OPINION: The Internet Channel

OPINION: The Internet Channel

Call me an idealist but I am hoping 2001 will be the year we get a more realistic valuation of the Internet. Everyone knew that there was too much hype centred around doing business on the Web but only the most cynical doomsayers could have been prepared for the extent of the "market correction". Even more surprising has been the events of recent months: we can't go a day without finding out one of the larger channel players are slashing staff and stripping everything back to core business units.

Lately I've been noticing something happening among the larger Internet players, those that have really suffered at the hands of the market downturn. When announcing new products and services, they are referring more and more to the role of the reseller. They aren't necessarily talking about the traditional PC channel, more often than not they are talking about the various companies in the Internet industry that can act as sales and support arms for these larger Internet players.

These new forms of resellers include Internet service providers, Web developers, system integrators, application service providers and consulting groups. They operate in much the same way as a PC reseller does: they take a core, customisable product and bundle a package of their own services with it to suit a particular type of end user.

For example, Peakhour develops a range of Internet services for the small business market, but an increasing proportion of their business comes from resellers who offer their customers these hosting solutions and pocket Peakhour's 25 per cent reseller discount. Yahoo is undertaking a similar strategy with its new Web hosting offering, and just this week Primus Telecom went as far as to say it expects to yield 70 per cent of its new domain registration service revenues through the channel.

Speaking with the marketing folks at these larger Internet players, one can see they have learnt an important lesson in recent months. You can spend all the dollars you want advertising on the side of a bus but building a solid customer base is a lot more complex, because the variety of businesses looking to utilise the Internet vary. They have different needs and budgets and prefer to talk to a salesperson that understands those needs. What I'm trying to get at is that the big Internet plays need a channel just as a vendor does.

And like a vendor, we can never be too sure about their commitment to the reseller. It seems the reseller earns the least from the deal but does the majority of the hard work. Lets say one of these large, well-branded companies come up with a generic Internet service which, once developed, costs very little to deploy and maintain. Their only real expense after the development is what it costs to capture and support the customer, and often it is the reseller that covers the majority of this cost. Resellers will also be anxious about the ease with which end users can buy direct when it comes to Internet services. We can only hope end users will see the value in the additional services the channel can offer.

In the next 12 months, we should see whether these reseller agreements pay off for both the Internet giants and the resellers who prop them up.

Brett Winterford is the section editor of ARN's and Web Development sections. Email him at

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