Internet Marketing & e-Commerce
Ward Hanson
Kirthi Kalyanam
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Phone: (800) 423-0563
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Part Two: Chapter Eight
Traffic Building
“A wealth of information creates a poverty of attention.”
Herbert Simon, Designing Organizations for an Information-rich World
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Value and Scarcity Online
• Volume of online content is growing far
faster than the number of Web users
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Value and Scarcity Online
• Volume of online content is growing far
faster than the number of Web users
• Every site faces unique challenges to
attract new visitors
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Value and Scarcity Online
• Volume of online content is growing far
faster than the number of Web users
• Every site faces unique challenges to
attract new visitors
• As Web users grow more experienced,
they are less likely to explore new sites
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Value and Scarcity Online
• Volume of online content is growing far
faster than the number of Web users
• Every site faces unique challenges to
attract new visitors
• As Web users grow more experienced,
they are less likely to explore new sites
• The true scarcity online: user attention
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Value and Scarcity Online
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Planning for Maximum Traffic
• Drawing more visitors to a site requires
a thoughtful web traffic plan
• Web traffic plans should consider each
of the five main traffic categories:
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Planning for Maximum Traffic
• Drawing more visitors to a site requires
a thoughtful web traffic plan
• Web traffic plans should consider each
of the five main traffic categories:
– Branding decisions (e.g. domain name)
– Search engine marketing
– Affiliate networks
– Online banner advertising
– Publicity and word of mouth
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Planning for Valuable Traffic
• Effective traffic plans assess the
volume and quality of traffic generated
• Spotting broad use patterns through
visualization tools helps calculate the
cost and productivity of new visits
• Key tool for traffic-building analysis is
cost-per-action: the number of visits
that end in a particular action divided
by the cost of the campaign
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Planning for Valuable Traffic
At each stage, visitors decline and costs rise
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Traffic-Building Goals
• Basic goal: best traffic at lowest cost
• But how to define best traffic?
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Traffic-Building Goals
• Basic goal: best traffic at lowest cost
• But how to define best traffic?
Maximum Profit
Best Traffic with Least Cost
Minimum
Cost-per-Action
Maximize Actions
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Traffic-Building Goals
• Profit guidelines that include web site
branding; ignore ad branding impact:
– Spend on traffic sources that maximize
difference between unified visit value and
cost per visit
– Acquire traffic as long as the cost per visit
is less than the unified visit value
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Traffic-Building Goals
• Profit guidelines that ignore branding
and all other impacts:
– Spend on traffic sources that maximize
difference between customer lifetime
value and web customer acquisition cost
– Acquire traffic as long as online customer
value exceeds acquisition cost
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Traffic-Building Goals
Variation in Average Customer Acquisition Costs for Four Net Companies
Company
Time Period
Acquired Customers
Customer Acq. Cost
Amazon.com
3/1997->3/2002
33,800,000
$7.70
eBay
12/1996->3/2002
46,100,000
$11.26
Ameritrade
9/1997->3/2002
1,877,000
$203.44
E*Trade
12/1997->3/2002
4,117,370
$391.00
e-Commerce firms
Online brokerages
SOURCE: Gupta, Lehmann, Stuart: “Valuing Customers,” Journal of Marketing Research 41, no. 1 (Feb. 2004)
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Search Engine Optimization
• The power of landing “Above the Fold”
SOURCE: FPG/Getty Images
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Search Engine Optimization
• Top placement in search returns is key
to generating organic Web traffic
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Search Engine Optimization
• Top placement in search returns is key
to generating organic Web traffic
• User’s willingness to investigate falls
sharply as items drop on the return list
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Search Engine Optimization
• Top placement in search returns is key
to generating organic Web traffic
• User’s willingness to investigate falls
sharply as items drop on the return list
– Higher click rate on top-rated items
– Few users go beyond first page or two
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Search Engine Optimization
• Improving search engine placement
– Get indexed on main search engines
– Use meta-tags and develop content with
appropriate keywords that trigger higher
search engine rankings
– Structure site content and navigation to
reinforce search engine algorithms
– Cultivate links from appropriate sites
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Keyword Advertising
• Clickable, text-based ads bring in
billions of dollars of ad revenue
• Ads steer traffic to an organization web
site; fee charged only if click occurs
• Competitive bidding process
determines a keyword’s value
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Keyword Advertising
• Evaluating keyword portfolios
– Identify a site’s most relevant keywords
– Test and expand list, based on conversion and
click-through rates
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Keyword Advertising
• Evaluating keyword portfolios
– Identify a site’s most relevant keywords
– Test and expand list, based on conversion and
click-through rates
• Bidding and tracking
– Higher bids increase chance at higher keyword
position
– No click costs more than maximum bid
– Price charged depends on intensity of
competition
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Keyword Advertising
Collecting Keyword Data
Clicks
Skylark fuel pump
Position 1
62
6
$0.10
GM fuel pump
Position 2
148
18
$0.20
12.16%
Buick parts
Position 2
1246
48
$0.25
3.85%
Used Buick Skylark
Position 1
8678
95
$0.23
1.09%
Buick
Position 3
362
15
$1.37
4.14%
17265
98
$0.34
0.57%
Used car parts
Position 2
Conversions
Cost per click
to hold position
Keyword Phrases
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Conversion rate
9.68%
Traffic by Association
• In traditional advertising, marketers put
a company’s message where
consumers work, live, play
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Traffic by Association
• In traditional advertising, marketers put
a company’s message where
consumers work, live, play
• Same concept holds true online
© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
Traffic by Association
• In traditional advertising, marketers put
a company’s message where
consumers work, live, play
• Same concept holds true online
– Banner advertising
– URL placement on shopping bags,
billboards, monthly statements
– Sponsorship and co-branding
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