Digital Gold Rush: For Some, The Net Means Net Income

While technology suppliers that have built the Internet – and have the engineers, technicians and, perhaps as important, the customers who take naturally to cyberspace – are finding the Web a great place to ply their wares, the biggest moneymaker on the Interactive 500 is a company founded almost a century ago by a bicycle messenger. Today, United Parcel Service continues to peddle as fast as it can. The company says it has spent more than $11 billion on technology in the last 15 years – more than it spent on its familiar brown trucks.

The company introduced UPS OnLine Tools two years ago and says it has registered more than 40,000 users. There are modules for tracking, rates and service selection, shipping and handling, address validation and other functions. UPS says it receives more than 2.5 million requests daily to locate packages.

By using these Web tools, UPS says it reduces the cost of a tracking request to 10 cents, compared with more than $2 for a telephone request. The UPS Document Exchange distributes documents digitally using software products from Digital Paper.

UPS also has an incubator called UPS e-Ventures. The first company to come out of it was UPS e-Logistics, which provides a turnkey supply chain product for e-commerce.

Using technology to redesign and run the supply chains for major businesses is, in itself, a major business for UPS, and the company is working to integrate its technology into customers business processes to make e-commerce viable.

UPS even has an online store called Brown & Brown Collectibles, where model planes and delivery trucks are sold to the public. The site, ec.ups.com, is a showplace for UPS OnLine Tools; it has advice on e-commerce strategy, and instructions on how to use shipping and logistics tools.

UPS Web efforts deliver, to the tune of a cool $1 billion profit.

The Internet has become synonymous with no profits, but companies as diverse as Compaq Computer, DLJdirect and eBay are racking up multimillion-dollar profits online.

And while Priceline.com made it seem that selling airline tickets was no moneymaker, Northwest Airlines and Cheap Tickets have enormously profitable Web sites. Cheap Tickets, in fact, has had seven profitable quarters selling discount airplane tickets, car rentals, hotel rooms and cruises.

Revenue has grown, but not in any spectacular way for Cheap Tickets. In the third quarter of 2000 revenue was $121 million, up 10 percent from $110 million a year ago. The company still has $154 million in cash and short-term investments. Cheap Tickets sells through an 800 number, its Web site and 12 retail stores. It also plans to launch E-Ticketing to catch last-minute travelers early in 2001.

Another traditional business that is combining interactive capabilities with its Internet presence, and earning money for its efforts, is Starwood Hotels & Resorts Worldwide. In July, it linked its reservation system with WorldRes.com to allow all its properties to do real-time booking through WorldRes network of partners. Starwood owns the Sheraton, St. Regis, Westin, Four Points and W hotels.

In addition to taking reservations and doing business over the Internet, Starwood has teamed with Zoho, a provider of supply chain management for the hospitality industry, to funnel Starwoods $3 billion in annual procurement through Zohos market.

Newer companies, such as Trend Micro, are finding cybergold. The company, a supplier of antivirus software and content security packages, reported profits of almost $20 million on $90 million revenue and is the market leader of Internet gateway virus protection products, according to International Data Corp. Recently, Equant announced a managed security service using Trend Micros products, joining several other carriers.

Many Interactive 500 companies find that efficiencies brought about by Internet technologies can have a significant impact on a companys bottom line.

Coffee Cup Software of Corpus Christi, Texas, sells software to build Web sites and reported a net profit of $2.52 million on revenue of $2.92 million, a profit margin of 85 percent.

Jeremy Cornelius, senior vice president of operations, says that the number is not an illusion. “We only have four people running the site,” he says, noting that the founder of the company has already retired.

Interbiznet of Mill Valley, Calif., does not do quite that well. Its profit margin is only 66 percent — $1 million out of revenue of $1.5 million. The company runs an online employee recruiting service, and CEO Colleen Gildea said that there is not much operating expense once the information is posted.

However, money losers still greatly outnumber gainers on the Interactive 500. Amazon.com and CMGI both lost more than a billion dollars, while many others – including Barnesandnoble.com, Buy.com, Egghead.com, eToys, WebMD and Webvan Group – lost more than $100 million. But if the past months New Economy shakeout means anything, its that making money still matters.

MoneyMakers And Money Losers

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