A common issue unites all companies, regardless of size and industry: there is never enough money to throw at every opportunity or threat. That fixed budget means investments in one area of the business come at the expense of others.

For Small and Medium Sized Businesses (SMBs), those budgetary decisions are especially difficult and visible. By definition, there’s fewer dollars available than in large corporations. And when there’s less than 100 employees and a relatively small customer base, it’s very apparent where resources are going and where they aren’t.

As result, investments are made in the areas that offer the most obvious return, and for many SMBs that is not perceived to be their website. Research indicates that 57% of SMBs are making money from their websites, either online or via offline sales. While it’s a growing percentage of revenue, it’s not yet reached the level where every SMB can quantify the benefits of investing in their website.

Every company can calculate the benefits of adding salepeople or investing in improved supply chain management systems, however, so it’s easy to understand why the website can lose out to other areas of the business.

This question of how to justify website investments was an important part of a seminar we presented to a group of business owners this week. Their companies ranged across a variety of sectors. Their websites, in turn, varied widely in functionality, content quality and visual appeal.

We reviewed ROI models that quantify the company-wide benefits created by a site that strongly links to organizational objectives. While each company worked with numbers that were unique to their business, there was one measure they all factored into their plans: 1/20^th of a second.

That’s the amount of time in which viewers judge your site, according to researchers in Carleton University’s Human-Oriented Technology Lab. They reached their conclusion by flashing websites for 50 milliseconds and asking study participants to rate them for visual appeal.

“Unless the first impression is favorable, visitors will be out of your site before they even know that you might be offering more than your competitors,” says Carleton’s Dr. Gitte Lindgaard. The research, which is reported in E-Commerce Times, suggests that the first impression forms an initital bias that dictates long-term opinions.

A positive first impression carries over to other features of the site, such as content. Since people like to be right, Lindgaard reasoned, they will continue to use a website that made a good first impression.

It’s an eye-catching stat, and one that certainly captured the attention of the business owners. While the benefits of a well designed site are difficult to quantify, the risk of creating a negative impression in a fraction of a second can be quickly understood.

And with that understanding comes an obvious justification for improving the design of a website.

RELATED ITEMS

Which comes first: resource allocation or strategy?

Design I: Making your site pretty can get ugly

When you launch your web browser, are you engaging in civic-related communications? Or are you initiating a commercial transaction? Your answer may determine what role you would accept for government involvement in your online experience and what responsibility you believe corporations have for enabling your communications and transactions.

Why is this significant for web strategy? Because, in western democracies, we have the luxury of assuming that businesses and their customers will have guaranteed access to the Internet at a reasonable price. That assumption rests on decisions made by governments regarding how to regulate, or not, the Internet. It is also shaped by how the companies who create and manage the backbone of the Internet interpret their responsibility toward customers and shareholders.

In a high-profile example of what can happen in countries that lack our democratic tradition, we witnessed Google agreeing to censor its site in China. The move has been criticized, but not by Bill Gates, who defended his rival’s decision. Gates said that Internet technology contributes to political freedom and added that “I think [the internet] is contributing to Chinese political engagement . . . Access to the outside world is preventing more censorship.”

A recent article in The Nation, “The End of the Internet?” suggests we shouldn’t take inexpensive Internet access for granted in North America. The writer, Jeff Chester, states that: “If we permit the Internet to become a medium designed primarily to serve the interests of marketing and personal consumption, rather than global civic-related communications, we will face the political consequences for decades to come.”

People who launch their browser to participate in political dialogue will nod enthusiastically at this point, lobby their government for greater regulation and propose clear responsibility for corporations in enabling citizens to engage in free discourse.

Many, many more people, who use the Internet to research and make purchases, will roll their eyes, perceive no role for the government and expect corporations to be responsible for delivering better products at a cheaper price.

Chester’s article can’t be easily dismissed, however. For one reason, telecos and cable companies have a responsibility to their shareholders to deliver a return on their investment. To that point, he quotes Ed Whitacre, chairman and CEO of AT&T, who told Business Week, “Why should they be allowed to use my pipes? The Internet can’t be free in that sense, because we and the cable companies have made an investment, and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!”

For another reason, Chester points out that these large corporations are aggressively lobbying the U.S. government to enact legislation that will support their revenue goals. “Under the plans they are considering, all of us—from content providers to individual users—would pay more to surf online, stream videos or even send e-mail.”

An imminent threat? No, but it’s certainly an issue to include in your “environmental scan” as you assess your Internet strategy.

In the meantime, you can take in the ACLU’s projection of how web technology and rich data can turn a simple transaction, ordering pizza, into an interaction with Big Brother.

Last week Yahoo! reported record profits – double the profit of last year. What was Wall Street’s response? Hammer it. The stock dropped quickly because it failed to reach the expectations of a few analysts. Those ‘expectations’ were off a couple of pennies per share. Yahoo’s stock is now less than it was a year ago despite doubling its profit on tremendous grouwth. Yahoo’s price-to-earnings ratio now sits at under 27.

Pessimism continues to proliferate Wall Street and Main Street. Ironically, this is the complete opposite of the trend six years ago when Wall Street couldn’t buy enough Internet stocks – sending prices to outrageously high and unconscionable levels. Those same sage investors now turn down their noses at Internet stocks, driving the prices to levels lower than would otherwise be seen as reasonable to outside onlookers. USA Today’s index of 50 Internet stocks increased just 1% in 2005. Without Google, it would have lost 8.2%.

Does this mean you should hesitate to invest in your website? An informed decision is required. Let’s take a look at some of the numbers:

• Almost 80 percent of North Americans have Internet access.
• More than 50 percent have made online purchases.
• A majority use the Internet as a decision-making tool.
• Online retail sales in the two weeks preceding Christmas were up 29% over last year to US$3.03 billion.
• The Internet is cited as the most influential channel on luxury purchasing (cited by 44 percent of affluent purchasers).
• 35% of first-time buyers consider the Internet to be their most important informational tool, as compared to 8.2% naming TV
• Online newspaper reading is up 30% to 53.6 million visitors a month during the fourth quarter of 2005
• 39%of North Americans use online banking.
• 73.5% of e-commerce sites estimate sales growth of 15 to 35% this year.
• 60% of chain retailers estimate web sales growth of 25-200 percent.
• Time spent online by adult Canadians has increased 50% since 2002 and Internet use is ready to overtake watching television.

Those numbers reflect a different story then the dogged, pessimistic tale woven by Wall Street. Its credibility as it relates to Internet stocks was ruined in the bubble of 1999 – 2000. That credibility continues to fail today.

“And it's not for a lack of profit,” writes USA Today’s Matt Krantz in Dot-coms' song and dance no longer entertains investors. “Forty-eight of the current members of the Internet 50 that were public in 2000 have seen their profits as a group quadruple since then. Google and Salesforce.com were private in 2000, so that doesn't even include Google's massive profit contribution.”

Here’s another key fact: according to the IDC FutureScan, all the indicators depict an expectation of 5% growth in U.S. IT spending this year. In other words, off the street and in the offices, business is investing in IT and the Web.

Don’t be scared away by Wall Street. Instead, listen to and embrace what your customers demand.

RELATED ITEMS:

Online Marketing: Mastering the Basics

© 2006 Toby Ward - Prescient Digital Media