The Internet as Communication

1
The Internet as Communication

• The importance of interactivity
• Implications for mix elements
• -Web-Based Advertising
• -Issues for Perspective

2
A Resource for Communication

• A unique medium
• Provides flexibility
• Provides multiple means for communication
• A context for content
• Distinction between information (content) and
  vehicle that conveys it (communication)
• Distinction between context/vehicle and
  infrastructure how it is presented (Internet)

3
Context for Content Communication Model
Communication (Type of Ad)
Consumer
Firm
Content
Medium
Consumer
Consumer
Infrastructure (Internet)
4
A Resource for Communication

• A unique medium
• A context for content
• Distinction between information and vehicle that
  conveys it
• Distinction between context/vehicle and
  infrastructure that conveys it
• A context with multiple vehicles
• Different forms of marketing communications

5
Media Typology Based On Characteristics
Dynamic Media
Face to Face Selling
Television
Web E-mail
Radio
Instant Messaging, Chats
Blogs
Impersonal
Personal
Multimedia Web
Static Web
Magazines
Direct Mailings
Billboards
Static Media
Source Hoffman Donna L. and Thomas P. Novak
(1996), Marketing in Hypermedia
Computer-Mediated Environments Conceptual
Foundations, Vol. 60 pp. 50-68.
6
Characterizing Communication

• Components
• Source
• Message
• Receiver
• Processes
• Encoding (by source)
• Decoding (by receiver)
• Communications
• Communication Process

7
The Communication Process
Marketer
Source
Ad
Encoding
Message
Medium
Channel
Decoding
Consumer
Receiver
8
Advertising Communications Model
Consumers
9
Autobiography
10
Narrative
11
Drama
12
Parsing the Vocabulary

• Marketing communication as a noun
• A noun is a thing
• E.g., a message and its form
• A Download Netscape 128.0 Now!!!! Button
• Marketing communication as a verb
• A verb is an act
• E.g., the process of sharing information
• Interactivity between source and receiver
• Interactivity between receiver and content

13
Parsing the Vocabulary

• Marketing communication as a noun
• A noun is a thing
• E.g., a message and its form
• A Download Netscape 128.0 Now!!!! Button
• Marketing communication as a verb
• A verb is an act
• E.g., the process of sharing information
• Interactivity between source and receiver
• Interactivity between receiver and content

14
InteractivitySource and Receiver
Source
Receiver
15
Source and Receiver Interactivity

• Interactivity is based on the size of the
  targeted audience
• Broadcast (mass audience)
• One-to-many
• E.g., Static web-pages (Phase II website)
• Narrowcast (focused audience)
• One-to-some (focused)
• E.g., Cable channels, protected servers,
  restricted access
• Pointcast (Individual audience)
• One-to-one
• E.g., Direct mail, e-mail, Blogs, chats

16
(No Transcript)
17
InteractivityReceiver and Content
Source
Receiver
Message Content
18
Receiver and Content Interactivity

• Role of user control over message
• User preferences (customerization)
• Dictated by computing constraints
• User as active participant
• Pull (selectivity) vs. Push of traditional media
• All forms (broad, narrow, point) can be pushed
  with the Internet but more often pulled by
  user!
• Internet enables pull

19
Effects of Interactivity on Content

• Use communication to match product to needs
• Individualized offering personalization
• Differently driven by push and pull
• Pull is user-initiated (e.g., My Yahoo!)
• Push is marketer-initiated (e.g., Amazon recs)
• The difference may affect the quality of
  personalization

20
Marketing Mix Implications - Product

• Communication and Product Strategy
• Mass customization with communication
• Two requirements
• Receiver-content interactivity
• Modularization
• Customization characteristics
• A continuum (mass production to personalization)

21
A Continuum
Mass production to Personalization
Mass Production
Personalization
Customization
n customers, several product forms
One product form, n users
n customers, n product forms
Interactivity
High
Low
Process
Individual Preferences
Optimize for Markets
22
Marketing Mix Implications - Product

• Communication and Product Strategy
• Mass customization with communication
• Two requirements
• Receiver-content interactivity
• Modularization
• Customization characteristics
• A continuum (mass production to personalization)
• AmericanGirl (Customization)
• My Twin (Personalization)
• My Jones Soda (Personalization)

23
Marketing Mix Implications - Pricing

• Communication and Pricing Strategy
• From static to dynamic pricing
• Limits to fixed price models
• Fixed is better for low differentiation, low
  elasticity (variability)
• Internet price trans. price sensitivity
• The Internet and alternative models
• Real-time pricing Fun with supply demand
• Role of infomediaries
• Auctions (e.g., eBay)
• Companies as price-setting middlemen (Priceline)
• So what pricing models are used online?

24
Online Pricing Models

• Pricing models for online ads
• CPM
• Click-through
• Flat-fee

25
CPM

• Cost Per Thousand (CPM)
• How much it costs to reach 1000 people
• Based on each type of communication

26
How to Calculate CPM

• An online shoshkele has 10,460,000 impressions.
• A full page shoshkele costs 8,000.

0.76
27
Online Pricing Models

• Pricing models for online ads
• CPM
• Click-throughs
• Flat-fee

28
Online Pricing Models

• Clickthroughs (CTRs) the percentage of the ad
  views that result in an ad click. 
• Recently, average clickthrough rate has declined
  to about 0.17 according to Nielsen Netratings. 
• First used in 1996 by PG but model failed to
  catch on because it did not take into account the
  impact on the consumer from simply viewing ads

29
Online Pricing Models

• Pricing models for online ads
• CPM
• Click-throughs
• Flat-fee

30
Online Pricing Models

• Flat fee flat rate charged per time period for
  an ad of a specific size (the traditional print
  ad model)
• Typically used when web site first created and
  has no track record of viewers
• Major media sites (e.g. Yahoo CNN) use flat
  pricing
• Costs can range from 100,000/month for a general
  ad on Yahoo because of its high traffic to 2,000
  a month on Spacenews.com, a speciality web site
  for the space industry.

31
Online Pricing Models

• Pricing models for online ads
• CPM
• Click-through
• Flat-fee
• Whats it worth ROAI
• of impressions purchased avg. click-through
  rate avg. customer turnover (visitors to
  customers) avg. net profit/sale expected
  return.

32
Calculate ROAI

• You purchase 100,000 impressions
• You get average of 4 click-throughs
• And 5 customer turnover
• You then make a profit of 100 every ticket
  priceline resells

100,000 x .04 x .05 x 100 20,000 ROAI
33
Marketing Mix Implications - Placement

• Communication and Distribution
• Internet as point-of-sale
• From complex sites to simple banners
• Decision making for online channels
• Destination site
• Full-fledged channel (all communication aspects
  managed)
• Most efficient for online transactions (e.g.,
  Dell.com)
• Micro-sites
• In-depth brand information, externally hosted
• lower online channel efficiencies (e.g., home
  appliances)
• Promotion Strategy
• Use promotions to distribute information and to
  achieve marketing goals
• Or use a combination!

34
Marketing Mix Implications - Promotions

• Communication and Promotion
• Sales promotions
• Short-term incentives
• Coupons, contests
• Public relations
• Corporate and brand image
• All unpaid-for exposure
• Site content
• Events (e.g., Sponsorship of events)
• Personal selling
• Direct Contact via online communication
• E.g., Responses to information inquiries (Car
  dealers)
• Advertising

35
Online Advertising

• Advertising is a big deal online
• Two forms
• 1) text-based and 2) web-based (multimedia)
• Text Based
• Email (can be multimedia), Blogs, Chats
• Web-based
• Banners, Pop-Ups, Rich Media

36
Internet Promotions are Not New

• Traditional Promotions

Internet Promotions
Banner Ads

• Broadcast Advertising

E-Mail

• Direct Mail

Website pressroom

• Press Releases

Online Events

• Promotions

Chat Rooms/Listservs

• Networking

Viral Marketing

• Word of Mouth

37
A Little History

• First Internet advertisement sold in 1994
• Hotwire.com sold the ad for 30,000/year to ATT
  the annual cost to run its web site
• Early advertisers included ATT, Sprint, MCI,
  Volvo, Club Med and Zima
• In the early days, clickthrough rates were 25
• Today Internet advertising is a 4 billion dollar
  business

38
LARGEST CREATIVE PORTFOLIO  ranked by of
unique creatives 
Week of November 14 20, 2005
Source http//www.netratings.com
39
Top Site Genres (where ads placed)
Ranked by impressions Week of November 14 - 20,
2005
Source http//www.netratings.com
40
Leading Consumer Packaged Goods Advertisers
Ranked by impressions Week of November 14 20,
2005
Source http//www.netratings.com
41
Types of Online Advertising

• Banner Ads
• SideBar Ads
• Pop-Up and Pop-Under Ads
• Rich Media (Interstitials and Shoshkeles)
• Email
• Blogs and Chats