Chapter 4
Advertisement in
Electronic Commerce
© Prentice Hall, 2000
1
Learning Objectives
Describe the objectives of Web advertisement,
its types and characteristics
Describe the major advertisement methods
used on the Web, ranging from banners to chat
rooms
Describe various Web advertisement strategies
Describe various types of promotions on the
Web
Discuss the benefits of push technology and
intelligent agents
© Prentice Hall, 2000
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Learning Objectives (cont.)
Understand the major economic issues
related to Web advertisement
Describe the issues involved in measuring
the success of Web advertisement as it
relates to different ad pricing methods
Compare paper and electronic catalogs and
describe customized catalogs
Describe Web advertisement implementation
issues ranging from ad agencies to the use
of intelligent agents
© Prentice Hall, 2000
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Opening Vignette :
CD-Max Uses E-mail Lists to Advertise
CD- Max Enterprises
A two-person business specializing in CD-ROM
development
Operates a resource site for information delivery
Generated an e-mail list of site visitors
the list is also valuable to other advertisers
50 lists were created to fit different advertisers
outsourced 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
the list sales “surpassed” the company’s expectations
selling e-mail lists has become a lucrative business
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Web Advertising
Advertising is an attempt to disseminate
information in order to affect a buyer-seller
transaction
Why Internet Advertisement?
Three-quarters of PC users gave up some
television time
Internet users are well educated with highincome, which makes them a desired target for
advertisers
Ads can be updated any time with a minimal cost;
therefore they are timely and very accurate
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Web Advertising (cont.)
Why Internet Advertisement?
Ads can reach very large numbers of potential
buyers all over the world
Online 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.
Web ads can be media rich, including voice and
video
Web ads can be interactive and targeted
The use of the Internet is growing very rapidly
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Web Advertising (cont.)
Internet Advertising Terminology
Ad views
Banner
Clicks (or ad
clicks)
Click Ratio
Cookie
CPM
 Effective Frequency
 Hit
 Impressions
 Reach
 Visit
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Web Advertising (cont.)
Interactive Marketing
Consumer can click with his/her mouse on an ad for
more information or send an e-mail to ask a question
Mass Marketing Direct Marketing Interactive Marketing
Best outcome
Volume sales
Consumer behavior Passive
Leading products Food, personal-care
products, beer,
autos
Market
High volume
Customer data
Passive
Credit cards,
travel, autos
Customer relationships
Active
Upscale apparel, travel,
financial services, autos
Targeted goods
Postal distribution
centers
Mailing lists
Targeted individuals
Cyberspace
Servers, onscreen
navigators, the Web
Logoff
Nerve center
Madison Ave.
Preferred
media vehicle
Television,
magazines
Preferred
technology
Worst outcome
Storyboards
Databases
Channel surfing
Recycling bins
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Online services
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Web Advertising (cont.)
Internet is the fastest growing medium in history
Adoption Curves for Various Media - The Web Is Ramping Fast
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Web Advertising (cont.)
Targeted Advertisement (one-to-one)
The Double Click (DC) Approach
3M Corp. wants to advertise its $10,000
multimedia projectors
DC monitored people browsing the Web sites of
cooperating companies
then matches them against a database
then finds those people working for advertising
agencies or using Unix system (potential buyers)
then 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
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Web Advertising (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
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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Web Advertising (cont.)
Pros of Internet Advertisement
Distribution costs are low (just technology cost),
so millions of consumers are reached at the
same cost as that of reaching one
Advertising and content can be updated,
supplemented, or changed at any time, and are
therefore always up-to-date
Ease of logical navigation — you click when and
where you want, and spend as much time as you
desire there
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Advertising Methods
Banners
Banners are everywhere
Keyword banners
Random banners
Benefits
be customized to the target audience
be customized to one-to-one targeted
advertisement
utilize “force advertising” marketing strategy
Banner Swapping
Direct link between one’s site to the other site
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Ad space bartering
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Advertising Methods (cont.)
Banner Exchanges
Swapping is a problem : a match is frequently not possible
Banner exchange organizations
a firm submits a banner
receives credit when shows others’ banners
can purchase additional display credits
specify what type of site the banner can be displayed on
use the credit to advertise on others’ sites
credit ratio of approximately 2:1
Example : 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.
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Advertising Methods (cont.)
Paid Advertising and Ad Agencies
Advantage of using banners
ability to customize them to the target audience
ability to decide which market segments to focus
on
be customized to one-to-one targeted
advertisement
“forced advertising” marketing strategy is utilized
Splash Screen
Capture the user’s attention
Promotion or lead-in
Major advantage : create innovative multimedia
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Advertising 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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Advertising Methods (cont.)
E-mail
Several million users can be reached directly
Purchase e-mail addresses
Send the company information; low cost
A wide variety of audiences; customer database
Problem: Junk mail or spamming
Target a group of people that you know
something about
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Advertising Methods (cont.)
Chat Rooms
Virtual meeting ground
Can be added to a business site for free
Allows advertisers to cycle through messages
and target the chatter again and again
Advertising can become more thematic
More effective than banners
Used in one-to-one connection
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Advertisement Strategies
Internet-base Ad Design
Advertisements should be visually appealing
Advertisements must be targeted to specific groups
or to individual consumers
Advertisements must emphasize brands and a firm’s
image
Advertisements must be part of an overall marketing
strategy
Advertisements should be seamlessly linked with
the ordering process
Designing Internet ads involve the following factors:
© Prentice Hall, 2000
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Advertisement Strategies (cont.)
Internet-based Ad Design: Important Factors
Page-Loading Speed
Graphics and tables should be simple and meaningful.
They need to match standard monitors.
Thumbnail (icons graphs) are useful.
Business Content
Clear and concise text is needed. A compelling page
title and header text is useful.
The amount of requested information for registration
should be minimal.
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Advertisement Strategies (cont.)
Internet-base Ad Design: Important Factors
Navigation Efficiency
Well-labeled, accurate, meaningful links are a must.
Site must be compatible with browsers, software, etc.
Security and Privacy
Security and privacy must be assured.
Option for rejecting cookies is a must.
Marketing/Customer Focus
Clear terms and conditions of the purchases,
including delivery information, return policy, etc. must
be provided.
Confirmation page after a purchase, is needed.
© Prentice Hall, 2000
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Advertisement Strategies (cont.)
Passive Pull Strategy
Customer will visit a site if it provides helpful and
attractive contents and display
Effective and economical way to advertise,
unidentified potential customers worldwide
Advertising World is a non-commercial site that
can guide the process of finding the customer’s
wish
Yahoo is a portal search engine site which can
be regarded an effective aid for advertisement
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Advertisement Strategies (cont.)
Active Push Strategy
Sending e-mails to the relevant people
Obtaining the mailing list is the process of
identifying target customers
Mailing list generation is done in companies
by using agent technology and cookies as
well as by filling out questionnaires (by
customers)
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Advertisement Strategies (cont.)
Ad as a Commodity
CyberGold
exchange of direct payment made by the
advertisers for viewing ads
consumers fill out questionnaires
CyberGold distributes targeted banners
the reader clicks the banner to read it and,
passing some tests on its content, is paid for the
effort
© Prentice Hall, 2000
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Implementing the Strategies
Customized Ad Strategy
Filtering the irrelevant information by providing
customized ads
One-to-One advertisement
Customized ads can be found in PointCast
personalized news and information by category
(Channel)
packaged by content providers, assembled by
PointCast, delivered on screen savers or at
prearranged times
© Prentice Hall, 2000
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Implementing the Strategies (cont.)
Comparison Aid as Medium of Advertisement
Customer
Meta-Malls
Customer Assistant
Meta-Malls Coordinator
Direct
Visit
Mall
Operator
A
Mall
Operator
B
Mall
Operator
C
Product
Database
Product
Database
Product
Database
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© Prentice Hall, 2000
Summary
and Index
Database
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Online Events, Promotions and Attractions
How to entice Web surfers to read Internet ads
There 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.
 www.egghead.com uses real people to help you.
www.lucent.com uses live people to talk to you over the
phone and then “push” material and ads to your
computer.
© Prentice Hall, 2000
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Online Events, Promotions and Attractions
(cont.)
 CyberGold (www.cybergold.com), Goldmine
(www.goldmine.com) 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 http://webstakes.com). 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 e-mail lists that people requested to be on.
 Free PCs will be given soon in exchange for obligation
to read ads.
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Push Technology
Benefit : 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
Pre-specification profile, selection of
appropriate content, and download selection
4 types of push technology
self-service delivery
aggregated delivery
mediated delivery
direct delivery
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Push Technology (cont.)
Pointcasting
Analogous to mass customization
Transmits the most relevant information directly to
the user
Push on the Intranet
Companies 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)
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 customer’s profile
Tailors an ad to the customers, or asks them if
they would like to receive product information
Alerts the users to new releases, recommends
products based on past selections, or
constraints specified by the buyers
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Economics and Effectiveness of
Advertisement
Payments are based on:
Exposure Models (CPM)
Click Through
Interactivity
Actual Purchase
Other Methods
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Online Catalogs
To merchants, the objective of catalogs is
advertisement and promotion
The purpose of catalogs to customers is
providing a source 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.)
1) Dynamics of information presentation
Static Catalogs: The catalog is presented in
textual description and static pictures.
Dynamic Catalogs: The catalog is presented in
motion pictures and graphics and possibly sound.
2) Customization
Ready-made Catalogs: Merchants offer the
same catalog to any customer.
Customized Catalogs: Deliver customized
contents and display depending upon the
characteristics of customers.
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Online Catalogs (cont.)
3) Integration with business processes
Integration with order taking and fulfillment
Integration with electronic payment
Integration with intranet workflow
Integration with inventory and accounting
system
Integration with supplier’s extranet
Relationship to paper catalogs
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Customized Catalog
 Identify the interesting parts out of the whole catalog
 Tool for aiding customers to concentrate on their needs
 LiveCommerce
creating catalogs with branded, value-added
capabilities
locate the information
compose their order
individualized prices, products, and display formats
 Let the system automatically identify the
characteristics of customers based on the transaction
records
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Special Advertisement Topics
To Advertise or Not
How Much to Advertise
Auditing and Analyzing Web
Traffic
Self Monitoring of Traffic
Internet Standards
Localization
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Special Advertisement Topics (cont.)
The Major Web Ad Players
Advertising agencies and Web
site developers
Finding market research
providers
Traffic measurement and analysis
companies
Networks/rep firms
Order processing and support
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Managerial Issues
Make Vs. Buy (Ad agencies)
Finding the Most Visited Sites
Company Research
Commitment to Web Advertising
Ethical Issues
Integration : Advertisement,
Ordering, Other Processes
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