Internet Marketing

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Internet Marketing
Chapter 5 Web Business Models
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Do You Yahoo?

• For 50 of US Web users YES!!!
• A phenomenal Silicon Valley success story
• Yahoo! brand extensions provide value add for
  users
• Yahoo! games
• Yahoo! clubs
• Yahoo! chat
• Yahoo! auctions
• Yahoo! Stores
• Yahoo! leverages its brand and ability to draw
  traffic to generate multiple revenue streams

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Most Popular Web SitesYahoo! Leads
Figure 5.1
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Yahoo! Brand ExtensionsThe Success of the Yahoo!
Brand
Figure 5.2
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Topics

• Web benefits to firms
• Closed loop marketing

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Web Benefits to Firms

• The range of Web benefits
• Business models can be based on improvements in
  product or service
• Business models can be based directly on
  generating revenue
• Lets take a closer look at these broad classes
  of business models

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Improvement-Based Biz Models
Use the Net to Improve Products Services
Enhancement
Efficiency

• Build brand
• Build category
• Enhance quality

• Reduce costs
• Free trial

Effectiveness

• Support dealers
• Support suppliers
• Collect information

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Before We Look at Revenue-Based Biz ModelsLets
Take A Look At Some Recent Headlines
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Headline
Name of Publication - Date

• Insert excerpts from a current article out of the
  business press (e.g. Wall Street Journal, Wired
  News, Business 2.0, or Fast Company) that
  profiles a company and its business model. I
  usually take excerpts out of the lead paragraph,
  and highlight keywords. Ive found articles on
  the accumulating losses of a number of e-tailers
  that provide an interesting introduction to the
  subject of making money on the Web.

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Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays

• Sponsorship
• Alliances
• Banner advertising
• Prospect fees
• Sales commissions

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Payment Mechanisms
Which Company Bears the Risk?

• Sponsorship least risky fixed payment
• Banner Ads payment depends on impressions
• Prospect Fees Sales Commissions depend on
  success of site and advertiser

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The Many Ways to Pay Online
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Bargaining Power Determines Who Bears Risk

• Powerful sites shift risk to advertisers and
  demand sponsorships
• Powerful advertisers demand accountability and
  negotiate for prospect fees of a share of
  transaction revenue

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Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays
Customer Pays

• Sponsorship
• Alliances
• Banner advertising
• Prospect fees
• Sales commissions

• Product sales
• Pay-per-use
• Subscriptions
• Bundle sales

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Building Value Bundles via Alliances

• The Internet makes it easy to bring a wide range
  of resources together on a single site
• Fast, cheap way to build a product or service
  offering (whole product)
• A visit to any search engine illustrates

Note At this point in the lecture, its helpful
to go to one of the major portals and identify
sponsorships, alliances, affiliates, advertisers
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Alliances A Marketing Challenge

• Screen real-estate
• how big will my logo be?
• where will it appear?
• exclusive deal?
• Revenue sharing
• The deal you can make depends on the bargaining
  position of each partner

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• No
• Companies try to generate revenues any way they
  can
• Multiple revenue models are combined on the same
  site

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Closed Loop Marketing

• Marketing is closed loop when specific customer
  responses to specific marketing actions can be
  tracked
• For example if an online ad encourages Web site
  registration, the campaign is closed loop if
  users can be tracked from ad exposure to the
  decision to register
• Closed loop marketing leads to rapid learning
• Marketers can experiment with prices, ad copy,
  and product features on selected samples of
  consumers

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The Impact of Closed Loop Marketing

• Marketers want two results from user responses
• They want consumers to make a choice that leads
  to
• information
• improved customer satisfaction
• a transaction
• Marketers want to learn about visitors to their
  site

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Web Chains

• A Web chain is a click sequence
• Can be as short as a single click
• Can be as long as all possible choices on a Web
  site
• Decision points event nodes
• Ending point result node
• Common Web chain starting points
• Company homepage
• Search engine or portal
• Banner ads

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Web Chain of Events
Figure 5.12
R1 Doesnt Notice Ad 0 benefit
Offline Induced Buyer (OIB)
R3 Offline Purchase (Ad brand Web Site brand
Offline profit)
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Evaluating Web Chains

• Enables marketers to evaluate a wide range of Web
  strategies and tactics
• Calculate
• expected value of an impression
• expected value of a prospect
• expected value of a new customer
• expected value of a repeat buyer

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Web Chain Benefits and ProbabilitiesFive Main
Benefits Occur in the Chain

• Online contribution the incremental profit from
  an online sale
• Offline contribution incremental profit from the
  sale of products through the standard channel
• Ad-brand impact value to a visitor, who sees the
  ad but doesnt click through
• Web site brand impact value of a visit to the
  Web site that results in benefits, but not a sale
• Lifetime customer value future value of profits
  from a new customer

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Evaluating Web Chains
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Cost and Performance
Table 5.5
One of the best uses of Web chain analysis is to
compare alternative methods of acquiring customers
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From Web Chains to Closed Loops

• Theres a strong connection between Web chains
  and closed-loop marketing
• A Web chain is closed loop if
• the chain extends from the marketing offer to the
  desired marketing response
• Each step is trackable
• The Internet can be used to close the loop on
  traditional media advertising if unique
  identifiers are included with the ad
• Dell newspaper ads contain a unique code