Dear Friends:

I remember an especially foggy night in San Francisco (January 1995), the kind where the cloud rolls in like a wave smothering the city. In San Francisco, you live in that cloud many nights, where the edges of buildings and highway blur into a cool mist. Having worked all day, I was in my own exhausted cloud...

Into that night I went across town to visit my friend Jonathan Mizel; we started talking about the World Wide Web and Netscape.

"What do you think about the Web, Dec?", he asked.

"It's okay, pretty simple really. Too easy. I put up a page like that."

Too easy; I remember those words rolling out of my mouth. What began that night was my network, built on the power of creating a business through relationships with customers, vendors, and others who expanded my network, my Web. Coordinating became more important than production; I had taken the first step towards really building my business on the World Wide Web when I realized how stupid my approach was. Too easy is bad? I was in my own techie fog. Too easy is a sign that something is working. I was used to "too hard".

Since then I've worked with Jonathan setting up several sites, including his, and have built my own Web that relies more on my sense of the market than technology. That network didn't happen overnight; I tested and retested ideas (and still am) to see what works. I find out if there is an audience, if they are interested, and test approaches to the market. What I've discoverd is that the power is in the network, in growing a business and a following to my Web, developing a brand name online. In this issue we explore hands-on techniques for building business networks on the

Web, using a case study of the Appraiser Online Network to show how to profit from this approach. Strategic partners mean the difference between winning and losing online. Like the saying goes, no man is an island unto himself. Especially not on the Web. Time to break the old patterns, while the breaking is good...

  Peace,
  MDD

Too often we use the word "networking" to mean a basic gathering of people who try to connect based on each other's connections. See how confusing that sounds? Networking as we understand it is a bunch of different businesses gathering and hoping to exchange referrals. What I've found is that they are basically excuses to schmooze, self-directed efforts to try and cudgel a lead out of a totally unrelated business. If this works for you, great, but this isn't what networking online means.

Two businesses have taught me how to break this mold. The first is Dell Computer, which became one of the biggest computer dealers in the early 1990s by taking a radical approach to selling. They took orders by phone, delivered by mail, and had one central resource for inventory that fed the nation through a network of individual agents working in cities throughout the U.S. The local salespeople are the local contacts; who cares where the computer comes from as long as you have a local person to contact for customer service?

The second business is Virtual Vineyards ( www.virtualvin.com ), one of the most successful online ventures. Virtual Vineyards created a network of wineries online. Instead of going to 30 plus different wineries to buy what you want, Virtual Vineyards developed a single location for the wineries, a one stop place to shop. They refused the competitive model and built a network, making it easy for the customer to buy.

The lesson? Dell and Virtual Vineyards both sell quality products backed up by excellent customer service. Both provide one national (and international) storefront for products, amplified by a network of agents or independent companies. The whole is far more powerful than the individual parts. Such a network makes it easier on the prospective consumer to find what they want, and easier on the

business than opening multiple stores all over the country, paying multiple rents with increased overhead of employees, insurance, and local market limitation. Dell even hires Web surfers to search online newsgroups and chat areas to detect dissatisfaction from customers, followed up by a personal message from customer service offering a solution. Now that's a powerful, cost-effective Web.

More importantly, these two examples inspired me to begin to build my business and to sell Web sites based on the possibilities of a network. I added a new tool to my arsenal; no longer was I just selling Web sites to individual businesses, I was targeting specific market segments and seeing if a bigger and more profitable project could be created.

The audience on the Web segments itself based on what they are interested in. Businesses should follow the same model, segmenting themselves into clusters, making it easy for consumers to find what they are looking for. The bottom line is, you need a win-win situation; a strategic partner should get far more than just a Web page if they work with you. They should have multiple avenues for generating leads, saving money on printing costs, enhancing their company's image, and reducing advertising overhead.

Benefits of a network online include:

• Related or closely related groups of businesses sharing traffic

• Providing service to their clients by providing access to their network

• Relationships built on simply exchanging links

• A flexible arrangement to exchange/profit from cross-reference work

• A method of generating income for a cross referral to another business

• Agreements to explore ways to generate content for each other, sharing updating

• Means of generating leads and incorporating various mailing lists into a unified whole

• Using agents in different states centering on the Web site as a customer service/sales tool

• Financing the site through sales of individual Web pages for agents, or using a Web page as a display ad for a business that doesn't need a full fledged Web site.

Building a network means we have to think beyond just a simple storefront for my specific business. In local terms, competing against my neighbor is the rule, because the market is limited to a physical location and local population. The online audience is based more on specific interest than location. Competition and isolation - what we call a closed network, or a business just out for itself fails miserably because they lose the power of the Web - being connected.

You need to offer more ways for the customer to spend, shop, and refer more people to your Web because there is so much going on, much more than any one business could do. The customer is driven by their own interest, not by us slapping them on the head with an image. We aren't even selling products to the audience, they are constantly selling themselves on what they need. As a network, we have to listen, learn, and create products and services in response.

What you need to identify for setting up an online network are a series of strategic partners. They should be non-competitive, perhaps in the same business. For instance, a dentist in San Francisco is not competing with one in New York; both will benefit from the local population and will not be hindered by competition. They will also benefit from being part of a national organization, possibly international, which a web site can become.

Strategic partners are not "partners" in the traditional sense; each business should operate independently and not tread on others' turf. This is Web partnering, which means that each business can benefit from other businesses being online with it.

Creating a Possible Network Scenario:

1. Identify a group of businesses that can work well together. Often small businesses don't need their own Web site but could work with other small businesses to share the expense. Sound strange? When you advertise in a magazine, many competitors' ads are right next to yours; the Web is no different, it's up to the customer to decide.

2. Invent a form of working together, like cross referencing businesses and commerce, ways to share clients that make sense to all involved. We all need to save money on promotion and make money on sales, so find a profitable path. We need to look for multiple ways of generating revenues; for instance, a fly fishing company might benefit from being together with a canoe company, a backpacking company, a travel company where people use these products, and a mountain biking company. Outdoor travel needs would all be handled by these strategic partners, who could easily cross reference traffic and add to their business because it is not a competitive model, but a collaborative partnership based on the specific interests of a segment of consumers.

3. Create a pricing scheme for each avenue; often one business will be a market builder, while others will create products to fulfill needs. Let everyone do what they do best. Make sure you optimize cross market capabilities; references should enhance the credibility and value of each business, drawing on different markets to generate new leads and orders.

4. Test out your approach on a specific group. Use different pricing schemes and give a few Web pages away (or even better, create a barter situation) at the beginning to create value. It's easier to sell something when it is already in existence than just making it up as you go. Sell value existing value and future value of your site by establishing goals. Or if you want to sell a business on setting up a network, explain what the value could be to them. Focus on overhead costs and long term investment; what other form of advertising can include promotion, market research, communication with consumers, and national exposure? Combine this with the reality of creating short term revenue through selling individual Web pages as advertising revenue and you have a coherent, conservative business model...on the cutting edge. That's power.

5. Develop your plan based on traditional avenues of advertising and/or promotion. Check out four color magazine ads and who advertises in them; compare the price of newsletter and trade journal advertising, as well as yellow pages and Chamber of Commerce participation. You need to structure the unit as having a benefit to the customer, just like traditional forms of media do. Use their model and adapt your own, then use their model to explain to new clients. That way you sell them on the Web by using a business model they understand (and can hold in their hands; bring magazines, yellow pages, etc. and show it to them, then compare it to the Web. The cost advantage alone will sell it.)

Franchises

Franchises are based on a centralized model for the business. The franchise can go online as an overall resource center and sell space to franchisees as part of their package as well. Check out http://www.mollymaid.com for an excellent, international maid service franchise.

Professionals Who Only Need a Business Card or Brochure Online

Many professionals want to come online but don't have a need for an entire Web site. If you run the Web site, do the marketing and pay the month by month rent, you can sell individual pages as part of a network. Consider it like a small Yellow Pages for one specific niche, such as:

  Real estate agents
  Dentists
  Architects
  Real estate appraisers
  Contractors
  Chiropractors
  Doctors
  Attorneys
  Loan Officers
  Video Production Companies
  Audio Engineers
  Desktop Publishing and Printing Firms

Businesses with Sales Agents

  Telephone Cards
  Collection Agencies
  Loan Companies
  
• Catalog Sales: Recent increases in bulk shipping make them an ideal target!
    Multi-level Marketing Companies
    Companies like Dell that have independent sales agents
    Distributors
    Publishing companies
    Non-Profit Organizations
    Stock Brokers

I created AON at the beginning of 1996. The initial site was for a single appraiser in Paradise, CA. called Appraiser Access. She wanted to try and become national, using the Web as her means of access.

We set up a newsletter page for information, an online form to fill out for an appraisal, a fax order form for the actual appraisal, a page describing the three available appraisals from Appraiser Access, and a links page.

I didn't think the idea of going national was that feasible, but the owner knows her business better than I do and explained an ingenious approach using agents. She would get orders from the varying states and call appraisers to do the actual appraisals. She could actually do one from her own home by using some basic research tools, both online and in books. If someone needed an official appraisal locally, she could contact a person in the area and receive an referral fee.

The Major Barrier Was Location

I set up her site and gave her my evaluation of the market. What I found were literally hundreds of appraisers online. It was impossible to find one, to figure out who was better than the next, and the sheer number of them made the job of finding an online appraisal difficult. The market is still young on the Web, with real estate one of the growing areas of development, so I found that while her business idea was feasible, getting in touch with her market would be difficult. She would be competing against all these other appraisers and prospective customers would likely look to their local appraiser out of sheer exhaustion and inability to tell the difference between two appraisers.

I interviewed the owner and asked her about the appraisal business. Appraisers gain customers mostly by word of mouth and are very competitive. Most are conservative and don't advertise in traditional media. I asked her about other appraisers, if they could use a Web site, and she laughed. She told me that most appraisers would just put their picture and a contact number up and be satisfied. She also told me that a recent law change had made it more difficult and competitive to be an appraiser. The market was getting tougher and appraisers needed more ways to get connected.

That's When the Idea Struck Me: Take The Virtual Vineyards Model and Apply It To The Appraisers On A Smaller Scale

I was exploring the Web in 1995 and came across Virtual Vineyards, a site with then over 30 wineries. Their approach was so straightforward; after reading their home page I knew who the expert was, what they offered, and why I should buy from them. Why not apply the same model to appraisers nationwide? We had already created significant content for the site, were doing the marketing, and needed a way to generate revenue.

I proposed the following scenario:

1. We market the site and upgrade it to The Appraiser Online Network, AON. (No one had thought of the idea at this time, although many have since copied it. Does our name ring a bell, like a popular online service?) We would create the only nationwide appraiser's network. We create the content, do the marketing, and develop the site selling single Web pages as display ads to appraisers within our network as the primary source of revenue.

2. Arrange the site very simply. Instead of putting up some map of the United States which undermines success since knowledge of geography is not exactly strong in this country we would create a page with the fifty states in alphabetical order. Click on a state and you arrive at a page with only 10 appraisers total. Click on the appraiser and you go to their page; simple, direct, and providing essential value to the customer.

3. We would set a standard of excellence for our site, a business principle akin to a Chamber of Commerce approach where all the businesses agree to abide by professional practices. In effect this gave us an understated form of a guarantee and would create credibility.

4. Our target market were the 90,000 plus appraisers nationwide, who were all thrown into a more competitive mode by the recent law change. Our network would refer work locally to appraisers in all 50 states; if one state had 10, we would run the lead by each of the AON appraisers. AON would then get a small referral commission, but the appraiser would make the majority of the sale. Primary revenue would be selling 10 appraisers in each of the 50 states, for an estimated 500 sales in a best case scenario. Our initial goals were 1 to 2 per state, or 50-100 total for the first year.

5. The challenge was in how to charge appraisers for this advertising medium and what to charge. First we considered the cost of a page; in creating such a start up, I agreed to a small 15% portion of the total price. We defined what a Web page would include:

• Two graphics, their business card and a logo;

• Three to four paragraphs of text;

• Contact information and an email link on each site, as well as a Web site link if they had one.

• A referral system via AON.

• A one price approach where we did all the marketing, they just paid once, got their advertisement online, and didn't have to do anything else.

• A form of advertising that offered more. This wasn't just an ad in a magazine, fighting with others for attention. Their Web page could gain them feedback, increase exposure, develop credibility, get their foot in the door for simply having a Web page and being on the cutting edge of the online marketplace, add prestige, and most of all, make them part of a larger network without putting constraints on their business.

  We decided to sell it as a year long advertising, trying out different pricing and focusing on $100 a month, $1,000 for an entire year with two months free. This pricing scheme, along with others, turned out to be the best for us and the consumer.

• We outlined the benefits of working with AON as follows:
    1. Being part of a national network of appraisers
    2. Putting your own Web page address on your business cards and letterheads
    3. Email links so customers could get directly in contact
    4. The opportunity to publish articles in our monthly newsletter to increase traffic
    5. An offer to upgrade to an entire Web site if desired, with the AON page being a link
      to your Web site, with discount charges for the Web site for AON members
    6. A cost-effective advertising approach, with four color print advertising benefits at
      less than half the cost
    7. An offer to resell space at AON for a referral fee.

The Initial Results

The reaction to our approach was amazing. We generated 250 leads within the first two weeks. The official appraisal organization for the United States told us that we "took" their idea; actually they had discussed such an approach and were having meetings, as corporations and government entities are prone to do. We put it online and got it working; they even offered to initially advertise one of their regulation books online at AON, although they backed off with fear of working together.

The traffic for the site doubled as we marketed the idea. The initial Web site looked like one person working out of a small office. Now we looked like a national business, a large firm that had its finger on the pulse of the Web for appraisers. Offers started to stream in via email. An 800 number was set up and we got our first order; a man in Beverly Hills ordered an appraisal for a house in Connecticut. The site appeared to be a huge business, enhancing the company's image and adding to the possibilities of being a national power. Remember, this is one woman working behind a desk in a small office in extremely Northern California north of Sacramento. Her fear of computers was equal to anyone coming online. She had no prior experience and no understanding of the Web; she understands value because she has been running her own business. AON made her an international network.

One amazing lead was from the Philippines. A group of appraisers wanted to explore ways that we might work with them. We showed the expertise in the site and had the experience that they lacked. They contacted AON after browsing the Web and being so impressed by the site, they began exploring how we might work together. Perhaps a joint venture or some form of collaboration would be good. The possibility of becoming multinational beckoned, a win-win situation for all involved.

Now the Hard Part: What We Lacked Was Follow-up to Close the Leads

The AON site is doing well but not as well as it could. Those leads that came in (and continue to flow in) were not followed upon quickly. I was simply the publishing branch and had no involvement in the follow-up and close of the sale.

Meanwhile, the owner had to develop AON in her spare time; her full-time job as an appraiser limited the amount of time she could spend on the project. Two to three weeks would pass without a response from AON. Leads evaporated. We had no system to close the deal. Our initial sales helped to fund the project, but we lacked the marketing power to really make it go.

No newsgroup postings, limited links to other sites, and relying on search engines were our tools, not the best method of promoting. Meanwhile, the excitement and early success of AON spurred on the idea to create more networks for different professional niches. We held a small, local seminar and tried the idea out.

We got too big too quick without really building the value of AON. We fell for the initial success and tried to replicate it. The problem was, we hadn't built up AON to its full potential. She made money, much more than she would have done selling appraisals. But we had to reevaluate our approach.

On Top Of That, We Ran Into A Techie Without A Clue

Finally, we learned a valuable lesson about the techies who ran her server. She had already set up with a local Internet provider that's what we call a techie with a big computer hard drive hooked up to a local phone line to put her site up with. The local contact is excellent, but the site was run by another branch of the business. Twice within three months of marketing this site, the techie changed the address on us. He knew about the change for months, but didn't bother to tell us until the day it was changed. So we had to go back and resubmit our site to all the search engines, which is a painstaking approach that requires visiting each one individually to adapt. The second time he changed it came two days after we had mailed a 500 piece direct mail test of our offer, with the old address. Understand that many businesses are on this server, trying to succeed online. He did this to all of us, twice! His argument was dealing with hackers and how they hurt his business.

We managed to limit the damage, but the warning is clear; techies often don't think about business. In his email, he actually wrote that it really shouldn't matter to anyone, since it is a simple change of address. He undermined our business and made us change our address twice, because he couldn't think about what was going on, that real people were conducting real business. Compare this to the real world; you set up a storefront and are forced to move twice, changing all your promotional materials. This lesson proves that going with a reliable service, one that has been online a long time like the iMALL, is the best path for any business. Be sure you don't put the future of your business in the hands of some techie who doesn't understand that it is your storefront, your way of making money.

Epilogue

We have begun to reevaluate our roles with AON, working to improve it our sales process. This is an ongoing venture for any business, but I will adapt a more hands-on approach to help out and gain a larger percentage of the revenue. Since the Web is my marketplace, I will put my efforts into improving traffic and awareness of the site, as well as generating and following up leads. AON is a success, just not the big one we had expected. It is still in its early stages and has room to grow.

The lesson? The business plan works, but only if you follow up. That's why it's important when setting up a network to make sure someone is really paying attention to the sales process. Do you have:

  1. Ongoing ways of generating leads, of continually marketing the business?
  2. Ways to follow-up on your leads?
  3. A good close for the deal and a way to measure your success?
  4. Future products/services you can offer your clients and prospective consumers to keep them coming back?
  5. A Plan with a sales process?
  6. A Coordinator of all the efforts with an incentive to help all succeed?
  7. The desire to make the online business compliment your offline efforts?

A business lives or dies on its ability to adapt. You need to adapt to what the market has to offer. I just read the latest report online (yes, it is a reliable one, not a piece of propaganda). People are actually starting to watch less television, replacing it with the Web. Books and magazine sales have actually increased, because people are turning to these traditional media to find their way around online.

I am an example of this pattern. I subscribe to 5 journals: Forbes ASAP, Wired, Red Herring, Upside, NetGuide, and numerous free and excellent online magazines about my business. Traditional media that can be held in the hand and referred to quickly are an important part of any network's development. Don't forget to use traditional media to also promote your efforts.

If you are selling or creating a Web site, you need to ask who your strategic partners might be. Is this realistic or will you have to force the prospective customer to understand what you are offering? The best sale is a simple one, made and defined so clearly that it is impossible to resist.

1. Identify what their business does.

Who is their competition? Can they benefit by working together with the competition? What about related businesses? Are their business relationships already in existence that can be added to the Web site? I've asked a number of businesses about their vendors, suppliers, clients, competitors, and agents they have selling their products; then I ask them about selling Web space on their site as advertising to these business strategic partners.

2. Understand what you are selling.

If you want to be the network creator of a Web site, think of individual Web pages as display advertising. You sell the rights to advertise on your site, but the ad is much more than just text. It gives an email link, telephone number and contact information, or for an added fee, online ordering. The advertiser could gain exposure by your efforts to promote the site and develop credibility. The person actually creating the Web site needs to know what production is involved so they can give you a standard price. Think of it like magazine advertising; they sell space on a page for such and such a fee, with submission requirements as well. Expect that the advertisement you get, i.e. the single Web page, is spell checked, on a computer disk, and with graphics attached.

3. To sell you have to compare.

Compare what you are offering to other forms of media if you are selling the Web pages as part of your network. If you want to sell a company on the idea, explain to them how this means generating actual revenue online for advertising, so even if they don't make any initial money, there will be funding to cover costs. That's the primary benefit of this approach, making real money to make your efforts successful. Think in terms of sources of revenue and apply this to your approach. Be sure to show them what you are selling; use a simple color print out along with your computer so they can quickly compare the advantages.