• by August 20, 2003

E-businesses are getting better overall in the view of their customers, but performance varies widely from company to company, according to the University of Michigan's American Customer Satisfaction Index (ACSI) study released on Wednesday.

The report, which includes measurements of search engines, portals, and online news and information websites as part of the e-business category, identifies a few outstanding performers and shows that Google, Yahoo!, and others are pulling off the extraordinary feat of morphing their business models without losing customer satisfaction and loyalty, while other companies lag behind.

Google and Yahoo! have scores that place them among the best performers of any of the roughly 200 top companies the ACSI measures on an annual basis. The new report revealed that AOL, though still a weak performer, has made a dramatic improvement in the past year and may be on the path to restoring the strength of its customer base. Meantime, the major news and information websites maintain a solid showing but demonstrate none of the signs that they dramatically impress their customers like the best Internet companies.

Overall, the ACSI e-business industry score improved over last year, up to 71.4 from 68.7 in 2002 (on a scale from 0-100). The e-business industry score trails the national ACSI score (73.8), which aggregates all industries measured by the Index, both online and traditional. Both the e-business score and the national average are dramatically below the rating consumers gave e-commerce (77.6) in a report released in February 2003.

Search Engines: Google has consistently been far and away the best performer in this category (82), and one of the best in any category measured by the ACSI. Ask Jeeves improved its performance an impressive seven points, up to 69, but nowhere near enough to make a dent in Google's lead. The other company named in the report, Alta Vista, trailed badly, earning only a 63. Both search engines lag "all others" in the category, mostly niche players who collectively earned a 78-which is a strong score that bears watching.

"Google's score is more than enough to dominate the search engine field," said web expert and ForeSee Results CEO Larry Freed. "In fact, their score shows they have one of the strongest relationships with their customers of any kind of company, online or offline. What's remarkable is that they are not leaving their customers behind while they continue to evolve their business model. That's a tough balancing act-and they're not just maintaining the strength of the customer asset, they are actually improving it from year to year."

Portals: Perennial laggard AOL is the most surprising story this quarter and made a dramatic six-point jump in performance. The increase brings AOL's score to 65, barely a low pass but an impressive leap in the right direction Yahoo! remains the dominant player in the category (78), with a two-point improvement over last year. MSN also moved up two points to 74, staying in the game but making no net headway. The score to beat among portals is 79, the average of other, smaller players measured as part of the ACSI sample.

"AOL's improvement is very, very impressive," said Freed. "People have said AOL was down for the count before and have been proved wrong. If AOL can keep this up, that company may prove once again how capable and resilient it really is. They said they were going to re-focus on customers and it looks like that was much more than lip service. They are looking like the AOL whose stock everyone used to want-aggressively innovating and earning customer loyalty. If they can do this amid all the issues with their parent company and huge changes in the online world, it will be one of the most impressive acts of the company's history."

Freed noted that AOL is building customer satisfaction even as it evolves its business model in multiple ways.

"The line is blurring between subscription-based services like AOL and Internet portals like Yahoo!," said Freed. "Both are taking on characteristics of the other, and both Yahoo! and AOL are increasing the strength of the customer asset base while they do this. It's also apparent that there are actually some ways in which AOL's merger is finally yielding some of that 'synergy' we heard so much about, like with AOL-only Time content."

News and Information: News and information sites proved to be solid, if unexciting, performers. MSNBC.com and ABCNews.com tied at 74, followed closely by CNN.com and USAToday.com, which tied at 72. There was little change upward or downward in the category. NYTimes.com brings up the rear again this year with a score of 70, down one point from last year.

"News sites show every sign of being, basically, a mature industry," offered Freed. "The innovation that we see come from hyper-competitiveness in so many online industries just doesn't exist in the news field. While some companies like Google and Amazon were created by and for the Internet, that's not the case with the major news organizations. News sites have basically created an online version of what they do offline and haven't felt the need to change much. This accounts for the big difference in scores as compared to Internet companies like Google and e-retail sites, which have felt the pressure to innovate and deliver intensively to customers."