Although it has been a turbulent year for dotcoms, there's still plenty of opportunity on the Web. The trick is knowing where to find it. Want a few hints? Here's a peek at 10 great Web businesses you can start today.
8. Web Hosting
You probably never imagined you could make your fortune by running around town, fetching things for people. But some of these urban gofers are making millions doing just that.
"People don't like to wait for things they order online to be delivered," says Ross Stevens, 30, chair, CEO and co-founder with CTO Mike Prindle and vice president of strategic development Fred Tausch of Urbanfetch Inc. "We saw a huge opportunity to provide a service where you can get things the same day, or even [the same] hour," says Stevens.
Currently, the New York City-based company offers free one-hour delivery on a variety of items, from bagels to electronics, throughout Manhattan and Brooklyn Heights. It hasn't taken long for the idea to catch on among busy New Yorkers: The company has only been making deliveries since October 1999 and already expects to earn sales of about $30 million this year.
Urbanfetch defines itself as an online shopping service. It warehouses inventory in low-cost areas of the city, allowing a cost savings not available to storefronts on Fifth or Madison Avenue.
Considering that the number of home deliveries is expected to more than double by 2003, the field may offer ample opportunity for start-ups. Those with less logistical expertise, however, may do better with a more simplified delivery business. Christopher Kelley of Forrester Research believes start-up businesses should focus on delivering packages from a local mail hub to consumers' houses, or on establishing relationships with and delivering products from local businesses. Warns Kelley, "They should stay away from trying to be a retailer."
Jupiter Communications reports that online sports content may be one of the most important new segments of the Web consumer marketplace.
Online consumers currently rank sports content among their five favorite online activities, and that translates into a big e-commerce opportunity. According to Jupiter, consumers will spend about $3 billion on sporting goods, apparel, footwear and event tickets in 2003.
If you want to get in on the game, one area to consider is women's athletic wear. Portland, Oregon-based start-up Lucy.com has quickly taken the lead in this niche. The start-up recently managed to secure $40 million in venture capital earlier this year. More good news: Jupiter expects sales of online apparel to hit $1.6 billion this year, and to leap to $7.8 billion by 2003.
Have a strong background in consulting? You may want to take your skills to the Web. Online consulting offers clients advice via an Internet, rather than human, interface.
IDC predicts that online consulting will pose a significant challenge to traditional consulting firms, as the business model is well-suited to the changing Internet marketplace. Yet few large companies have stepped into this arena. Those that have, such as Ernst & Young and IBM, target enterprise clients and other larger businesses, leaving the small-business niche wide open for start-ups.
"A consultant who spent some years with a major firm could start an online consulting business, especially one that targets the small and middle market," says Sophie Mayo, program manager at IDC. She adds, however, that start-ups should plan to eventually add a face-to-face component to their services in an effort to build ongoing client relationships.
Why should you thrust your business into the frenzied world of online auctions? Three words: eyeballs, eyeballs, eyeballs.
"It's really the lowest-cost avenue for start-ups to hook up with major players like eBay, Yahoo! or Amazon," says Sue Rothberg, senior auctions analyst with Lincoln, Massachusetts-based Gomez.com. "Putting your business on high-traffic sites like these allows you to build a brand and a customer base without having to do the marketing."
No need to sell 43-year-old Richard Birnbaum on the idea. He has doubled his sales since putting inventory from his Engelwood, New Jersey-based clothing business, Wearamerica.com, on eBay in January 1999. "There's no place you can advertise that's as cheap as eBay," he says.
Birnbaum says his 11 year-old wholesale company's first experiment with retail was eBay. "Over the course of the year, we've built a million-dollar retail business from nothing," he says. "Now we're doing about $1 million in wholesale and $1 million in retail."
Entrepreneurs who plan to venture into the auction space had better be committed to putting in the hours, Birnbaum advises, and should keep three to four months worth of inventory on hand at all times to maintain consistent sales volume. He says it also helps to work with an auction management service.
Just as home delivery is winning converts among the time-challenged, so are Web-based services that allow you to receive and pay your bills online. E-billing services make it possible for bills to be created, delivered and paid over the Net. IDC predicts worldwide sales for these services will jump from $32 million in 1999 to $1 billion by 2004.
CyberBills, which offers services enabling consumers to essentially click their bills paid, has developed a hybrid business model consisting of its branded consumer site-StatusFactory.com-and a set of business-to-business services it offers to portals, banks, brokerage houses and other companies that want to brand their own e-billing services. Co-founder and CEO John Simpson, 34, has found these services to have more sales potential than just the consumer portal alone, because most consumers are more comfortable handling financial matters through recognized institutions. Companies reselling CyberBills' services include Intuit and AOL.
Simpson says e-bill payment services may be hard to break into at this stage of the game, as many of the early movers have tied up relationships with the larger institutions. He suggests start-ups may do better as resellers of existing bill payment services they can offer to their online customers, primarily as a way to keep customers coming back to their sites.
"This market is still in its infancy," says IDC's e-commerce manager Albert Pang, "but it has the potential to blossom into a staggering opportunity."
Online health is becoming big business, and it's likely to explode over the next few years. Jupiter Communications reports online health sector sales should soar from $200 million in 1999 to $11 billion by 2004.
At the same time, a Jupiter study indicated that 49 percent of respondents do not buy online because it's easier to buy pharmaceuticals at the local drugstore while doing other errands. This explains why sites offering traditional products have been floundering.
The start-up solution: providing health-care items you can't usually find in your local brick-and-mortar store. Selfcare.com in Emeryville, California, for example, attracts health customers with special needs to the Web by offering alternative and traditional health and wellness products for allergies, weight management and chronic pain. Anyone can go to the local drugstore and pick up some aspirin, but where in the world are you going to find a soy-milk-maker or a magnetic beauty mask?
Much of the current wave of enthusiasm for the gaming industry centers around online gaming, which was responsible for $500 million in sales last year, largely due to the popularity of online role playing games like Sony's "Everquest" and Electronic Arts' "Ultima Online."
The future of this market depends on the widespread home adoption of broadband-DSL or cable modems. IDC predicts that, by 2003, nearly a third of U.S. homes will have broadband Internet access, which is good news for start-ups that can get in now and hold on for a while.
Unfortunately, the competition is stiff in an industry dominated by behemoths like Microsoft, Sega and Sony. Chances are, start-ups looking for an in will have better luck taking a b2b approach. New York City-based Gamegate.com, for example, makes more than $1 million in annual sales developing online Java Internet games for Microsoft, SEGA, Star-media, AOL Europe and Infospace.com.
The future looks bright for Web hosting. "We're projecting growth in that area from about $1.4 billion at the end of 1999 to $19.8 billion in 2004," says Forrester senior analyst Jeanne Schaaf. "It's a huge opportunity."
But is this a good opportunity for start-ups? "It's not for someone who knows nothing about Web hosting, Web architecture, Web servers and networks," says Schaaf. "This is a high-tech business that's going to demand high-tech skills."
In other words, contrary to popular opinion, it's not as easy as throwing a bunch of servers in a room and expecting the company to run itself.
Don Fredrickson, co-owner and CEO of ISP got.net, brings in about $1 million in annual sales. He plans to expand his Web hosting activities from its current level of 15 percent of his business, to as much as 70 percent of his business over the next four years. Fredrickson says that while high-profile and enterprise-level clients are flocking to data centers that charge between $5,000 and $10,000 per month for 24/7 hosting service, many smaller businesses are looking for a less costly, but still trustworthy, alternative. Fredrickson, for example, charges about $20 per month for his basic hosting service, and $300 a month for co-locating a company's server in got.net's facility.
Fredrickson adds that entrepreneurs will be especially successful if they have an area of expertise. "People looking for hosting will start coming to you," he says, "because you'll build up a reputation in that area."
IDC reports that, by 2003, 500 billion people will spend more than $1.3 trillion online. For shopping portals, that means lots of traffic, leading to generous ad and affiliate sales for sites that can attract the most, and the right, eyeballs.
A shopping portal is a site offering a collection of gateways to various online stores and services. According to Charlene Li of Forrester Research, the biggest portals-Yahoo!, AOL and MSN-will grab about 40 percent of the market in 2004. The rest of those ad dollars ultimately will go toward vertical portals that specialize in just one type of niche or content site.
For start-ups, the clear message is, "think vertical." One promising area is online sales of office supplies to small businesses. Sites like works.com and BizBuyer.com are bringing start-ups together to build purchasing clout. This provides them with access to low-cost business supply deals usually offered only to larger companies. These companies are also working to automate small-business purchasing practices. For entrepreneurs, this type of business makes sense for two reasons: 1) Forrester predicts the market for office supplies will grow from $2.9 billion in 1999 to $6.4 billion in 2000 and 2) as a small business, you'll certainly know your audience!
Finding Your Niche
With so many major players in the field, it can be a tricky business for start-ups to break in . . . unless you can find a specialty market and offer your customers a little something extra. Just ask 37-year-old Philip Kaskawits, co-founder of Textbookhound.com, a New York City-based site that enables students to find and compare prices for college textbooks. Unlike many other shopping search services, Textbookhound. com's custom designed search engine allows students to enter and search for multiple books at one time. Kaskawits and his partner, Eric Borgos, plan to work with schools to allow professors to list their curricula on the site, further simplifying students' textbook searches.
Much of Textbookhound.com's sales come from affiliate sales: Amazon or Barnes & Noble will pay the company a percentage of sales that come through their sites. Kaskawits says that, unlike many other comparison shopping sites, Textbookhound.com doesn't list stores in order of which ones give the company the best return, but according to the lowest price for the customer. "We try to be different that way," he says. "You don't have to think of the next best thing. Take something that's out there, pick your niche, and do a better job than anyone else."
Julie Vallone is a San Francisco Bay area writer. Her work has been featured in a variety of publications, including Entrepreneur's Start-Ups, Investor's Business Daily and Salon.com.
- Forrester Research (Christopher Kelley), (617) 613-6025, firstname.lastname@example.org
- Forrester Research (Jeanne Schaaf), email@example.com
- Urbanfetch Inc. , www.urbanfetch.com