Title: Introduction to the Internet
1Introduction to the Internet
2Unit Outline
- The Yahoo Story
- A Variety of Perspectives
- The Internet
- The Web
- Hierarchy of Effects Explanation
- Internet Business Models
- The Web and the Economy
3The Yahoo Story
- Jerrys Guide to the World Wide Web
- Human compiled index
- Yahoo! Index
- Advertising revenues nearly 100 million
- Stock rose from 13 to 172 per share between
April 1996 to July 1998
4The Yahoo Story
- Way to go Jerry (Yang) and Dave (Filo)!
- Current Yahoo! Stock price?
- Yahoo!
5A Variety of Perspectives
- A technology
- Social space
- Marketing tool
- Information publishing
- Economic, social and business contexts
6The Internet
- A network of computers (similar to a telephone
system) - WWWeb was a child of the internet and the part
of the internet that can be surfed - The child is now larger than the parent
- When people say internet usually they mean WWW
7The Internet as Technology
- Bits are the essential building blocks of digital
information - Takes on a zero or one value
- Grouping bits forms more complex information
- The Internet is all about moving bits from place
to place
8The Internet as Technology (Cont.)
- Speed is important
- Internet is currently too slow
- Video on demand is the holy grail
9The Internet as Technology (Cont.)
- WWW was developed to make it easier for users to
exchange bits - A point and click graphical interface
- Sound, picture and video elements
10The Internet as Social Space
- A place where users communicate
- e-mail
- Usenet
- Web
- Chat rooms
- Conferencing
- Video conferencing
- Internet phone
- Interactive games
Geocities
11The Internet as a Marketing Tool
- The Marketing Concept
- An organization exists to satisfy customer wants
and needs while meeting organization objectives - Mass customization of communications and products
is now possible - Increasingly smaller target markets
- A target market of one!
12The Internet as a Marketing Tool (Cont.)
- Used in Marketing for
- Information gathering for planning
- New products
- Digital distribution channel and electronic
storefront - Promotion that allows for two-way communication
- 50 million users in four years (television took
13)
13The Web
- In 1991 the National Science Foundation decided
to allow commercial use of the Net - Three stages
- Information publishing
- Transaction-based systems
- Mass customization
14The Web - Information Publishing
- Business began with informational home pages
(brochureware) - Evolved to new product for some businesses
(magazines, newspapers) - People do research on the WWW
- Selling ads and sponsorships supports the content
15The Web - Information Publishing (Cont.)
- Portals
- Entry points to the web
- Index and retrieve information from other content
providers - Largest is Yahoo!
16The Web - Transaction-Based Systems
- Allows firms to communicate and sell online
- More difficult (and expensive)
- Online storefronts
- Business to business commerce
17The Web - Transaction-Based Systems (Cont.)
- Web page must link to backend computer systems to
validate and manage transactions and inventories - Backend because the user never interacts with
them directly
18The Web - Mass Customization
- Mass Customization
- Creating systems that can personalize messages to
a target audience of one. - Two kinds - automatic and manual
19The Web - Mass Customization (Cont.)
- Automatic customization
- Software tailors content to user based on info
about users historical surfing behavior - Example is Amazon.com
- Ethically controversial
- What is the benefit delivered?
20The Web - Mass Customization (Cont.)
- Manual customization
- Relies on explicit instructions from user
- Common in the news delivery service
- Example is CNN Interactive
21Lavidge SteinersHierarchy of Effects Model
- Awareness (think)
- Knowledge (think)
- Liking (feel)
- Preference (feel)
- Conviction (do)
- Purchase (do)
22What is Involvement?
- The extent to which something is somehow
important to the consumer - Driven by risk
- Financial
- Social
- Performance
- Psychological
23Impact of Involvement
- The greater the level of involvement, the greater
the - time spent in search
- effort expended in search
24Hierarchy of Effects Explanation
High Involvement
Awareness
Cognitive (think)
Knowledge
Affective (feel)
Liking
Preference
Conviction
Conotive (do)
Purchase
25Hierarchy of Effects Explanation
Low Involvement
Cognitive (think) (low levels)
Awareness
Knowledge
Conative (do)
Purchase
Conviction
Liking
Affective (feel)
Preference
26Internet Business Models
Hierarchy of Effects
Business Model
Cognitive and Attitude
Stakeholder communication Branding lead
generation Customer service E-mail databases
Sell product Electronic publishing Sell
Content Sell ads Agent services
Transactive Behavior (Revenue Generating)
27Internet Business Models
- Stakeholder Communications
- information about the company and its brands
(www.mcdonalds.com) - stockholders, consumers, employees, suppliers,
media, government are all stakeholders - When the web site is stricly informational, this
is brochureware
28Internet Business Models
- Branding
- Selecting a brand name and/or mark and supporting
with marketing communication - Object is to build brand equity - brand
advertising - Internet has not been strong, but predicted
growth - what do you think?
29Internet Business Models
- Sales promotions
- Build short-term sales
- Coupons (J. Crew)
- Sampling (Hallmark)
30Internet Business Models
- Lead generation
- Company uses e-mail or its web site to gather
names of potential customers (HermanMiller)
31Internet Business Models
- Customer Service
- Information for customers (Rollerblade)
- Feedback mechanisms for communication with
customers - e-mail - and databases, avoid spam
- Customer satisfaction surveys
32Internet Business Models
- Sell Product
- Online transactions
- Largest segment business to business markets
(about 2/3s of all dollars) but - Consumer transactions growing
33Internet Business Models
- Electronic Publishing
- A subset of selling products
- Media create online versions of product and
either - 1) charge a subscription rate and/or
- 2) sell advertising space
- New York Times
34Internet Business Models
- Agent Services
- Firm acts as middleman but never takes posession
- Aggregators (advertising, travel, commodities)
(Travelocity) - Intermediaries (searching for lowest prices)
- Syndicated selling (commisions to other web sites
for customer referrals) (Amazon)
35Internet Business Models
- Agent Services
- Be aware that the internet is a global medium!
36The Web and the Economy
- Real cost of a product is the nominal cost
search costs (Stigler) - The cost of information is decreasing radically
as a result of information on the web - How does cheaper information lead to greater
wealth?
37The Web and the EconomyInternet Stocks are Up!
- Internet stocks are up (with some recent - late
spring 1999 - fluctuations) - This, despite the fact that most inernet
companies are NOT making money - Stock trading online is big
38The Web and the EconomyNew Media Revenues
- New media industry
- combines elements of computing technology,
telecommunications, and content to creaate
products and services which can be used
interactively by consumers and business users
(Coopers Lybrand 1977, p.16)
39The Web and the EconomyReduced Inflation
- Commerce Department believes digital technology
has helped keep inflation in check (from 3.1
down to 2) - Conflict between lower cost of information and
bidding up of goods and services?
40The Web and the EconomyEfficiency and
Effectiveness
- Efficiency minimized input to output ratio
- Effectiveness making the right choices in order
to maximize the companys competitive advantage
41The Web and the EconomyGains to Efficiency
- Purchasing
- automation, lower costs, downward price pressures
through online bidding - Inventory management
- JIT and electronic ordering, reduced inventory
holding costs - Cycle times (new product development)
- Customer service (cost shifting?)
- Sales and marketing
42The Web and the EconomyGains to Effectiveness
- Purchasing
- locating hard-to-find components
- Inventory management
- Incorporate latest technology
- Cycle times (new product development)
- Respond quickly to changes in the marketplace
- Customer service
- Greater satisfaction, likelihood of repeat
purchase - Sales and marketing
- Superior service, greater customer satisfaction
43The Web and the EconomyJobs
- New media payrolls increased to 2.73 BILLION by
mid 1997 - Number of new media companies grew by 16 and the
number of employees grew by 31 - Marketing and sales positions in new media have
quintupled during the 18 months ending in
mid-1997 - 31 of new media managers own equity in the
business - New media companies represent the largest and
fastest growing U.S. Industry sector in 20 years