Marketing and Electronic Commerce

What can be done with the web part 1?

  1. The Players
    1. Content Providers
    2. The Marketers
  2. Advertising
  3. Sales Promotion
  4. Public Relations

The Players

Before discussing the value of WWW as a marketing tool it is necessary to understand who the "players" are on WWW, and how these players are able to use WWW. The players can be categorized into three areas:

  1. Content Providers
  2. Marketers
  3. Infrastructure companies
The infrastructure companies are those that have helped create and develop WWW as a commercial medium. These companies are able to benefit from WWW in as much as they provide something value adding to other WWW players. They might be internet service providers, advertising agencies or hardware/software providers like Netscape and Microsoft. The focus of this discussion is going to revolve around the other players, the content providers and the marketers who use WWW to perform business activities.

Content Providers

The content providers are the WWW publishing companies who develop entertainment, create WWW news, information, or maintain search capable databases of WWW resources, for the WWW audience. The key is, they must provide something value adding to a particular WWW audience(s). These providers include traditional publishing companies like Time Warner (Pathfinder) NBC (MSNBC) and the Wall Street Journal, niche publishers like the BloodHorse, new WWW publishing companies like Hotwired and Yahoo!, and technology companies like DEC (Alta Vista).

WWW enables these companies to market their content and create a target audience that accesses that information. WWW as a medium is thus competing with traditional media as a method of distributing news information and entertainment. For these companies to be successful in this medium, they must clearly understand the medium as a method of distributing information (and the inherant advantages that it holds over other media) and develop an effective business model in order to generate revenue from this type of business. This has been the most difficult aspect of the medium to date. The current publishing business models fall into the following categories:

  1. Subscription
  2. Advertising supported
  3. A mix of the above
The pure subscription model has yet to prove sucessful. The idea behind the subscription model is that the perceived value of the information is greater than the subscription fee. It is hard to convince web browsers of this equation when so much information on WWW is free already! The content provider must have a very strong brand name among its target audience in order to convince them of the value of the information. Wall Street Journal is probably the best illustration of a publisher following this model. Wall Street Journal had 650,000 registered visitors to its site before it started charging a $49 annual fee in September 1996. It now has 70,000 paid subscribers. The jury is still out as to its success. Slate (Microsoft) has temporarily (permanently?) postponed its efforts to charge a subscription fee.

The advertising supported model is followed by most content providers. The theory is that the content provider is able to attract highly targeted consumers to their web-site, these consumers are very valuable to marketers, so marketers will "sponsor" parts of the site in order to get a message to the audience and a gateway to their site. 900 content providers received advertising revenue in 1996 ($301 million according to Jupiter Communications), the ten largest received 57% of the total (was 67% of $55 million in 1995). Netscape remained the number one site for advertising revenue ($27.7 million), this included approximately $19 million it received from 5 search engines. Netscape was followed by Yahoo! ($20.6 million), Infoseek ($18.1 million) and Excite ($12.2 million). The largest web advertisers were Microsoft ($13 million), AT&T ($7.3 million), Excite ($6.9 million) and IBM ($5.9 million).

Content Providers charge advertisers in the following ways, either:

  1. Cost per Impression (CPM). Each time the web page is accessed the marketer pays the content provider. These costs usually run around $70 per thousand impressions. This is more than TV ($5/thousand) and Magazines ($40/thousand) because the audience can be more targeted. Since this medium is still very new, these costs may change.
  2. Cost per "Click Through". Since WWW is interactive, and browsers can click on the banner ads for more information (to the marketers website or other target advertisement) then many marketers are looking at being charged per click through. Thus the charge that marketers are paying is more closely tied to the effectiveness of the advertisement. Content providers concern with this method is that although they do control, to a certain extent, who visits the site (impressions) they don't control the quality of the banner advertisement and therefore don't entirely control the likelihood of click through. Procter and Gamble was the first major marketer to demand this type of model, and Yahoo! was the first major content provider that agreed. This model is becoming more established and it really recognizes that WWW is a new medium, and old models don't necessarily work.

    There are also many examples of a combination of these two methods.

Other content providers have developed sites that are advertising supported and subscription based. Subscribers to the site have access to proprietory information that non subscribers do not see. ESPNet is a good example of this model. There is a lot of sports information that can be accessed by non-subscribers, but they also have subscriber only information which is identified by a small flag. This acts as a teaser. Over time, browsers may decide that the information they can acquire as a non-subscriber is good, but some of the stories they weren't privvy to are probably worth more than the small fee. The value of a subcriber to the content providers goes beyond the dollar value. They can also acquire information about subscribers that can be used for more targeted marketing.

In the future, publishers may be able to develop micropayment schemes such that consumers pay for each article they read.

The Marketers

There are many business applications that WWW allows for other marketers (non-WWW content providers). These can be classified as follows:

  1. Advertising
  2. Sales Promotion
  3. Public Relations
  4. Customer Support
  5. Internal and Channel Communication
  6. Branding
  7. Product Development
  8. Market Research
  9. Entertainment


WWW allows marketers to develop a presence in order to communicate with customers. This is advertising. There are two methods that marketers can adopt to achieve this:

  1. Web-site presence
  2. Banner Sponsorship of other content
Developing a web-site is the focal point of any WWW advertising effort. A web-site can offer the following advantages over other media:

  1. Information rich
  2. Demand pull
  3. Unobtrusive
  4. Experience
The above characteristics, discussed in detail in session 4, can enable a web presence to become a very valuable to a marketing program. The following are good examples of such sites:

Marketers can also pay to sponsor other sites, as mentioned above. This sponsorship helps create more awareness of the marketer's site on other (content) sites whose target audience is similar to the marketer's site. The advertising banners are used to help drive WWW browsers to the marketer's site.

Sales Promotion

WWW enables marketers to run targeted sales promotions. These promotions can be designed for four purposes:
  1. To encourage browsers to navigate a single site
  2. To acquire information on browsers
  3. Reward browser activity on WWW
  4. To deliver offline sales promotions
Sales promotions that encourage further site navigation will help make sure browsers are fully aware of the information you have available to them. These sales promotions are therefore designed to make your WWW presence more effective. A good example would be to run a contest periodically, that requires consumers to get additional information about your offerings that can only be found on the site. The information from contest entrants can also be used to help target customers for special promotions. An example of a promotion that is designed to collect information and encourage browsers to return to a site can be seen from Godiva Chocolate. In fact this site includes many good examples of WWW marketing.

Other examples of sales promotions on WWW are from companies that reward browsers for their activities on WWW. Browsers acquire "points" for performing certain activities, these points are then reimbursed for prizes such as free online use, or the ability to purchase products from member marketers. The goal of this type of program is to encourage browsers to interact with certain sites (the program's sponsor sites). Thus a marketer would become a sponsor to try to get exposure to the program's audience. The value of this program to the marketer must be examined. The incentive for the browser to access a site is for a reward that is unrelated to the browser's perceived value of accessing the site for the marketer's information. Thus, are the marketers getting access to a desirable audience? Examples of companies investigating this area include FreeRide, GoldMail and NetPerks (to be launched this summer).

WWW is a good medium to deliver regular sales promotions. Instead of using the sunday newspaper to deliver coupons to potential customers (80% of coupons are distributed this way with a less than a 3% redemption rate!) make coupons available for browsers to download and print out. Thus coupons are delivered on demand to a company's customers. Companies like H.O.T. Coupons! enable consumers to find appropriate coupons, searching on zip codes, from many companies.

WWW can be used to track frequent user programs. Companies that offer these programs can keep information about the programs, and individual customer's status within programs, on WWW. This information can then be accessed by a customer, using a unique PIN.

Public Relations

WWW is an effective public relations medium. Press releases can be published on WWW, unedited by other media. Financial information for (potential) stockholders can be published, and kept current. WWW is particularly useful in crisis situations, when a company needs to react very quickly to information in the marketplace that could be damaging. This takes advantage of the ability to update information in real-time. It is also very important to monitor WWW for other sources of information that could be potentially damaging, from dissatisfied consumers. Since consumers have the ability to create web-sites, they can use it as a tool to speak out against a company. Extreme examples of this can be seen in the use of parody sites. Sites that have been developed to mimic and mock other sites. Illustrations of this include, Stale, a parody of Slate, America On Hold, a parody of America Online and CNNot, a parody of CNN.