A Page on the Web, published in the Solicitors Journal, January 2001

The new millennium kicked off, as the old had ended, in a wave of optimism for internet business. Many bright ideas were transformed into business plans sufficiently credible to separate gullible investors from their money.

Of course the party could not last and the year 2000 ended with many of these enterprises out of business or taken over by more substantial and secure undertakings – often those with established ‘terrestrial’ businesses.

Why e-commerce is not (yet) working

It is easy with the benefit of hindsight to pick holes in, even ridicule, some of the business models which but a short year ago found ready investors. And of course mismanagement has played a part in the downfall of many. But the fact is that the medium is still very young and internet-consumer behaviour insufficiently understood, so there is plenty of room for getting it wrong. Some of the lessons being learned are:

• The internet is seen by users more as a tool for information gathering and communication than for commercial transactions. People use the internet mostly for sending and receiving email messages. An ongoing survey of US usage by the Pew Foundation reveals that 47 per cent of users send and receive email every day, while only 4 to 5 per cent regularly shop or bank online.
• Internet advertising doesn’t work. Click through rates are extremely low, less than half a percent, and continue to drop, with users exhibiting a high degree of ‘banner blindness’ to the extent that they also avoid links which look like ads. High profile sites such as yahoo.com and AskJeeves.com and online ad agencies have all recently issued profit warnings due to poor advertising revenues.
• Offering free services is not a sustainable business model; only loyal paying customers have lasting value. Even though consumers are not yet ready to pay, businesses are realising that they must charge for the services they currently offer for free.

Their legal e-businesses

e-businesses serving the legal sector have followed the general trend. The most-visited US legal portal site FindLaw has slashed advertising rates and other US sites have cut advertising spend and been the subject of takeover.

In the UK law.com/uk established a generously-funded portal site in the Summer in the expectation of replicating the success of its US parent, only to close up shop on Christmas Eve, just a couple of months after its official launch party.

There are dozens of other legal portal and service provider sites seeking a slice of the action, though judging from the lack of content development most have yet to find a winning formula, some being forced to cast around for small streams of revenue from disparate activities.

A category of site which does appear to be succeeding (ie they continue to develop and expand) is the established law publishers, in particular Butterworths, Sweet & Maxwell/Westlaw and Lawtel/interactive lawyer. This is not to say necessarily that their online operations are yet profitable, but they had sound pre-existing businesses to support their online development and large bases of loyal, paying customers. And of course their sites are high in hard content.

There are still opportunities for innovative and well-run legal e-businesses, but the days of the quick buck are surely numbered.

Your legal e-business

There are now well over 1,000 firms of solicitors in England and Wales with websites and an increasing number of other legal advice sites competing for your business. It is now no longer simply desirable but an imperative to have a web presence in order retain and increase business. But given the catalogue of failure described above you will be forgiven for wondering how you will make this pay.

Certainly you should aim to provide a meaningful web service rather than a simple advertising brochure. But this does not mean you have to invest large sums on sophisticated e-commerce capabilities. Given the finding reported above that the majority of users use the internet to gather information and communicate, you should aim first to fulfill these needs. Last June’s Page on the Web set out some basic guidelines for getting your web business going and September’s Page some ideas for promoting it. The latter counselled careful evaluation of legal marketing sites which promise actively to promote your services. According to a recent survey, experience to date is that they deliver little benefit (see Delia Venable’s article at www.venables.co.uk/n0101marketing.htm).

Affiliate marketing

Returning to advertising, an alternative to expensive, yet ineffective, banner advertising is ‘affiliate’ marketing agreements between providers of complementary goods and services. Here the supplier pays a commission (typically between 5% and 15%) to the affiliate website for orders referred to it via links from the affiliate site. The oldest such scheme is that operated by the online bookseller Amazon who now boast more than half a million affiliates worldwide. For the supplier, customer acquisition costs are considerably reduced; and the affiliate is able to offer a wider range of services to its customers. How productive this is depends on how well the service complements the affiliate’s business and how effectively the affiliate integrates the links into its site. In one form or another such schemes are being increasingly used in e-businesses both for and by lawyers.