EXECUTIVE SUMMARY

The Online is the fastest growing medium in the 90s with Indian Online market
growing steadily in terms of subscribers and the number of active subscribers has
touch 4.5 million as of March 2009. This represents a growth of 30 per cent compared
to the 3.1 million active subscriber bases in March 2008. It has great potential as an
advertising medium. Its feedback and interaction possibilities enable advertisers and
online users to customize and differentiate the advertisement to meet the users own
requirements.
Online advertising is becoming part of some companies marketing strategy. However
it requires new strategies and thinking. The benefits of online advertising are its
ability to cover all promotional objectives from awareness to action by leveraging all
5 elements in the promotion mix. The Online is also a highly selective, cost effective
media with greater measurability than any other media. Despite higher global reach
Online is not yet a local mainstream media.
The Online offers companies targeting well educated, innovative, affluent males or
students great potential for success as their segments are highly represented. Products
with high information intensity and high buyer involvement are also appropriate for
online promotion due to its large information capacity at low costs. Its distribution
opportunity is especially suitable for the increasing channel of mail order products.
Low product fit or low audience fit companies can benefit by building a brand image
to establish a user link or simply to learn about interactive media.
Traditional advertising is consumed passively & online implementation requires
understanding, commitment and resource allocation from corporate management to
operate successfully. The marketing department should be responsible in conjunction
with advice from a competent advertising agency for online strategy development and
implementation.

INTRODUCTION
Throughout history, technological breakthroughs have created fundamental changes in
the way we communicate and relate to each other. The new forms of communication
that have surfaced with the passage of time have, each in their own way, influenced
society dramatically. Gutenbergs invention of the printing press in the 15th century
made it possible to mass produce text and triggered a wave of knowledge
dissemination which eventually provided the foundations for the Lutheran
reformation and other radical changes in the society of that time.
In the 20th century, radio and television have brought sound and pictures directly to
the individual household. This first generation of electronic mass media expanded the
individuals access to information and exercised a homogenizing influence on large
parts of the population.
Interactive networks
In these years, a new communication technology is beginning to break through:
interactive networks, which make it possible for the individual to retrieve and deliver
large amounts of information to one or more recipients. As the information processed
in these networks is digital, it can be replicated, manipulated and distributed with an
unprecedented ease. And unlike the unidirectional communications of traditional mass
media, the interactive networks are based on a two-way communication flow which
gives a more active role to the user. Many observers argue that interactive networks
hold the potential to revolutionize the way we communicate, work, shop and entertain
ourselves. Revolution or not, there is little doubt that their long-term impact on our
lives will be significant.
Commercial use of the Web
With a growing number of users spending an increasing amount of time on the
Online, advertisers, who annually spend billions of dollars courting potential
customers, are beginning to show great interest in this new medium. The fastest
growing part of the Online, the World Wide Web, is increasingly being used for
commercial purposes by companies who are attracted by the low costs of making
information available, the possibilities of reaching a global audience, and the
opportunity to use the mediums interactivity to create a dialogue with the audience.

OBJECTIVE
The aim of this report is to analyze the World Wide Web as an advertising carrier. The
World Wide Web is a new medium which has not yet been adequately researched and
described in the literature, and it embodies a number of communication characteristics
which differ fundamentally from those of traditional mass media.
Moreover, there are large uncertainties about who the Web users are, how they use the
medium, and what the general strengths and weaknesses of the Web as an advertising
carrier are.
In short, this report aims to answer the following questions:
a. What are the differences between online advertising compared to traditional mass
advertising strategies?
b. How is online advertising linked with the promotion mix?
c. What are the pros and cons of online advertising compared to general media?
d. What are the critical success factors for advertising on the Online?
e. How should online advertising be implemented?
In order to answer these main questions, the report will address the following sub
questions, which include analyses about the medium and its users, as well as
prospective advertisers:
From a theoretical perspective, what are the differences between the communication
processes on the World Wide Web and traditional mass media?
What are the characteristics of the Web users?
What are the strengths and weaknesses of the Web compared to other advertising
media?
Which companies should use the World Wide Web for advertising?
What guidelines can be established for designing Web advertisements?

Review of literature
Lack of research
Because of the explosive development in this area, research has lagged behind
practice. Despite the great attention given to the development of the Online, very little
research has been undertaken about how the World Wide Web is actually used for
advertising purposes today, and even less about how it should be used. While most
observers agree that the Web has an enormous potential as a commercial medium,
there is widespread disagreement about how the medium is developing and what
advertisers should do to exploit this development. In this report, we will attempt to
shed light on these questions.
IMRB has used its internet survey data to come out with an online banner advertising
report and claim internet banner ad market will grow from Rupees 235 crores this
year to 350 crores next year. Just for a comparison Rediff the largest Indian internet
site in India posted a revenue of $23.3 million from India last year which is
approximately equal to 90 crores and most of its revenue is from display ads that is
why I think Online advertising has a bigger scale than reported or maybe it is
concentrated in the hand of a few top players. Some key highlights of the report are:

80% of Internet active population has clicked on an ad in 2007.

BFSI (Banking, Financial Services and Insurance), online industry and

ITES (Information Technology Enabled Services) with 25%, 25% and
13% share were the leading advertisers in the online banner space
during the 2007-08 financial year.

The internet ad categories with highest degree of recall amongst users

are loans by Bank and Financial institutions followed by jobsites.

Online advertisements play an important role as awareness generators

41% of the Internet users have searched for additional information
after seeing the ad for a job site.

Conversions are highest for ads for Holidays and tours and bank loans
along with laptops as shown in table above.

In a study it is known that 28% of Indian mobile users accessed the Internet:

As per a study conducted by Nokia India and TNS India, Indian mobile users
accessed Internet for 2.4 day a week as compared to 2.7 days a week via a PC

28% accessed Internet as compared to 26% via PCs

Internet advertising in India grew by 45% in 2008 to touch Rs 363 crores

(1.7% of the advertising pie)

1) Business today has a good story covering the full spectrum of digital advertising
companies in India - from full fledge interactive agencies to online Indian ad
networks.

As per a Lintas media report, Internet advertising in India is Rs 215 crores ( a

43% Y-o-Y growth)

Possibility of the market growing to Rs 2500 crores by 2011

Current mobile advertising in India is Rs 40 crores, expected to grow to Rs

500 crores by 2011

2) Content Sutra has another story on figures released by FICCI, which puts the
Indian online advertising market at Rs 270 crores, a 69% Y-o-Y growth. Online
advertising was just 1.3 % of total Entertainment & Media advertising in 2007.

Online advertising in Last recession

11 percent growth in online advertising
The slowdown in global economy has not affected the online advertising business.
This industry saw a growth of 11% compared to last year as per a report released by
the Interactive Advertising Bureau. Internet advertising revenues in the third quarter
of the year were around $5.9 billion. The sad news however that is the growth is not
as fast as it used to be. However, this quarterly revenue for the industry was the
second best ever.

Indian online advertising networks

Online advertising is steadily robbing the market share from traditional media
advertising. Given the potential of growth and increasing Internet penetration in India,
online advertising is set to explode in coming years. The 38.5 million Indian Internet
users, according to an IAMAI study, have become the prime target for numerous
advertisers clouding the web.
To cash in on this growth, numbers of online ad networks have come up in India in
last few years. Here is an overview of current pool of online ad networks in India.

Komli is a leading online ad network in India offering tools to Publishers to help them
manage, optimize, and make the most of their online advertising. On the other hand,
advertisers have access to millions of clients worldwide in order to increase their
consumer commitment, brand recognition, leads, and sales. They offer different
options such as CPM and performance based CPC and CPA marketing.
Solutions to both publishers and advertisers include Komli premium network and
Komli performance network. Komli premium network offers publishers tons of
advertising formats using the newest web technologies, as well as many top brands,
and provides advertisers with rich, targeted ways to connect with consumers.
Komli last year got $7 million funding from 3 VCs namely Nexus India Capital along
with Draper Fisher Jurvetson and Helion Ventures.

Tyroo is an India based online advertising network that uses proprietary targeting
technology to ensure advertisers reach out to the right websites from its inventory of
publishers.
Internet company Yahoo picked up at least 35% stake in Tyroo for an undisclosed
amount in July 2007. Incubated by Delhi-based digital media company Smile
Interactive Technologies Group, Tyroo was voted as one of the 10 most interesting
startups by Business daily Mint, a part of the HT Media group.
Recently Tyroo claimed to reach 2.5 billion Ad impressions a month. According to
Tyroo, its 2500 strong publisher network includes Perfspot, Facebook, About.com,
SantaBanta, Smashits, Yatra, and OneIndia. The company counts Microsoft, General
Motors, Pepsi, ICICI and Yahoo amongst its advertisers.
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dgm India claims to be the largest performance based affiliate ad network in the
country. dgm India is a wholly owned subsidiary of Deal Group Media.
dgm India offers to its advertisers affiliate program to develop a virtual sales force
using one of their turnkey affiliate marketing products, whereby advertisers promote
their products via relevant and top performing affiliates /publishers.
For publishers, DGM India will optimize their online inventory, monitor and evaluate
performance and provide with attractive deals from all the advertisers.

PayPod is an online ad network specifically tailored to help advertising agencies take

advantage of the digital medium. Targeted at the advertising and publishing industry
in India, PayPods Digital Advertising Network solution helps deliver ads on the
Internet based on geography, context, content, gender and age group relevant to
specific requirement and target audience.
Along with online Internet advertising, PayPod has also launched mobile advertising
solutions for publishers in India.

IndiAds is the leading Internet advertising network for the Indian and South Asian
online community. They claim to deliver 800 million ads per month to Indians and
South-Asians living in North America, Europe and Asia.
IndiAds offers ad serving services for websites with traffic over 20,000,000
pageviews per month. With ability to precisely target ads to any geographic location,
with greater flexibility in campaign settings, publishers are able to acquire new
advertisers and provide better results for their existing clients.

Although not Indian, it is the most popular Ad network not only in India but
worldwide. More than 5 publishers mentioned above claim to be the largest Ad
network in India. I wonder how that can be with more than 75% market share is with
Google alone!
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Online advertising market in India

I have searched quite extensively for statistics related to online advertising in India how big is the market, who are the biggest online Indian advertisers, which portals
lead the segment, what kind of advertising is popular - CPM / CPC / CPA and finally how much is the average CPM rate for these Indian portals. Now, Businessworld has a
story in its latest edition, which answers pretty much all the questions above. Some
interesting points:

Rediff leads the Indian portals in terms of pageviews followed by Yahoo India
and Indiatimes.

Average CPM rates for Indian portals is between 100-125 Rs.

E-commerce and FMCG companies are the leading online advertisers

Ebay India,Travelguru, Makemytrip, Yatra, Sulekha, Bharatmatrimony,

Shaadi,99acres, Naukri, banks are the leading online advertisers.

DEFINITIONS AND DELIMITATIONS

WORLD WIDE WEB
The World Wide Web is the part of the global Online which follows the HTML
standard. Although e-mail and file transfers strictly speaking follow different
protocols, we will consider them part of the Web as they can easily be accessed
through most Web browsers and thus appear to be an integrated part of the Web from
a user perspective.
Advertising
Advertising can briefly be defined as nonpersonal communication of information
usually paid for and usually persuasive in nature, about products, services, or ideas by
identified sponsors through various media. This traditional definition of adverting
will be elaborated later in section 1.3. We will argue that the traditional understanding
of what advertising is should be reconsidered and expanded in connection with
interactive media because of the different characteristics of these new media.
Traditional mass media
There are several groups of stakeholders that are influenced by advertising on the
Web: advertisers, advertising agencies, content providers wishing to attract
advertisements to their Web site, and, of course, the audience. The point of view taken
in the report is that of the advertiser considering whether to advertise on the Web, and
wondering how it should be done.
Geographical delimitation
In terms of geographical delimitation, the unit of analysis will primarily be the
American market. This approach is justified, since the Online is an American
innovation whose development is driven by American forces. The American market is
by far the one with the highest Web usage rate - thus, some analysts argue that there
are as many, if not more, Web users on the North American market than in the rest of
the World combined. Network Wizards (1996) found that 64% of all host computers
connected to the Online are located in the United States.

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RESEARCH METHODOLOGY
This section, we will explain the methodological approach that has been adopted in
order to answer the questions posed in the problem formulation.
In the field of advertising research, no generally accepted scientific framework exists.
Advertising

theories

are

rather

collections

of

operationally

oriented

systematizations and checklists than scientific theory. As a consequence of this

absence of a general theoretical framework, the report is not structured after a general
theory. Various models and frameworks from communication, advertising and
marketing theory have been included on an ad hoc basis in the analysis where it has
been found relevant.
Much has been written about the Online over the last 6 months. However, due to the
dramatic development over the last few years the process of both academic and
commercial research in the marketing and advertising field has lagged far behind
everyday practice.

SECONDARY RESEARCH
External desk research is used in a subsidiary way; however primary research is the
main thrust of the work. Secondary data provided a context within which to set the
work. The secondary research is mainly based on articles from journals, newspapers
and magazines because only few on-line marketing books has been published. None
contain any academic/ theoretical research.
Through the interactions with the experts in the advertising industry it was possible to
get access to confidential online material, surveys and briefings. New technology
driven research methods like CD-ROM databases and library computer networking
were time saving, cost effective and efficient. During Online research several good
unpublished theoretical articles on advertising strategies was found. Press clippings
leading websites were also useful.

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Primary Research
Certain research objectives especially concerning how online advertising works could
not be covered through secondary research. They required a more analytical approach.
Furthermore online development is so tremendous, that relying only on historic data
will leave the dissertation with bias. The primary data was gathered through a
combination of observation, experimentation and questionnaires.
Many hours have been spent surfing the net to get a understanding of how and what
the people use the Online for advertisements and company homepages were
investigated and analyzed. Several companies were interviewed through E-mail about
their communication strategies. Marketing mailing lists and discussions groups were
joined. Quick and free feedback from experts and users was thereby gathered.
They were asked to predict the future for the Online as advertising medium and what
effect it would have on media habits and communication strategies. The differences
between this medium and traditional media were discussed along with what the
critical success factors are. Companies present on the Online were interviewed about
their reasons for being there, what their strategies were and how successful they have
been.

Structure of the report

As indicated in the problem formulation, the report has been structured in four main
parts, where part I and II contain the body of the analysis. The question is that which
issues are addressed in the individual chapters, and do not necessarily correspond to
the titles of the chapters.
The aim of part I is to gain an understanding of the World Wide Web, its users, usage
patterns, and the mediums virtues and limitations as an advertising medium. This is
achieved through a comparative analysis of the Web and traditional mass media.
While parts of the analysis in part I are of a descriptive nature, it has been emphasized
to maintain a critical and analytical approach to the discussions. The main reason for
the somewhat

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descriptive approach in part I is that the Web has not yet been adequately described in
the literature, and an in-depth understanding of this new medium is an essential
prerequisite for developing recommendations for its use.
A theoretical analysis of the communication processes on the World Wide Web, using
theories of interpersonal communication and mass communication as a point of
departure. The analysis in chapter 3 is primarily based on empirical data about the
users and usage patterns of the Web. The chapter discusses how many users the Web
has, what factors drive and impedes the growth of the medium, which the mediums
users are and how they use the medium. Chapter 4 identifies the main strengths and
weaknesses of the Web as an advertising carrier compared to other media. The
conclusions reached in chapter 4 are used in the discussion of how the Web should be
incorporated in the companys media mix.
The aim of part II is prescriptive. Based on the conclusions from part I, part II
develops a series of recommendations for prospective advertisers about if and how
they should use the medium. Chapter 5 discusses the products and services best suited
for being advertised on the Web, and formulates recommendations for companies
considering advertising there. It also discusses how the Web should be incorporated in
the media mix of the company. Chapter 6 establishes guidelines for advertisers that
have chosen to integrate the Web in their advertising. In the chapter, a new approach
to advertising on the Web is presented and a number of models are developed than can
assist prospective advertisers in creating a successful advertising presence on the Web.

DATA COLLECTION & ANALYSIS

The data used in our analysis is come from secondary sources. A number of personal
interviews have been undertaken with experts in the area, mainly in advertising
agencies. Moreover, our own practical experience with the design of Web sites has
provided valuable insights into how to use the medium in practice.

The Web as a research tool

A large part of the data used for the analysis in the report has been collected on the
Web. In the list of literature, the URL (Uniform Resource Locator, the Web address)
of each source has been provided so the reader can access the source online if he

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wishes to. Using the Web as a research tool has proven to be extremely effective and
efficient. Many of the sources available on the Web are not accessible in print, which
means that using the Web for data collection has allowed us to access a much wider
selection of relevant sources and use them as input for the analysis.
In addition to using the Web as a library, we have also used the medium actively to
create a dialogue with other students, researchers and practitioners. As a part of the
work on this project we established a Web site1 that describes our research program.
The index page of the Web site is depicted on the following page. Within a two-month
period the site generated more than 2400 hits2. Via this site, we have received a large
number of e-mails from students, researchers and business practitioners in different
parts of the world working on related issues. The dialogue generated through this Web
site has provided us with valuable input and inspiration throughout the process. The
reduction of geographical distance as a barrier to research dialogue and exchange of
ideas and results is likely to keep accelerating and improving the quality of
knowledge generation, as more and more researchers use the Web for dialogue and
data exchange.
However, data collection on the Web raises two problems: Firstly, validating the
quality and authenticity of the information is an even more critical issue than in print
media, since the gatekeeper function performed by editors and publishers is absent
on the Web. This issue has been addressed through a critical examination of the data
and conclusions of each source and by cross checking with other sources when
possible. Moreover, the positions and institutional affiliations of the authors have been
considered when assessing the quality and reliability of the sources. Secondly, there is
a risk that sources are changed, updated, or moved to a different URL. Nevertheless,
we have found that the benefits of using information from the Web fully outweigh
these disadvantages.

Towards a new advertising paradigm

In this section, we will discuss what advertising is and what purposes it serves. The
purpose of the section is to elaborate the definition of advertising presented earlier in
this chapter and identify some of the defining characteristics of advertising as it is
currently implemented in traditional mass media. This is done in order to set the scene
for the discussion about how traditional advertising approaches should be altered for

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advertising on the World Wide Web. We will argue that a new advertising paradigm is
needed as the traditional paradigm, based on a one-way information push, is not
suited for interactive media.

PROMOTION MIX
Communicating with present and potential customers is an essential part of any
business. Any company is inevitably cast as communicator and promoter as well as
producer and has to manage a complex marketing communications system (often
referred to as the promotion mix), which consists of four major tools. (Kotler 1991):
Advertising: Advertising is defined below. It differs from the other components of
the promotion mix by being persuasive communication, from the company to an
audience through the mass media.
Personal selling: Oral presentation in a conversation with one or more prospective
purchasers for the purpose of making sales.
Sales promotion: Short term incentives to encourage purchase of a pro duct or
service, i.e. through special incentives discounts.
Public relations: A variety of programs designed to improve, maintain, or protect a
company or product image.
WHAT IS ADVERTISING?
Arens and Bovee (1994) put forward a common definition of advertising:
Advertising is nonpersonal communication of information usually paid for and
usually persuasive in nature, about products, services or ideas by identified sponsors
through various media. The word advertising originates from the latin ad veterre,
which means to turn the mind toward (Russel & Lane 1993). Advertising represents
one of the most important ways that companies convey messages about their products
and ideas to potential customers and stakeholders, and advertising revenues constitute
the financial basis for thousands of TV stations, newspapers, and magazines.
In general, current advertising is a one-way communication process whereby
standardized messages are dispersed to large audiences. Advertisements have become
bundled with the general information push of the mass media (Negroponte 1995),
which pushes the advertisements into the consumers minds. The bundling of

15

advertisements with TV programs has made it possible for the advertisers to develop
efficient forms of intrusive advertisements, which have an effect on the audience even
though they do not take any significant interest in (at least some of) the
advertisements as such. As the classical purposes of traditional advertising is to
inform, persuade, and remind, the actual sale normally does not take place in direct
connection with the exposure to the advertisement. Since exposure and transaction are
usually separated in time and space, advertising is functionally separated from sales
(Wells, Burnett, and Moriarty 1992).
THE MEDIUM OF THE MESSAGE
The current attitude towards what advertising is, the function it includes, and how
advertisements are designed, has been shaped by the technological possibilities and
constraints of traditional mass media. Because of the many forms and uses of
advertising, it is difficult to make all-embracing generalizations about what
advertising is, but still a number of defining characteristics of advertising can be
observed:
CHARACTERISTICS OF TRADITIONAL ADVERTISING
One-way communication flow: Because of the one-way communication flow of
mass media, advertising is basically a monologue, not a dialogue. Therefore, mass
media advertising usually precludes feedback from the audience, such as transactions
or requests for further information.
Standardized messages: Due to the inherent standardization of mass media
communication, all of the audience normally receives the same messages in the same
form, regardless of their specific desires and information needs.
Simple messages. Advertising (especially in broadcast media) tends to concentrate
on very simple messages with rather low information content. This is in part because
of the brief exposure, which restricts the complexity of the message that can be
communicated, and in part because of limited audience involvement in the
advertisements. In the words of Krugman (1994), ...people do not watch TV in order
to make decisions about which brand of dog food to buy next.
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 Captive audience. It can be argued that the audience in traditional mass media is to a
certain extent captive, in the sense that it must do something actively to avoid being
exposed to the advertisements in their full length (for instance, change to a different
channel on TV).

WORLD WIDE WEB

THE HISTORY OF THE ONLINE
The Online is a global computer network, which is linked together by international
telecommunications lines. ARPANET (the original name) was founded in 1968 by the
United States Defence Department to develop a world-wide communication system to
connect government and military locations together. For safety reasons, there is no
central computer and no central authority which controls the Online.
The Online then grew into an academic site. Science and education fields used it as an
electronic library and for exchanging of information through discussion groups. This
was made possible through interactive video-conferencing and E-mail. The
construction was very basic, mainly text based and very slow due to poor software.
3.2. The Development of the World Wide Web (WWW)
The WWW was founded in 1989 and was introduced commercially in 1993. By 1994
3 Million WebPages of information, entertainment and advertising existed.
The Online changed from an individual communication site to a commercial
environment. A survey in 1996 showed that 89% of the websites belonged to the
commercial industry, the remaining 11% to individuals. The WWW is compared to a
cross between electronic trade show and a community flea market due to its openness,
informality and interactivity. The WWW made the Online user-friendly and
customized. Homepages can contain creative graphics, video clips for people to view
and audio visual clips. By typing the URL home address or through hyper linking the
user can in an unsequential way select, what and when to see specific information and
to interact and visit other peoples homepages.
There are still only few who can actually browse the web and not all computers have
the capability to play the video and audio files. However, the web is believed to be the
future standard and is improving daily. Commercial On-line services like Airtel, Tata
Indicom, Reliance, Infocomm etc. now provide their customers access to the WWW.

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3.3. Online Technology and its limitations.

Basic Online Equipment
The Online and broadband penetration was much lower than in other Asian countries.
Access to the Online requires a computer, a telephone line and a minimum 14.400 K
modem. The Bill Gates vision of a PC in every house seems a bit unrealistic or at
least distant.
The reason for the less penetration is, that many do not master the technology. This
can result in a huge gap in the information society between computer users and nonusers. Consumer may also find Online too complicated, confusing and cold or simply
prefer to be passively entertained. However, technology prices and on-line
subscription fees are falling, modem speeds are increasing and thereby reducing the
bandwidth problem, software is improving and information and communication needs
are exploding, making Online services accessible, affordable and attractive. This will
increase the online volume, which is important for the advertiser.
BANDWIDTH
Most users surf at expensive day time rate. During peak hours7 it takes longer to
download. To watch an advert that plays for 10 seconds would take 20-50 minutes to
download on a basic 14.4 kbps modem. A survey found that if nothing starts to
appear, users start to wander elsewhere after 12-to-15 second. Traditional TV spots
are therefore not suitable to display on the Online.
India has invested in fibre-optic cable, which in the near future should increase the
speed significantly. However, transmission of large data with the current bandwidth
problem can be solved by combining CD-ROM with the Online. CD s ability to carry

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Online HTML language enables advertisers to offer customers to purchase the quicker
CD with up to 630 MB of information ,and up-date the version over the Online.
SECURITY
Microsoft, Visa and MasterCard work on securing credit card transactions, which
might include digital signatures. Firewalls and encryption have already been
developed to protect confidential material. Digital cash or virtual money like E-cash
are also being tested as means of payment on the Online.
So far only 2.5 million people have purchased products and services over the WWW,
but according to a Hermes pre-test programme in 1994 it is expected to grow by
85%.Direct selling will not be fully utilized, until the public is convinced that the
Online is safe for transactions. This means that the advertiser meanwhile should
provide the surfer with other alternatives to exchange money e.g. through phone
transfer. Advertising will not be able to finish the sale, until the security problem is
solved.
CONTROL
There is no central authority, no governing body and no official policies on the
Online. Every one is free to publish what ever they like. To trust sources can be
difficult. A lot of irrelevant content is being published. Since the US government
stopped sponsoring the Online in 1995, there is a need for someone to fund the future
development of the Online.
The commercial industry now sponsors development and quality content, with the
trade- off of allowing promotion. Also legal issues across borders are difficult to
control. What might be legal in one country may be illegal in another.
Property rights
Digital transmission makes it easy to copy and alter all sorts of information and art,
from music to databases to computer software. The Online is one gigantic copying
machine. All copyrighted works can now be digitized and once on the Net,
copyrighting is effortless, costless, widespread and immediate says David Nimmer, a
Los Angeles lawyer in intellectual property rights. This is dire news to the commercial
industry, which become very vulnerable to piracy to a vast number of people.
Advertisers must be aware of this problem.
Current copyright law is based around national boundaries, which leaves the question
what national law should be used. The European Union has created a green paper on
copyright and related rights in a digital society, which may become a directive. Also

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the World Intellectual Property Organization is working on a set of international

standards for copyright laws.
Many products sell, not for what the physical objects costs to make, but for a price
that reflect the heavy research costs (drugs) or an ingenious idea (software) or
spending on branding (perfume). The erosion of copyright protection may end up as
part of the price producers will pay.
Tracking down piracy is difficult as people put it anonymously on the net. Second,
who is liable?. The operator or the content producer? The current situation seem too
diffuse to make any conclusion how to address this increasing problem.
TRADEMARK PROTECTION
Other legal issue is trademark protection. Demand for catchy domain names
(you@yourname.com) are rising and the process of name assignment and registration
is becoming a contentious process. Currently 120.000 commercial domains are
registered by InterNIC, a service which manages name registration and directories. It
is growing with 3000 per week. Many companies pay the $50 annual registration fee
simply to protect their trademark, without using the domain name. For instance P&G
has registered all its brand names partly for this reason.
The Online users
Before creating an advertisement the media users must be surveyed and understood in
order to target them efficiently. SRI International conducted in mid 1995 detailed
research on the different segments on the Online. Commerce Net/ Nielsen Online
demographics Study released its first major US Online survey in October 1995. Their
findings were.......

Online Demographics
The user is an extremely attractive target due to his/her characteristics. They are well
educated (64% have at least college degree), professional (50%) with a high disposal
income - 25% have income over 80.000 dollars aged between 30 and upwards.
Research results confirm that education and not income is the key to online
participation.

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The users status and profile makes them often opinions formers. Reaching these
segments have a great impact on word-of-mouth communication. They are
information seekers, curious, active and innovative. They like interacting and being in
control. They are more demanding, than advertisers expect.
STUDENTS
Most colleges and universities give free accounts to the students. They have a
significant demographic component on the Online. They are innovative and looking
mainly for entertainment. To reach this segment at an early age could create the
possibility of establishing a relationship with a life time value for the advertiser.
GENDER DIFFERENCES
The Online is primary male dominated with 60% of the total usage. However, women
on the Online are increasing significantly in numbers now accounting for
approximately 40% up from 15% in 1995. Researchers say there is evidence that men
and women use media in different ways. This will have implications of the future
development of the Online, which has previously been male focused. A recent study
showed that females are more loyal and spend more time on specific Online sites
where as males surf around for whats cool? and entertainment. Men are more
impressed by fancy graphics and download games, where as women look for chat
rooms or ways to make their lives more efficient.
More women in cyberspace could be a gold mine for advertisers. They are believed to
make 75 percent of the general consumer decisions. However, a survey sponsored by
Apple computer still shows, that 90% of on-line shoppers are men. Many believe this
21

will change, once the woman become familiar with the net. Some companies such as
Clinique or Toyota have realised this potential and target women directly with special
female sites. However, only few have so far taken this initiative, either because they
do not believe there is any difference or because they do not understand there is a
difference.
ONLINE USAGE
17% (34 million) of the total US population have access to the Online. 11% had
accessed the net the past three months - 8% the WWW. They spend an average of 5
hours and 28 minutes per week on the Online. In total the Online is receiving 46%
more usage time than on-line services.
US experience suggests that as media fragment, so do audience. If they are on the Net,
they are not watching Television. In fact viewing drops by 25% when people surf the
Online. So as Mark Dickinson, new media development director at Lowe HowardSpink says, If we are not there (Online) too, were going to lose them.
Advertising has until recently not been tolerated due to Onlines past history as a
highly reliable academic information-exchange pool. Advertising is becoming more
accepted now, if it adds value to the users, where relevant.
Dramatic levels of growth and rapid shift in the Onlines population might create new
on-line rules or weaken existing ones. However, it will not remove rules. There will
be a shift toward secure privately-ruled communities within the net. The move to
electronic commerce will demand new communities and support new rules. In
cyberspace the real power will lie with those who make the rules.

DEVELOPMENT IN HOSTS, NETWORKS AND

DOMAINS
Hosts
A host is a computer, which has direct online access. It can be located in a university,
a company or in the offices of an online service provider. As a host can have
anywhere from one user to several thousand users, it is not possible to say how many
users are connected to the Online through each host. However, the number of hosts
connected to the Online can be established with reasonable precision, and indicates
how fast the Online is growing. As illustrated in figure 3.1, the numbers of hosts has
grown from 380,000 in 1991 to almost 9.5 million in January 1996.

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Networks
As explained earlier in the report, the Online consists of interconnected networks. As
with the number of hosts, there is no way to determine how many users are connected
to each network, and numbers are best suited for describing the growth pattern. Figure
3.2 shows how the number of networks has grown from 2,338 in 1991 to 93,671 in
early 1996.
Domains
Domain names are addresses of large Web sites; thus, Apples Web address is
http://www.apple.com. Each domain name can contain anything between one and one
thousand Web sites, so it is difficult to establish any precise estimates about the
number of Web sites on the basis of domain names alone. Still, the growth from
16.000 registered domain names in 1991 to 240.000 in 1996 depicted in figure 3.3
reflects an explosive growth in the content available on the Web.

The Hard Core users are the segment of users that have used the Web within the last
24 hours and claim to use the Web frequently. According to the results of the survey,
this segment has 1.8 million users, which constitutes 16% of all Web users in the
United States. Regular users are users who have used the Web in the past week, but
not within the last 24 hours and

23

generally use the medium frequently. There are 2.4 million regular users, which
equals 21% of total Web users. Occasional users use the Web less frequently than
Regular and Hard Core users and have not used the Web in the past week. With 4.2
million users, this is the biggest of the segment, comprising 37% of all users of the
Web.

INTERPERSONAL & MASS COMMUNICATION

Within communication research, a sharp division between interpersonal
communication and mass communication has traditionally been maintained. However,
it can be argued that the Web is a hybrid medium which has some characteristics in
common with mass communication, but also shares certain characteristics with
interpersonal communication. Using models of mass communication and
interpersonal communication as a point of departure, we will discuss which
characteristics are distinctive of the Web from the perspective of process theory.
Information pull
As the exchange of information becomes increasingly easy and flexible, there is no
need to waste resources pushing bit-based information to the media users. They can
pull the information down on demand, when they are actively interested in receiving
the information. These developments may gradually change the nature of mass media
from broadcasting to narrowcasting, and could develop to the point where the receiver
programs his own TV-channel and composes the contents of his own newspaper.
Thus, the information push of the industrial economy is beginning to change into an
information pull. Today, the Web is the medium which most clearly reflects this
development.
Interpersonal communication
While the main focus of the chapter is put on comparing the Web to traditional mass
media, we will briefly analyze the characteristics of interpersonal communication
processes as well. This is done because the existing theory of mass communication
processes are not adequate to explain the processes on the Web, but need to be
complemented by concepts from interpersonal communication theory.

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Feedback and interaction

Interpersonal communication is the original form of human communication, where
two persons communicate face-to-face. The communication flow is two-way and
takes place in real time, so that both persons are able to adjust the signals they
transmit to the signals they receive on a continuous basis. The most important
concepts distinguishing interpersonal communication from mass communication is
feedback and interaction (Burgon,Hunsaker & Dawson 1994). Feedback exists when
person A after receiving a message (X1) from person B returns a message (X2) to B.
If the exchange continues, and B sends another message (X3) to A which is influenced
by message X2, it can be said that A and B interact. An example of feedback is when a
newspaper communicates a message to a reader, who responds by writing a letter to
the newspaper. If the newspaper subsequently responds to the letter it can be said that
the reader and newspaper interact, although the interaction will be very limited
because it does not take place in real time, but with significant delays.

Mediated communication
Interpersonal communication between two persons who are not located very close to
each other has to take place through a medium such as a telephone or by mail. Thus, a
distinction can be made between two basic kinds of interpersonal communication:
mediated and unmediated communication. In the case of mediated interpersonal
communication, the medium limits the bandwidth so that some information (in the
form of sensory impressions) are lost in the communication process. In addition to
limiting the bandwidth, some media also introduce a time lag between transmission
and reception of the signal, for instance in the case of a letter that does not arrive until
the day after it has been sent. Figure 2.1 illustrates the communication process in
mediated face-to-face communication.
Mass Communication
Mass communication is communication from one sender to many receivers, and has
become a predominant form of communication during our century. Laswell (1948)
introduced one of the most common models of mass communication, which is
illustrated in figure 2.2.

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Standardized messages
The figure illustrates the communication process in traditional mass
communication, where a sender transmits a message through a mass medium
to a large number of receivers. All receivers receive the same message in the
same form. The effect may differ, as different receivers interpret the message
in different ways depending on personal factors and situational factors.
Personal factors refer to the culture and background of the receiver; situational
factors refer to the specific situation the communication process takes place in,
e.g. whether the receiver is exposed to the message on the street, in a train,
from a radio running in the background, etc.
As depicted in Laswells model, there is no interaction between the sender and the
receiver. The communication flow is one way, and it is not possible for receivers to
give direct feedback to the sender or influence the form and content of
communication in other ways. Depending on the bandwidth of the particular medium
in question, the content transmitted can be either static (text, pictures and graphics, as
in print media) or dynamic (video, audio and animation, as in broadcast media).
No feedback symmetry
The model does not include feedback as Laswell did not consider this concept (Fiske
1990). The principal reason for this is that it is impossible for the receiver to give
feedback through the same medium in traditional mass media. If there is a feedback, it
has to be channeled through other media which delays and limits the process.
Sum-up
However, mass communication has a number of shortcomings compared to
interpersonal communication. All users receive the same standardized content in the
same form, and the users cannot interact with the sender or the medium - there is no
feedback symmetry. Because of the standardization of messages, mass media have a

26

low degree of flexibility because the user cannot control when to have the content
delivered.

World Wide Web - neither interpersonal nor mass

communication
The communication processes on the World Wide Web can neither be categorized as
interpersonal, nor as mass communication processes. The Web creates a hybrid of
possibilities which blurs the traditional distinctions between interpersonal and mass
communication. With respect to the field of communication research, the medium
challenges its division into two separate research areas - a division, which has been a
defining characteristic in the last 40 years (Reardon & Rogers 1988). This is because
the Online can be used for interpersonal communication, for mass communication,
and for various hybrids of the two.

Many-to-many communication
Therefore, where interpersonal communication is basically a one-to-one process and
mass communication is a one-to-many process, communication process on the Web is
essentially a many-to-many process. This is so because there are many senders and
many receivers interacting with each other and the medium. Person interactivity also
exists on the Web, through exchanges of e-mail, which makes it possible for
companies to communicate directly with the audience (and vice versa) and to process
transactions and various forms of customer service in connection with advertising
Web sites.
Hoffman & Novak (1995a) have put forward a model to illustrate the communication
processes in many-to-many media, such as the Web. The model, which is depicted in
figure 2.3, illustrates how the Web combines characteristics from interpersonal
communication and mass communication to create many-to-many communication,
creating a hybrid of opportunities.

A hybrid medium
For example, the Web can be used as a one-to-many medium if a company
communicates a standardized message to a wide audience, for instance using a banner
ad. The prospective customer receives the message and gains an interest in the
companys products, and proceeds to interact with the medium to obtain further
information. If still interested, the prospective customer can send an e-mail to the

27

company with any special questions he may have. In this way the Web functions first
as a mass medium, then as an interactive medium (machine interactivity), and finally
as an interpersonal medium (person interactivity).

Absence of gatekeepers
The model also illustrates that it is much easier for Web users to be content providers
(as opposed to only being content consumers) than in traditional mass media, which is
why World Wide Web communication is referred to as many-to-many communication.
As mentioned, mass media have relatively few points of access which are controlled
by gatekeepers, i.e. editors, publishers, etc. On the Web, the millions of servers each
constitute a point of access, and the individual user can deliver content at a very low
cost, without having to get past any gatekeepers. Thus the ratio of content producers
to content consumers is much higher on the Web than in mass media (Quarterman
1994).

Trust
In traditional mass media advertising, the effectiveness increases because consumers
know that the advertiser has to invest large sums in the advertisements (Kotler 1991),
and therefore take the ad more seriously. Because of the high noise on the Web, and
the fact that advertising Web sites can be created at very little cost to the advertiser,
generating trust and validating the quality of the information becomes a critical factor
for many Web sites. This has important implications for advertisers, especially those
who attempt to integrate transactions in their Web advertising. These implications will
be addressed in part II of the report.

HYPERTEXT
As mentioned, the World Wide Web is a global network of interconnected documents.
The Web users navigate by jumping from document to document. One of the
fundamental differences between Web and traditional mass media is the interactivity
and the fact that the content of the medium is structured with hyperlinks.

NAVIGATION
The individual user chooses to follow. Consequently, it is said that the user navigates
in the hypertext document rather than reads it. Some authors (i.e. Whalley 1993) goes
so far as to describe hypertext as a medium which is essentially formless, while
others maintain that hypertext challenges the traditional distinction between form and
content.

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On the Web, it is not only within the individual documents the information can be
structured using hyperlinks - documents can also be hyperlinked to other documents
anywhere else on the Web, forming a complex web of cross references. Therefore, the
medium contains a body of interconnected information of enormous proportions.

Electronic word-of-mouth
Because of the immense amounts of information that can be accessed, meta
information (information about how to locate other information) plays an important
role. Many Web sites contain hyperlinks to other Web sites, which the site
administrator found interesting. If Web users find an advertising Web site useful or
interesting, there is a fair chance that one or more of them will create a hyperlink from
their own site to the advertising Web site, which will generate more traffic to the
advertising site. This can be labeled an electronic word-of-mouth effect, which can
be very powerful since it tends to create a positive feedback cycle, where more traffic
generates more hyperlinks, which in turn generates more traffic, etc.

User control
As mentioned, the Web is characterized by an information pull as opposed to the
information push in traditional mass media. This has important consequences for how
the information is consumed, because this is controlled by the users rather than by the
information suppliers. The somewhat captive audience of traditional mass media does
currently not exist on the Web, at least not to the extent that is the case in traditional
mass media. As the control with the communication process shifts in favor of the user,
there will be a tendency towards fragmentation, diversity and heterogenization of the
media.

Searching or surfing?
Hoffman & Novak (1995a) make a distinction between two basic forms of navigation
on the Web: Experiential and goal-directed.

When navigating experientially, the user is primarily driven by intrinsic

29

Motivation, meaning that he is performing the activity for its own sake rather than as
means to a specific end. The user surfs the Web, often guided by impulses and
curiosity. In the case of goal-directed navigation, the user is searching for
Specific content. Basically goal-directed navigation can be described as searching,
whereas experiential navigation is best described as surfing.
Searchers usually have a high degree of involvement if he expects to find valuable
information in a Web site, while surfers are likely to abandon a Web site faster if they
do not find it immediately entertaining or interesting. This has implications for the
design of advertising Web sites, which will be further explored.

SUM-UP
Since the medium is interactive, users of the World Wide Web play a much more
active role in the communication process than users of traditional mass media. Where
traditional mass media are characterized by an information push, the communication
processes on the Web are driven by a basic information pull, meaning that the control
balance of the communication process has shifted in favor of the user. Thus, the user
controls sovereignly what information he wants to access, which parts of it to be
exposed to, when to be exposed to it, and how to navigate in the information. The
immense body of information available to the individual user further pushes the
control of the communication process towards the user, and has lead to a highly
fragmented content structure that allows the individual user to pursue his specific
interests.

VARIOUS FORMS OF ONLINE ADVERTISING

RICH MEDIA ADVERTISING
DEFINING RICH MEDIA
Rich media has elevated web display advertising to new realms of possibility video,
audio, animation, interactive features, games and more. More advertisers than ever are
using rich media to create cool ads that entertain, engage, educate and encourage
product sales with online audiences.

30

The simplest objective definition of rich media is web advertising units based on
technologies more complex than GIF or JPG images and simple animation. The most
common technologies for rich media ads are Flash, Java and DHTML.
Rich media ads also come in many shapes, sizes and feature implementations. To
simplify these, DoubleClick describes most rich media executions by the following
standard formats:

In-page : standard IAB ad unit shapes that may include advanced rich media
functionality, such as embedded games, animation, video, registration forms
or interactive marketing brochures, and which may allow for larger file sizes
through polite download technology

Expandable : similar to in-page units, but they expand in size when a user
moves his mouse over the ad or clicks to interact with it. Some publishers
are experimenting with ads that automatically expand when the page loads,
then retract after a small delay. These ads are sometimes called push
downs or server-initiated expandables

Floating : ads that appear as a layer on top of the users current page; these
are typically free-form ads that can move across the page in a variety of
shapes and sizes and which may resolve into an in-page ad on the same
page or a smaller floating reminder ad unit which continues to float above
the page

Pop-ups : ads that launch a new smaller browser window that appears above
the open page (possibly not long for this world due to the advancement of
pop-up blockers)

Transitionals: also known as between-page ads or interstitials, these

ads appear between one page and another as a user clicks through a site.

Who Is Using Rich Media?

Some categories of advertisers rely more heavily upon rich media than others.
Automotive and telecommunications companies are dedicating over half of their
online impressions to rich media, as shown in above figure. Entertainment companies
also devote almost half of their web ad impressions to rich media, and consumer
31

product goods (CPG) firms are not far behind with 39%. Perhaps because of their
direct response focus, business-to-business (B2B) and retail businesses appear least
enthralled with rich media, dedicating only 17% and 12% of their total online
impressions to such ads respectively.

While advertisers are deploying a greater percentage of rich media impressions,

publishers are responding to the increased demand.
Not surprisingly, music/ streaming media is the top category for publishers allocating
inventory to rich media, almost 45%, as shown in below figure (on following page).
Close behind is sports/recreation, which attracts advertiser categories such as
entertainment, financial services and automotive manufacturers, all heavy rich media
users.

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Common Brand Effectiveness Metrics:

Online ad awareness : also known as ad recall, whether consumers

remember seeing a companys advertising campaign

Unaided or aided brand awareness : the extent to which consumers think

of or recognize companys brand, with or without prompting

33

Brand favorability : the extent to which consumers perceive the brand

positively

Message association : the extent to which consumers attribute

characteristics to a company product that were the subject of the ad
campaign

Purchase intent : likelihood that consumers will buy the advertisers

product or service any time soon

Challenges Remain:
With all the excitement around rich media, along with the demonstrated results, the
question arises, why arent advertisers using rich media even more than they are now?
The fact is that many challenges remain for agencies and advertisers looking to
deploy rich media campaigns, along with publishers looking to offer rich media
inventory. Some of the key challenges include:

Standards lacking: Although the IAB has published rich media guidelines,
there remains a great deal of variety in publisher standards for rich media.
34

Requirements vary for kilobyte size, interaction methods (user-initiated vs.

server-initiated), creative guidelines and many other details, which are far
more granular than those imposed on non-rich media creatives.

Need for innovation: Rich media inherently defies standardization. No

matter what standards are imposed, agencies and advertisers want to push
the envelope to break out of the clutter. This creates a dynamic away from
standardization and towards custom work.

Technology complex : Flash is a complex platform to build upon, and

adding custom APIs from each vendor makes the process of creating
effective and bug-free ads difficult for many designers.

Integration needed: Back when rich media made up a small portion of ad

buys, it was perfectly acceptable to use non-standard workflows to execute
and track these campaigns. With the maturity of the industry and the
increasing importance of the buys, the pain of non-integrated solutions
becomes acute.

Conclusions: Advice for the Future

The key new advertising metric is consumer engagement. Like it or

not, we now live in a consumer-controlled media world. TV advertisers are
just coming to grips with this in the face of TiVo and other digital video
recorders (DVR) (not to mention video-on-demand, Internet Protocol
Television (IPTV) and more in the world of interactive-TV). Nowhere is this
truer, though, than online. If blocking or closing an online ad isnt an option,
closing the page its on is. Advertisers now have to earn the attention, if not
the respect, of consumers in order just to get their ads seen. Rich media in
the form of video, interactive units, games and more is a powerful tool in
this new world of consumer permission and invertising.2

Plan, measure, optimize. Advertisers cant know whether theyve had

success unless they are clear on their objectives in the first place. Then, you
cant improve what you dont measure, and rich media provides tremendous
measurement capabilities. But improve you must; too many advertisers leave

35

out the critical phase of a second campaign wave that optimizes the creative
unit and media placements based on learnings from a first wave.

Aim for brand-response. For years advertisers have clung largely to two
disparate camps of brand versus direct-response orientation. This is a false
dichotomy. Rich media is the ideal platform for a merging of these two
marketing philosophies, where advertisers can precisely measure consumer
interactions while at the same time create powerful brand media.

Online video is the next big thing . For the next few years, video
advertising online is likely to surge. Presently, online video takes the form
primarily of in-banner video units, typically user-initiated clips inside
standard ad sizes, and in-stream pre-roll spots in downloadable or streaming
video content clips. As publishers increase inventory for these spots, expect
dollars to flow rapidly from traditional rich media, to video-enhanced rich
media.

Be original, inventive, and bold. Rich media is a suite of tools that lets the
best minds in creative departments explore their wildest dreams. Consumers
are jaded with advertising. They are sick to death of the run of the mill. Grab
their attention and hold onto it with something terrific, hilarious, fascinating,
useful or otherwise out of the ordinary.

Make life easier. Deploying rich media isnt as easy as anyone would like,
due to a lack of standards, disparate technologies, and the inherent
complexity in doing cutting-edge work. But good planning and
communication can overcome many of these obstacles. Rich media vendors
like DART Motif can help facilitate the back-and-forth between agency,
publisher and creative to make sure everyones on the same page. Timelines
are always tight, but you can ease the pain by treating the routine campaigns
routinely and giving yourself extra lead time for anything outside the box.

E-MAIL MARKETING
E-mail marketing is a form of direct marketing which uses electronic mail as a
means of communicating commercial or fundraising messages to an audience. In its

36

broadest sense, every e-mail sent to a potential or current customer could be

considered e-mail marketing. However, the term is usually used to refer to:

sending e-mails with the purpose of enhancing the relationship of a merchant

with its current or previous customers and to encourage customer loyalty and
repeat business,

sending e-mails with the purpose of acquiring new customers or convincing

current customers to purchase something immediately,

adding advertisements to e-mails sent by other companies to their customers,

and

sending e-mails over the Internet, as e-mail did and does exist outside the
Internet (e.g., network e-mail and FIDO).

Researchers estimate that United States firms alone spent US$400 million on e-mail
marketing in 2006.

Advantages
E-mail marketing (on the Internet) is popular with companies for several reasons:

A mailing list provides the ability to distribute information to a wide range of

specific, potential customers at a relatively low cost.

Compared to other media investments such as direct mail or printed

newsletters, e-mail is less expensive.

An exact return on investment can be tracked ("track to basket") and has

proven to be high when done properly. E-mail marketing is often reported as
second only to search marketing as the most effective online marketing tactic.

The delivery time for an e-mail message is short (i.e., seconds or minutes) as
compared to a mailed advertisement (i.e., one or more days).

An advertiser is able to "push" the message to its audience, as opposed to

website-based advertising, which relies on a customer to visit that website.

E-mail messages are easy to track. An advertiser can track users via
autoresponders, web bugs, bounce messages, unsubscribe requests, read
receipts, click-throughs, etc. These mechanisms can be used to measure open
rates, positive or negative responses, and to correlate sales with marketing.
37

Advertisers can generate repeat business affordably and automatically.

Advertisers can reach substantial numbers of e-mail subscribers who have

opted in (i.e., consented) to receive e-mail communications on subjects of
interest to them.

Over half of Internet users check or send e-mail on a typical day.

Specific types of interaction with messages can trigger (1) other messages to
be delivered automatically, or (2) other events, such as updating the profile of
the recipient to indicate a specific interest category.

E-mail marketing is paper-free (i.e., "green").

Disadvantages

Many companies use e-mail marketing to communicate with existing

customers, but many other companies send unsolicited bulk e-mail, also
known as spam.

A report issued by the e-mail services company Return Path, as of mid2008 e-mail deliverability is still an issue for legitimate marketers.
According to the report, legitimate e-mail servers averaged a delivery rate
of 56%; twenty percent of the messages were rejected, and eight percent
were filtered.

Internet system administrators have always considered themselves

responsible for dealing with "abuse of the net", but not "abuse on the net".

INTERACTIVE ADVERTISING
Interactive advertising uses online or offline interactive media to communicate with
consumers and to promote products, brands, services, and public service
announcements, corporate or political groups.
In the inaugural issue of the Journal of Interactive Advertising, editors Li and
Leckenby (2000) defined Interactive Advertising as the "paid and unpaid
presentation and promotion of products, services and ideas by an identified sponsor
through mediated means involving mutual action between consumers and producers."
This is most commonly performed through the Internet as a medium.

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Interactive advertising objectives:

It is these mutual actions or interactions that enhance what Interactive Advertising is
trying to achieve. But to understand how these help we must study the objectives of
Interactive Advertising. The goals of interactive advertising are usually akin to the
traditional objectives of advertising. This in turn means that many of the traditional
elements of advertising impact and effectiveness remain relevant, even within the
scope of interactive media. However, according to the Journal of Interactive
Advertising 2001, interactive advertising also has some properties that expand the
range of potential objectives and that facilitate the acquisition of traditional measures
of advertising effectiveness. Interactive advertising also has the potential to lessen the
consequential losses associated with poorly coordinated advertising, to reduce the
difficulties commonly encountered in clearly communicating an advertising message
and to help overcome new product hurdles, such as a consumer rejection.

Elements of interactive advertising:

There are many different facets to Interactive Advertising, including varying methods
and types. Using many different types of cognitive tools and advert presentations,
organizations can enhance the impact of their campaigns with this type of advertising.
According to Thorson (1996), all advertisements can be classified into one of five
basic categories, including: product/service, public service announcement, issue,
corporate and political. Advert types also interact with the user's motives to influence
outcomes, or consumer responses, reinforcing the need for Interactive Advertising as
a means of persuading potential consumers and target audiences.
Using the Internet as the main medium for Interactive Advertising to study the
methods, types and outcomes, we can then sound out the different user or advertiser
controlled aspects.

User generated/controlled aspects

Functions, Internet motives and mode are the main factors of user controlled aspects.
In fact, a number of researchers and practitioners argue that consumers have more

39

control on the Internet than do advertisers (Roehm & Haugtvedt, 1999). Some have
gone so far as to argue that interactive marketing and advertising techniques will not
work unless practitioners "step into the shoes" of and approach the Internet from the
consumer's vantage point (Cross & Smith, 1997).

Advertiser controlled aspects

Internet aspects that are under the control of the advertiser. Most of these variables
include structural elements, such as ad types, formats and features. This does not
mean that consumers never control the structure of the interactive ads. Banner Ads,
pop-up ads, sponsorship, hyperlinks and non-carrier websites are examples of
Advertiser controlled Interactive Advertising.

FUTURE TRENDS AND THEIR IMPACT ON THE

ONLINE ADVERTISING
CONSUMER TRENDS
Demographic, social and technological changes influence consumers lifestyle, value
and beliefs. By paying close attention to todays signs in consumer moods an
advertiser can predict coming trends.
The dramatic change in technology has altered the way customers live, shop and
interact with each other. The computer screen will become a window to the outside
world. People will be staying at home more, in what Faith Popcorncalls her first
future trend cocooning with the cocoon central for operations like shopping,
security, consumption and work. This will have a major impact on the potential of the
Online as a distribution channel. Penetrating the cocoons will, according to Faith
Popcorn, be the primary challenge for advertisers in the future.
This prediction may be exaggerated and more relevant for America than Europe, but
Europe is following America to some extent. On-line shopping and increased online
subscription in the UK support this assumption.
On-line shopping
When on-line shopping was introduced in 1984 customers were suspicious about this
new purchasing opportunity. However, technology has become more user-friendly and
customers have become accustomed to its opportunities. The more customers realize
the benefit of on-line shopping the better for Online advertisers. Advertisers get an
additional distribution channel, while getting closer to knowing their customers. An

40

on-line sale counted for 200 million in 1995 and is expected to grow to 30 billion in
year 2000.
Advertising Forecast
Exact figures are difficult to estimate, but Investment banker Alex Brown expects
online based advertising will reach 1.4 billion dollars in 1998. Forrester Research
predicts that advertising on the web will generate 74 million dollars in revenue this
year and reach 2.6 billion dollars by 2000.
To take advantage of this profit centre advertisers must start developing competencies
in this field, but it requires a fundamental change in their communication strategies.

Key findings
The Online is the fastest growing medium in the 90s with 25 million users
with an average estimated growth of 10-20% per month.

The World Wide Web is attractive as commercial site as it allows documents

containing text, images, sound and video to be sent across the Online at low
costs.

Bandwidth, control, security, property rights and trademark protection are still
problems advertisers face on the Online.

The users are highly attractive target for advertisers due to their sociodemographic profile and their status as innovators and opinion leaders.

Advertisers must respect and follow the Netiquettes rules and restrictions to
operate successfully.

The Online offer advertisers an additional distribution channel for online

shopping.

41

FUTURE GROWTH OF THE WEB

As indicated above, the reach of the Web is still very limited compared to traditional
media. However, the growth rate in the number of Web users indicates this is
changing rapidly. Find/SVP found that 51% of all online users stated to have used
their first online application in the past year, indicating that online usage doubled in
1995. If this three-digit annual growth rate continues, the Web will develop towards
becoming a mass medium within three or four years. As the medium matures,
however, the growth is likely to slow down.
Due to the complexity of the development, there are great uncertainties associated
with forecasting the future growth of the Web. As indicated in figure 3.6, Morgan
Stanley forecasts that the number of Web users wills reach 152 million by year 2000.
IDC forecasts indicate that the number of Web users globally

will reach 200 million by that year. However, the quantitative forecasts are associated
with immense uncertainties, and it is therefore relevant to discuss which drivers and
barriers influence the further growth of the medium.
DRIVERS
The Web has now reached the critical mass to set a powerful positive feedback cycle
in motion: The audience is now sufficiently large to interest new and established

42

content providers, who increasingly deliver quality content through the medium. And
the more interesting content available, the more attractive the medium is to new users.
A distinctive characteristics of networks, such as the Web, telephones, and railroads,
is that their value tends to increase the more widespread they become (in contrast to
most other goods, the value of which tends to decrease with declining scarcity).The
virtuous circle described above has given the Web status as todays de facto
information superhighway (Economist 1995), and the widespread attention towards
the Web which has been created through these developments attract more users.
BARRIERS
There are also barriers that may limit the further growth of the medium. The most
important are the relatively low ease-of-access and ease-of-use, and the scalability of
the Web.
Falling barriers
Overall, it can be argued that ease-of-access as well as ease-of-use constitute falling
barriers, which will further stimulate the growth of the Web. Moreover, it is likely that
the scalability of the Web will remain satisfactory. The evidence thus indicates that the
Web will continue the transition towards a mainstream medium. However, the barriers
to access and use still constitute significant problems for the large part of the
population that has no prior knowledge about information technology.
The progression of the World Wide Web towards a mainstream medium is likely to be
spurred by the net computers which are about to be introduced by leading computer
and consumer electronics companies such as Oracle, Sony and Apple. The net
computers are small terminals without a hard disk which will be built especially for
providing online access.
OCCUPATION, EDUCATION AND INCOME
Until a few years ago, the users of the Web were primarily scientists and techthusiasts.
However, the last years have witnessed a strong growth of students and professionals
among Web users, especially business professionals. And as mentioned, the Web is
gradually developing towards becoming a mainstream medium as more and more
users access the medium from home. This changing composition of the users has also
led to a change in the way the medium is used. Where the Web was principally used
for seeking information and communication, entertainment is increasingly important
for the users.

43

The trend is developing towards a much more heterogeneous use of the medium,
where different groups of users use the medium for different purposes. And the user
composition on the Online is gradually developing towards a mainstream
composition, but still has a strong overrepresentation of white, male, well-educated,
high-income, technologically savvy users.

Online users are generally upscale. Thus, Nielsen (1995) found that 25% have an
annual household income of more than $80.000. This result is confirmed by Hermes
(1996) which reached the conclusion that 27% have a $75.000+ income on the basis
of an extensive online survey. The findings about differences in income and, job
position and education are reflected in figure 3.7. It is evident from the demographic
data presented here, that while the reach of the medium may still be very limited, the
audience has an attractive demographic profile from an advertising viewpoint.
Psychographics
In this section, we will briefly discuss the psychographic profile of the users of the
Web. The section is based on the results SRIs VALS survey3 . The survey, which was
concluded in May 1995, is based on 5,500 online questionnaires. According to the
VALS survey, which explores motivational behavior, the majority of the total Online
population is made up of

44

actualizers (50%) and Experiencers (18%). These groups tend to lead social change
and gravitate towards parts of society associated with innovation - universities, trendy
city neighborhoods and fashionable occupations, etc.(CyberAtlas 1996). Figure 3.8
illustrates the findings of SRI (1995). However, it should be kept in mind that there
are general uncertainties associated with psychographic segmentation in general and
these data in particular, as they are based on an online survey.

To Sum - Up
The reach of the World Wide Web is still very limited. As of late 1995, approximately
11.5 million people used the Web in the United States, corresponding to 5.8% of the
American population aged 16 and over. The Web users can be divided into four
segments, depending on the intensity with which they use the medium. The groups of
Hard Core users and Regular users, who use the medium frequently, comprises 4.2
million users (which equals 2.1% of the population), while the groups of Occasional
users and Infrequent users constitute the majority of all Web users. This means that
the part of the population that can be reached frequently through the World Wide Web
is still very limited.
In general, the Web is slowly becoming a mainstream medium, and the profile of the
users is gradually becoming more similar to that of the general population. With the
changing composition of users, the way the medium is being used also changes where the Web was principally a tool for information search a couple of years ago, the
45

users today mention browsing and entertainment as the principal reasons for
using the medium. In spite of the immense amount of content that can be accessed
through the Web, many users exhibit usage patterns dominated visits to a limited
number of sites. Thus almost one third of all users have visited a total of less than 10
sites. However, another survey found that the average user visited 22 sites per month.
What remains certain is that Web usage patterns are extremely heterogeneous.

WEB AS AN ADVERTISING CARRIER

The analysis focuses on the strengths and weaknesses of the Web as an advertising
carrier compared to traditional mass media.
It is our belief that the Web has a high potential as an advertising carrier, among other
things because it offers the opportunity to integrate activities previously not
associated with advertising in the advertisements. Until now, it has been necessary to
achieve wide reach through mass communication, and subsequently use some form of
interpersonal communication to deliver individualized information, give customer
service, and complete a trans- action. The Web is the first widely used hybrid medium
which offers the opportunity to perform all of these functions in one medium. To a
certain extent (albeit highly limited in the short run), the Web therefore has the
potential to substitute commercials in broadcast media and the individualized
information and transaction processing normally undertaken by sales people.

ADVERTISING SPENDING IN MAJOR MEDIA

Initially, we will take a look at how current advertising spending is distributed
between media. Figure 4.1 shows the distribution between the major mass media and
direct mail. As illustrated in figure 4.1, newspapers are the most important advertising
medium, followed by TV, direct mail, radio and magazines. Figure 4.2 depicts World
Advertising Trends (1995) estimates of advertising expenditure distribution between
media.
Apart from the fact that figure 4.1 is based on 1992 figures and figure 4.2 is based on
1993 figures, one of the reasons why the figures estimate the media shares differently
is because World Advertising Trends does not include direct mail in their estimates. In
46

this chapter we will mainly focus on comparing the World Wide Web with
newspapers, TV, magazines, radio and direct mail since these media attract the highest
advertising revenues.

Forecasts
Forrester Research estimates that $ 74 million will be spent on Online advertising in
1996 (Araneum 1996). This figure, which only constitutes 0.25% of current
advertising spending on newspapers is insignificant compared to the revenues
attracted by major mass media. However, Forresters projections indicate that this
figure will rise to $ 2.6 billion by year 2000. Jupiter Communications estimates that
47

1995 advertising spending on the World Wide Web was $42 million, and that Web
advertising spending will skyrocket to $ 4.6 billion by year 2000. While that figure
will be close to projected radio advertising revenues, it is still far from touching the
money made in TV or print media (Jupiter Communication 1995). It is impossible to
estimate accurately how the figures will develop, but there is little doubt that the Web
will attract significant advertising revenues in the future.

FEE-BASED VS. SPONSORBASED CONTENT

There are two basic models for how content providers can attract revenues on the
World Wide Web: the fee-based model, where the user pays for consuming content,
and the sponsorbased model, where the content is financed with advertising revenues.
It is, of course, possible to combine the two models. This is normally the case in
newspapers, which are financed with advertising placement sales as well as user
payments.
So far, most of the larger content providers on the Web, such as CNN, Time Warner,
Yahoo and zWired, have adopted the sponsor based model since there is still a very
low willingness to pay for accessing content among the Web users (Hermes 1996).
This is in part because the users have come to expect content to be free, and in part
because of the perceived security risk of online payments. As the security of online
payments improves, and ways of facilitating micro payments are improved, it is
likely that more content providers adopt the fee-based model.

Banner ads
As illustrated on page 16 in section 1.4, each advertiser buys a banner containing a
hyperlink to the advertisers Web site. If the user clicks on the banner ad, he jumps to
the advertisers Web site. While banner ads can be effective for generating traffic to the
advertisers Web site, the banner ad in itself may not be as effective as TV spots or
full-page print media advertisements. Because of its size and all the other impressions
competing for attention on the site, the banner has a limited visual impact. Further, the
restrictions dictated by the size of the banner ad means that only the simplest of
messages can be conveyed. Because of this, it is difficult to position products or build

48

brand image through banner ads. This must be achieved on the advertisers Web site
or through other media.

Pricing
Due to the infancy of the medium and the lack of generally accepted standards for
measuring exposures on the World Wide Web, the pricing of banner ads still varies
dramatically between different sites. While some sites offer placements at very low
CPM4 prices, other sites charge CPM prices that are extremely high compared to
traditional media. Thus Gotfredson (1995) found that three major computer
magazines by average charged 40 times the CPM prices for ad placements on their
Web editions than for the equivalent print vehicle. The high CPM prices of Web
banner ads are confirmed by Forrester Research (in Araneum 1996), which maintains
that the average CPM prices on the Web are around $75, compared to typically $5 on
TV or $40 in magazines. It should be noted, however, that advertisers rarely pay the
official list price - real prices are usually significantly lower as is often the case in
traditional media (Araneum 1995). Further, anecdotal evidence indicates that banner
ads can be placed at very low CPM prices at some advertising Web sites. Therefore,
no sharp conclusions can currently be made with respect to the CPM prices of banner
ads on the Web.

TRAFFIC MEASUREMENT
In contrast to traditional advertising media, the technology of the Web makes it
possible to register how many people visit a Web site. This is done by installing
software on the Web sites server which logs how many machines visit the site. On
many commercial sites, these records are used to establish the CPM price for
advertising placements. However, no commonly accepted standard for measurement
has been established. Each visit by a user is referred to as a hit, but hits are counted
in different ways. On some sites a hit is defined as the number of elements loaded on
to the screen, which means that a layout with extensive use of graphics may result in
more than 15 hits counted each time a user accesses the page. On other sites, the time
the user spends on the site is registered. These uncertainties make hit measurement a
problematic way of calculating a fair CPM price, and contribute to the great variations

49

in CPM prices found on the Web today. It further complicates the pricing that hits are
measured by the content provider, and not by an independent third party.

EXPOSURE ON DEMAND
The possibility for customers to expose themselves to an advertisement on demand is
a highly relevant dimension to include when discussing the media characteristics. In
traditional mass media, exposure on demand through active search for specific
advertisements has always been very limited, due to the information push of these
media. The situation is further exacerbated by the low information capacity and
selectivity of most traditional mass media. Thus, mass media advertising is generally
based on a high degree of intrusiveness of the exposures, which means that many
media users receive a great deal of information they basically do not care about.
It should be noted, however, that there are significant differences between the
possibilities of exposure on demand between the different mass media. In TV,
exposure on demand is almost impossible, but in business magazines, it is easier to
facilitate due to the higher selectivity and information capacity of this medium. In
traditional media, exposure on demand usually entails searching in catalogues,
visiting a store, or calling sales personal to get in-depth information about a product
or service. However, catalogues and brochures have several shortcomings as
advertising vehicles. They are expensive to produce and distribute, and tend to have a
high time lag between production and distribution, which makes them difficult to
update. Apart from exposure to banner ads, all exposure to advertising Web sites is
essentially exposure on demand. It is quick and easy for a customer to access updated
information about products and services when he needs it.

50

SWOT ANALYSIS OF VARIOUS ADVERTISING

MEDIUMS
MEDIA CHARACTERISTICS:
STRENGTHS AND WEAKNESSES OF THE MAIN ADVERTISING MEDIA
Sepstrup (1991) argues that effective communication, and with that effective
advertising, ideally should be individualized and selective. Individualized, because
different receivers have different information needs, and selective, because the
message(s) should only reach the intended audience, thus avoiding to waste resources
on individuals for whom the message is not intended or relevant. As put by Sepstrup
(1991) The advertisers ideal is the best possible reach within a well-defined
audience (selectivity) with good possibilities of feedback and low costs, while mass
communication often forces the advertiser to accept high reach with a low selectivity
and no feedback opportunities in order to achieve a reasonable cost-effectiveness.
Sepstrup (1991) argues that the following dimensions should be included when
evaluating the advertising characteristics of different media:
Reach. How large is the audience that can be reached?
Selectivity. How precisely can the audience be reached, and how precisely can each
segments particular information needs be addressed?
Feedback. How easy is it for the receiver to provide feedback to the advertiser?
Cost. How expensive is it to convey the message through the particular medium?
Information capacity. How much information can be processed through the
medium?
In the following, we will analyze how newspapers, TV, direct mail, radio, and
magazines compares to the World Wide Web on the dimensions listed above. It should
be kept in mind that any comparison between media types is inherently simplified, as
51

there can be significant variations between the characteristics of the individual

vehicles within each media type.

NEWSPAPERS
Newspapers are the medium that attracts the most advertising revenue. However, the
newspapers have faced increasingly hard competition from TV, magazines and direct
mail. Advertising in newspapers is flexible with respect to use of (static) graphic
elements, size of the advertisement, and timing.
Newspapers have a wide reach, especially to well-educated segments aged 35 and
above (Russel & Lane 1993). On the other hand, the reach is very low within the
young and poorly educated parts of the population. The selectivity in newspapers is
rather low, although it is possible to achieve a reasonable selectivity through choice of
which newspaper to place the advertisement in and which sections of the newspaper
to place it in. With respect to textual information, the information capacity is rather
high, but limited somewhat by the costs of large advertisements and the majority of
the readers unwillingness to spend the time to read them. For newspaper
advertisements with a high hard information content, there is a depth/breadth tradeoff.
Either the advertiser can supply broad information appealing to a wide audience, or he
can supply specialized information to a limited part of the audience. However, it is
very difficult to do both at the same time in newspaper advertisements.

TELEVISION
As almost all demographic groups can be reached through TV, it has a wider reach
than any other mass medium. On the other hand, the selectivity is rather low, although
advertisers try to improve it through their choice of channel, program and time.
Because of the large bandwidth, TV can have a very high sensory and emotional
impact since it can include static (text and graphics) as well as dynamic (audio and
video) elements. On the other hand, TV is rather inflexible with respect to the size and
format of the individual advertisement, which gives the individual advertisement high
costs in terms of production as well as placement. However, the large reach means
that CPM prices are still reasonably low for TV advertisements.

52

Russel & Lane (1993) argue that all kinds of concepts can be adapted to TV
advertisements because of the high bandwidth. As mentioned in chapter two, TV is
also rather efficient to monopolize the users attention since he has to do something
active to avoid being exposed to the advertisement, but has quite a high noise ratio
because of the number of ads normally included in the advertising breaks. On the
other hand, the textual information capacity of TV is very limited because of the 1520 second duration of most TV advertisements, which limits most advertisements on
TV to simple messages and concepts. The feedback possibilities are also highly
limited.

DIRECT MAIL
Direct mail is a highly flexible form of advertising, since mail campaigns can be
adapted to most purposes, segments, and can contain all kinds of static graphical
elements. However, direct mail has a serious image problem as a consequence of the
junk mail invasion witnessed by households and companies within the last ten years.
Both reach and selectivity can be optimized in direct mail campaigns; however, their
precision depends on the accuracy of the comprehensive databases over potential
customers which need to be maintained. The feedback possibilities are moderate, as
coupons and stamped and addressed return envelopes can be included in the mail.
However, the high selectivity of direct mail campaigns has a cost: CPM prices tend to
be very high compared to other forms of advertising.

RADIO
Radio has also become a popular advertising medium, in part because of the low costs
of production and placement. It covers most hours of the day, and many radio stations
enjoy high loyalty from their listeners. On the negative side, radio is normally a
background medium which receives only little attention from the listener, feedback is
difficult, and the radio lacks the visual element which gives it much less impact than
other mass media.
The medium is therefore generally conceived to be less suited for serious
advertising purposes. In sum, the radio is a low-cost medium with a very low
information capacity.

53

MAGAZINES
Magazines have a high selectivity, and are well suited for targeting narrowly defined
segments, as there are a large number of magazines that allow advertisers to segment
the audience by demographics, psychographics, or interests. Especially the market for
business magazines is very specialized, and allows advertisers to reach
microsegments.
Because of the specialization of the magazine market, their reach is often too limited
for companies addressing broad segments of the population. Therefore, magazine
campaigns often need to be placed in several different magazines or supplemented by
campaigns in other media. Further, the advertising deadlines of magazines tend to be
quite far in advance of the actual distribution of the magazines, which reduces the
flexibility and possibilities of reacting to changes in the market. As in other print
media, the information capacity and feedback opportunities are reasonably high in
magazines.

The World Wide Web

In the following, we will discuss how the World Wide Web compares to the
advertising media just mentioned on the dimensions of reach, selectivity, feedback,
information capacity, and cost. As mentioned, the comparisons reflect generalizations
which hide the substantial differences that exist within each media type.

54

REACH
As discussed in chapter two, the limited reach of the World Wide Web currently
constitutes a major weakness of the medium. Not only does the medium have much
fewer users than other media, but as a group, the Web users tend to use the medium
less frequently than users of the other main mass media. Thus, the percentage
reached yesterday through the Web constitutes only 2,3% of the population aged 16
and above of the United States5 . Figure 4.3 compares the percentage reached
yesterday through the Web with that of traditional mass media. As reflected in the
figure, the World Wide Web is still unsuited to be a primary advertising medium for
advertisers whose campaigns aim at reaching the general audience frequently.
However, with the explosive growth of the Web the figures will change dramatically
in favor of the Web within the coming years, and the reach is likely to become
55

comparable to that of newspapers in certain geographical areas within the next 4-5
years. As concluded in chapter 3, the Web currently only has a high reach within some
narrow segments, most notably intensive computer users and researchers. As
illustrated in figure 4.4, the Web has a lower reach than the other media, except for
direct mail which is usually used for campaigns targeting audiences of a very limited
size.

SELECTIVITY
As argued in chapter two, the selectivity of the World Wide Web is much higher than
in any traditional mass medium, with the exception of direct mail. This is so because
Web users expose themselves to the advertisements rather than being passively
exposed to them. This means that the selectivity is high, since only interested
customers expose themselves to the advertisements for extended periods of time. The
selectivity is further increased as the individual user sovereignly decides how long
time to spend on the advertisement, which parts of it to see, and how to structure his
navigation in the advertising Web site through the machine interactivity discussed in
chapter two. As concluded earlier, the customer actively

56

participates in creating the form of the advertisements through the hypertext

structure, thus customizing the advertisements to his particular information needs.
Figure 4.5 illustrates that the Web has a higher selectivity than most other media.
However, the user control and scarcity of attention on the Web means that advertisers
need to be very conscious about how to address real needs and wants of the target.
With a content structure that currently resembles the magazine market, segmentation
strategies of narrowcasting to microsegments are likely to become widespread.
FEEDBACK
As depicted in figure 4.6, The World Wide Web is the only mass medium with
feedback symmetry, meaning that the customer can respond immediately through the
medium. Feedback to advertisements through traditional media is much more difficult
for the customers, since it has to be channeled through other media than the
advertising medium.
When navigating in a well-made advertising Web site, the customer can easily send
an e-mail to the company in order to get further information. The possibility of
customer feedback through the medium can be exploited in many ways: to give
customer service, process transactions, make online quizzes and contests, let the
customer play online games, etc. In chapter
six, we will discuss a number of approaches to how the feedback symmetry can be
used to create effective advertisements.

INFORMATION CAPACITY
As concluded in chapter two, the Webs information capacity is extremely high, as far
as textual information is concerned. In TV advertisements, the information capacity is
highly limited by the short duration of the advertising spots. More textual information
can be conveyed in print media, but it is still limited how much information can be
conveyed in a magazine ad. On the Web, the marginal cost of making extra

57

information available to the customer is close to zero. Users, who see a Ford
advertisement on a commercial Web site can click on the ad and have the entire
updated catalogue of Ford at their disposal. Figure 4.7 compares the information
capacity of the Web to other media. The abundant information capacity in Web
advertisements also means that the classical depth/breadth tradeoff becomes
irrelevant. It is possible to design Web advertisements that are broad in nature, yet
allow the individual user to retrieve in-depth information about the particular aspects
he finds interesting.

COSTS
At this point in time, it is difficult to generalize about the costs of advertising on the
Web. It is very cheap to make content available to users on the Web. However,
making the content available does not per se guarantee that any customer will actually
visit the advertisement. To increase exposure to the advertising Web sites, most major
advertisers buy banner ads. And as mentioned earlier in this chapter, the prices of
banner ads fluctuate wildly. Due to the infancy of the market it is impossible to
generalize about CPM prices with a reasonable degree of accuracy - currently, CPM
prices at some commercial sites are much cheaper than in traditional mass media,
while CPM prices at other sites are substantially more expensive (Araneum 1995).
Depending on the extent to which banner ads are used to generate traffic to the Web
site, CPM prices may be anything from close to zero to $80. The uncertainties about
the cost of Web advertising are reflected in

58

figure 4.8, which shows that the Web can be an extremely cheap advertising medium,
but that this is not always the case.
At present, Web advertising has a different cost structure compared to advertising in
traditional mass media. As concluded in chapter two, the scarce factor on the Web is
not access to distribution, but solely access to attention. Ceteris paribus, the costs of
content production can be expected to constitute a larger part of the cost structure,
because quality content is the best way to ensure lasting exposures in the usercontrolled environment on the World Wide Web.
SUM-UP
Table 4.1 summarizes the characteristics of the World Wide Web compared to the
main advertising media. As shown in the table, the World Wide Web compares
favorably to the other mediua on the dimensions of selectivity, feedback, cost and
information capacity. However, the reach of the Web is still very low in comparison to
the other media.

59

Comparisons between advertising spending on the World Wide Web and traditional
media reflect that the World Wide Web is still in its infancy as an advertising medium.
Thus, total advertising placement revenue on the World Wide Web is expected to
constitute only 0.2% of newspaper advertising revenue in 1996. Although there are
large uncertainties associated with the figures for Web advertising spending, the
figures do indicate that the extent of World Wide Web advertising is still so limited
that it will take several years for it to become a major threat to the advertising
revenues of traditional mass media.
In sum, the Web is a medium which may become a tough competitor for traditional
mass media because of the possibility of providing large amounts of individualized
information on demand to a self-segmenting audience, and its ability to process
feedback and transactions with an ease hitherto unknown in mass media.. However,
the medium is likely to remain a secondary advertising medium for the majority of
advertisers in the short and medium term, because of its low reach, limited
intrusiveness, and low bandwidth.

Best Practices for Optimizing Online Advertising

Effectiveness
The objective of this white paper is to help advertisers improve their success online by
presenting several proven strategies for increasing online advertising effectiveness,
substantiated with research and evidence from industry experts. Here are ten best
practices for optimizing web advertising effectiveness:
1. Adopt a Disciplined Framework for Managing Campaigns
The most successful online advertisers adhere to a disciplined process. They set clear
campaign objectives. They build measurement, targeting and optimization into the
campaign process.

Set Clear Objectives: Identify what business goals the campaign is designed
to achieve, and, just as importantly, the metrics by which those objectives will
be assessed.

Segment Audiences: Identify which audience groups are most likely to

respond positively to the advertising message on which sections of which
60

websites, in which context, exhibiting which behaviors, and at which times of

day, week, month or year.

Optimize Media and Creative: Plan for campaigns to improve iteratively as

you learn, and adjust based on what ad and landing-page creatives best
achieve the campaign objectives for which audience segments on which
media placements.

Review, Assess and Improve: At the conclusion of a campaign cycle,

perform a rigorous postmortem on the campaign to determine how effectively
the campaign achieved its planned objectives, whether those objectives were
in fact the right objectives, whether the chosen metrics were effective at
measuring the objectives, whether the right audience segments, media
placement and creative treatments were used, and what learnings from the
campaign could be applied to future advertising initiatives.

2. Manage Reach and Frequency

Very little will have as dramatic an effect on the success of advertiser campaigns as
managing reach and frequency. Whether a campaigns objectives are more geared
towards brand development or direct response, in almost all cases it is in the
advertisers best interest to maximize the number of people who see the campaign
(reach) at an optimal number of exposures to the ad per person (frequency). All
too often, however, when advertisers do not manage their online campaigns closely
for this, the result is that a relatively small number of people will see the ads at a
tremendously high frequency, wasting many impressions of the campaign. Reach and
frequency have a proportional relationship. Each ad impression in a campaign is
shown either to someone who has not yet seen the campaign, thereby expanding its
reach, or to someone who has, increasing the campaigns average frequency. The
optimal frequency the ideal number of times consumers should be exposed to the
campaigns online ads is ambiguous. Little research exists on the subject, and results
will vary according to the product, campaign objectives and other factors. That said,
conventional wisdom is that the optimal frequency for most campaigns is around 4-7
ad exposures, and, much beyond that, results hit a point of diminishing returns for
both brand and direct response objectives.

61

Above figure illustrates the challenge. It graphs a campaign where 37% of the
audience sees only one exposure of the ad, 17% sees it twice, 10% sees it thrice, and
the distribution gradually diminishes so that only 1% sees the ad 10 times. But then
something remarkable happens: 13% of the exposed audience sees the ad 11 or more
times. Although we do not propose this actual campaign represents the industry
average frequency distribution, it does look similar to many distributions we have
seen. Assuming that the last high frequency set 13% of the total exposed audience
has seen the ad an average of 12 times per person, that works out to 40% of the total
impressions of the campaign being consumed by this small segment. By the time
someone has seen an online ad 11 times, the odds that further exposure will improve
his opinion of the brand, or likelihood to click on the ad, are low. In other words, 40%
of the impressions in this campaign represent money largely wasted.
3. Avoid Spill by Targeting Geographically
Geo-targeting is a widely practiced form of online targeting. It obviously makes sense
to geo-target for companies whose products or services are available only in regional
or local markets. But advertisers should also consider what portion of their untargeted
advertising is being consumed by international audiences. It is not unusual for many
popular U.S. media sites to have 25% or more of their traffic made up of international
surfers.
The term among media buyers for this kind of exposure to unwanted audiences is
spill .There are a few ways to accomplish geo-targeting.
The most reliable, but not necessarily the most practical, means of geo-targeting is
through zip codes on sites that require registration. These self-reported data are
62

generally reliable, but because most sites offer unrestricted access to most of their
content, finding enough registered zip codes for a sizable media buy can present a
challenge. A useful compromise is IP-based geo-targeting. This technique is not
watertight, as certain large networks, such as ISPs and corporate networks, often
cluster IP addresses so that all users of the network appear to live in the same town.
4. Use Large Ad Formats
Bigger is better. Whether an advertisers objectives are direct response or brand
oriented, larger ad units simply perform better in most circumstances. Larger ad units
would be more successful at attracting web users attention, better impacting their
brand attitudes.

Larger Ad Units Better at Raising Purchase Intent

Larger Ad Units Generate Higher Click Rates

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5. Use Rich Media and Video Ad Formats

Rich media ads are significantly more effective at engaging users than are standard
GIF or JPG image ad formats. These rich media ads are typically formatted in Flash
or enhanced-Flash (i.e., specialty rich media ad platforms like DoubleClicks DART
MotifSM), with features such as the ability to expand outside of standard ad
dimensions, to float across the top of web pages, or to play video clips. Analysis of
DART ad-serving logs shows that more interactive and prominent rich media units
have far higher click rates than standard image ads.

Rich Media Ad Units Generate Higher Click Rates

Rich Media and Video Ads Raise Purchase Intent More

Campaigns served in the platforms of specialty rich media ad providers were at least
50% more effective at improving purchase intent than were GIF/JPG image ads.

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6. Target Audiences with Appropriate Creative Treatments

Another challenge for online ad campaigns is that many agencies have one team, or
even one subsidiary company, doing the creative design of ads, and another buying
placement on media properties. There may be advantages to this kind of division of
labor, including concentrating fields of expertise and cost efficiencies. But the tradeoff is that the creative is not always ideally suited for the audiences that see it and the
environment where they see it. Closing that gap and better aligning creative
executions to the right audiences and environments can have a dramatic impact on
campaign effectiveness.
In below figure, in total, the campaign performed very well, with a CTR of 1.6%, an
interaction rate of 12.7%, and users spending an average of 5.6 seconds engaged with
the ads. On NationalGeographic.com, however, each of those metrics improved by
roughly one- to two-thirds above the overall campaign averages.

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7. Track View-Throughs
The click-through is truly a new paradigm in ad measurement: a mechanism by
which consumers can react immediately to ad messages put in front of them. This
feature has given rise, however, to the idea that all online ads should aspire to drive
users to click on them, and that clicking on them is the basic means of measuring their
effectiveness. The principal aim of many branding campaigns, however, needs not
necessarily to be driving clicks. It can instead influence attitudes about brand
attributes and stimulate purchase intent. Furthermore, even when an objective of the
ad is to drive people back to the advertisers website, an immediate click is not always
how they get there. In many cases, people exposed to ads do not click, but they end up
visiting those websites later of their own accord, taking the desired action promoted in
the ad. This is known as the view-through effect.

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8. Measure Effectiveness Scientifically With Control Groups

Nineteenth century department store magnate, and grandfather of modern advertising,
John Wanamaker famously complained, I know half of my advertising is wasted. I
just dont know which half. Too bad he couldnt use control groups. Control groups,
as we remember from seventh grade science class, are at the heart of the scientific
method. To determine whether a particular factor is causing an effect, we can set up a
study with two observed groups: one that includes the factor we are testing, and
another otherwise identical group that does not include the factor in question. We can
then see whether the inclusion of that factor affects the predicted result. Market
research studies that use a test/control method are referred to as employing
experimental design.

Indian Online Advertising Industry - Challenges

Online Advertising seems to be the buzzword in the Advertising Industry these days.
It is exciting for all of us in the Internet AD world to note that our media, which is still
less than 3% of the total Media bought, receives over 50% of the voice share by the
Industry gurus and the press. This attention is largely fuelled by the almost 100%
year-on-year growth of this medium and the various industry reports suggesting that
80% of all media bought by 2020 would be digital media.
The proof that Internet Advertising works comes from the excellent growth registered
by the early adopters such as the jobs, finance, travel & matrimony businesses. These
are the businesses that trusted Internet with a large share of their AD budgets and they
are the ones who have to stood to gain returns. As much as the small success of the
Internet Media excites us, what remains a concern is whether we are ready to face the
rude challenges thrown up to this industry.

1. Adoption of The Medium

With so much of hype around the medium the bitter truth still remains that only 20%
of the advertisers have adopted the medium. The biggest challenge today is that
Internet is increasingly getting branded as a ROI medium. A few doubts still remain in

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the minds of the marketers and they doubt whether this should be the medium of
choice when it comes to ROI.
There is no problem with seeing the internet as a ROI medium but is approach to the
measure of ROI correct. What needs to be corrected is that marketers need to consider
Internet advertising as a tool beyond the lead generator. It is high time that we used
the more advanced AD Matrix to measure ROIs on Internet. The Internet might be at
the early stage of e-commerce but it is for sure the most preferred & high engagement
medium when it comes to influencing ones perception about a brand or a purchase
decision. But, how many (I am sure not many..) marketers are really using the right
Matrix to calculate the ROI.
Check out the success of the I-Coke platform in China a community of 20 million
users and still growing- and the Adidas worldwide platform. When you consider these
examples, you will put aside all inhibitions about the possibility of successfully
building Brands and Communities on Internet. I am sure these were campaigns
launched with goals that beyond CPC, CPL & CPA!
Marketers just need to be more innovative & evolved with the quarterly sales targets
not being the be all and end all of it.

2. Critical Mass
It is very disheartening for me when a client says, well I like everything that Internet
can do for me. But you know I am a mass brand and the reach of Internet in India
today is not exciting enough for me to put serious time and money behind it.
Whether the Internet in India has already achieved the critical mass or not is ofcourse,
a very subjective and debatable topic. There is still huge growth potential for both the
increase of user base and quality inventory. Many more local ideas are available to
create compelling content to fuel the growth of Internet in India. It is true that not
every business created on the Internet will have the potential to come out with an IPO.
But as long as it is an idea with some value for an Internet user, trust me you will be
able to run a decently profitable business. We need more entrepreneurs who can fill
the huge gap of quality inventory vs demand.

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3. Infrastructure
Whether it is the Internet or the Mobile, bandwidth continues to remain the big
roadblock to unleashing the true potential of the medium. Most innovative advertising
solutions are bandwidth hungry and to a large extent the growth of broadband and
internet advertising are directly proportional. We are all waiting for 3G to make our
mobile phones the true convergence device and suddenly we would add up 130
million users. Advertising on the Mobile is going to be big and would give an
immediate upside to Online Advertising. Internet advertising agencies will have to
gear up to service the needs to Mobile advertising as a lot of Internet Advertising is
going to converge with the hand held device.

4. People
The average age of executives in Indias Internet AD agencies is between 26-27 years.
Why are the traditional advertising guys who know so much about Advertising shy of
choosing the Internet? Why is it that not many creative gurus of the leading
advertising agencies are willing to do Online Advertising? They all believe that
Digital is the future yet they are not adopting it. Is it that they are unwilling to learn
Online or the clients are willing to invest almost nothing on the Online Creatives. The
same guy who spends almost Rs. 25 lakhs on a TV commercial finds if difficult to
invest even a lakh on Online Creatives.

5.

Localization of Medium

Finally, there is serious dearth of local Internet inventory today. A lot more needs to
be done whether in terms of local/regional content, vernacular advertising, more
targeted IP & behavioral advertising. This will not only make Online advertising more
targeted & relevant for the national players but shall make way for the yet to be
tapped huge SME advertiser market. In a country where organized retail is less than
2%, the potential of the unorganized SME advertiser is too large to be ignored.
Companies such as Google Ad Sense and TYROO are doing a great job in helping
consolidate the local publishers and advertisers.

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While these are all very real challenges being faced by the industry, I am sure they are
not insurmountable. The Internet AD world will slowly but surely grab a much larger
share of the advertisers pie in times to come.

6. Cookie Window
The cookie window needs to be set based on each business objective. Some
businesses might have a longer purchase or research cycle which would mean
consumers take more time to convert after they see the ad, example laptops
computers. Whereas, there would be some business where the consumers would
convert quicker. Thus, we cannot have a common cookie window for all the
businesses.

7. Cookie, Work vs. Home

Many consumers would see and click on the ad at home but might complete the
transaction at home or vice versa. So, the cookie would not be able to close the loop
and the advertiser would miss out on counting the revenue or the conversion based on
the online advertising.

8. Last Click
Typically, the ad servers reporting systems attribute the conversion to the last click
and miss out on the multi-touch aspect. For example if a consumer clicks on a banner
and then clicks on a Paid Search and then converts, the Paid Search gets 100% credit
but the display ad also had some contribution in driving the consumer to the website
and increase the consumers interest in the product.

9. Cookie Deletion
It is knows that consumers tend to delete cookies from their computers. So, if the
cookie is deleted, the ad server will not be able to connect the conversion to the ad
unit that the consumer was exposed to or had clicked on. There is also an issue of 3rd
party cookie deletion vs. 1st party cookie deletion. The 3rd party cookie deletion is
more prevalent than the 1st party cookie deletion.

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RECOMMENDATIONS
COMPANIES SHOULD USE THE WEB FOR ADVERTISING
The preceding chapters have aimed at analyzing the communication processes, users
and usage patterns, and strengths and weaknesses of the World Wide Web. Based on
the results of the analysis it is to determine which companies should incorporate
advertising on the Web in their media mix, and how this should be done.
The three dimensions to consider:
Companies contemplating to establish an advertising presence on the Web should
consider three basic elements: the medium (product fit), the audience (audience fit)
and the situation of the company (general benefits to the company). The three basic
dimensions that are important to take into consideration are depicted.
First of all, the company should consider to which extent its target group uses the
Web, and whether they can realistically be reached through this medium. In the
following, the congruence between the target group and the Web users will be referred
to as the audience fit. Another basic dimension to consider is how the product or
service is suited for the medium, in terms of buyer involvement, information intensity,
and possibilities of providing increased purchase facilitation in comparison with
traditional media. This dimension will be referred to as the product fit. A reasonable
product and audience fit is required in order for a company to advertise profitably on
the Web. In addition to product fit and audience fit, companies should also consider
the general benefits to the company, such as image effects and learning effects.
.

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1. AUDIENCE FIT
The first main dimension to consider is the audience fit, which refers to the
congruence between the companys target group and the Web users. Obviously, a
reasonable audience fit is necessary to achieve a successful campaign. As concluded
in chapter 3, the demographic profile of the Web users differs significantly from that
of the general population, with an overrepresentation of well-educated, affluent, white
males and a high representation of innovators and opinion formers.
Due to the large group of students among Web users, all products and services
appealing to students such as books, sports equipment are also likely to find a
reasonable audience fit. Many upscale products are also likely to achieve a rather high
audience fit, because of the above-average affluence of Web users.
2. PRODUCT FIT
As concluded in part I, the World Wide Web gives increased control to the customer
and makes it possible to provide large amounts of product-related information in the
advertisements, letting him seek out the exact information he needs. On the other
hand the medium is not yet well suited for advertisements which require audio and

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motion pictures to be effective, and it has a lower degree of intrusiveness because of

the limited bandwidth and increased receiver control.
These properties of the medium make it ideal for advertising certain kinds of products
and services, for which Web advertisements can offer benefits to the advertiser and
the consumer which are unparalleled in traditional media. The product fit is a
multidimensional construct which is based on the following dimensions:
Degree of buyer involvement
Information intensity
Possibilities of providing purchase facilitation
The higher a product scores on these dimensions, the greater the product fit. It should
be noted that a product need not have a high buyer involvement and be information
intensive and have characteristics that makes purchase facilitation possible in order to
have a high product fit. In the following, each of the dimensions will be explained.

DEGREE OF BUYER INVOLVEMENT

The Webs extended receiver control of the communication process mean that the
customers judgment of what is relevant and what is not becomes more decisive. As
customers, by definition, are more interested in high involvement products than in low
involvement products, high involvement products are more likely to gain significant
exposure on the Web. To a large extent, involvement stems from the economic or
psychosocial1 risk the buyer associates with the purchase of a product. Infrequently
purchased products are often high-involvement buys, since the customer is not used to
buying the product in question.

INFORMATION INTENSIVE PRODUCTS

As mentioned in part I, the Webs ability to provide virtually unlimited amounts of

information, makes it ideal for information-intensive products, such as cars, houses
and consumer electronics. This feature of the medium can also be exploited when
dealing with buying situations that involve a choice between many different products.

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The World Wide Web not only offers the possibility of providing extensive
information about the individual products, but also of using sophisticated database
search techniques to search and choose between different products or product
variants. Moreover, it is cheaper and easier to update information on the Web than in
traditional media.

POSSIBILITY OF PURCHASE FACILITATION

As will be elaborated in the following chapter, Web advertising can offer more value
added compared to advertising in traditional media by integrating functions not
traditionally associated with advertising, such as customer service, transaction
processing and, in some cases, distribution. When incorporating these functions into
the advertisements, Web advertisers can provide a purchase facilitation which is
unattainable in other media, thus compressing the decision-making chain from
exposure to action.

PRODUCTS SUITED FOR ONLINE SALE

Offering the possibility of a direct sell in the advertisement is especially relevant for
products usually sold via mail order such as books, compact disks, appliances, and, to
a lesser extent, clothing. Certain goods with a strong brand franchise and standardized
products are also suited for online shopping, since trusting the vendor is a critical
factor because of the low entry barriers to the medium. For this reason, branded goods
and companies with a strong image have an advantage since they are already
perceived by the customer to be of high quality. Therefore, customers are likely to
trust to be treated fairly by companies commanding a strong brand franchise. As
mentioned, standardized goods such as compact discs and books are also well-suited
for online sales, since the customer knows which quality level to expect.
LOW AUDIENCE FIT, HIGH PRODUCT FIT
Products with a relatively low audience fit may still be marketed profitably if the
product fit is high enough to offset the disadvantages of the low audience fit.

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Womens underwear manufacturer Knickerbox found an innovative way of

overcoming the low audience fit: the visitors (predominantly younger males) had the
option of sending a love letter to their sweethearts, by filling out a form online. The
letter was then forwarded by mail together with a Knickerbox catalogue, and the
names of the recipients were included in Knickerbox direct mail database (PC World,
1995). The example illustrates how innovative thinking can help surpass a low
audience fit.
Low product fit, high audience fit
In cases with a low product fit and a high audience fit, it may still be profitable to use
Web as an advertising carrier if it is done innovatively. For instance, products such as
soft drinks and chips have a low product fit because they are typically lowinvolvement products with highly limited information content and insignificant
possibilities of purchase facilitation. However, they have a fairly high audience fit,
and the low product fit can be overcome by providing value for the customer through
competitions, games, etc. Danish potato chips manufacturer Kims staged surfing
championships, quiz trivia knowledge the answers to which could be found on the
Web. The prizes included vacations and clothes. Through innovative use of the Webs
possibilities of interactivity, Kims succeeded in providing a degree of non product
related entertainment value which was high enough to overcome the low product fit.
More detailed strategies for how this can be done will be elaborated in the following
chapter.
Low potential products
For companies with a low product fit and a low audience fit, it is difficult to use the
Web profitably as an advertising carrier in the short term. It should be noted that the
products we have defined as low potential products includes product categories which
are advertised heavily in traditional media. For example, detergents and toothpaste
have a low product fit (because of low information intensity and low involvement and
the need for intrusiveness) and a low audience fit (because only a very limited fraction
of buyers of these products are represented on the Web). The products of many of the

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largest advertising spenders, such as Procter & Gamble and Unilever, can be classified
as low potential products with respect to Web advertising.
3. GENERAL BENEFITS TO THE COMPANY
As mentioned earlier, the decision about whether to use the Web as an advertising
carrier should not be based exclusively on analyses of the audience fit and the product
fit. Considerations about other benefits to the company, such as image effects and
learning effects should be included. The following sections contain brief discussions
of these general benefits of establishing an advertising presence on the Web.

IMAGE EFFECTS

The public image of any company is greatly influenced by the messages conveyed by
the company and the media used as vehicles for these messages. Because of the
general perception in the public of the Web as a medium of the future, there are
positive image spillovers for companies using the Web for communication purposes.
A recent Danish survey based on 1.000 telephone interviews (Lintas 1996) found that
companies using the Web in their communication mix were generally perceived as
future oriented, progressive, innovative, and service minded. 75% of the respondents
thought positively of firms using the Web as a communication channel. The survey
also showed that the respondents expected more serious and relevant
.

Public relations

Positive image effects from using the Web is in itself an argument for establishing a
Web presence. Further, the Web can be an efficient tool for creating a new kind of
dialogue with the companys surroundings. It offers the opportunity to open up the
company, not only to potential customers, but also to other publics/stakeholders who
can access updated information about the company and its products on the Web site.
The integration of public relations and advertising in the Web site gives the company
a whole new range of possibilities not formerly availably due to the fact that modern
public relations is based on dialogue while advertising is usually based on one-way

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communication of standardized messages. Brand building through dialogue with

customers as well as other publics can be expected to be a very effective way of
improving public relations among the political consumers of the late 20th century.

LEARNING EFFECTS

There is widespread agreement that interactive media will become pervasive in the
future. As argued in this report, communicating with target audiences through
interactive media such as the Web differs radically from communicating through
traditional mass media. Interactive media require a changed attitude with respect to
what should be communicated and how it should be communicated. Companies
incorporating interactive media in their media mix engage in a learning process which
allows them to continuously develop their competencies in this area based on the
feedback they receive through the medium and the results they achieve.
SUM-UP
The World Wide Web holds significant potential as an advertising carrier, but this
potential varies depending on the product type and company in question. The three
basic dimensions which should be considered by companies contemplating to
advertise on the Web are audience fit, product fit and general benefits to the company.
For most companies, the Web will be a secondary, supplementary component of their
media mix. Because of the Webs media characteristics, it is best suited for operating
in the lower stages of the AIDA-model, i.e. the stages of desire and action, and mainly
as a supplementary medium. Local companies will find it difficult to advertise
profitably on the Web due to the limited reach in local areas. However, the Web has
the potential to become a main component in the media mix for companies producing
goods with a high product and audience fit to global niche markets.

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Suggestions
GUIDELINES FOR DESIGNING WEB ADVERTISEMENTS
This will be referred to as value-based advertising. Further, a number of specific
models and strategies for implementing value-based advertising are developed and
discussed.
1)

The key to customer attention: Introducing value based advertising

One of the main conclusions in part I was that the characteristics of the Web require
that the traditional approach to advertising is adapted to this new medium. The
traditional

approach to advertising

usually entails

communicating

simple,

standardized messages to a passive, captive audience. These messages have a high

degree of intrusiveness due to the information push associated with traditional mass
media.
2)

A DIFFERENT APPROACH IS NEEDED

The differences between communicating with active media users on the Web instead
of with traditional media viewers on television should not be underestimated. In the
information pull context, where customers have vast choice and control over media
options, the rules of the game change. Even though advertisers can expose customers
to small banners through sponsorships, the decision whether to click on the banner to
visit the advertising web site, how long to stay at that site, and which parts of it to see,
belongs sovereignly to the customer. Not only do advertisers need to arouse the
interest and curiosity of customers to make them visit their Web site, they also need to
provide significant incentives for them to stay at the site and revisit it. This renders
traditional advertising approaches which assume a passive, captive audience difficult,
if not impossible to apply successfully. Where the users of traditional mass media
have to do something active to avoid advertisements, Web users have to do something
active to see them.
3)

VALUE-BASED ADVERTISING

We shall refer to this approach to advertising on the Web as value-based advertising.

The starting point when designing an advertising Web site should be: How can it be

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made worthwhile for potential customers to visit, stay at, and revisit this site?. As
indicated in the question, the three important issues are generating visits, retaining
visitors in the Web site and making them revisit the site at a later occasion. In the rest
of the chapter, we discuss how the three objectives are best achieved. Table 6.1
illustrates the basic success factors for each of the objectives.

As argued above, the most basic and important success factor in World Wide Web
advertising is to make advertisements value-based. Advertisements which offer
something of value to their customers will more easily attract an audience because
they can exploit the powerful electronic word of- mouth effects on the Web. Above
all, value-based advertisements can retain customers in the site by offering them
interesting information or entertainment, thus leaving a positive impression of the
company and its products. It is also easier for value-based advertisements to generate
repeat visits because customers are left with a positive impression after the first visit.

THREE APPROACHES TO CREATING VALUE FOR THE CUSTOMER

How to create value for the customer is ultimately a creative issue as well as a
strategic one and varies depending on the company, product type, target audience,

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resource constraints, etc. In many ways the Web is still virgin territory from an
advertising perspective, and it holds countless possibilities for innovative advertisers.
We have identified three basic incentives that advertisers can use as a basis for their
Web sites to attract and retain customers: product-related information, entertainment
or information of a more general character, and purchase facilitation. The
appropriateness of each incentive is influenced by the product characteristics
discussed in chapter five. For each of these basic incentives, we shall outline an
advertising model that can be successfully implemented on the Web:

INFOMERCIALS

Infomercials provide useful product-related information. Infomercials are viable only

for high involvement products because customers are not likely to find productrelated information about low-involvement products sufficiently valuable to visit and
stay at the site. Infomercials are especially useful for information intensive products
and products where the associated information change rapidly, since advertisements
for these products can exploit the mediums information capacity and the possibility
of providing continuously updated information.

ADVERTISEMENTS

Advertisements focus on non product-related content where the value is provided by

entertaining the customer. This strategy is suited for low involvement products, where
it is difficult to provide value through product- related information. In advertisements,
the user is exposed to the product or message while being entertained for a period of
time. Advertisements can also contain non-product related information, thus blurring
the boundaries between information and entertainment.

PURCHASE FACILITATION

As discussed in chapter five, purchase facilitation is a way to integrate ordering,

payment, and in some cases even distribution in the advertisement. It is especially
suited for goods where pre-purchase trial is not important and is also applicable for

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low involvement products if the trouble of acquiring the product through traditional
channels can be reduced.
4)

CUSTOMER SUPPORT

Another way of offering value through customized information is customer support,

which has traditionally been handled by phone. To maintain a telephone-based
customer support service is very costly and requires many employees to serve
customers immediately during peak hours. On a Web site, it is fairly inexpensive to
create a support center where customers can access data sheets and FAQs (lists of
Frequently Asked Questions). FAQs are quite widespread on the Web. Customers
often have the same problems, and FAQs offer a convenient method of checking if
there is a simple answer to the problem at hand.
A support center is a good way to provide customer value on the Web site and create
loyalty towards the company and its product. Support centers should be designed with
hierarchical menus and search engines to make it easy for the customer to find
answers to complicated problems, regardless of time and place.
5)

BRANDING

Advertisements are a useful strategy for companies manufacturing lifestyle products,

e.g. Coca Cola or Levis. These companies do not usually focus on providing productrelated information in their advertisements in traditional media, but rather on building
image and associating certain values with the products. For these companies
advertisements on the Web provide interesting possibilities for further improving their
brand images in an innovative manner, thus exploiting the positive image benefits
associated with having a Web presence.
6)

PURCHASE FACILITATION

The last basic model for creating customer value in Web advertisements is through
purchase facilitation, which entails that goods can be purchased via electronic home
shopping in connection with the ad. As concluded in part I, the Web offers the
opportunity to integrate functions traditionally not associated with advertising because
of the mediums interactivity. Figure 6.1 illustrates how transactions and even
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distribution can sometimes be integrated in the advertisements in order to facilitate the

purchase. This ability is unmatched in other media, and therefore advertisers whose
products score high on the possibility of providing purchase facilitation- dimension
explained in chapter five should seriously consider the purchase facilitation approach
on the Web.
7)

HOME SHOPPING

The striking increase in sales via mail order, TV-shopping, and telephone sales
throughout the entire Western World testify to the growing importance of home
shopping in todays purchasing landscape. The Web has the potential to cannibalize
parts of this revenue stream and expand the home shopping market as a whole
(McKinsey & Co. 1994).
It should be emphasized that integrating home shopping in an advertisement does not
create value for the customer per se. The advertisement has to offer true purchase
facilitation in the sense that it should be made easier, faster, or cheaper for the
customer compared to traditional channels.

8)

Integrated advertising

The limited success of many of the early attempts at establishing profitable

cybermalls on the Web reflects a failure to appreciate this observation. Figure 6.1
illustrates how functions traditionally not considering parts of advertisements can be
integrated in Web advertisements. An important point with respect to Figure 6.1 is that
increasing integration of non-advertising functions means increasing economic
commitment to the medium. Thus significant resources are required for content design
and acquiring the necessary capacity and technical backup to distribute products on

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the Web. Moreover, high integration requires organizational changes to handle

customer integration.
9)

THE CUSTOMERS CONCERNS

To a large extent, the continued low level of online shopping can be attributed to
buyers concerns about the security of online payments. Many buyers are afraid to
volunteer information about their credit card because they fear that the information
may be abused by a third party. In their Hermes study, researchers at the University
of Michigan found that 56% of respondents claimed that a security concern was a
primary reason for not shopping online (Hermes 1996).
Online shopping also holds significant potential for business markets. In the case of
office articles, customers can order them from an online catalogue, which can
integrate special rebates for certain customers and the possibility of quick access to
products which are ordered frequently by the individual customer. This integration of
catalogue and ordering can lower transaction costs for the seller and the buyer and
raise the switching costs of the customer through closer cooperation.
10)

ONLINE DISTRIBUTION

As mentioned above, it is possible to distribute certain kinds of information- based

products which can be digitized on the Web. The medium then transforms into a
virtual market, where advertising, ordering, payment and distribution occurs online.
So far, distribution is only possible for a limited group of products such as
newspapers, magazines, reports and smaller software applications. However, as the
bandwidth increases it will be feasible to distribute products that are more data
intensive. In the long run, it is not unlikely that movies and music will be distributed
over the Web.
Using the Web in this way reduces costs dramatically, since all costs associated with
replicating, storing, and transporting the information are almost eliminated. In the
case of newspapers, these costs often constitute around 50 percent of the total cost
structure. In addition to the cost savings, online distribution also reduces time-tomarket significantly, as the product can be delivered to the customer immediately
after its design has been completed, no matter where in the world the customer is.
Companies that are able to exploit this development will experience a collapse of
geographical distance as a barrier to marketing and will be able to offer significant
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value to their customers in the form of purchase facilitation. Examples of companies

already distributing their products online include Time Warner, which distributes
magazines on their Pathfinder site2 , and Netscape3 which distributes software to
millions of users from their Web site.
11)

ATTRACTING VISITORS TO THE SITE

Although creating a value-based advertising site is the most important precondition

for advertising successfully on the Web, advertisers must also invest in creating traffic
to the site. This is not an easy feat considering the number of sources competing for
attention on the Web. To make Web users

Aware of the sites existence, a number of means can be used. As illustrated in figure
6.4, there are four basic way to attract visitors to a companys Web site: banner ads,
campaigns in traditional media, search engine registration and electronic word-ofmouth effects. While the three first are within the companys direct control, the
strength of word-of-mouth effects cannot be controlled directly by the company but
depends largely on the extent to which the Web site is value-based.
Banner ads are one of the principal ways of generating traffic to a Web site. As
explained in chapter four, banner ads are small rectangular pictures which are placed

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on other sites for a fee and contain a hyperlink to the advertisers Web site. The main
advantage of using a banner ad is that the user is already on the Web when exposed to
the ad, and it is very easy for him to visit the advertising Web site. With the possible
exception of electronic word-of-mouth effects, which cannot be directly controlled by
the company, banner ads are probably the most efficient way to generate large-scale
traffic to an advertisers Web site. However, the banner ad also has a significant
disadvantage. Because of its small size the visual impact of a banner ad is limited
compared to a full-page advertisement in a magazine or a TV advertisement.
12)

SMART BANNER ADS

While current use of banner ads is rather primitive, interesting efforts are being
undertaken to develop smart banners capable of changing the ad depending on the
visitors browser type or domain. In the future, it may be possible to tie the ad directly
to the demographic or psychographic profile of the user (if such data are obtained,
either by registration or memberships with the content provider, or carried as a file
associated with the browser). If realized, these could make banner ads an extremely
precise and selective advertising tool, further augmenting the value of exposures
dramatically.
Advertisers should consider carefully where to place their banner ads. Companies that
have created advertisement-based Web sites should use locations frequented by
surfers such as hotlists. Companies with infomercial- based Web sites should
generally attempt to place their banner ads at sites with related contents because
relevance is a key success factor for infomercials.
13)

SEARCH ENGINES

As explained in part I, many Web users search for companies, products and services
using search engines such as Yahoo, Lycos, or Alta Vista. Obviously, a company
should register its advertising Web site with these search engines in order to make the
site visible for Web users actively seeking information about the company or its
products. The audience which can be expected to be attracted through the search
engines are predominantly searchers who already have category need and brand
awareness. Registration of the site at search engines is free and all companies
advertising on the Web should do so.

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14)

WORD-OF-MOUTH EFFECTS

The electronic word-of-mouth effects discussed in chapter two can be extremely

powerful on the Web. It is easy for electronic magazines, hotlists, and everyone with a
homepage on the Web to establish hyperlinks to sites they find interesting. If people
find an advertising site valuable and make hyperlinks to it, more people will visit,
more links to the site will be established, etc. If the Web site is extraordinarily good,
this snowballing effect can be immense and result in an explosion of the traffic to the
site. Advertisers that have created truly value-based sites should target opinion
formers (for instance, the ones responsible for maintaining the most popular hotlists)
in order to stimulate such an effect. However, word-of-mouth effects
Work largely outside the influence of the advertiser.
15)

GENERATING REPEAT VISITS TO THE WEB SITE

In addition to generating traffic to a Web site and retaining the audience in the site,
companies should consider how to generate repeat visits to their Web site. The most
important precondition for making Web users come back is to ensure that the Web site
is value-based so that the customer is left with a positive impression after the first
visit to the site. Apart from this basic consideration, the most important tool to
generate repeat visits is to update the content available on the site on a continuous
basis. As put by the editor of a Danish online magazine: Online means that youre
never finished. Frequent updates of the site contents are the most effective way to
generate repeat visits by customers. In Apples Web site, there is a continuous stream
of new press releases, descriptions of new products, tips for users, reports of software
bugs and distribution of patches to fix these bugs, news from computer-related
expositions, etc. Continuous updates of a Web site give visitors an incentive to visit
the site frequently.
16)

MAILING LISTS

An efficient way to increase customer loyalty and increase awareness of new

additions to the site is to create a mailing list which Web users that have visited the
site can subscribe to. C-net, which has a large Web site containing all kinds of
computer- and Online-related news and stories, gives registered members the options
of receiving an e-mail once a week covering new developments on C-nets Web site.
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The e-mail includes direct hyperlinks to all the areas of the site mentioned so the user
can jump directly from the e-mail (if read in his Web browser) to the relevant part of
the site. The mailing list is a low-cost and efficient way of keeping users informed
about changes in the site.
17)

SPECIAL EFFECTS

Similarly, special effects such as sound and video clips can be very effective for
making the site appealing to users, but at present these are limited to only a smaller
(albeit rapidly growing) part of Web users. If, for instance, a Web site includes
Shockwave animations, advertisers can currently only expect about 10 percent of Web
users to be able to view these. But for users who possess the required hardware and
software to take advantage of the advanced standards, exploiting these standards can
add significant value to the advertisement. The cutting-edge standards today, such as
Java, Shockwave, and QuickTime Virtual Reality can be expected to become
mainstream within the next year or so.
The general trade-off between the technical sophistication of a Web site and

the size of the audience that can address the site is illustrated as a continuum in figure
6.5. The choice about where to position the site on the continuum should be made
depending on the target audience and the hardware and software used by this
audience. For example, campaigns targeting the segment of Hard Core users
(identified in chapter three) can usually implement experimental Web site design with
greater success than campaigns targeting Infrequent and Occasional users.
\

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CONCLUSION
While the traditional approach to advertising in mass media usually entails
communicating simple, standardized messages to a passive, captive audience, the
implications of communicating with active media users on the Web instead of the
traditional media receivers should not be underestimated. In the information pull
context of the Web, where customers have vast choice and control over media options,
the decision whether to visit an advertising web site, how long to stay there, and
which parts of it to see, belongs sovereignty to the customer. If a site is to leave a
positive impression with the customer, it needs to provide some kind of value in
return for the time and money the customer spends to visit the site.
Purchase facilitation integrates ordering, payment, and in some cases even distribution
in the advertisement. It is especially suited for goods where pre-purchase trial is not
important, and is also applicable for low involvement products if the trouble of
acquiring the product through traditional channels can be reduced. The purchase
facilitation approach to Web advertising creates value for the customer through
increased choice and variety, lower prices, speedy delivery, or some combination of
the above. Moreover, it reduces the companys transaction and distribution costs.
Visitors can be attracted to the Web site through banner ads, campaigns in traditional
media, search engine registration and electronic word-of-mouth effects. While the
three first are within the companys direct control, the strength of word-of-mouth
effects cannot be controlled directly by the company but depends largely on the extent
to which the Web site is value-based. In order to generate repeat visits, the company
needs to update the content of the Web site frequently and keep the target audience
informed of these updates. When designing advertising Web sites, the designer faces a
trade off between the technical sophistication of the Web site and the size of the
audience that can access the site. Furthermore, accessibility of the site is a key issue in
connection with the design of Web sites. A site has to be placed on a server with
sufficient capacity to handle the traffic, and the use of graphic elements has to be
balanced correctly to avoid excessive access times.

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LIMITATIONS

Research limit was eight weak, which was not sufficient to complete the study.
It cant be assured that data has high degree of precision and accuracy, as most
of the data was collected online.
Customer could have been biased while answering the questions.
Most of the data was secondary in nature.
Market trends that were considered at the time of the study may not be
applicable later.
Most of the respondents were not ready to give all the information asked in the
questionnaire.

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BIBLIOGRAPHY
BOOKS

Black & Hjberg (1989): Hndbog i public relations

Bornman & von Solms (1993): Hypermedia, Multimedia, and Hypertext

-Definitions and Overview

Burstein & Kline (1995): Road Warriors - Dreams and Nightmares along the
Information Highway

CyberAtlas (1996): The Online Research Guide

The Economist (1995): The Accidental Superhighway

MAGZINES

Business World

Global World - IT Sector

Business Today

WEBSITES

www.doubleclick.com

www.cyberatlas.com

www.economist.com

www.pathfinder.com

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