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Web prices show decline in new survey

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The median price of building business Web sites has come down by a significant amount from last year, according to NetMarketing's second survey of 25 Web developers in six cities.

In the first survey seven months ago, developers priced three hypothetical businesses with very specific Web proposals. Compared to those results, bids from developers this time around were down nearly 30% for small sites, and as much as 45% for the biggest, most ambitious sites.

National costs get cheaper
 
Sept '97 April '97 Change
Small $26,100 $18,570 -29%
Medium $102,025 $67,500 -34%
Large $596,073 $330,000 -45%

On a city-by-city basis, results were mixed as to Web development costs. For small sites, Los Angeles -- a newcomer to the survey from last year -- beat out Chicago as most expensive. But Chicago was still most expensive for medium sites, and New York came in highest for the largest site.

To some extent, the current median prices are obviously a function of which developers participated in the survey. (Of the 25 developers, 16 participated in the last survey; all the Los Angeles developers were new this time around.)

Los Angeles Web Prices
(by median price)
Small $45,000
Medium $85,000
Large $350,000
Nonetheless, the results of the current NetMarketing survey are consistent across all cities and nationally: Median Web development prices are noticeably lower, for a variety of reasons.

BETTER PRICE CONSISTENCY

On the most obvious level, the lowest and highest prices both moved toward the middle, a sign that some price consistency is starting to occur across the country. In the first survey, prices were scattered across a 1,000% range. While ranges remain wide, they've closed somewhat.

Looking at the data developer by developer, there was no clear trend. Some raised their prices on small sites while lowering the other two. Some developers did just the opposite. But every developer reported some change in prices.

What accounts for the price shift? Some of the developers say they now have more experience and a better idea of the expectations of the business.

THE VALUE OF EXPERIENCE

One of the smaller developers admitted that in the first survey, "We were a bit naive in our estimations of time."

But more importantly, there have been shifts in the nature of the industry itself.

"There is more competition out there," said Michelle Kensinger, business development manager at Vivid Studios, San Francisco. "The industry is changing. I used to get 50 calls a week and most of my job revolved around selecting projects. Now we do a lot of agency-type work like pitching projects and becoming Web agency of record."

Vivid has aimed for larger corporate clients, such as recently-signed Nike. Because of that, they have seen their competition go from other Web design firms in an infant industry to heavy-hitting traditional ad agencies who can "spend $50,000 on a pitch and design an entire site before they even have the project."

Prices vary widely
National low/high
Small$7,250/142,100
(Sept. '96)$2,800/200,000
Medium$21,000/960,000
(Sept. '96)$9,280/960,000
Large$62,400/2,300,000
(Sept. '96)$15,000/2,800,000

This can be especially hard on smaller developers. "We've lost bids simply because people feared our size. However, some people see it as an advantage because we are cheaper than an ad agency who is probably outsourcing to someone like us anyway," said Dallas developer Marshall Hays of Hays Internet Marketing.

TECHNOLOGY SAVES MONEY

Marketers seem to be maturing themselves in terms of better understanding the Web and how it fits into their marketing plan. Several of the developers in the study are working more on a retainer basis, like an ad agency, and less on project-by-project work.

Technologically there have been changes as well that help reduce costs. As one survey participant said, "Based on the maturity gained in the Intel/Windows NT camp over the last six months to a year, I would move both of the larger sites to NT. This would give us some substantial savings across the board, say, 20%."

And the tools have changed somewhat. Developers have created many of their back-end tools already and more off-the-shelf solutions exist for creating even high-end sites. These are much more flexible than even earlier versions of the products. Essentially, earlier clients have already paid some of the development bill for new clients.

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