Doing Business on the Net
Used properly, the Internet has the potential to be an effective business tool -- whether for advertising a company's wares or for expanding and streamlining its work processes. AndÅ@because the nature of the online medium is a great leveler, small start-ups can compete head-to-head with established corporate giants. John Boyd looks at three small businesses that have adopted the Internet as part of their business success strategy.by John Boyd
It's been on the cover of Time and Newsweek. It gets regular newspaper coverage. And every day, it's making millions of ordinary folk around the world flip on their modems. But is the Internet making anyone any money?
Sure, business is booming (at least for now) for the publishers of those doorstep-thick tomes on how to surf the Net, for NTT, and for those access providers still managing to charge big bucks for their services -- not to mention the vendors of high-speed modems, servers, and communications software. But what about the millions of corporations around the world that have scrambled to set up "me-too" home pages on the World Wide Web? When you drop in to their sites, you find that most are using the Net without much imagination. Often, their Web pages are little more than just another way to hype their products and services: boring online versions of their company brochures and magazine ads.
Selling language-learning
products via the Web
When it comes to pioneers using the Net for commercial purposes -- adding some substance to the usual pretty pictures and yards of text -- in Japan, at least, it's generally the SOHO (small office/home office) businesses and start-ups that are making the moves. Take Ken Butler, for instance. Butler has been long known in Japanese language teaching circles, both here and abroad. He was director of the prestigious Inter-University Center for Japanese Language Studies in Tokyo for 10 years, until 1978. (And a position that, as of late August, he has announced he is taking up again.) He then went into business consulting for himself for a decade, before returning to designing Japanese and English language learning programs in 1989. Butler has since produced six CD-ROM-based products.
Creating commercial language-learning products has been a relatively straightforward occupation for the experienced Butler, who has been a Japan resident since retiring from the US Navy after the end of the Korean War. The hard part, he says, has been finding an effective channel to sell his products -- at least, without going into debt to pay initial advertising and marketing costs.
Now, Butler believes that he has found the answer in the Internet. "The Internet as a whole, and the Web especially, is going to turn the business world upside down," predicts Butler. "It's an entirely new approach to doing business. It's going to replace sales as we know it."
Working from his home office in Seijogakuen (Tokyo), Butler has been using the Net for several months to sell two of his CD-ROM products at $149 each: Japanese For Everyone and Let's Speak Japanese (both designed for Apple Computer's Macintosh). Previously, Butler relied exclusively on the services of a US-based Macintosh mail-order company -- a channel that produced few sales.
To attract customers, the mail-order company buys ad space in popular Macintosh magazines, with small developers like Butler each paying a portion of the price for the ad if their products appear. Butler chipped in, but the result was discouraging. "I didn't even get enough orders to pay for the cost of the ad," he admits. The problem is that among readers of computer magazines, only a relative few will likely be keen to learn a foreign language, and fewer still will want to learn Japanese. "Mine is a niche product," observes Butler.
When the Internet exploded in popularity, Butler decided to become part of the boom. "It was a natural progression from textbooks, cassette tapes, floppy disks, and CD-ROMs," he explains. TWICS, the Tokyo-based electronic information service and Internet access provider used by Butler, helped him put his home page up on the Net. (See http://www.twics.com/~kenbutler/butlerconsulting.html.) Butler designed the page himself, with the help of BBEdit (a freeware text editor that incorporates HTML extensions); he used MacroMedia for the graphics.
So far, Butler has had over 6,500 hits. "And I know that everyone who looks at my page is interested in Japan, or they wouldn't bother." Still, collecting hits is only a small first step to making a possible sale, Butler admits. "I must convince them I know a lot about the Japanese language, and that I have good products."
To encourage browsers to drop in regularly -- Butler estimates it takes five or six repeat hits before the typical potential customer is ready to buy --he offers tutorials on the use of Japanese particles for free downloading. At first, many browsers came in, downloaded the freebies, but never ventured further to find out what he was selling. "Obviously, I hadn't designed my Web page properly," notes Butler. He rearranged things, and now those taking the freebies also see what he's selling and are offered the chance to order.
He couldn't easily have made such a change if he just placed an ad in a newspaper, Butler points out. "But now, I can check (my page) and see how it's being accessed, make some adjustments, check it again, and it doesn't cost me. What's more, I get instant feedback. It's mind boggling."
Net-based business transactions are still considered risky by some, given the lack of security. To circumvent the fear of doing business on the Net, and to further encourage sales, Butler recently established a mailing address and toll-free "800" phone number in the US (run by a relative) so that American customers can call and make purchases by credit card. Now, he reckons he's making a sale a day -- not exactly on the scale of Microsoft Corporation shipments, but a big increase over his sales through the conventional mail-order channel. And Butler feels he's barely begun.
Using the Net to
coordinate translations
Urban Connections Inc. of Shibuya (Tokyo) is an information services start-up. Established in 1990 by Larry Greenberg, who hails from New York, it now employs 35 people. The company has seen revenues climb from ¥25 million in 1990 to a projected ¥500 million in 1995.
As befits the commodity it deals in -- information -- the company wears a number of hats, including those of multilingual translator, market researcher, and print and electronic publisher. Greenberg explains that Urban Connections started out as a translation company, moved into print design and layout, and progressed to CD-ROM publishing. Then the Internet came along. "It's basically all information," Greenberg says. "The secret is knowing how to gather the right facts and having the right tools to deliver them."
When it comes to the competitive translation business, the secret of success is finding and keeping reliable translators. That's no easy task, because good translators often move on to greener pastures after a stint in Japan. This is where the Net has become invaluable. "Now, we put up a tender for a translation project on our InfoAsia home page (http://
www.infoasia.com/) and invite translators to bid for it electronically," Greenberg explains.
A tender typically contains a job description, work period, payment information, a sample of the work, and a registration form. Since putting up its home page in February, Urban Connections has subcontracted over 5,000 pages of translation work through the Net. Greenberg adds that Urban Connections has also found 15 good translators from around the world via the Net, and can call on them to supplement the company's own in-house and regular Tokyo-based freelance translators.
Sean O'Mahony, a director in the firm, takes care of the company's computer systems. He was the one who urged Urban Connections to make use of the Internet and, by default, is the company's "Web master." O'Mahony feels that posting translation tenders is only the first step to using the Net for commercial purposes. The company has begun taking advance orders over the Net for an upcoming CD-ROM product called Inside Source (described as a pictorial database of world leaders), which will ship in October.
Given the company's expansion plans, Urban Connections decided to open a subsidiary in Palo Alto, California, called InfoAsia. It is here that O'Mahony set up the company's Internet server. The location was selected in part because of the lower costs in the US, and to cut down on "the latency, the number of hops you have to make to get to where you want to go," O'Mahony explains. A Tokyo-based Internet access provider provides Urban Connections' direct link to the Palo Alto server.
Another big advantage in locating in Silicon Valley, says O'Mahony, is that "Tokyo is 18 months behind (in networking communications). I was shocked at how advanced the Internet is being used in Palo Alto. My learning curve was massive." But now that he's up to speed, O'Mahony says he is working to turn what he's seen in the US into new business opportunities for Urban Connections in Japan.
The Net as a virtual dinner show
Another Tokyo-based company that's been inspired by Californian culture on the leading edge is fab Universal Ltd. This Tokyo-based entertainment group specializes, among other things, in establishing theme restaurants and cafes (such as Hook Town, the basketball center in Tokyo's trendy Harajuku area). Along with the two founders of fab Universal, two of the company's executives, Naoshi Ishihara and Masami Kikuchi, each chipped in to come up with the ¥40 million in capital needed to start a Japanese franchise of Electronic Cafe International (ECI) in Shibuya, Tokyo. The Japanese version of ECI, besides offering customers alcoholic and nonalcoholic beverages, also provides computers connected to the Internet.
Apple Japan got to hear about the proposed venture and, after discussions, loaned the start-up 27 Macintoshes, software, and other equipment. ASCII Corporation, the print and software publisher, meanwhile, jumped in to arrange access to the Internet.
Electronic Cafe International has its roots in the 1984 Olympic Arts Festival in Los Angeles. A computer network was set up connecting a number of cafes and restaurants in LA, allowing people to hold conferences in different languages, share videos, and work on drawings together. Today, according to co-founder Kit Galloway, ECI has grown into over 40 networked international venues and produces multimedia-based "live performances and encounters in virtual space."
ECI Tokyo, however, claims to differ somewhat from others in the group. "Unlike the other Electronic Cafes around the world that are event-driven, we are open every day," says Kikuchi. "So we bear a far greater (financial) risk. And it's a big, big risk!" Indeed, partner Ishihara says they started the project this June, realizing from the beginning they would be unlikely to turn a profit. "We were thinking of continuing for three months, until September 25. But now, we seem almost certain to continue until the end of the year."
One reason for the extension is the amount of publicity the cafe has garnered in the Japanese media, and subsequent visits from the curious who are willing to plonk down ¥2,000 for a drink and a session on the Internet. According to Kikuchi, about 100 people visit during the day, and another 50 to 70 in the evening. "But we need 250 to break even," he admits.
Yet, since in late August only five Macs were connected to the Net, more customers would create both Internet access and space problems. Kikuchi adds, though, that ASCII was to increase the connections to 10 Macs by the end of September. During the wait to get a seat from which they can get onto the Net, through, customers can play computer games or try out various CD-ROMs on the other Macs, while they enjoy a drink and chat, perhaps with other customers, in the relaxed atmosphere.
Even if ECI doesn't turn out to be financially rewarding, it is proving to be an invaluable experiment for the group, maintains Kikuchi. The company is keen to learn how to blend its entertainment know-how with new forms of high-tech communications, multimedia, and the Internet. "This is only the first phase," Kikuchi says. "We are already deciding what our next goal should be. It will certainly be related to (tele)communications and multimedia, because we are sure this will be an area that will make a lot of money in the near future" After all, he points out, "Entertainment is communications at its best."
For the curious, the Electronic Cafe Tokyo is just a short walk up Dogenzaka, the hill on the right of the 109 Building near the Hachiko exit of Shibuya station. Turn left at the Sakaue junction, and you'll find the cafe about 50 meters ahead on the left in the basement of Fuji Bldg. 37 (1-18-3 Dogenzaka, Shibuya; phone 03-5489-5551). You can reach the staff by e-mail at ecafe@netcom.com.
