1 © Prentice Hall, 2000 Chapter 4 Advertisement in Electronic Commerce

2 © Prentice Hall, 2000 Learning Objectives zDescribe the objectives of Web advertisement, its types and characteristics zDescribe the major advertisement methods used on the Web, ranging from banners to chat rooms zDescribe various Web advertisement strategies zDescribe various types of promotions on the Web zDiscuss the benefits of push technology and intelligent agents

3 © Prentice Hall, 2000 zUnderstand the major economic issues related to Web advertisement zDescribe the issues involved in measuring the success of Web advertisement as it relates to different ad pricing methods zCompare paper and electronic catalogs and describe customized catalogs zDescribe Web advertisement implementation issues ranging from ad agencies to the use of intelligent agents Learning Objectives (cont.)

4 © Prentice Hall, 2000 Opening Vignette : CD-Max Uses Lists to Advertise zCD- Max Enterprises yA two-person business specializing in CD-ROM development yOperates a resource site for information delivery yGenerated an list of site visitors xthe list is also valuable to other advertisers x50 lists were created to fit different advertisers xoutsourced the job of creating and maintaining the lists, and selling them to potential advertisers, to NetCreation which developed 275 lists from the names collected at CD-Max xthe list sales “surpassed” the company’s expectations xselling lists has become a lucrative business

5 © Prentice Hall, 2000 Web Advertising zAdvertising is an attempt to disseminate information in order to affect a buyer-seller transaction zWhy Internet Advertisement? yThree-quarters of PC users gave up some television time yInternet users are well educated with high- income, which makes them a desired target for advertisers yAds can be updated any time with a minimal cost; therefore they are timely and very accurate

6 © Prentice Hall, 2000 yAds can reach very large numbers of potential buyers all over the world yOnline ads are much cheaper in comparison to television, newspaper, or radio ads. Such ads are expensive since they are determined by space occupied, how many days (times) they are shown, and on how many national and local television stations and newspapers they are posted. yWeb ads can be media rich, including voice and video yWeb ads can be interactive and targeted yThe use of the Internet is growing very rapidly Web Advertising (cont.) zWhy Internet Advertisement?

7 © Prentice Hall, 2000 zInternet Advertising Terminology y Effective Frequency y Hit y Impressions y Reach y Visit Web Advertising (cont.) yAd views yBanner yClicks (or ad clicks) yClick Ratio yCookie yCPM

8 © Prentice Hall, 2000 zInteractive Marketing Web Advertising (cont.) yConsumer can click with his/her mouse on an ad for more information or send an to ask a question Volume sales Customer data Customer relationships Passive Active Food, personal-care products, beer, autos Credit cards, travel, autos Upscale apparel, travel, financial services, autos High volume Targeted goods Targeted individuals Madison Ave. Postal distribution centers Cyberspace Television, magazines Mailing lists Online services Storyboards Databases Servers, onscreen navigators, the Web Mass Marketing Direct Marketing Interactive Marketing Best outcome Consumer behavior Leading products Market Nerve center Preferred media vehicle Preferred technology Worst outcome Channel surfingRecycling binsLogoff

9 © Prentice Hall, 2000 zInternet is the fastest growing medium in history Web Advertising (cont.) Adoption Curves for Various Media - The Web Is Ramping Fast

zTargeted Advertisement (one-to-one) Web Advertising (cont.) yThe Double Click (DC) Approach x3M Corp. wants to advertise its $10,000 multimedia projectors xDC monitored people browsing the Web sites of cooperating companies xthen matches them against a database xthen finds those people working for advertising agencies or using Unix system (potential buyers) xthen builds a dossier on you, your spending, and your computing habits using “a cookie” xprepares an ad for 3M projectors xtargeted for people whose profile matches what is needed for 3M 10 © Prentice Hall, 2000

11 © Prentice Hall, 2000 zPros of Internet Advertisement Web Advertising (cont.) yInternet advertisements are accessed on demand 24 hours a day, 365 days a year, and costs are the same regardless of audience location yAccessed primarily because of interest in the content, so market segmentation opportunity is large yOpportunity to create one-to-one direct marketing relationship with the consumer yMultimedia will increasingly make Web sites more attractive and compelling

12 © Prentice Hall, 2000 yDistribution costs are low (just technology cost), so millions of consumers are reached at the same cost as that of reaching one yAdvertising and content can be updated, supplemented, or changed at any time, and are therefore always up-to-date yEase of logical navigation — you click when and where you want, and spend as much time as you desire there Web Advertising (cont.) zPros of Internet Advertisement

13 © Prentice Hall, 2000 Advertising Methods zBanners yBanners are everywhere yKeyword banners yRandom banners yBenefits xbe customized to the target audience xbe customized to one-to-one targeted advertisement xutilize “force advertising” marketing strategy zBanner Swapping yDirect link between one’s site to the other site yAd space bartering

14 © Prentice Hall, 2000 zBanner Exchanges ySwapping is a problem : a match is frequently not possible yBanner exchange organizations xa firm submits a banner xreceives credit when shows others’ banners xcan purchase additional display credits xspecify what type of site the banner can be displayed on xuse the credit to advertise on others’ sites xcredit ratio of approximately 2:1 xExample : Link Exchange offers help in banner design, provides membership in newsgroups, delivers HTML tutorials, and even runs contests. It acts as a banner-ad clearing house for more than 200,000 small Web sites. It also monitors the content of the ads of all its members. Advertising Methods (cont.)

15 © Prentice Hall, 2000 zPaid Advertising and Ad Agencies yAdvantage of using banners xability to customize them to the target audience xability to decide which market segments to focus on xbe customized to one-to-one targeted advertisement x“forced advertising” marketing strategy is utilized zSplash Screen yCapture the user’s attention yPromotion or lead-in yMajor advantage : create innovative multimedia Advertising Methods (cont.)

16 © Prentice Hall, 2000 zURL (Universal Resource Locators) yAdvantages: xminimal cost is associated with it xsubmit your URL to a search engine and be listed xkeyword search is used yDisadvantages: xsearch engines index their listings differently xmeta tags can be complicated Advertising Methods (cont.)

17 © Prentice Hall, 2000 z ySeveral million users can be reached directly yPurchase addresses ySend the company information; low cost yA wide variety of audiences; customer database yProblem: Junk mail or spamming yTarget a group of people that you know something about Advertising Methods (cont.)

18 © Prentice Hall, 2000 zChat Rooms yVirtual meeting ground yCan be added to a business site for free yAllows advertisers to cycle through messages and target the chatter again and again yAdvertising can become more thematic yMore effective than banners yUsed in one-to-one connection Advertising Methods (cont.)

19 © Prentice Hall, 2000 Advertisement Strategies zInternet-base Ad Design yAdvertisements should be visually appealing yAdvertisements must be targeted to specific groups or to individual consumers yAdvertisements must emphasize brands and a firm’s image yAdvertisements must be part of an overall marketing strategy yAdvertisements should be seamlessly linked with the ordering process yDesigning Internet ads involve the following factors:

20 © Prentice Hall, 2000 zInternet-based Ad Design: Important Factors Advertisement Strategies (cont.) yPage-Loading Speed xGraphics and tables should be simple and meaningful. They need to match standard monitors. xThumbnail (icons graphs) are useful. yBusiness Content xClear and concise text is needed. A compelling page title and header text is useful. xThe amount of requested information for registration should be minimal.

21 © Prentice Hall, 2000 yNavigation Efficiency xWell-labeled, accurate, meaningful links are a must. xSite must be compatible with browsers, software, etc. ySecurity and Privacy xSecurity and privacy must be assured. xOption for rejecting cookies is a must. yMarketing/Customer Focus xClear terms and conditions of the purchases, including delivery information, return policy, etc. must be provided. xConfirmation page after a purchase, is needed. Advertisement Strategies (cont.) zInternet-base Ad Design: Important Factors

22 © Prentice Hall, 2000 zPassive Pull Strategy yCustomer will visit a site if it provides helpful and attractive contents and display yEffective and economical way to advertise, unidentified potential customers worldwide yAdvertising World is a non-commercial site that can guide the process of finding the customer’s wish yYahoo is a portal search engine site which can be regarded an effective aid for advertisement Advertisement Strategies (cont.)

23 © Prentice Hall, 2000 zActive Push Strategy Advertisement Strategies (cont.) ySending s to the relevant people yObtaining the mailing list is the process of identifying target customers yMailing list generation is done in companies by using agent technology and cookies as well as by filling out questionnaires (by customers)

24 © Prentice Hall, 2000 zAd as a Commodity Advertisement Strategies (cont.) yCyberGold xexchange of direct payment made by the advertisers for viewing ads xconsumers fill out questionnaires xCyberGold distributes targeted banners xthe reader clicks the banner to read it and, passing some tests on its content, is paid for the effort

25 © Prentice Hall, 2000 Implementing the Strategies zCustomized Ad Strategy yFiltering the irrelevant information by providing customized ads yOne-to-One advertisement yCustomized ads can be found in PointCast xpersonalized news and information by category (Channel) xpackaged by content providers, assembled by PointCast, delivered on screen savers or at prearranged times

26 © Prentice Hall, 2000 Implementing the Strategies (cont.) zComparison Aid as Medium of Advertisement Product Database Mall Operator A Product Database Mall Operator B Product Database Mall Operator C Meta-Malls Coordinator Customer Meta-Malls Customer Assistant Direct Visit Summary and Index Database © Prentice Hall, 2000

27 © Prentice Hall, 2000 Online Events, Promotions and Attractions zHow to entice Web surfers to read Internet ads yThere are dozens of innovative ideas; here are some examples :  Yoyodyne Inc. conducts give-away games, discounts, contests & sweepstakes. Its entrants agree to read product information of advertisers ranging from Major League Baseball to Sprint communication.  Netzero and others offer free Internet access in exchange for viewing ads.  uses real people to help you. uses live people to talk to you over the phone and then “push” material and ads to your computer.

28 © Prentice Hall, 2000  CyberGold ( Goldmine ( and others connect you with advertisers who pay you real money to read ads and explore the Web.  Netstakes runs sweepstakes that requires no skills; in contrast with contests. You register only once and can randomly win prizes (see Prizes are given away in different categories. The site is divided into channels, each has several sponsors. They pay Netstakes to send them traffic. Netstakes runs online ads both on the Web and in several hundred thousand lists that people requested to be on.  Free PCs will be given soon in exchange for obligation to read ads. Online Events, Promotions and Attractions (cont.)

29 © Prentice Hall, 2000 zBenefit : instead of spending hours searching the Web, people can have the information they are interested in delivered automatically to their desktop via Web technology and the Internet zPre-specification profile, selection of appropriate content, and download selection z4 types of push technology yself-service delivery yaggregated delivery ymediated delivery ydirect delivery Push Technology

30 © Prentice Hall, 2000 zPointcasting yAnalogous to mass customization yTransmits the most relevant information directly to the user zPush on the Intranet yCompanies use push technology to set up their own channels to pointcast important internal information to either their own employees (on intranets) and/or their supply chain partners (on extranets) zThe Future of Push Technology yDrawback : the bandwidth requirements are large yExperts’ prediction : the technology will never fly Push Technology (cont.)

31 © Prentice Hall, 2000 Intelligent Agents zProduct Brokering yKnows the customer’s profile yTailors an ad to the customers, or asks them if they would like to receive product information yAlerts the users to new releases, recommends products based on past selections, or constraints specified by the buyers

Economics and Effectiveness of Advertisement zExposure Models (CPM) zClick Through zInteractivity zActual Purchase zOther Methods 32 © Prentice Hall, 2000 Payments are based on:

33 © Prentice Hall, 2000 Online Catalogs zTo merchants, the objective of catalogs is advertisement and promotion zThe purpose of catalogs to customers is providing a source of information and price comparisons zConsist of product database, directory and search capability and presentation function zReplication of text in paper catalogs zMore dynamic, customized and integrated

34 © Prentice Hall, ) Dynamics of information presentation yStatic Catalogs: The catalog is presented in textual description and static pictures. yDynamic Catalogs: The catalog is presented in motion pictures and graphics and possibly sound. 2) Customization yReady-made Catalogs: Merchants offer the same catalog to any customer. yCustomized Catalogs: Deliver customized contents and display depending upon the characteristics of customers. Online Catalogs (cont.)

35 © Prentice Hall, 2000 z3) Integration with business processes yIntegration with order taking and fulfillment yIntegration with electronic payment yIntegration with intranet workflow yIntegration with inventory and accounting system yIntegration with supplier’s extranet yRelationship to paper catalogs Online Catalogs (cont.)

36 © Prentice Hall, 2000 Customized Catalog zIdentify the interesting parts out of the whole catalog zTool for aiding customers to concentrate on their needs zLiveCommerce ycreating catalogs with branded, value-added capabilities ylocate the information ycompose their order yindividualized prices, products, and display formats zLet the system automatically identify the characteristics of customers based on the transaction records

37 © Prentice Hall, 2000 Special Advertisement Topics zTo Advertise or Not zHow Much to Advertise zAuditing and Analyzing Web Traffic zSelf Monitoring of Traffic zInternet Standards zLocalization

38 © Prentice Hall, 2000 zThe Major Web Ad Players yAdvertising agencies and Web site developers yFinding market research providers yTraffic measurement and analysis companies yNetworks/rep firms yOrder processing and support Special Advertisement Topics (cont.)

39 © Prentice Hall, 2000 Managerial Issues zMake Vs. Buy (Ad agencies) zFinding the Most Visited Sites zCompany Research zCommitment to Web Advertising zEthical Issues zIntegration : Advertisement, Ordering, Other Processes