Every day more big financial services companies commit themselves to spending multiple millions of dollars to develop e-commerce capabilities.

FleetBoston Financial Corp. will spend $100 million over 18 months on its Internet strategy, which includes linking brokerage and banking sites. Charles Schwab Corp. is spending nearly $150 million annually to move customers on-line.

Everywhere we turn, forward-looking chief executive officers have created separate e-commerce groups and given them resources, staffs, and blank checks.

But what do you say if someone asks how it all gets paid back? Or even where to start? The question traditional financial services providers should be asking themselves is what, exactly, are they getting for their Internet investments?

The good news is that Internet success does not have to be a mystery. The veteran e-commerce companies that have grown quickly and profitably know it's a business, after all. As more and more traditional corporations hammer out strategies to profit from the Internet, they need to ensure that these strategies include concrete measures of profitable, sustainable growth. To establish hard measures, the veteran managers know the answers to the following questions:

How quickly should I be transitioning to the new economy? What customer and revenue growth rates should I expect as milestones toward profit? When should my initiatives break even? How do I know whether I am winning against my competitors?

The most important measure of the time an Internet company takes to grow to maturity, or "time to scale," is rate of revenue growth. Profitable veterans like Net.Bank and Ameritrade, are achieving 50% to 100% annual revenue growth. High-potential startups like Telebanc are growing at more than a 100% rate, and phenomena like NextCard at more than 1,000%.

Even Schwab, a more established brokerage, which is building off a much larger base of customers, is growing at about 30% per year. Bain & Co.'s study of the 30 companies on TheStreet.com Index finds average annual revenue growth of 243%. Without NextCard, the average is 123%.

The right target for annual growth in new, on-line operations is 100% or better.

If your strategy is to build revenue, each initiative should be held up to this growth goal. If you have the advantages of loyal customers, a developed brand, and strong product or service delivery, you ought to set more aggressive on-line growth goals, bearing in mind that the Internet can be used to deepen existing customer relationships as well as to attract new ones.

Next take a hard look at costs. For traditional companies, Internet profit often comes through cutting off-line costs as well as adding Web revenues. The key measure here is rate of customer shift to on-line channels.

One secret to Schwab's success is that 15% of its customers have moved from off-line to on-line interaction each of the past three years, halving the costs per customer. By contrast, when banks added automated teller machines, call centers, and other lower-cost delivery channels in the 1980s, many failed to shift customers. They just multiplied transactions, actually driving up costs per customer 3.4% a year.

Are you tracking costs per customer? Are you investing enough to market and shift channel use? What is e-commerce doing for your margins? If you don't manage the movement from and to channels, you can lose money in a hurry.

Though Schwab accounts for only 40% of on-line trades, it has dominated the profit pool by capturing 70% of the net earnings in on-line brokerage. That means thin margins or losses for a number of its competitors. Total Internet brokerage margins have declined from 19% to 6% since 1997 because of pricing pressure and rising customer acquisition costs.

Converting browsers to buyers is the key to shifting customers on-line. In general the odds are daunting. At the average e-commerce site only 6% of visitors buy anything. Meanwhile, 60% of consumers consider purchasing over the Internet unsafe, and two-thirds are not confident about doing business with companies that lack a street-level presence.

But the odds can be beaten, especially in financial services, where 33% of stock trades have moved on-line. The winning formula includes tracking conversions and adjusting marketing efforts to boost them. Here, traditional companies should take a lesson from the pure plays: Amazon has achieved a conversion rate of 48%; eBay 31%. Macy's.com and Gap Online sit at only 12% and 11%, respectively.

A related measure is the repeat-purchase rate, a gauge of a site's "stickiness." Again, the pure plays have it, with eBay at 80%, eToys at 70%, and Amazon with its one-click purchase feature at 60%. If your financial services site is scoring less than 60%, benchmark these sites and invest to adjust yours. The veteran Schwab outspends its competitors significantly in sales and marketing - and reaps the benefit.

Finally, don't be proud of losses. Don't assume that an e-business of tomorrow can't make money today. Almost half of e-commerce ventures are already profitable. Ameritrade made money in its first year. Net.Bank posted its first earnings in two years, and Internet star Yahoo in three.

The worst drops in stock prices happen to companies that are not profitable.

So how do you win? Once you are growing at 100% a year, cutting costs per customer, increasing conversion and repurchase rates, and can see your way to actually making money, how will you know when you are ready to outstrip competitors?

Again we return to a business fundamental: scale. Cyberspace is vast, but as in any commercial space, size and scope count. If you are large enough to squeeze out or deter competition through greater flexibility in pricing and cost-sharing, you win.

For traditional companies, this augurs for keeping on-line businesses integrated into overall operations, not spinning them off.

Fleet, Citigroup Inc., Schwab, and others can set the stage for success by setting expectations for growth higher - and for profits sooner. Firm up cost/benefit measures, and keep your business integrated. Winning the e-commerce war should be a well-calculated business risk, not a blind gamble. Mr. Aboaf is vice president, Mr. Farkas managing director, and Mr. Johnson a director in global financial services at Boston-based Bain & Co. Consultant Dean Profis assisted with this article.

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