internet connections is prompting a growing number of SMBs to begin to view Web sites as serving similar function to that of Yellow Pages advertising.

. The speed with which this "Yellow Pages" role of Web sites develops is likely to vary from locale to locale depending on the level of broadband penetration in the specific community.

Micro-Scale Web-based Businesses

The surge in domain registrations is also getting a boost from the growth in micro-scale Web-based businesses. The entrepreneurs who are exploring these new opportunities have been attracted by the plunge in the costs of registering a domain name and of maintaining a modest Web site: under $10 for registration and less than $20-a-month for hosting. At these price levels, it becomes feasible for entrepreneurs to experiment with sideline micro-enterprises that offer a handful of selected highly specialized products. These businesses are looking to use the global reach of the Web - combined with the availability of improved and inexpensive shipping options - to generate enough revenue to be viable.

2. Shifts in Web site Characteristics

SMBs that are establishing "Yellow Pages" Web sites signal a pair of important expansions of the online world. On the one hand are locally-oriented businesses whose Web sites put an emphasis on serving customers and prospects who:

. are likely to already know about the businesses and/or

. are likely to be visiting the businesses' physical location.

For these SMBs, the Web site primarily serves as a reference tool that enables customers to easily get instant, detailed information (e.g., about hours, items on a menu, exact location, product offerings) without needing to make a phone call.

At the other end of the spectrum are SMBs whose Web sites are their primary business location. For these SMBs,

. Customers and prospects are NOT likely to know much about the SMB business prior to visiting the Web site.

. Their interactions-and transactions-with customers and prospects probably occur entirely online.

. For many of these SMBs, there may not even be a brick-and-mortar location.

The flood of new SMB Web sites also has produced other changes. For example, even

Even though the overall volume of ecommerce activity has exploded over the last 10 years, the proportion of transaction-enabled SMB Web sites has actually decreased.

though the overall volume of ecommerce activity has exploded over the last 10 years, the proportion of transaction-enabled SMB Web sites has actually decreased.

. The early SMBs that established Web sites were likely to be computer-literate and tech-savvy. They also were likely to be very interested in selling on the Net, and they often included an ecommerce capability when they initially set up their sites.

. Today, in contrast, the SMBs that are fueling the new wave of Web sites and domain registrations are much more likely to be focused on establishing an online presence that can deliver "brochureware" whose mission is to provide information.

In fact, SMBs that are setting up these online presences don't even need to own computers to sign up for a Web site. Even among those SMBs who do have online transaction capabilities, there has been a noticeable movement toward simpler, more maintainable Web sites.

. Many of the early-adopter SMBs were part of the first wave of Web enthusiasts who initially sought to put their entire product catalogs online. However, with the passage of time, maintainability has become a more significant concern. In response, these SMBs have put more effort into streamlining and simplifying their Web sites-often trimming the number of products that they offer for online sale.

. Among the SMBs who have more recently launched their Web sites, the newcomers seem more comfortable with experimenting with the sale of a just few of their products online, rather than trying to post their entire inventory.

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