Chapter 5 Advertisement in Electronic Commerce

Prentice Hall, 2002 1

Chapter 5

Advertisement in Electronic Commerce


Learning Objectives

Describe the objectives of Web advertisement, its types and characteristicsDescribe the major advertisement methods used on the Web Describe various Web advertisement strategies


Describe various types of promotions on the WebDiscuss the benefits of push technology and intelligent agentsUnderstand the major economic issues related to Web advertisement

Learning Objectives (cont.)


Learning Objectives (cont.)

Describe the issues involved in measuring the success of Web advertisement as it relates to different pricing methodsCompare paper and electronic catalogs and describe customized catalogsDescribe Web advertisement implementation issues


Opening Case: Advertisement in the Digital Economy

Theknot.com and Wedding411.comInformation about planning weddingsAssistance selecting vendorsSite includes promotions and ads from vendors

Promosinmotion.comVW bugs painted with Web site logosDislplayed online and offline

Topbulb.comOnline catalog for light bulbsAlso displays the off-line business


Opening Case: Advertisement in the Digital Economy

ToyotaPromotes its SUV with banners on altavista.comKelly Blue Book (kbb.com) links to Toyota site

IBMUses banners linked to college campuses to promote recruitment “Club Cyberblue” became the scheme for restructuring their traditional plan


Web Advertisement

Ad viewsBannerClick (ad click)Click ratioCookieCPM

Effective frequencyHitImpressionsReachVisit

Advertising is an attempt to disseminate information in order to affect a buyer-seller transaction

Internet Advertising Terminology


Web Advertisement (cont.)

Why Internet Advertisement?3/4 of PC users gave up some television timeWell educated, high-income Internet users are a desired target for advertisersAds can be updated any time with a minimal cost; making them timely and very accurateAds reach very large number of potential buyers all over the worldOnline ads are much cheaper in comparison to television, newspaper, or radio ads


Web ads effectively use text, audio, graphics, and animationAds easily combine games, entertainment, and promotionsWeb TV and Internet radio are attracting more peopleWeb ads can be interactive and targetedThe use of the Internet is growing very rapidly


Why Internet Advertisement?



Internet vs. Traditional methodsCombining advertising mediaInternet is the fastest growing medium in history


Figure 5-1Adoption Curves for Various Media

Source: Morgan Stanley Technology Research.



Objectives and growth of Internet advertisement—persuade customers to buy a certain product or serviceTargeted Advertisement (one-to-one)

Customize ads to fit individualsCan be expensive as well as rewardingGain cost effectiveness by targeting groups (based on segmentation)



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 companiesMatches them against a databaseFinds those people working for advertising agencies or using Unix system (potential buyers)



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 3MDoubleClick shares revenue with cooperating partners


Pros of Internet AdvertisementInternet advertisements are accessed on demand 24 hours a day, 365 days a year, and costs are the same regardless of audience locationAccessed primarily because of interest in the content, so market segmentation opportunity is large




Pros of Internet Advertisement (cont.)Opportunity to create one-to-one direct marketing relationship with the consumerMultimedia will increasingly make Web sites more attractive and compelling


Advertisement Methods

BenefitsCustomized to the target audience or one-to-one adsUtilize “force advertising” marketing strategyDirect link to advertiserMulti media capabilities

LimitationsHigh costDeclining click ratio—viewers have become immune to bannersSize of banners is too small

Banners--banners are everywhereKeyword banners Random banners


Advertisement Methods (cont.)

Banner swappingDirect link between one site to the other siteAd space bartering

Banner exchangesFirm submits a bannerReceives credit when shows others’ bannersCan purchase additional display creditsSpecify what type of site where the banner is displayedUse the credit to advertise on others’ sites


Banner exchanges (cont.)Credit ratio of approximately 2:1Example: Link Exchange (bcentral.com)

Helps design bannersProvides membership in newsgroupsDelivers HTML tutorialsRuns contestsIs a banner-ad clearing house for more than 200,000 small Web sitesMonitors the content of the ads of all its members



Standard (pop up boxes that look like newspaper or magazine ads) and classified ads

Micro-sites5 advertising sizes larger than bannersPop-up boxes at sites they are linked to

Classified adsSpecial sites (classifieds2000.com)Free or for fee depending upon size



E-mailSeveral million users may be reached directlyPurchase e-mail addressesSend the company information (low cost)A wide variety of audiences (customer database)Target a group of people that you know something aboutProblems:

Junk mail Spamming




Mobile phonesInteractive one-to-one adsLocation, situation, weather-related ads

Splash ScreenCapture the user’s attentionPromotion or lead-inMajor advantage: create innovative multimedia

Spot leasingPermanent space on popular portal or Web pageAds may be small and expensive


URL (Universal Resource Locators)Advantages:

Minimal cost is associated with itSubmit your URL to a search engine and be listedKeyword search is used

Disadvantages:Search engines index their listings differentlyMeta tags can be complicated



Chat RoomsVirtual meeting groundFree addition to a business siteAllows advertisers to cycle through messages and target the chatter again and againAdvertising can become more thematicMore effective than bannersUsed for one-to-one connections



Advertisement Strategies

Internet-based Ad DesignVisually appealingTargeted to specific groups or to individual consumersEmphasize brands and a firm’s imagePart of an overall marketing strategySeamlessly linked with the ordering process


Advertisement Strategies (cont.)

Internet-based ad design: important factors

Page-loading speedGraphics and tables—simple, meaningful, and match standard monitorsThumbnail (icon, graphs) are useful

Business contentClear and concise text with compelling page title and header textMinimal amount of information requested for registration



Internet-based Ad Design: Important Factors (cont.)

Navigation efficiency and compatibilityLinks—well-labeled, accurate, meaningful Site—compatible with browsers, software, etc.

Security and privacySecurity and privacy must be assuredMust provide option for rejecting cookies

Marketing Customer FocusClear terms/conditions of the purchases—delivery information, return policy, etc. Confirmation page after a purchase



Pull (Passive) StrategyEffective site provides helpful and attractive contents and displayEffective and economical way to advertise, unidentified potential customers worldwideAdvertising World—non-commercial site that guides the process of finding customer’s requestsYahoo—portal search engine site regarded as effective aid for advertisement



Push (Active) StrategySending e-mails to relevant peopleObtaining mailing list—process of identifying target customersMailing list generation—uses agent technology, cookies, and questionnaires (filled out by customer)



Associated Ad Display StrategyAssociate 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.comBarnesandnoble.com

Keyword bannersJust-in-time strategy



Ads as a commodityCyberGold (MyPoints.com)

Direct payment made by the advertisers for ads viewedConsumers fill out questionnairesCyberGold distributes targeted bannersReader clicks the banner, passes some tests on its content, and is paid for the effort



Viral marketing—word-of-mouth over the Internet

Easily forwarded e-mail messages from sitesForward sites by filling out e-mail addresses“Advocacy marketing”—hotmail.com

Each e-mail sent invited free hotmail serviceCompany grew from 0 to 12 million in 18 months

DownsidesE-mail hoaxesSpread of viruses


Implementing the Strategies

Customized ad strategyFiltering the irrelevant information by providing customized adsOne-to-one advertisementCustomized ads in Webcasting

Personalized news and information by categoryUsers select specific categories they want to receive


Implementing the Strategies (cont.)

Comparisons as medium for advertisement

Customer compares alternative products and servicesFinds the least expensive place to purchase the itemUses the comparison site that lists vendors and their prices for the product


Figure 5-3Illustrative Screen for Product Comparison

Source: Korean Engine (no longer in business).


Online Events, Promotions,and Attractions

Enticing Web surfers to read Internet adsYoyodine, Inc.

Give-away games, discounts, contests, sweepstakesEntrants agree to read product information of advertisers

Netzero and others offer free Internet access in exchange for viewing ads


Online Events, Promotions,and Attractions (cont.)

Enticing Web surfers to read Internet adsEgghead uses real people to help youLucent uses phone interviews that lead to material and ads sent to your computerRetailers provide special offers as shoppers “check out”Riddler provides opportunity to play games for prizes


Online Events, Promotions,and Attractions (cont.)

Enticing Web surfers to read Internet adsNetstakes runs sweepstakes (no skills necessary)

Register only once to win prizes randomly from different categories Sends traffic to several channels that have multiple sponsorsRuns online ads both on the Web and in several hundred thousand e-mail lists

Offer free samples (freesamples.com)Use company logo as cursor


Push Technology

BenefitsRequested information they delivered automatically to their desktop via Web technology and the InternetDecreases the number of hours used to search the Web


Push Technology (cont.)

Pointcasting—mass customization of information

Pre-specification profileSelect appropriate contentDownload selection

4 types of push technology

Self-service deliveryAggregated deliveryMediated deliveryDirect delivery


Push on the IntranetCompanies 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 TechnologyDrawback: the bandwidth requirements are largeExperts’ prediction: the technology will never fly

Push Technology (cont.)


Intelligent Agents

Product BrokeringKnows the customer’s profileTailors ads to the customers, or asks them if they would like to receive product informationAlerts users to new releasesRecommends products based on:

Past selectionsConstraints specified by the buyers


Effectiveness and Pricing of Advertisement

Exposure ModelsMultiple of number of guaranteed ad viewsNumber of hits

Click-ThroughNumber of times customers click on bannerOnly effective for large corporations

InteractivityBased on how customer interacts with the ad viewHow much time was spent viewing the ad

Actual PurchaseReferral fee based on customers moving to ad site to make a purchase

Methods for measuring advertisement effectiveness, conducting cost benefit analyses, pricing ads


Online Catalogs

Evolution of online catalogsMerchants—advertise and promoteCustomers—source of information and price comparisonsConsist of product database, directory and search capability and presentation functionReplication of text in paper catalogsMore dynamic, customized and integrated


Online Catalogs (cont.)

Classifications of catalogsDynamics of information presentation

Static catalogs—textual description and static picturesDynamic catalogs—motion pictures, graphics, sound

Degree of customizationReady-made catalogs: same catalog to all customersCustomized Catalogs: customized contents and display depending upon the customers


Electronic catalogs allow integration ofOrder taking and fulfillmentElectronic paymentIntranet workflowInventory and accounting systemSuppliers’ extranetRelationship to paper catalogs

Online Catalogs (cont.)


Customized Catalogs

Assembled specifically for:A companyAn individual shopper

Customization systems can:Create branded, value-added capabilitiesAllows user to compose orderMay include individualized prices, products, and display formatsAutomatically identify the characteristics of customers based on the transaction records


Special Advertisement Topics

How much to advertisePermission advertisementMeasuring, auditing, and analyzing Web trafficSelf-monitoring of trafficInternet ad standardsLocalizationInternet radio for localization


Major Web ad playersAdvertising agencies and Web site developersMarket research providersTraffic measurement and analysis companiesNetworks/rep firmsOrder processing and support

Special Advertisement Topics (cont.)


Managerial Issues

Make vs. buyFinding the most visited sitesCompany researchCommitment to Web advertising and coordination with traditional advertisement


Managerial Issues (cont.)

Integrated marketing campaignsEthical IssuesIntegrating advertisement with ordering and other business processesContent is critical

Documents

Chapter 5 Advertisement in Electronic Commerce