Half of B2C sites are making a profit

ActivMedia Research observes that one reason why few on-line firms are making a profit is the relative newness of the internet as a commercial medium. The company said in a statement:

"On-line firms have not had much time to make the necessary investments to be profitable. Many have conducted business off-line and know how to run a profitable business, however few have equivalent experience selling on-line. They are fast realising that selling on-line is not quite the same."

The report claims that:

• One in three B2B e-tailers are currently profitable, and another one in three expect to be profitable in the next few years. However, a substantial proportion don't intend to be profitable since their web sites are marketing communication vehicles.
• Half of today's B2C e-tailers are profitable because they are the most active web sites in terms of directly selling products and services to customers on-line.
• One in four On-line Content firms are profitable, but most expect to show profits over the next couple of years as the market matures.
• Only one in four Internet Services & Support firms (ISPs and ASPs) are profitable, but they have hopes for the future. Burdened by heavy competition online, they are particularly affected by other media that offer internet access along with other services.

ActivMedia Research's VP of Market Research, Harry Wolhandler rejects the claims of many of today's analysts. Wolhander said:

"Many analysts report that the greatest e-commerce success is among the most known dot.coms. I disagree. On-line successes are instead found most broadly in the mid-sized business arena where companies with in-place businesses increasingly capitalise on their extended communication capabilities.

"High-flying dot-coms are forced to expend resources on building a business backstage to accommodate the high level of sales that they generate. As long as they are experiencing stratospheric growth it will strain their ability to grow. They will not begin to effectively accumulate cash until growth slows to more modest, steady levels. The challenge for them will be to remain standing when online markets mature five or ten years from now."

The survey was based on research into 1,013 companies of which 69% were from the US and 6% were from the UK.