Chapter 5 Advertisement in Electronic Commerce

1. Chapter 5Advertisement in Electronic Commerce Prentice Hall, 2002

2. Learning Objectives • Describe the objectives of Web advertisement, its types and characteristics • Describe the major advertisement methods used on the Web • Describe various Web advertisement strategies Prentice Hall, 2002

3. Learning Objectives (cont.) • Describe various types of promotions on the Web • Discuss the benefits of push technology and intelligent agents • Understand the major economic issues related to Web advertisement Prentice Hall, 2002

4. Learning Objectives (cont.) • Describe the issues involved in measuring the success of Web advertisement as it relates to different pricing methods • Compare paper and electronic catalogs and describe customized catalogs • Describe Web advertisement implementation issues Prentice Hall, 2002

5. Opening Case: Advertisement in the Digital Economy • Theknot.com and Wedding411.com • Information about planning weddings • Assistance selecting vendors • Site includes promotions and ads from vendors • Promosinmotion.com • VW bugs painted with Web site logos • Dislplayed online and offline • Topbulb.com • Online catalog for light bulbs • Also displays the off-line business Prentice Hall, 2002

6. Opening Case: Advertisement in the Digital Economy • Toyota • Promotes its SUV with banners on altavista.com • Kelly Blue Book (kbb.com) links to Toyota site • IBM • Uses banners linked to college campuses to promote recruitment • “Club Cyberblue” became the scheme for restructuring their traditional plan Prentice Hall, 2002

7. Ad views Banner Click (ad click) Click ratio Cookie CPM Effective frequency Hit Impressions Reach Visit Web Advertisement • Advertising is an attempt to disseminate information in order to affect a buyer-seller transaction • Internet Advertising Terminology Prentice Hall, 2002

8. Web Advertisement (cont.) • Why Internet Advertisement? • 3/4 of PC users gave up some television time • Well educated, high-income Internet users are a desired target for advertisers • Ads can be updated any time with a minimal cost; making them timely and very accurate • Ads reach very large number of potential buyers all over the world • Online ads are much cheaper in comparison to television, newspaper, or radio ads Prentice Hall, 2002

9. Web Advertisement (cont.) • Web ads effectively use text, audio, graphics, and animation • Ads easily combine games, entertainment, and promotions • Web TV and Internet radio are attracting more people • Web ads can be interactive and targeted • The use of the Internet is growing very rapidly Why Internet Advertisement? Prentice Hall, 2002

10. Web Advertisement (cont.) • Internet vs. Traditional methods • Combining advertising media • Internet is the fastest growing medium in history Growing Fast Prentice Hall, 2002

11. Figure 5-1Adoption Curves for Various Media Source: Morgan Stanley Technology Research. Prentice Hall, 2002

12. Web Advertisement (cont.) • Objectives and growth of Internet advertisement—persuade customers to buy a certain product or service • Targeted Advertisement (one-to-one) • Customize ads to fit individuals • Can be expensive as well as rewarding • Gain cost effectiveness by targeting groups (based on segmentation) Prentice Hall, 2002

13. Web Advertisement (cont.) • Targeted Advertisement (one-to-one) • The DoubleClick (DC) Approach—3M /ciro, wants to advertise its $10,000 multimedia projectors • DC monitors people browsing the Web sites of cooperating companies • Matches them against a database • Finds those people working for advertising agencies or using Unix system (potential buyers) Prentice Hall, 2002

14. Web Advertisement (cont.) • Targeted Advertisement (one-to-one) • The Double Click (DC) Approach for 3M Corp. (cont.) • Builds a dossier on you, your spending, and your computing habits using ‘a cookie’ • Prepares an ad for 3M projectors targeted for people whose profile matches what is needed for 3M • DoubleClick shares revenue with cooperating partners Prentice Hall, 2002

15. Web Advertisement (cont.) • Pros of Internet Advertisement • Internet advertisements are accessed on demand 24 hours a day, 365 days a year, and costs are the same regardless of audience location • Accessed primarily because of interest in the content, so market segmentation opportunity is large Prentice Hall, 2002

16. Web Advertisement (cont.) • Pros of Internet Advertisement (cont.) • Opportunity to create one-to-one direct marketing relationship with the consumer • Multimedia will increasingly make Web sites more attractive and compelling Prentice Hall, 2002

17. Benefits Customized to the target audience or one-to-one ads Utilize “force advertising” marketing strategy Direct link to advertiser Multi media capabilities Limitations High cost Declining click ratio—viewers have become immune to banners Size of banners is too small Advertisement Methods Banners--banners are everywhere Keyword banners Random banners Prentice Hall, 2002

18. Advertisement Methods (cont.) • Banner swapping • Direct link between one site to the other site • Ad space bartering • Banner exchanges • Firm submits a banner • Receives credit when shows others’ banners • Can purchase additional display credits • Specify what type of site where the banner is displayed • Usethe credit to advertise on others’ sites Prentice Hall, 2002

19. Advertisement Methods (cont.) • Banner exchanges (cont.) • Credit ratio of approximately 2:1 • Example: Link Exchange (bcentral.com) • Helps design banners • Provides membership in newsgroups • Delivers HTML tutorials • Runs contests • Is a banner-ad clearing house for more than 200,000 small Web sites • Monitors the content of the ads of all its members Prentice Hall, 2002

20. Advertisement Methods (cont.) • Standard (pop up boxes that look like newspaper or magazine ads) and classified ads • Micro-sites • 5 advertising sizes larger than banners • Pop-up boxes at sites they are linked to • Classified ads • Special sites (classifieds2000.com) • Free or for fee depending upon size Prentice Hall, 2002

21. Advertisement Methods (cont.) • E-mail • Several million users may be reached directly • Purchase e-mail addresses • Send the company information (low cost) • A wide variety of audiences (customer database) • Target a group of people that you know something about • Problems: • Junk mail • Spamming Prentice Hall, 2002

22. Advertisement Methods (cont.) • Mobile phones • Interactive one-to-one ads • Location, situation, weather-related ads • Splash Screen • Capture the user’s attention • Promotion or lead-in • Major advantage: create innovative multimedia • Spot leasing • Permanent space on popular portal or Web page • Ads may be small and expensive Prentice Hall, 2002

23. Advertisement Methods (cont.) • URL (Universal Resource Locators) • Advantages: • Minimal cost is associated with it • Submit your URL to a search engine and be listed • Keyword search is used • Disadvantages: • Search engines index their listings differently • Meta tags can be complicated Prentice Hall, 2002

24. Advertisement Methods (cont.) • Chat Rooms • Virtual meeting ground • Free addition to a business site • Allows advertisers to cycle through messages and target the chatter again and again • Advertising can become more thematic • More effective than banners • Used for one-to-one connections Prentice Hall, 2002

25. Advertisement Strategies • Internet-based Ad Design • Visually appealing • Targeted to specific groups or to individual consumers • Emphasize brands and a firm’s image • Part of an overall marketing strategy • Seamlessly linked with the ordering process Prentice Hall, 2002

26. Advertisement Strategies (cont.) • Internet-based ad design: important factors • Page-loading speed • Graphics and tables—simple, meaningful, and match standard monitors • Thumbnail (icon, graphs) are useful • Business content • Clear and concise text with compelling page title and header text • Minimal amount of information requested for registration Prentice Hall, 2002

27. Advertisement Strategies (cont.) • Internet-based Ad Design: Important Factors (cont.) • Navigation efficiency and compatibility • Links—well-labeled, accurate, meaningful • Site—compatible with browsers, software, etc. • Security and privacy • Security and privacy must be assured • Must provide option for rejecting cookies • Marketing Customer Focus • Clear terms/conditions of the purchases—delivery information, return policy, etc. • Confirmation page after a purchase Prentice Hall, 2002

28. Advertisement Strategies (cont.) • Pull (Passive) Strategy • Effective site provides helpful and attractive contents and display • Effective and economical way to advertise, unidentified potential customers worldwide • Advertising World—non-commercial site that guides the process of finding customer’s requests • Yahoo—portal search engine site regarded as effective aid for advertisement Prentice Hall, 2002

29. Advertisement Strategies (cont.) • Push (Active) Strategy • Sending e-mails to relevant people • Obtaining mailing list—process of identifying target customers • Mailing list generation—uses agent technology, cookies, and questionnaires (filled out by customer) Prentice Hall, 2002

30. Advertisement Strategies (cont.) • Associated Ad Display Strategy • Associate the content of a Web page with a related ad like: • Search Yahoo on a topic, a banner pops up offering “search for books at” • Amazon.com • Barnesandnoble.com • Keyword banners • Just-in-time strategy Prentice Hall, 2002

31. Advertisement Strategies (cont.) • Ads as a commodity • CyberGold (MyPoints.com) • Direct payment made by the advertisers for ads viewed • Consumers fill out questionnaires • CyberGold distributes targeted banners • Reader clicks the banner, passes some tests on its content, and is paid for the effort Prentice Hall, 2002

32. Advertisement Strategies (cont.) • Viral marketing—word-of-mouth over the Internet • Easily forwarded e-mail messages from sites • Forward sites by filling out e-mail addresses • “Advocacy marketing”—hotmail.com • Each e-mail sent invited free hotmail service • Company grew from 0 to 12 million in 18 months • Downsides • E-mail hoaxes • Spread of viruses Prentice Hall, 2002

33. Implementing the Strategies • Customized ad strategy • Filtering the irrelevant information by providing customized ads • One-to-one advertisement • Customized ads in Webcasting • Personalized news and information by category • Users select specific categories they want to receive Prentice Hall, 2002

34. Implementing the Strategies (cont.) • Comparisons as medium for advertisement • Customer compares alternative products and services • Finds the least expensive place to purchase the item • Uses the comparison site that lists vendors and their prices for the product Prentice Hall, 2002

35. Figure 5-3Illustrative Screen for Product Comparison Source: Korean Engine (no longer in business). Prentice Hall, 2002

36. Online Events, Promotions,and Attractions • Enticing Web surfers to read Internet ads • Yoyodine, Inc. • Give-away games, discounts, contests, sweepstakes • Entrants agree to read product information of advertisers • Netzero and others offer free Internet access in exchange for viewing ads Prentice Hall, 2002

37. Online Events, Promotions,and Attractions (cont.) • Enticing Web surfers to read Internet ads • Egghead uses real people to help you • Lucent uses phone interviews that lead to material and ads sent to your computer • Retailers provide special offers as shoppers “check out” • Riddler provides opportunity to play games for prizes Prentice Hall, 2002

38. Online Events, Promotions,and Attractions (cont.) • Enticing Web surfers to read Internet ads • Netstakes runs sweepstakes (no skills necessary) • Register only once to win prizes randomly from different categories • Sends traffic to several channels that have multiple sponsors • Runs online ads both on the Web and in several hundred thousand e-mail lists • Offer free samples (freesamples.com) • Use company logo as cursor Prentice Hall, 2002

39. Push Technology • Benefits • Requested information they delivered automatically to their desktop via Web technology and the Internet • Decreases the number of hours used to search the Web Prentice Hall, 2002

40. Pointcasting—mass customization of information Pre-specification profile Select appropriate content Download selection 4 types of push technology Self-service delivery Aggregated delivery Mediated delivery Direct delivery Push Technology (cont.) Prentice Hall, 2002

41. Push Technology (cont.) • Push on the Intranet • Companies set up their own channels to pointcast important internal information to: • their own employees (on intranets) • their supply chain partners (on extranets) • The Future of Push Technology • Drawback: the bandwidth requirements are large • Experts’ prediction: the technology will never fly Prentice Hall, 2002

42. Intelligent Agents • Product Brokering • Knows the customer’s profile • Tailors ads to the customers, or asks them if they would like to receive product information • Alerts users to new releases • Recommends products based on: • Past selections • Constraints specified by the buyers Prentice Hall, 2002

43. Exposure Models Multiple of number of guaranteed ad views Number of hits Click-Through Number of times customers click on banner Only effective for large corporations Interactivity Based on how customer interacts with the ad view How much time was spent viewing the ad Actual Purchase Referral fee based on customers moving to ad site to make a purchase Effectiveness and Pricing of Advertisement Methods for measuring advertisement effectiveness, conducting cost benefit analyses, pricing ads Prentice Hall, 2002

44. Online Catalogs • Evolution of online catalogs • Merchants—advertise and promote • Customers—source of information and price comparisons • Consist of product database, directory and search capability and presentation function • Replication of text in paper catalogs • More dynamic, customized and integrated Prentice Hall, 2002

45. Online Catalogs (cont.) • Classifications of catalogs • Dynamics of information presentation • Static catalogs—textual description and static pictures • Dynamic catalogs—motion pictures, graphics, sound • Degree of customization • Ready-made catalogs: same catalog to all customers • Customized Catalogs: customized contents and display depending upon the customers Prentice Hall, 2002

46. Online Catalogs (cont.) • Electronic catalogs allow integration of • Order taking and fulfillment • Electronic payment • Intranet workflow • Inventory and accounting system • Suppliers’ extranet • Relationship to paper catalogs Prentice Hall, 2002

47. Customized Catalogs • Assembled specifically for: • A company • An individual shopper • Customization systems can: • Create branded, value-added capabilities • Allows user to compose order • May include individualized prices, products, and display formats • Automatically identify the characteristics of customers based on the transaction records Prentice Hall, 2002

48. Special Advertisement Topics • How much to advertise • Permission advertisement • Measuring, auditing, and analyzing Web traffic • Self-monitoring of traffic • Internet ad standards • Localization • Internet radio for localization Prentice Hall, 2002

49. Special Advertisement Topics (cont.) • Major Web ad players • Advertising agencies and Web site developers • Market research providers • Traffic measurement and analysis companies • Networks/rep firms • Order processing and support Prentice Hall, 2002

50. Managerial Issues • Make vs. buy • Finding the most visited sites • Company research • Commitment to Web advertising and coordination with traditional advertisement Prentice Hall, 2002