Does Broadband 'Cause' Development? Does it 'Cause' Education? Does the Web Behavior Cause Sales Growth?

Whether business owners are more successful because they use the web, or use the web because they are more skillful is impossible to resolve. One might as well ask whether Internet use causes educational attainment. There might be a strong correlation, but that does not mean causal effect.

 

To be sure, a new study sponsored by Portfolio suggests that the more engaged small business owners are with the web, the more successful they are. The implication is that web usage drives success.

 

The problem is that it is impossible to know whether use of the web and success are causal, or merely related. "People with higher Internet involvement are more successful businesses," argues Godfrey Phillips, American City Business Journals VP. "I think it's because that's how you do business these days."

 

It would be hard to argue with the basic proposition. But the existence of the relationship is not definitively causal. One might argue that more-effective salespeople use the Internet more than less-effective salespeople. But the best salespeople might use the web because they already know how to be the best salespeople.

The survey of 1,762 owners, CEOs, and presidents of businesses with five to 499 employees looked at just what those business owners were doing online. It assessed 33 different activities, from following the news to writing blogs and commenting on content to shopping and selling online. The business owners were then separated into five personae depending upon their online activity.

 

"Viewers" have the lowest net worth and investment portfolio among all the personae, and they run the smallest companies. But they also are the youngest, so they arguably are just beginning their careers and businesses.

 

They like their music, entertainment news, and sports. But they don't get a whole lot of use out of the Internet beyond superficial entertainment, Portfolio notes. They make up 21 percent of the small business leaders interviewed. But they account for just 10 percent of the small-business sales, and that's all sales, not just Internet sales.

 

"Commentators" are the youngest of all the groups, has more women than most, and has the most minority-owned businesses. Members of this persona work out of the home more than any of the other groups and they work the longest hours. They're the highest users of blogs, but the least-active buyers of stuff online.

 

They'll comment on articles, and they'll blog. But that's about all they do online. Seventeen percent of business leaders fall into this group, and like the viewers, they underperform, with only 14 percent of the sales. Again, note that this group is the youngest, and also heavily home-based workers, factors that might suggest why they are not among the top gross revenue generators.

 

"Interactors" tend to have higher educations, represent the largest companies and have the most sales in the survey. Nobody should be surprised at these correlations, either.

 

Members of this persona use the Internet to keep up with business news, download software, research and buy business products and services, make travel plans, and much more. They make up 15 percent of the small-business owners surveyed, but account for 24 percent of small-business sales.

 

"They just do more of everything, and they don't watch music videos," said Phillips. "They're using it as a business tool, totally."

 

"Investors" include the oldest business owners and the oldest companies, with the highest net worth and the highest household income.

 

They are less active than their interactive counterparts when it comes to mining business applications and buying plane tickets online. But where they're very active is in consuming news and banking and investing online. But they're not big on buying or selling online.

 

Still, investors account for 22 percent of businesses and 23 percent of sales.

 

"Transactors" are the second-oldest business owners, they represent the second-oldest batch of companies, and they have they second-highest level of sales. One demographic category where they stand out from the pack is that they have the lowest household incomes.

 

These are the business owners who use the Internet to research the competition, service customers, download software, sell products, and keep their own businesses' websites up to date. Where transactors truly shine is in sales share. They account for 25 percent of the small-business leaders surveyed, and 29 percent of the sales, the highest among all of the personae.

 

"You can't be out of the Internet and be a successful business person," Phillips said. "It would just be impossible."

 

The research is fine as far as it goes. There likely is some difference between active and less-active Internet users.

 

The problem is that there is a readily-available answer for why some groups use the Internet more, and have higher sales or incomes.

 

Older business owners do better than younger business owners. Among the likely reasons is that they are the survivors of a winnowing process. They are still in business because, for whatever reason, they have succeeded where others have failed.

 

Better-educated executives work in settings with higher sales. Again, one might suggest there are other factors at work here than simply how people use the Internet. Other studies also show a correlation between education and broadband use, for example. But it would be faulty reasoning to suggest that broadband use "causes" educational success.

 

That would seem to be the case here: a relationship exists, but we cannot say for certain whether there is a causal effect.