Web budget increases for 1999 reflect growth of e-commerce

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"Clearly, we've consistently gotten a high return on Web tools."

Top Web site managers have been working on their 1999 budgets for months, and their struggles reflect the state of the business-to-business Web today.

Sites launched as billboards or e-commerce initiatives are becoming the central focus of corporate marketing efforts, says Deborah Ramstorf, advertising manager for W.W. Grainger, Lincolnshire, Ill.

"We're in a transition," Ms. Ramstorf says, from a commerce initiative supported by upper management into a portal for the whole company. "We believe it's the way of the future."

The site's budget must include money for enhancements such as company-specific pricing, which can be hard to institute.

Money from multiple departments

These concerns are typical of those faced by high-end Web site developers in this year's budget process, says Tom Burke, marketing director for net.Genesis, Cambridge, Mass., which writes Web applications such as netAnalysis, a Web traffic analysis package.

"The site becomes a hybrid between marketing and information services," Mr. Burke says.

The money needed to fund the site must now come from multiple departments as well. The IS department may pay for hardware and software, and marketing will pay for content development, support and training.

"All roads lead back to the Web site," Mr. Burke says, and that must be accounted for in building the 1999 Web budget.

So must the need to show a return on Web investments, he adds, although that's becoming easier.

Cisco Systems, San Jose, Calif., estimates it saves $375 million a year in total operating costs through its Cisco Connection Web site, says Todd Elizalde, director of networked commerce and customer service operations for the company. As a result, "We don't sacrifice anything," he says.

But that doesn't mean Cisco is just throwing money into a Web pot and expecting savings to flow out the bottom.

"Each functional organization in the company has a budget that includes CCO [Cisco Connection Online] spending as well as normal department spending," Mr. Elizalde says.

"By managing it this way, each organization makes investment decisions based on where they will get faster payback," he says. "Clearly, we've consistently gotten a high return on Web tools," and that is reflected in the spending mixture.

Payroll drives budget increase

Mr. Burke of net.Genesis says the big increases in this year's budgets will come in payroll costs. "The people who are good at what they do can name their price," he says.

Curt Wilson, director of public relations at Lucent Technologies, Murray Hill, N.J., admits it's the Web payroll that's driving this year's budget increases.

"Hosting and network connectivity are regularly recurring costs. Development and design for new content and applications are the major focus of other resources we expend," Mr. Wilson says, and it takes good people to make good content.

A lot of Web developers find that, as Web costs rise, other marketing costs, such as advertising and trade show budgets, go down, says Tom Rodak, director of sales and marketing for Commerx, Chicago, which runs the Plastics.Net site.

"We're becoming another channel to sell through," he says, but spending on that channel must be aggressive in order to make sense. "We can't just budget on sales. We want to budget on goals."

In the case of Plastics.Net, that will mean over half the Web budget will go into launching e-commerce for member companies, as Commerx's business plan evolves from one based on advertising revenue to one based on the company becoming a procurement system, Mr. Rodak says.

That's also true for Thomas Publications, New York, where Julianne Garry is director of Internet marketing and product development for Thomas Register on the Internet.

To develop its database in 1999, Thomas Publications has already budgeted $3 million for marketing the site, 70% of which will go into online advertising, Ms. Garry says.

"We've been receiving 5% click-through rates on banner ads," she says, so the company will buy more of them.

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