1. Monitoring the Rate of Return on Investment in Internet Applications Presented by Allen Monroe International Quality and Productivity Center San Francisco, February 24, 1998

2. Background u Most web sites begin as “no-brainer” investments, motivated by: –CEO, head of Marketing or head of Information Systems achieving “Internet Vision” –Desire not to be left behind in a competitive world when every TV commercial has a www address –Client or customer insistence

3. It’s Simple in the Beginning u Low Cost effort u “Proof of Concept” stage usually doesn’t require performance measures u “Get it up quickly” and move on to next step u Key users and contributors of content need to see it in order to better- visualize how to use and benefit from the site.

4. The “Textbook” Approach u Develop a clear business plan first u Identify Objectives u Identify How to Measure Success or lack thereof. u Periodic Review of Performance Measures u Feedback from key management personnel and user groups

5. Site Evolution u Step 2: Now that you’ve got their attention u Obtain diverse user input. Can we include …? u Designing a better look, easier “navigation,” build traffic through reciprocal links and registering with search engines. u Greater cost, clearer idea of objectives u Introduction of site measurements and provision for visitor tracking and feedback.

6. Building on Success: Step 3: Interactive Applications and Depth of Content u Interactive Bulletin Boards, Search Engines, Forms to Apply for or Order Products and Services u Password-Protected Areas for use by diverse user groups, including in- house personnel, outside sales force, clients, and suppliers u Cost increases to attention-getting levels.

7. Step 4: Extension to Software Applications u Scott McNealy: “The network is the computer” u Ability of HTML web pages to connect to any other computer connected to the Internet u One web page can draw data or applications from many computers at the same time.

8. Multiplicity of Users Complicates Measuring Success u Prospects u Clients / Customers u Employees u Management u Suppliers and Business Partners

9. What is ROI? u Return on Investment: The discounted present value of the sum of all future net, after-tax profits, divided by the sum of investment outlays required to generate the income stream u Use the company’s “cost of capital” or “required rate of return” as the “discount factor” in calculating “present value.”

10. The Real Objective of ROI Analysis u Determining how much to invest in the Internet effort. u Under-investment can be as dangerous than over-investment if competitors leverage their investments into dominance. u The difference between “marginal” rate of return and “average” rate of return.

11. Components of ROI Analysis u Stream of Profits over time = each year’s Revenue attributable to Internet initiative less Operating Expenses. u Importance of Timing u Importance of Discount Rate u Possibly break down by Application Types or User Groups

12. An Example: Internet Insurance Quotes u The exception rather than the rule u Concern over the existing distribution network of agents and brokers u Examples include InsWeb, Intuit, CyberQuote, QuickQuote.com (life and annuities) u Secure Server u Connections to Data Bases

13. The OnLine Quote Process: CyberQuote u CQuote.com u Jim Brown: Parkville, Missouri u “Proof of Concept” : Missouri and Kansas u Investment: $100,000 programming, $1,200 web site + personal time u Focus on “Main Street Business” property/casualty agents u Modem access by downloaded software to filed rate data of 14 carriers u $7.50 / quote to compare 5 carriers or $10 for 10 carriers.

14. Ramifications for the Existing Distribution System u By comparison, a $1,000 premium commercial policy takes 3-4 hours for an agent paid $20+ per hour to rate a few alternative quotes = $80 - $100. u Compare with $7.50 for the quote.com process.

15. Regulatory Issues u Provide tool for licensed agents and brokers, rather than sell insurance without a license. u National and International scope of web site poses regulatory problems.

16. Objective u Improve your access to clients, customers, and suppliers. u Invest to such a degree that the marginal ROI is commensurate with other investment opportunities.

17. Contact Us Allen Monroe Founder and CEO RiskINFO 234 West Baltimore Avenue Larkspur, CA 94939 (415) 927-8824 Email: allen@riskinfo.com Web Site: http:www.riskinfo.com Contact Us