In this second of two articles, we will examine three successful case histories of companies that have prospered on the Internet. Last month, we looked at Internet marketing options and the prospect of explosive growth.

Marketing people at companies large and small are eagerly exploring the Internet. They have many basic questions.

People at large firms want to know:

Is this just window dressing for us? A chance to show the world that we're technologically up-to-date? Will we really make a profit on the Net? What are out long-term growth opportunities?

Owners and managers of small companies ask:

Can a small company our size succeed on the Internet? Don't you need tens of thousands of dollars-possibly hundreds of thousands or millions of dollars to get started? And if I make the investment, won't I eventually get run over by the big boys?

These are some questions we will explore through three case histories: one will be a portrait of Hello Direct, a large direct response firm with a presence on the Internet. The second illustration show will show how Downtown Anywhere has opened marketing opportunities to many companies operating on a small budget. Finally, we will see how a small start-up company known as CDnow! The Internet Music Store has become a premiere vendor of music CD's on the Net-all on a shoestring!

Hello Direct- building for the future

1.Hello Direct, a vendor of telephones and related equipment to businesses, has been operating on the Internet since July 1994, having been set up with a site on the World Wide Web (a graphical part of the Internet popular with marketers) by American  Computer Group.

2.Hello Direct's site uses ACG's T3 connection, which is very speedy for handling large numbers of customers. In fact, the upper capacity of the system has never been tested. Other companies operating on the Net through ACG include The Sunday Comics Store and Paper Direct. Many other firms are just getting started.

3.Among the advantages claimed by ACG are their financial stability, having been in business since 1983. ACG is headquarters in Phoenix, Arizona-having moved there from Los Angeles to be free of the threat of natural disasters such as earthquakes and floods. ACG is actually part of the backbone of the Internet. Smaller providers often traffic through multiple layers of intermediaries, which slows down access and reliability.

4.ACG will soon offer a new standard package for start-ups. They will get a company on The Web on the Internet on ACG's server. This will be a turn-key operation, including a software interface, design a credit approval system (on-line or off-line).verification can also be done on-line. Approval will happen even before the order is sent to the computer system for fulfillment and billing.

5.This package will begin at $25,000 and so far has no upper limit on data and image storage. This includes registering a domain name, designing an inquiry-handling system, interface for order entry, and whatever else it takes to get them on the Internet. Creation of the electronic catalog pages can be done on a direct-billing basis, charging    about $150 to $200 per page.

6.Recouping the investment long-term

7."No one is making a great deal of money yet," says Geoff Watters of ACG. "The reason companies are getting on the Net is to establish the lead position and a gain a marketing edge over the competition."

8.Success is gauged in many ways. One of these indicators is the number of "hits" or visits made by Internet cruisers to a particular site. The number of hits to be expected can vary widely. Playboy once had 175,000 hits in a day-but with no purchases made Discussions are now under way between ACG and Playboy on ways to generate sales as well as traffic. Although neither Hello Direct nor Paper Direct are yet profitable on the Net, the investment cost of these high-tech catalogs is small compared with that of a new paper catalog.

9.Net future looks like "net gain"

10.Factors that will change the picture are: Windows 95, which will include an internet on-ramp software; OS/2 Warp, which also includes an on-ramp; plus the next generation of Macintoshes.

11."This means that virtually every PC shipped form the middle of 1995 on will have Internet access built right in," says Watters. "Over 11 million PCs will be sold to consumers this year. That means a lot of new surfers, and many more shoppers."

12.Also, Prodigy is now signing up 10,000 new customers a day, in large part by offering new Internet access.

13.Hello Direct customers will purchase from an order form on the Internet, to be transferred directly to their computer. The plan is to include a credit card number, with security issues being resolved right now. Secure browsers are coming out on Netscape, and everyone who uses it will be secure. There will also be a "firewall" or security barrier between the server with the data and the user's PC.

14.Chuck Volwiler, vice president for marketing at Hello Direct, is optimistic about  reaching customers through their new electronic marketing efforts.

15."The Web is increasingly utilized by people whom Hello Direct wants to reach," he says. "It enables them to have a seven-day a week dialogue, 24 hours a day. Plus the catalogue can be a living thing-constantly changing. We're about to start a program to change it almost weekly. This will enable us to change it based on customer input.

16."For instance, if customers are confused by some copy or need further explanation, we can add information. That replaces answering them forever on a one-by-one basis, except where it's necessary. We haven't scratched the surface yet. In fact we're getting started."

17.Volwiler appreciates the quality of information about usage that he gets from the company's Web site. "You can actually track which screens customers are viewing, and in what order. This is much more accurate than eye-float studies of paper catalogs. It's real and more completes an important plus for analyzing creative.

18."And then it's worth noting that getting on the Web is not very expensive.We manipulate our electronic text ourselves. The costs are low-less than a third of the costs for the Compuserve or Prodigy exploration, which has been around $25,000 or $50,000 for a fair market test.

19."The Web is not the information superhighway itself. We'll continue to test various media. But the expertise we develop and core electronic pages would be transportable to different media-just like an ad that can be run in many places. It could be the NET, MCI, or AT&T Magic Link. That's a service for PDA's-Personal Digital Assistants. But our Web presence is important, and possibly our flagship effort."

20.For many companies, profitability on the Internet may not be an instant-success proposition. Rather, success can be estimated by projection of sales via Life-Time Value (LTV) models; or by corporate positioning for future Net growth.

21.American Computer Group may be reached on the World Wide Web at url: http://www. mailorder.com,. You will reach the index to their server.