Prices for sites fluctuate as Web gets more sophisticated and developer firms consolidate

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The Web Price Index, BtoB's exclusive look at pricing for full Web site creation, finds double-digit changes for small, medium and large companies since our last estimate, in September 1999.

Started in 1996, the Web Price Index surveys Web developers about the prices they would charge hypothetical companies for various services.

The swings in prices are indicative of several factors at play in today's Web development marketplace. The most significant of these factors is the maturation of the Web and marketers' use of it.

Today's "basic" Web site is more robust than the "basic" Web site of a year ago. A simple Internet sign post won't meet the needs of many marketers as they -- and users -- demand more functionality.

As a result, smaller companies now want services once sought only by midsize or large companies as the Web becomes a more valuable part of business.

"People, especially in b-to-b, who have not traditionally had a large e-commerce play, are starting to integrate that into their sites," said Dan Woods, VP-sales and marketing for Web developer Grapevine Inc., Menlo Park, California BtoB accounted for this in the types of services requested by our "small" and "medium" sites, ACME Sprockets and Investments 'R' Us, respectively.

As the ACME site became more sophisticated, we charted a 46% increase from September 1999 in median price, closing in on the price for Investments 'R' Us, which saw a decrease of almost 30% for its development.

Despite the increased demand for more sophisticated sites, very small, simple sites can still be useful for some -- especially local -- marketers.

Some developers see costs for such sites decreasing over time. "[Costs for small sites] will go down because people will be satisfied with commodity," said Robert Santos, director of strategic development for Cnation, Los Angeles.

Prices jump from last year

While the price differences between small and midsize sites has narrowed, the prices for large, full-blown e-commerce Web sites have increased significantly since last year.

"Barriers to entry are higher now for anyone who wants to conduct business in a serious way on the Internet," said Kathy Kruse, director of marketing at Grapevine.

Blockmonster, our "large" site, continues to be a high-end e-commerce site with some massive databases powering it.

The price increase -- up just over 50% to a median price of $608,000 -- is indicative of the premium prices that companies making a significant foray into the Web can expect to pay.

"Any [company with a] decent business plan is going to realize that there are some serious costs," Santos said.

And marketers willing to invest serious money in their Web sites are seeing more options. "Companies are much more hip to what they can do on the Web in terms of customer relationship management," Woods said.

Midsize developers flourish

The developer market is changing as well. Consolidation is creating Web superpowers, while some smaller shops are dropping out of the business or becoming more focused on their local markets.

"The Fortune 500 companies will look to them [large Web conglomerates like iXL and MarchFirst] first," Santos said. "For other companies and niche work, [marketers] will turn to the smaller boutique agencies."

Meanwhile, the "middle class" of 30- to 90-person boutique shops is flourishing as it gains experience and a longer term client base.

Larger developers still will tend to charge higher end prices -- if you can even hire them. It's a developer's market at this point, with some large shops refusing any new business.

But alternatives are available. There are still developers who will price below what most marketers have come to expect. Chicago-based I-Works uses many of the same processes to keep prices down for clients as small as local car dealers and as large as 3Com.

"We don't gouge people," said Jack Graham, senior developer at I-Works. "We are oriented toward volume and are able to achieve economies of scale."

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