Federal agencies reap financial rewards in operating Web sites

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Government agencies shelled out an estimated $325 million over the past three years for Web site development and employee Internet access.

These outlays increased an unprecedented 258% between 1994 and 1996, according to "Internet and Electronic Dial Up Bulletin Boards," a study released in June by the General Accounting Office.

Making money

But, unlike many corporate Web efforts, federal funds aren't falling into a black hole. Agencies report returns on Web investments through electronic commerce and other efforts, says Bernard Ungar, assistant director, GAO.

"Several told us they had quadrupled their sales of information," Mr. Ungar said. "But most reported saving on the cost of printing documents and the ability to respond to requests with less staff."

Developed at the request of the Senate Appropriations Committee to assess Internet expenditures, the study uncovered more than 4,300 Web sites operated by agencies of the executive branch.

Among 42 federal organizations surveyed, the Department of Defense emerged as the biggest spender, at $145.6 million over three years, with the National Aeronautics and Space Administration a distant second at $30 million. Average expenditure for all agencies topped $7 million.

Discovering the benefits

"We had no idea what to expect," says Linda Libician, the GAO evaluator who was in charge of the study, which was conducted from May 1996 to May 1997. "It's a nice chunk of change, which is why the appropriation committee wanted us to audit these activities."

While the GAO stopped short of calculating return on investment, individual agencies have cited hard- and soft-dollar benefits from their Web initiatives.

Dramatic growth

The most dramatic example is STAT-USA, a self-sustaining unit of the Department of Commerce. Since investing nearly $200,000 into developing and maintaining its Web site, the agency has quadrupled subscriptions for its information services, driving up Internet revenue from $1,000 in 1994 to about $1 million in 1996.

Electronic commerce was a lifesaver for the agency, which had experienced losses for several years. "If we hadn't moved to Internet sales, we'd be out of business," says Deputy Director Paul Christy.

STAT-USA, like other agencies, created the site itself to keep costs down and maintain control.

Indeed, federal agencies have been early adopters of Internet technology, launching Web sites en masse in the early 1990s. Initially, these efforts were intended to cope with budget cuts, reduction in head count and mandates to provide public access to data.

Now, with a two- to three-year lead over private industry, a lot of these entities are reaping the rewards that still elude many corporate marketers.

The National Technical Information Service, for example, more than doubled the percentage of its annual revenue coming from Web-related activities, from $12.2 million in 1994 to $34.3 million in '96. The uptick resulted not just from increased customer access to the Internet, but also from the "addition of many new electronic products and services to our collection," according to spokeswoman Renee Edwards.

Soft-dollar savings

Agencies are also chalking up soft-dollar savings. As a direct result of its $929,000 Web investment, the Fish and Wildlife Service reported handling triple the number of inquires at a time when its support staff was being reduced. It also "saved on printing costs and reached a variety of interest groups without increasing the public affairs staff," the GAO report said.

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