Customer satisfaction with e-business is rising
The second quarter 2005 release of the University of Michigan's American Customer Satisfaction Index (ACSI) shows that customers are increasingly satisfied with e-business sites. In this report Larry Freed, president of ForeSee Results, highlights the prevailing e-business trends and market leaders.
Customer satisfaction with search engines, portals and news & information sites rose 4.7% since this time last year to 75.9, narrowing the gap with the ACSI e-Commerce score of 78.6. More significantly, aggregate satisfaction with e-business sites has jumped 20.5% since the first year of measurement.
Along with increased customer satisfaction, the e-business category has seen the continued convergence of different types of sites in this category. When the ACSI began measuring the e-business sector, there was a clear distinction between search engines and portals. The distinction between these categories has eroded over the last few years as search engines increasingly offered access to extensive content and portals improved their search capabilities. In fact, Yahoo, MSN and Google are commonly considered competitors today, even though Yahoo and MSN began as portals while Google's roots are as a search engine.
E-crossovers While news and information sites are still somewhat unique, there is also a crossover of services with portals and search engines. Many portals and search engines frequently aggregate news from other sources.
The ACSI measures sites in the three categories of news/information, portals and search engines, for comparison with historical data. However, these sites can also be thought of in two primary groupings: content providers (those that actually house information) and content facilitators (those facilitating access to content) - which might be a more useful distinction given the convergence of the sites' functions.
Portals booming The 4.7% aggregate increase in satisfaction across measured e-business sites was due primarily to a 5.6% increase in the portals category, which saw its overall score increase from 71 last year to 75 in 2005. The overall score for the news & information sites stayed flat year-over-year at 75. Search engines also reported the same score as last year with a score of 80.
Satisfaction leads to revenue When comparing revenue growth from 2003 to 2004, we see great examples of how satisfying customers leads to financial success. Google and Yahoo both more than doubled their revenue from 2003 to 2004 and these two organisations lead the way in customer satisfaction with scores of 82 and 80 respectively. MSN saw modest growth in revenue from 2003 to 2004 and trails the leaders with a customer satisfaction score of 75. AOL saw even smaller revenue growth and their customer satisfaction score, while improving, still trails with a 71. These figures again demonstrate the link between financial success and satisfying customers, otherwise known as meeting their needs and exceeding their expectations.
Google vs. Yahoo Google and Yahoo are number one and two respectively in market share in the US search market and are just separated by two points in customer satisfaction scores, with scores of 82 and 80 respectively. Both have evolved greatly into "content facilitators" - Google from its start as a purebred search engine and Yahoo from its beginnings as a portal.
Google commands an impressive lead in the search space: the number of second quarter 2005 searches conducted on Google exceeds the combined searches on rivals Yahoo, MSN, America Online and Ask Jeeves. Since 2002, when Google was first measured, this Internet giant has seen gigantic revenue increases: from US$440 million in 2002, to US$1.5 billion in 2003, to US$3.2 billion in 2004. Customer satisfaction increases, however, have not kept pace. While Google reports a solid score of 82, the highest of all measured companies in the e-business category, this score has not increased significantly since 2002, when it stood at 80.
On one hand, it is impressive that Google has managed to maintain such high customer satisfaction amidst so much change - in both the industry and its own business model. Google now competes not only as a search engine, but also a portal and provider of email, a shopping aggregator and a mapping tool, among many others. Recent product introductions include Google Earth, a satellite, 3-D mapping feature and two services for mobile phones: Google SMS, which enables users to send search queries via cell phone text messaging and Google Local, which gives access to local information from a mobile web browser. As Google expands into new functions and markets, its well-earned credibility is a distinct competitive advantage.
On the other hand, customers increasingly have a multitude of choices, as many of Google's competitors are launching similar services. Recently, for example, MSN introduced VirtualEarth, which is comparable to Google Earth, while Yahoo introduced SMS search and Yahoo Mobile for mobile phone users. In addition, competitors now offer alternative search pages that have mimicked Google's spare and streamlined page layout for search, which is so popular. When faced with choice, customers will go where they are most satisfied, so Google will have to focus to a greater degree on keeping its customers happy to maintain a competitive edge as its competitors innovate and copy its most successful features and functions.
Yahoo also appears to be in a constant state of expansion into new product areas. In addition to SMS search and Yahoo Mobile, Yahoo recently launched a "deep web" search that enables users to search subscription-based areas of the Internet and Yahoo Music Unlimited, a subscription-based online music downloading service.
Yahoo has also seen steady growth in revenue - from US$717 million in 2001 to US$3.5 billion in 2004. Customer satisfaction has trended upward in that same time period - from 73 in 2001 to 78 in 2004. Customer satisfaction in 2005 is up 2.6% from last year to a solid score of 80.
Differentiation One area where Google and Yahoo have taken decidedly different approaches is with respect to news on their sites. Both aggregate news from different sources, and, in this way, compete with the news & information sites in the e-business category. Yahoo enables users to subscribe to RSS feeds, search for news from news organisations and send news to others via instant messaging. Google, on the other hand, has automated technology to search the web for news stories, which are posted on Google.
As Yahoo and Google continue to explore new product offerings and compete more directly with each other in a variety of areas, they will both need to ensure that they meet the needs and exceed the expectations of their respective customer bases. Since many people use both brands for various needs, the company that better understands the customer satisfaction dynamics on their website has a competitive advantage that can be leveraged to influence customer behaviour.
Ready for a come-back America Online (AOL), while still the lowest scoring of the "content facilitator" sites, is clearly on the upswing. Its second quarter score of 71 is 6% above last year's score of 67, the greatest leap for any of the measured e-business sites. Since AOL was first measured in 2000, its customer satisfaction score has increased an impressive 26.8%.
AOL, long positioned as the favourite Internet Service Provider (ISP) of "internet newbies" is dramatically changing its business model as it explores the best way to leverage exclusive content available through its Time Warner affiliation. Realising that increased options and Internet familiarity are leading to a decline in ISP subscriptions, especially for its higher-priced monthly plans, AOL is reacting with new services, many of them available for free.
Building on the popularity of its AIM instant messenger service, which is available for free, AOL is currently beta testing web-based e-mail to AIM users. This free email service will eventually be available to all Internet users and will compete with the free email offerings from Yahoo, Google and MSN. AOL has also recently announced they will be introducing a portal for non AOL subscribers that should compete with the free portal models of Yahoo and MSN. AOL appears to be embracing the web based interface to co-exist with their proprietary software approach that has been so popular in the past with the less savvy internet users. They also will introduce a higher level of service on their web-based interface, available through a subscription, attempting to create a hybrid of their current service and the free portal approach of Yahoo and MSN. Other recent developments at AOL include web video search capability (a feature that Google launched in January) and a joint venture with AEG and Satellite Radio on Network Live, which will offer live programming across the web, satellite, wireless and other platforms.
AOL is in a unique position with their strong content capabilities from Time-Warner. This gives them a potential competitive advantage over their rivals. However, to take advantage of this potential strength they must continue to evolve their offerings to better meet today's customer's needs, who are far more demanding, sophisticated, and internet-savvy than the customers in AOL's early days. With the announcement of a much stronger AOL.com offering (currently in beta), they appear to be making great strides forward and, if they fully take advantage of their content advantage, they will once again compete for customers.
AOL's sustained upward trend in customer satisfaction is a great sign. AOL still trails the leaders but is gaining ground every year. With their new approaches that embrace the non-proprietary web based interface and their strong content via Time-Warner, they have a great opportunity to aggressively compete with the leaders Yahoo and Google.
Reinvention MSN, like Yahoo and Google, is in a state of reinvention as it continues to evolve into much more than a portal. MSN, which comes in third in the U.S. search market, introduced a new search engine earlier this year that looks like Google. PC-to-mobile instant messaging and Virtual Earth, its 3-D satellite mapping system, are just two of MSN's recent product introductions. And, like the other major players in this category, MSN now offers desktop search functionality.
However, customer satisfaction with MSN has stayed flat at 75 since last year. Over the past few years, revenue at MSN has also stayed relatively stable, rising from US$1.9 billion in 2003 to US$2.2 billion in 2004 and US$2.3 billion in 2005. The challenge for MSN is to turn its Windows penetration advantage into a more dominant and highly satisfying portal experience.
More of the same Ask Jeeves seems to be the only site in the search engine category that is not trying to be "all things to all people". Rather, it has stayed true to its start as search engine, albeit one that offers several ways to search, including by typing in a question. Ask Jeeves is currently beta testing local search and MyJeeves, a way of saving and organising search results and other favourite information.
In second quarter 2005, Ask Jeeves, along with AOL, outpaced search giant Google in terms of percentage growth in search queries, supported by a major rebranding advertising effort over the past couple years. Customer satisfaction this year is up this year to 72, a 1.4% increase since 2004. More impressive is the fact that customer satisfaction with Ask Jeeves has risen 16.1% since it was first measured in 2002. Increases in revenue have corresponded to increased customer satisfaction, with revenue climbing from US$74 million in 2002 to $107 million in 2003 and then more than doubling to US$261 million in 2004. The test for Ask Jeeves will be to leverage the resources of its new parent company, IAC Corporation, which also houses the major brands Ticketmaster, iWon, HSN and Expedia.
The portal's success The aggregate customer satisfaction score for the ACSI portal grouping, which includes the content facilitators that started as portals, has risen 5.6% from last year to an aggregate score of 75.
Within the portal group, AOL has the greatest year-over-year increase, 6%, as well as the greatest increase since it was first measured: 26.8%. This increase in customer satisfaction bodes well for AOL's future financial success as it continues to reinvent itself. The "all other" category includes customer responses for portals other than those listed. Further proof of the convergence of the portal and search engine sectors is the fact that 40% of respondents cited Google as their portal of choice. Other responses included Comcast and Netscape.
Customer satisfaction with the search engine grouping stayed flat on an aggregate level, although its score of 80 is the highest in the e-business category. Ask Jeeves was the only site in this category to experience in uptick in customer satisfaction: its score rose 1.4% from last year to 72.
When news stagnates... News & information sites have stayed true to their objective of being content providers. On an aggregate level, customer satisfaction with news & information sites stayed the same as last year, with a score of 75. This score is tied with portals, but below the search engine category score of 80. Unlike the portal and search engine groupings, customer satisfaction with the news & information sites, on aggregate, has not increased dramatically since they were first measured. Since 2002, the customer satisfaction score for the news & information sector has risen 2.7%, compared to 17.6% for search engines and 10% for portals (from when they were first measured in 2000).
The internet is challenging traditional media as the preferred channel for getting news information, especially among younger audience segments. Being able to offer "on demand" information to the consumer gives the Internet news providers a distinct advantage over more traditional channels. However, the news and information sites have not been able to distinguish themselves from each other. All the sites measured scored between a 74 and 72, an almost indistinguishable difference. Recent announcements about providing more streaming video on their sites reflect an attempt to continue to "push" the experience and differentiate themselves from competitors. It is going to be hard to create that differentiation with technology or functionality. It will more than likely have to be done by creating a unique personality as traditional news channels have done over the years.
The stakes are high for these sites as they extend their traditional brand online, however none of these sites appear to be able to create the loyalty amongst users that their traditional channels have been able to accomplish. Part of the problem is that the portals and search engines own the gateway to the Internet for most consumers; and often web browsers access news via a portal or search engine. Add in the growth of RSS and the portals and search engines have become content providers, which on the surface is not all bad. However it limits the ability of news-specific sites to generate ad revenue via their sites. This could lead us down the path of either advertising to become more embedded in RSS and portal feeds or more paid-subscription models. The revenue model must exist for these news sites in order for them to continue to grow.
Conclusions In the war for supremacy to be the leading interface to the internet, Google and Yahoo are neck and neck in terms of satisfying their customers ad are leading the pack in revenue growth: not a surprise at all. But the race is far from over. Each of the major content facilitators has a potential advantage in this very competitive space.
Google brings great credibility and a dominant position as the search leader. They continue to push the functionality barriers and are ready to go head-to-head with their competitors on every front, even attacking the desktop stranglehold Microsoft has had for so long, with the introduction of desktop search and the rumours of their interest in building a browser. Other sites are equally vulnerable as Google prepares to launch a competitor to PayPal in the commerce arena.
Yahoo has always had the widest range of services available and they continue to try to hold that advantage. With their recently launched music service, they continue to expand their functionality. If they can continue to stay ahead of the competition by introducing new functionality, it will give them a great advantage.
MSN has always had the desktop advantage thanks to Microsoft Windows. Yet, they have not fully capitalised on that advantage and trail Yahoo and Google. If they can capitalise on their inherent advantage, they can compete. However, Google and others will continue to challenge Microsoft with desktop-friendly new functionality.
AOL has struggled in the past few years to meet customers' evolving needs, despite their behemoth size. However, they appear to be moving clearly in the right direction. They are listening to their customers and delivering on those needs and desires, even adjusting their delivery models to meet the maturing Internet users' needs. If AOL can leverage their competitive advantage of superior content, they can once again compete with the leaders.
And AskJeeves can not be forgotten. While they have stayed pure to search, the acquisition by Interactive Corporation offers great promise. The leveraging of the various brands under that umbrella could make for a very competitive battle.
So, who wins? Today Google and Yahoo are the winners, leading in both satisfaction and revenue growth. However, each of the competitors has a strength which, if it can be leveraged, could make them a force to be reckoned with.
Larry Freed a web effectiveness and customer satisfaction expert, and is president and CEO of ForeSee Results, an online customer satisfaction measurement and management company that uses the methodology of the American Customer Satisfaction Index (ACSI) for its research. The ACSI is a cross-industry measure of consumer satisfaction with the quality of goods and services available in the USA. All charts and figures shown here are reproduced with the kind permission of ForeSee Results.