Part One: Chapter Three Networks

1. Part One: Chapter ThreeNetworks “The science of networks has taught us that distance is deceiving. That two individuals can be connected through a short chain of network ties – through only six degrees – is a claim about the social world that has fascinated generation after generation.” Duncan Watts, Six Degrees: The Science of a Connected Age

2. The Evolving Internet • A decade of rapid growth ends with the transition to a more mature market

3. The Evolving Internet • A decade of rapid growth ends with the transition to a more mature market • Experienced users more likely to engage in online commerce and upgrade to faster connection services

4. The Evolving Internet • A decade of rapid growth ends with the transition to a more mature market • Experienced users more likely to engage in online commerce and upgrade to faster connection services • The seasoned user also moves away from exploratory “surfing the Net”

5. Changing Patterns in Global Net UseThe declining share of U.S. Internet users Source: World Bank, U.S. Census

6. An Information Explosion, On the Go • Music, books and home videos all contribute to a sea of information

7. An Information Explosion, On the Go • Music, books, x-rays and home videos all contribute to a sea of information • Internet users increasingly obtain information from mobile devices

8. An Information Explosion, On the Go • Music, books, x-rays and home videos all contribute to a sea of information • Internet users increasingly obtain information from mobile devices • Instant messaging and text messaging create new frontier for marketers

9. An Information Explosion, On the Go • Music, books, x-rays and home videos all contribute to a sea of information • Internet users increasingly obtain information from mobile devices • Instant messaging and text messaging create new frontier for marketers • Blogs, pod-casts and beyond create new challenges for reaching audience

10. Source: Pew Internet & American Life Project Training Survey, February 2004

11. Second Generation Internet • The early Internet served basic documents to anonymous users, helping drive widespread use but limiting its performance and security

12. Second Generation Internet • The early Internet served basic documents to anonymous users, helping drive widespread use but limiting its performance and security • Second Generation Internet focuses on more descriptive content and ways to reliably authenticate users

13. Understanding Social Networks • Network connections grow faster than the number of participants

14. Understanding Social Networks • Network connections grow faster than the number of participants • Extensive local clustering: friends tend to have the same group of friends

15. Understanding Social Networks • Network connections grow faster than the number of participants • Extensive local clustering: friends tend to have the same group of friends • Small worlds: connecting any two people on a network with limited steps

16. Understanding Social Networks • Network connections grow faster than the number of participants • Extensive local clustering: friends tend to have the same group of friends • Small worlds: connecting any two people on a network with limited steps • Hubs and Connectors spread information more quickly than other members

17. Understanding Social Networks • Network connections grow faster than the number of participants • Extensive local clustering: friends tend to have the same group of friends • Small worlds: connecting any two people on a network with limited steps • Hubs and Connectors spread information more quickly than other members • OK to lose members randomly, but networks vulnerable to deliberate attack

18. Marketing Value in Networks • Networks are most valuable when they are ubiquitious: the power of the ever present

19. Marketing Value in Networks • Networks are most valuable when they are ubiquitious: the power of the ever present • Increased speed can transform business

20. Marketing Value in Networks • Networks are most valuable when they are ubiquitious: the power of the ever present • Increased speed can transform business • Participants expectations are important and can be shaped by publicity and hype

21. Marketing Value in Networks • Networks are most valuable when they are ubiquitious: the power of the ever present • Increased speed can transform business • Participants expectations are important and can be shaped by publicity and hype • Resource sharing benefits knowledge

22. Marketing Value in Networks • Networks are most valuable when they are ubiquitious: the power of the ever present • Increased speed can transform business • Participants expectations are important and can be shaped by publicity and hype • Resource sharing benefits knowledge • Greater opportunity for specialization and challenges in branding

23. Ubiquity Metcalfe’s Law The value of a network starts to grow at a rate that is the square of the size of the network

24. To Understand How Metcalfe’s Law Plays Out, Let’s Take A Look At Some Recent Headlines

25. Headline Name of Publication - Date Insert excerpts from a current article out of the business press (e.g. Wall Street Journal, Wired News, Business 2.0, or Fast Company) that talks about the increasing number of people online. I usually take excerpts out of the lead paragraph, and highlight keywords. I’ve found articles on the surging Net population in China, for example, that nicely illustrate Metcalfe’s law.

26. Ubiquity Metcalfe’s Law The more people on line, the bigger the e-commerce opportunity

27. Ubiquity Opt-In, Opt-Out, Spam • Spam is a drawback to ubiquity • Net marketers must choose what terms they offer users • No restrictions: the company has unrestricted use of the information it gathers on visitors to its site • Opt-out: users can choose not to receive any solicitation • Opt-in: users can give permission to receive relevant solicitations • No sharing: the company cannot use or sell user information

28. Expectations • Publicity and Celebrity • Hype plays a large part of any Net marketing campaign • Jeff Bezos, Amazon • The economic logic of hype • Celebrity endorsements, media stories, and general “buzz” create an aura of success

29. Sharing • Low connection costs lead to sharing • Shared resources enable companies to launch a Net presence more easily and cost-effectively

30. Specialization • The Internet makes it easier to bring resources together from a wide range of alliance partners • Each alliance partner specializes in providing particular content • Visit any portal or search engine • Yahoo! • Excite • Alta Vista • Lycos • AOL

31. Virtual Value Activities • A VVA takes information as input and outputs new kinds of information that helps customers • solve problems • make better decisions • entertain themselves

32. Clusters and Connections • Within clusters, connections made even more rapidly • Any two members can usually be connected with only a few links • Kevin Bacon and Six (or fewer) Degrees of Separation

33. Why The Net Works • Open technology standards enable the Internet to grow (scale) • Open standards • software protocols and operations are readily available • they are documented widely • they aren’t controlled by any one firm • Scalability refers to the ability to add locations, paths, capabilities, and resources to the Net without having to reengineer the whole thing

34. Why The Net Works • It’s reliable and efficient • Multiple connections • There are a number of ways to connect to each node on the network • Even if multiple links aren’t working, a message can still get through • Packet switching • Messages are broken up into pieces called packets • This allows many users to simultaneously share network resources

35. The Five Virtual Value Activities • Selecting • Synthesizing • Enabled by technologies that build up profiles of users (implicit) and allow a user to input preferences (explicit) • Selects the most relevant info (to a given user) and makes it the most obvious • My Yahoo! • Preferred customer pages

36. The Five Virtual Value Activities • Gathering: assembles info & links, so the user only has to go to one site instead of many • Organizing: places info into categories and presents a structure that enables the user to find what he/she is looking for • Distributing: using the Web to publish info and make it widely available

37. When The Net Stumbles • Outages on the Net are quite rare • Congestion and delay is more common • Access lags are caused by limited transmission capacity from the user to the Internet • Faster connections will enable marketers to utilize and send richer content • Transmission lags are caused by limited transmission capacity from the user’s ISP to the server’s ISP • Server lags refer to the time that a server takes to recognize and fulfill a user’s request

38. Networks Inside Companies • Internet marketing uses Net technologies to reach out to customers • Many companies divide their Net activities into three categories • the public Internet, managed by the marketing department • the extranet, connects the company with it’s major suppliers • the intranet, available only to the company’s employees

39. Visible to the public • Managed by marketing • Visible to suppliers & • B-to-B customers • Supply chain management • Managed by marketing • & logistics • Internal to a company • Available only to employees • Often managed by HR How Companies Organize Net Activities

40. Contrasting Internal and External Network Roles

41. Study Question 1 Which of the following is an example of a market that has moved from local to a national or global audience by going online: A) Banking B) Education C) Insurance D) A and b only E) All of the above

42. Study Question 2 The leading driver of Internet usage is: A) Email B) Ecommerce C) News sites D) Financial sites

43. Study Question 3 With basic documents and anonymous users, the first generation of the Internet facilitated all of the following EXCEPT: A) Wide use B) Low cost C) Secure interactions D) Expansive exchanges

44. Study Question 4 Each of the following is considered an important step for marketers in creating value in online information EXCEPT: A) Gathering B) Producing C) Organizing D) Distributing

45. Study Question 5 When using networks, marketers must utilize a diverse mix of technology and what? A) Information downloading B) Information processing C) Social interaction D) Social engineering