Chapter 4

Advertisement in Electronic Commerce

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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

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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

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

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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
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Web Advertisement (cont.)

Why Internet Advertisement?
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
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Web Advertisement (cont.)

Internet vs. Traditional methods
Combining advertising media Internet is the fastest growing medium in history

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Figure 5-1 Adoption Curves for Various Media

Source: Morgan Stanley Technology Research.

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Web Advertisement (cont.)

Objectives and growth of Internet advertisementpersuade 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)
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Web Advertisement (cont.)

Targeted Advertisement (one-to-one) The DoubleClick (DC) Approach3M /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)
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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
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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
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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

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Advertisement Methods
Banners--banners are everywhere
Keyword banners
Benefits
Customized to the target audience or one-to-one ads Utilize force advertising marketing strategy Direct link to advertiser Multi media capabilities

Random banners
Limitations
High cost Declining click ratio viewers have become immune to banners Size of banners is too small

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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 Use the credit to advertise on others sites
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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
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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
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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
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Advertisement Methods (cont.)

Mobile phones
Interactive one-to-one ads Location, situation, weather-related ads

Splash Screen
Capture the users 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
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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
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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
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Advertisement Strategies
Internet-based Ad Design
Visually appealing Targeted to specific groups or to individual consumers Emphasize brands and a firms image Part of an overall marketing strategy Seamlessly linked with the ordering process
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Advertisement Strategies (cont.)

Internet-based ad design: important factors
Page-loading speed
Graphics and tablessimple, 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
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Advertisement Strategies (cont.)

Internet-based Ad Design: Important Factors (cont.)
Navigation efficiency and compatibility
Linkswell-labeled, accurate, meaningful Sitecompatible 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 purchasesdelivery information, return policy, etc. Confirmation page after a purchase
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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 Worldnon-commercial site that guides the process of finding customers requests Yahooportal search engine site regarded as effective aid for advertisement
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Advertisement Strategies (cont.)

Push (Active) Strategy
Sending e-mails to relevant people Obtaining mailing listprocess of identifying target customers Mailing list generationuses agent technology, cookies, and questionnaires (filled out by customer)
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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
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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
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Advertisement Strategies (cont.)

Viral marketingword-of-mouth over the
Internet
Easily forwarded e-mail messages from sites Forward sites by filling out e-mail addresses Advocacy marketinghotmail.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
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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
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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

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Figure 5-3
Illustrative Screen for Product Comparison

Source: Korean Engine (no longer in business).

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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
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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
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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

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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

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Push Technology (cont.)

Pointcastingmass 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

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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
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Intelligent Agents
Product Brokering
Knows the customers 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
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Effectiveness and Pricing of Advertisement

Methods for measuring advertisement effectiveness, conducting cost benefit analyses, pricing ads
Exposure Models
Multiple of number of guaranteed ad views
Number of hits

Interactivity
Based on how customer interacts with the ad view How much time was spent viewing the ad

Click-Through
Number of times customers click on banner

Actual Purchase
Referral fee based on

customers moving to ad site to Only effective for large make a purchase corporations Preston University North Campus
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Online Catalogs
Evolution of online catalogs
Merchantsadvertise and promote Customerssource 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
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Online Catalogs (cont.)

Classifications of catalogs
Dynamics of information presentation
Static catalogstextual description and static pictures Dynamic catalogsmotion pictures, graphics, sound

Degree of customization
Ready-made catalogs: same catalog to all customers Customized Catalogs: customized contents and display depending Campus the customers upon Preston University North
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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

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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
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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
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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
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Managerial Issues
Make vs. buy Finding the most visited sites Company research Commitment to Web advertising and coordination with traditional advertisement

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Managerial Issues (cont.)

Integrated marketing campaigns Ethical Issues Integrating advertisement with ordering and other business processes Content is critical

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