If you see below image, there are two applications deployed to IIS.
Option 1 is working without any issues, but as you see InstallShieldPOCWebApplication it looks like foder rather than web site. Also it does not work.
How can I deploy application as website using INSTALLSHIELD
Here is my IIS Settings from InstallShield Tool
Default Web Site is a website. QManualDeployment is a virtual directory / application off of Default Web Site.
In InstallShield, it isn't enough to just author all of your directories/files into components. You also have to define the IIS configuration.
I'm not sure if you are using InstallShield Express, Professional/Premier of Limited Edition so I can't give you more direction then that.