On investing in the web

I found out an amazing fact this week: as a distribution channel, our web platform is quite a bit more expensive to run than our 100-strong call centre. On a per customer basis.

Now to put figures to that would be to disclose confidential commercial information. But it does start to explode some of the myths of web-enabled commerce, does it not?

Travel in general is a pretty low margin business. Despite what many people think, travel companies do not generally make a packet. TUI Travel and Thomas Cook Group may well be FTSE 100 companies these days, but not based on their profit margins. Think 3%. In a good year. What this means to the business as a whole is that there is not a whole lot of investment monies to be had. Business cases need to be pretty robust. And by robust I mean 10 times the capital invested returned within 3 years. Right now, capital is pretty expensive to get hold of, and with the economy looking like it has been, that may actually get worse. Meanwhile, the City don’t tend to let plc companies have a bad year. Shareholders expect.

So when it comes to making a case for investing in something when you’re working for a larger company, you’ve got to be pretty confident of the numbers. That’s what I’ve been working on this week. And it forces you to question some long-held preconceptions of what makes for good business. The trouble with investing in the web is that it’s a long game. Amazon may not have made any money in their first 6 years but look at them go now. Enough cash to buy the rest of LoveFILM!

Unfortunately for every Amazon, there’s your boo.com. (And indeed the second boo.com went under recently). So the “long game argument” is not one that holds much water with most C-level execs. The truth is to get a web-enabled business really motoring it takes time to even get close to what people expect, let alone start to exceed them. To achieve this takes a fair degree of talent, no shortage of hard work and a hell of a lot of patience.

My conclusion: sometimes the web is not the answer, it’s the problem.


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