Advertising Effectively on the Internet

Justin Hertel ICS 392-401 Dr. G. M. Welsch Fall Quarter 2000

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CONTENTS
I. II. INTRODUCTION THE INTERNET AUDIENCE 3 4 6 7 7 9 10 10 11 12 12 13 14 16 3

III. ADVANTAGES OF INTERNET ADVERTISING IV. DISADVANTAGES OF INTERNET ADVERTISING V. METHODS OF INTERNET ADVERTISING A. BANNERS B. INTERSTITIALS C. KEYWORDS D. SWEEPSTAKES E. SPONSORSHIPS F. VIRAL MARKETING G. COMPANY/PRODUCT WEB SITE VI. DETERMINING THE EFFECTIVENESS OF AN ONLINE CAMPAIGN

VII. CONCLUSION VIII. BIBLIOGRAPHY

Hertel 3 I. INTRODUCTION Over the past five years, Internet advertising spending has increased exponentially from $55 million in 1995 to $4.62 billion in 1999. Internet advertising spending far outpaces the growth of both broadcast and cable television advertising spending in their first five years (Buy the Numbers 2000). Obviously, many companies view the

Internet as a new channel to reach their customers more effectively and a willing to spend a lot of money to advertise on the Internet. However, is Internet advertising really that effective and how can a marketing manager be sure that their money is not being wasted? The goal of this paper is to describe ways in which advertising currently takes place on the Internet, new trends in Internet advertising, and ways to measure the effectiveness of an Internet ad campaign.

II. THE INTERNET AUDIENCE Before any advertising campaign, one should know the demographics of the audience they intend to reach and the demographics of the audience reached through a particular medium (i.e. the Internet). It is estimated there will be over 361 million active adult Internet users worldwide by 2003, up from 191 million in 2000 (Warren 2000). A recent study shows that 62 million Americans, which is 30% of the American population age 16 or older, browse the Internet. In the past, Internet users were considered

wealthier, better educated, and more innovative than the general population. However, the same study suggests that attitudes and buying habits of Internet users increasingly mirror those of the general population (Maguire 1998). Also, Nielson/NetRating points

Hertel 4 out that the number of hours per month that Americans spend on the Internet is on the rise: from seven hours and 34 minutes in July 1999 to nine hours and 40 minutes in July 2000 (Warren 2000). Clearly, the Internet offers a large audience for marketing

communications if they can be reached effectively. Now it is important to discuss the advantages and disadvantages of the Internet as a channel for marketing communications.

III. ADVANTAGES OF INTERNET ADVERTISING The advantages of advertising on the Internet are what make it different from television advertising: a global reach, the ability to target specific audiences, and the ability to interactively communicate with them. The Internet is the only communications medium that offers global reach. Television, radio, magazines and other marketing channels offer citywide or nation-wide audiences at best. A good example of the global reach of the Internet is Procter & Gambles site (http://www.pg.com) which has a column of sixteen flags on the left-hand side that provide links to the P&G site for those countries in their respective languages. The P&G site shows how on the Internet companies can reach widely diverse audiences with essentially the same marketing communication, but tailored to a specific geographic region or language group. However, the Internet can do more than allow one to reach large populations around the world. Probably the Internets most important feature is its ability to segment the entire online audience. The ability to reach and advertise to a highly specific target audience is best demonstrated by an online marketing tool call @plan

(http://www.webplan.net).

@plan allows an advertiser to calculate which sites they

should advertise on to reach their target market. For example, Betty Crocker may want to

Hertel 5 target women ages 25-49 who are married and have kids for their products or their online recipe and meal planning services. Entering these demographics into @plan will return the percentage of the total online audience that this segment makes up and what sites attract this group of consumers. However, those in marketing know that demographic segmentation often does not give the exact market that would most likely purchase the product or service. For instance, many married women ages 25-49 with kids may never cook, look for recipes online, or even think about buying something on the Internet. In this case, psychographic data becomes important and @plan allows one to enter a wide variety of psychographic information to narrow the target even more. For example, Betty Crocker one may want to be sure that their target market is willing to buy from the Internet and has looked for recipes online in the past. The purpose of narrowing the target market is to communicate to those consumers most likely to purchase the product or service. Advertising Ages Matt Carmichael anticipates the day that online advertising reduces the probability of a feminine hygiene product ad showing up on my screen to roughly the same probability of my ever buying such a product (Verdi 2000). Compared to television advertising, which really amounts to little more than a shot in the dark, the Internet can much more effectively reach a particular market segment. Even if one could reach a global audience and target a specific market segment by advertising on television, the internet still has one very important advantage: the ability to communicate with the consumer one-on-one. Television advertising gives the marketer only thirty seconds to tell consumers about the product or the brand. Marketing on the Internet gives the consumer instant access to all the information they may want on the product. Not only is all product information available, but the consumer decides how

Hertel 6 they want to interact with the brand and how much they want to know about the product. This interactivity puts a premium on the ability to make the consumer visit as easy, quick and informative as possible. The consumer will think poorly of the product, regardless of its benefits, if they have a bad experience online with the brands Web site. A recent study reported that: of the 45 sites tested, only 60% bothered to respond to customer emails; fewer than ten sites offered clear guarantees to refund unsatisfied customers; only one-third of online retailers would accept returns at their brick-and-mortar outlets; only 30% percent offered real-time inventory confirmations. (Fine 2000) The Internet offers a whole new level of communication to the consumer, but the effort must be made to that interaction as pleasant as possible and build a relationship with them to keep them coming back.

IV. THE DISADVANTAGES OF INTERNET ADVERTISING Some of the disadvantages of advertising on the Internet are deciding which sites to advertise on and to measure the campaigns effectiveness. The sheer number of sites on the web does present a problem when trying to decide where to advertise. However, by defining a specific target audience and then using a marketing tool, such as @plan, to determine what sites draw that audience is a very good start. It is also important to keep refining the target audience and constantly look for new sites that may attract a larger proportion of that segment. Measuring the effectiveness of a campaign is the largest disadvantage to advertising on the Internet. Fran Diamond, director of research at Giant Step, an

interactive agency of advertising firm Leo Burnett, points out that there isnt a company

Hertel 7 like Nielsen that is able to look at everything (Maguire 1998). What Nielsen offers to television advertising is a standard firm that can look across all parts of the media and tell what the audience looks like. On the internet one could measure a countless number of statistics that may or may not reveal the effectiveness of an ad or Web site: ad impressions, ad clicks, average page views, purchases, visitors, unique visitors (no visitor is counted more than once), registered visitors, active registered visitors (those who visit once a week or more), subscribers (asked to receive emailed newsletters), active subscribers (those that actually open the emailed newsletter), etc. Recently, two leading Web measurement companies, Media Metrix and RelevantKnowledge, announced plans to merger and create a single standard (Maguire 1998). Consolidation in the industry will help the confusion, but the advertiser must determine what measurement(s) makes sense to their product or brand and follow it closely.

V. METHODS OF INTERNET ADVERTISING Now that the advantages and disadvantages of Internet advertising have been outlined, it is important to understand how one can advertise on the Internet. There are many ways to advertise on the Internet and draw attention to a product or brand. This section will define each advertisement, discuss the pros and cons of each, and determine its effectiveness.

A. Banners Banner ads are the most common Internet advertising tools and account for more than half of all Internet advertising spending (Calleja 2000). If you have ever visited a

Hertel 8 Web site, chances are that you have seen many banner ads usually across the top of the page. The biggest problem with banner ads is the falling click-through rates that measure their effectiveness. Click-through rates for banner ads are now at a meager 0.3% (Calleja 2000) and the percentage of veteran Internet users that click on banner ads has declined from 32 to 28% (Galea 2000). However click-through rates may not be the best way to measure a banner ads effectiveness. AdKnowledge: about 34% of conversions (people who actually purchased products from a Web site) resulted from users who viewed an ad, but visited the site later. When you compare that to the 24% of conversions which resulted from click-throughs, it becomes clear that the effectiveness is undervalued (Closser 2000). This study shows that while the user did not click on the banner ad, they still visited the site later and purchased a product, so the ad was effective although it was not measured in the click-through rate. This behavior is not exclusive to banner ads either. For example, Ford put ads in a magazine, but dont expect you to go out and buy their cars instantly. They want to make an impression so when you do go out and buy a car, Ford will be imprinted in your mind (Galea 2000). So, traditional rules of marketing suggest that banner ads should not be measured by click-through rates, but by how it helps create a positive image of the product. Nevertheless, there are new advancements in the technology of banner ads to increase their click-through rate. ePod, a Manhattan-based Internet company, has According to a recent study conducted by

developed a banner ad that allows users to browse mini-pages in an interactive adand even buy productswithout leaving the site theyre already on (Calleja 2000). So far the results have been tremendous for the ePod banner ads, with hit rates five times those

Hertel 9 of normal banner ads and about 50% of users buy something, give an email address, or whatever the target action is (Calleja 2000). Clearly, there is some ability to make banner ads more relevant to users with technological changes. Another way to make banner ads more effective is to target them to a much more specific audience. In this paper we have already discussed how to determine which sites attract the right target market for a product. If more banner ads were relevant, welltargeted, and placed in appropriate areas on the web people would not tune them out (Galea 2000). In essence, the same rules for advertising on television, on radio, or in print apply to advertising on the internet.

B. Interstitials Interstitials (and superstitials) are more commonly referred to as pop-up advertisements. The superstitial is larger than the interstitial, but they both block the page the user is trying to view with an ad until it is clicked on to close it. Generally, interstitials are more than just a banner ad because they can be more like commercials with video and audio included. However, interstitials have become the subject of a recent class-action lawsuit filed against America Online. The hourly subscribers who brought the suit claim that pop-up ads interrupt material that a viewer may be accessing and thus costs money (The average 2000). A ruling against AOL and interstitials could mean that pop-up ads will not become a large part of advertising on the internet. However, interstitials are generally more effective than banner ads because in the time a user would usually spend waiting for a site to download they could learn about a new product.

Hertel 10 C. Keywords Buying keywords on search engines or Internet directories is another very common way to get people aware of a companys presence on the Internet. For example, Bulbs.com, a company that sells light bulbs online, bought keywords such as bulb, bulbs, light bulbs, halogen, and fluorescent (Korn 2000). The purchase of these keywords was to be sure that anyone looking for light bulbs online would become aware of his site no matter what terms they chose to use. This example may make the process of determining which keywords are appropriate to use easier than it is. For example, Bulbs.com did research that showed 80% of people thought of the word bulb in terms of light while only 20% thought of it in terms of plants and seeds (Korn 2000). This shows that bulb is not an appropriate keyword for a gardening company to purchase even if they do sell bulbs. Another problem with purchasing keywords is trying to link them to appropriate areas on a companys site. Linking a keyword to a section of the site that is not quite what the user had in mind results in a click and run, which means the user clicks on a selection after searching, does not recognize how the site relates to the search, and immediately leaves. Both problems related to keywords can be overcome by carefully researching which words are appropriate and then providing a link to the particular area of the site that best matches the keyword.

D. Sweepstakes Online sweepstakes are prize giveaways to consumers who register and give an email address. Sweepstakes are very effective because consumers are more willing to

Hertel 11 give their email address if there is a chance of winning something. For example,

MySeasons.com, an online gardening company, came out with an Internet sweepstakes to give away a free packet of seeds. The prize was deliberately chosen so that they could build relationships with the right customers (i.e. those that are serious about gardening). The campaign was highly successful, giving MySeasons.com a list of 60,000 email addresses for serious gardeners (Korn 2000). They can now build a relationship with these customers by sending them emails, notifying them of special promotions, and getting them to visit the site again. However, sweepstakes also have some disadvantages to simple ads because they require more money for development and prizing and they must be registered with the government. Despite these drawbacks, if the goal is to create a database of customer emails then there is no better way than to give away prizes.

E. Sponsorships Online sponsorships are a way to advertise on the Internet in a much more subtle way than banner ads or interstitials. The most common online sponsorships are

sponsorships of online games. For example, ESPN sponsors Sports Jeopardy!, Xerox can sponsor College Jeopardy! in an effort let more college students know that they are recruiting, and Energizer may sponsor Jeopardy! Online in which every category has to do with famous rabbits. Of course, Jeopardy! is just an example and sponsorships may take place on any number of other online games. The advantage of sponsorships is that consumers will be interacting with the game for a long period of time and they will exposed to the brand many times over. Compared to banners, which if they are not clicked on are only seen until the user moves to another page, sponsorships have a much

Hertel 12 longer length of exposure. The difference is that banner ads appear on a users way to some destination, while sponsorships occur at the users destination where they will spend more time. Sponsorships can also be made of online polls that ask users to vote on a certain topic. Overall, online sponsorships are especially useful if the advertiser does not have a web site that it wants to link consumers to for product information. Although banners must have a site to which users are sent after they click on the ad, sponsorships do not need a separate product web site because all the ad exposure and product information can be at the online game or poll.

F. Viral Marketing Viral marketing is advertising through email and asking the recipients to pass the email along to friends. The email encourages forwarding it to others buying offering the possibility of winning a prize for sending it to a certain number of people (The average 2000). Therefore, the ad is spread by the recipientsmuch like a virus. Although the ad is spread voluntarily, there is a possibility of angering potential customers since most people do not like ads in their inboxes unless they have asked to receive them.

G. Company/Product Web Site Probably the most important way to advertise online is to have an informative and user-friendly web site. A web site should be thought of as an advertising site, because a bad consumer experience with the site reflects poorly on the brand or product. However, to make a user-friendly site one must know how users are interacting with the site and

Hertel 13 whether they are finding what they are looking for. There are many companies out there that offer software and services to track how users are interacting with a site, such as Personify.com, Burntsand, Webassociates, SPSS, and Epiphany.com. The software these companies offer has the ability to track what keywords are used, how the site is navigated, and at what point consumers leave the order process and abandon their shopping cart among many other consumer behaviors. Once you realize how consumers are navigating the site and what they are looking for you can redesign the site to make it more user-friendly. For example, Volvos site at one time featured information on travel and culture. However, they eventually

discovered that most visitors wanted quick information on the latest Volvo models, so the site was redesigned to reflect this desire. On the other hand, Peets Tea and Coffee found that their visitors wanted less product information and more promotional content. In response, Peets expanded their promotions by adding more email programs and featuring more holiday specific sales (http://www.personify.com). These examples underscore the need to find out exactly what consumers want from your site and not assume you know what they are looking for.

VI. DETERMINING THE EFFECTIVENESS OF AN ONLINE CAMPAIGN All of the Internet advertising methods already discussed do not conform to one specific measurement to determine its effectiveness. Instead, marketers will have to look at different measurements for different advertising methods. For instance, for banner ads effectiveness may be related to its click-through rate or the number of impressions, while a successful sweepstakes will gather a certain number of consumer email addresses.

Hertel 14 Marketers must be sure to judge their online advertisements according to the most appropriate measurement for that method. The software providers mentioned earlier, such as Personify.com, can also help in making a more effective online campaign. By tracking where your visitors came from (i.e. what ad they clicked on or what keywords they used) you can figure out which advertising methods have worked best at bringing customers to your site. For example, Hoovers Online is an Internet site that offers business information. While they do offer some free information, they make the most money when visitors pay for a subscription to have access to more detailed business information. Using Personify software, Hoovers Online analyzed their advertising buys by studying which ads led to more subscriptions. They identified ad buys that were eight times as effective as the average ad buy in bringing in valuable customers (http://www.personify.com). This discovery means that Hoovers can decrease its advertising spending while making it much more effective in bringing in potential subscribers.

VII. CONCLUSION If used and understood properly, Internet advertising can b a very effective way to target a specific market and interact with consumers one-on-one. The Internet will become a more powerful marketing tool as usage expands to include a more diverse audience. At the same time, advertising on television will come under increasing duress as personal video recording devices (i.e. TiVo and ReplayTV), which allow users to skip through commercials, become more popular. Forrester Research, a technology research

Hertel 15 firm predicts a 30% decrease in the viewing of traditional TV ads over the next 5 years as the PVR market grows from 750,000 to more than 53 million (Banham 2000). Despite the bad news for TV advertising, marketers should limit themselves to advertising on the Internet only. The use of all advertising channels should be integrated to maximize the effectiveness of the entire campaign. Television and radio do well at creating brand awareness, while the interactivity of the Internet allows a deeper relationship to develop between the consumer and the brand. Television and radio should be used to drive consumer to the Internet for a much higher level of marketing communication. For example, Nike created the whatever campaign early this year, which used TV spots to drive people to a specially built web site. The TV ads were shot from the viewers perspective, featured some big-name athletes, and the commercials ended on a cliffhanger. At the site visitors could find several endings to the commercial, information on the athletes and the featured shoes, and the ability to order the show online or locate a nearby retailer. Overall, the campaign drew 4.26 million visitors to the site and the online banner ads reached click-through rates of over 9% (Warren 2000). The Nike campaign shows how each advertising medium can be used to complement the other. The goal of every marketer should be to integrate the advertising campaign across all media to use the strengths of each to create the most effective campaign possible.

Hertel 16 VIII. BIBLIOGRAPHY 1. The Average Click-Through Rate on Banner Ads is below 1 Percent. Westchester County Business Journal, 3 July 2000. 2. Banham, Russ. Advertisings Future. Forbes, Fall 2000 Supplement. 3. Buy the Numbers. Forbes, Fall 2000 Supplement. 4. Calleja, Dawn. A Better Banner? Canadian Business Journal, 21 August 2000. 5. Closser, Stacey. Jury Remains Out for the Online Advertising Biz. Dallas Business Journal, 14 July 2000. 6. Fine, Dan. Its Not Marketing as Usual with the New Customer. Puget Sound Business Journal, 18 August 2000. 7. Galea, Christine. The Incredible, Indelible Banner. Sales & Marketing Management, June 2000. 8. Korn, Donald. Net a Better Brand. Forbes, Fall 2000 Supplement. 9. Maguire, Tom. Web Nets the Masses. American Demographics, December 1998. 10. Personify, Inc. Customer Profiles. http://www.personify.com (accessed 21 September 2000). 10. Verdi, Christine. Ads All Over the Newest Channel. Forbes, Fall 2000 Supplement. 11. Warren, Chris. The 360 Brand. Forbes, Fall 2000 Supplement