Whether or not a website is effective is primarily dependent on the intended purposes of the website and the usability of it. As such, one of the two choices should not apply to every company.
If the purpose of the website is to be a static page much like a print work/flyer but happens to be on the web, for example when it's meant only to provide the contact info, address, menu, and prices for a restaurant, then a fancily designed website is not required. The quality of the visual design of the website, if it exists, can have an effect on the perceived quality of the restaurant, but if in the end it meets its primary function - to show what the restaurant has to offer and how to get there - it's acceptable for most cases. In this situation, users simply will not spend a lot of time using the website regardless of how well it is designed because that's not it's function. Furthermore, for lots of businesses, clients wouldn't even think to look for a company website, let alone use it regularly.
Also, one can get a nicely designed print-like website without paying a special design team to create the site. There are a lot of templates meant for such occasions, and ample freelance developers (especially outside of developed nations like the U.S.) who implement these types of sites for dirt cheap. That's the reason why most high quality web development companies won't even accept this type of work - they simply cannot match the pricing offered by overseas developers. Using this approach, the developer work is nearly wholly a service implementing an already built product, not adding value directly by their work - which is perfectly acceptable in some cases.
If a business is going to go with this approach, they should look for sites that they like before talking to a developer and show those sites to the developer to assure that, while they are likely still getting mostly premade content, the final result will be what they actually want and not some outdated/poor website that could actually take away from the power of the content.
I know some companies that had a website but later removed it because it was a cost that didn't bring many new customers or retain old ones in of itself. For these businesses, a "business page" on a social network like FaceBook or on a food services website was sufficient and free.
If a website is not very usable for its intended purposes, regardless of who made it or for how much, it's a bad website.
With that being said, if the purpose of the site is something beyond a static, print-like page, is attempting to provide a service other than just advertise their own offline service, or if they are trying to reach certain types of people who judge businesses heavily based on their websites (which is relatively few), it could very well be more beneficial to pay a web development company to create their website and could harm their business if they have a poor website. It goes without saying that web-based/focused companies are in this category.
The biggest category that I see falling into this are when companies seek to offer some sort of service on the website itself. This could range from buying things, building user trust, having users create a profile to keep track of favorites/upload content, to some other related concept, but what they all have in common user involvement as part of the function of the site. Having a poor user flow or visual design on sites like these leads to a more poor experience and thus less interaction, and generally revenue. This is what companies (both design/development companies implementing these sites and the businesses themselves) hope to avoid.
Simply put, web design/development companies are usually pretty dang good at their job. Given purposes for the website, it's their job to make it more profitable than posting bleak, poorly formatted content. They build experiences and build user trust. If they fail to create a useful and effective website they will likely lose that client in the future and perhaps others that the client knows as well. They (should) know the trends, create quality work, and create a good environment for users, adding value to the site past what just the content has to offer. This, at times, has enormous value to a business because it adds value past the content.
I suppose it comes down to acquiring and retention of customers. If the purpose of the site is to acquire a higher proportion of viewers - and people actually have reason to go to the website in the first place - hiring a respectable web company is likely worth their money. The same goes for retention: if the purpose of the site is to retain customers and it's a deciding factor in doing so, spending good money on a website is likely worth it. Having a poor experience for the user could lose that customer.
If neither of these are true, there may not be good reason to hire a high quality web development company. In any case, the situation has to be analyzed based on the business itself, the purposes behind the website, and on the cheapest method of achieving those goals effectively.