Advertising on the Internet

Chapter I

Introduction

Introduction and Goal

The World Wide Web (WWW) is the killer application for the Internet. It has turned the Internet into a colorful and animated cyber-landscape. The onset of the WWW has created an excellent communication medium.

Along with this colorful landscape, came the world of electronic commerce (EC). Put briefly, EC is the transaction online. Evidence from market research firms, such as Odyssey, suggest that more American households are making purchases over the Internet (Lohr, 1999). Online purchases have exceeded 56 million in the last six months. This is a fourfold increase comparable to a year earlier (Lohr, 1999). The result is that more time online equates to more dollars being spent.

Nothing attracts more people and businesses than money. These spent dollars are the driving force for advertising online. The philosophy is that companies will be able to target audiences with pinpoint accuracy. It will allow companies to track who is seeing their advertising, what action was taken after they saw it, and in some cases, tailor the advertising to the consumer. It is the ultimate Shangri-La (Savitz, 1999).

Cyberspace is not just a medium for the highly technical researcher anymore. It has become a ground where everything and everyone seems to be equal. The only distinguishable characteristic is what is seen online. Advertisers fight for consumer’s time and most of all his/her dollars. For businesses with no clue on how to advertise online, this research paper will prove to be the most valuable resource. The Internet cannot be ignored anymore. It is the next strategic step in a business’ marketing plan.

This research paper is organized into four additional chapters. Chapter two describes the literature used in this paper. Each reference is detailed as to its relevance. Chapter three is divided into two parts. Part one is the history of online advertising. This is the era known as “prior to the banner.” Part two details the current trends in online advertising such as banners and affiliate programs. Within each type, there are multiple forms and each of them is discussed. In addition, examples of these forms are provided. Chapter four discusses the issues and future of online advertising. Brand recognition, local business advertising, and consumer issues are addressed. Lastly, this research paper concludes with some final thoughts.

Barriers and Issues

One main barrier may hinder the completion of this research project. Online advertising is constantly evolving. EC and online advertising is a brand new field where only the imagination is the limiting factor. In addition, some material is not published by the required due dates of this project. One book is not expected to be released until late July 1999. Therefore, it will be hard to capture all the new and latest advertising technologies.

Relevance

The world of EC is in its infancy. As this new wave of technology grows, so does the amount of business online. Whether a business is “brick and mortar” with a physical presence or one that exists in cyberspace, the main objective of any business is to make money. Even small companies must generate enough traffic on the Internet so they can sell their inventory for a reasonable price and still earn enough revenue to survive (Zeff and Aronson, 1997).

In order to make money businesses need to establish themselves with consumers. Moreover, to get consumers, businesses must advertise. "Old-line merchants no longer insist, as they did not long ago, that they can do without an Internet presence. Everyone is coming online" (Offline stores are moving, 1999). Advertising is a way of life and may be the only life for some. If the WWW were thought of as broadcast television, then 100 percent of the revenue would come from advertising (Zeff and Aronson, 1997).

As reported by the Internet Advertising Bureau (IAB), online advertising is growing at a staggering rate as more people surf the WWW (Lohr, 1999). These online advertisements are helping individuals make decisions about what to purchase. This is equally seen based on the amount of advertising revenue. The IAB found the first three-quarters of 1998 had revenues of $1.3 billion (Ginsburg, 1999).

The bottom line is whether the business is online or offline; the value of this project is immeasurable. As stated eloquently in Blur, knowledge plays a very important role in business. What a business knows, how it uses what it knows, and how fast it can know something new is the basic notion of its competitiveness. Knowledge is the determining factor of whether it will succeed or not. This project can be used as a benchmarking measure or to enumerate the various methods businesses use to make their online presence more appealing and most of all profitable.

Plan and Approach

The approach was a research study methodology. First, a general search of online advertising was done. Second, books with high ratings from Amazon.com were bought. All this information was gathered and analyzed. Upon analysis, the project was written in the five-chapter model per the dissertation guide by SCIS Nova Southeastern University.

Data was collected via search engines from various online sources as well as books that specialize in the Internet and advertising. Most of the information used in this project had come from various online publication sources such as The Electric Library, ProQuest Direct, etc. Instrumentation was in the form of a discovery approach with the research paper detailing what was located. The subjects of the study were the actual online advertising trends as well as future ones. The time schedule was according to the requirements set forth in the syllabus for DISS 890.

Milestones and Expectations

The idea paper was submitted on April 4, 1999 with an approval to write a preliminary proposal on April 18, 1999. The idea paper was reworked to include revisions requested by Dr. Abate. Submission for the preliminary proposal was the week of May 24, 1999. Upon approval and requested corrections, submission of the final proposal was May 31, 1999. Chapter 4 of the project was completed on July 15, 1999. Chapter 5 was completed on July 23, 1999. Final submission of the project was July 25, 1999 with expected approval on August 6, 1999.

Summary

In summary, the introduction given above described the problem to be investigated, goal to be achieved, and potential barriers and issues expected during the completion of the project paper. Also included were the plan and approach for the project along with a timeline of milestones and expectations. In the next chapter, a thorough review of literature relevant to advertising on the Internet is detailed.

Chapter 2

Review of the Literature

The review of literature provides a brief overview of the resources used to complete this project. Included in this review, is how this resource has helped contribute to this research project.

Introduction

To introduce the world of online advertising, statistics surrounding the number of individuals online and advertising revenue were detailed. Lohr (1999) had featured the total number of American households making purchases on the Internet in the last six months. His article had pointed out that this would be a continuing trend. Ginsburg (1999) had detailed how Internet advertising revenue had exceeded $1 billion for the first time in just nine months. Reports by the New Media Group for the Internet Advertising Bureau (IAB) had conducted the studies and had reported which categories had led the online spending. These two resources were used to exemplify the relevance of advertising online.

Relevance

In conjunction with these statistics, two other resources were utilized to determine relevance. Zeff and Aronson (1997) had provided "why" online advertising should become part of a company's strategic business plan. Their book had briefly described online advertising, but mostly had centered on how to create an online advertising strategy. This book had detailed how to price online advertisements and target an audience. Most of the book was beyond the scope of this project, but it did provide some background information to chapter three such as the definition of online advertising and the benefits.

Another resource that had helped determine relevance was Offline Stores are Moving Online (1999). After years of taking the "wait-and-see" approach, old-line retailers were moving to the online world. As part of it, Ernst & Young's year-end survey of 125 traditional retailers had found that 76 percent of them were now online. This resource also had listed the top e-tailers. It was another reason why being online had to be part of a company's business plan.

In this online world, the environment had moved at a fast pace. The only way to keep up with it was knowledge. Davis and Meyer (1998) had an excellent book on the speed of change. Their book had detailed how being connected would change the way business was done and how it had affected each of us individually. The leveraging of knowledge was utilized as part of the introduction of why it was important for a person or business to review this research project.

History

Hyland (1998) had briefly described how the Internet had become an accepted communication medium in just five short years. A case study had compared the Internet to television. In addition, as part of this, Everett-Thorp (1997) had detailed how being online has not changed the basic concept of advertising, but had put a whole new spin on it. Her article had stated why it is important to advertise online, where the audience was, and how the competition for advertisements was getting fiercer all the time.

Next, a look at the advertising models "prior to the banner" era was detailed. Sterne (1997) was one of the best resources for this topic. His book had explored the world of online advertising in depth. In some respects, it had gone further than the requirements set forth in this project. Issues such as advertising return on investment (ROI), placing advertisements, and creating a Web advertising strategy were beyond the scope of this research project. The sections of the book that had contributed to this project go well beyond the history of online advertising. It was also used to detail the current trends in banner advertising.

Sterne (1997) had provided the main foundation for "prior to the banner" era. However, many resources were used to compliment his research. Tedeschi (1998) had briefly described direct marketing, which was advertising by email. His article had detailed different case studies of companies who used this method and had success. He also had talked about how this advertising model was used in the early Internet days. This resource had provided some of the additional information found under the email advertising model.

Another resource was To Spam or Not to Spam? (1998). One of the pitfalls of direct marketing was spamming. Consumers had despised this type of advertising. Therefore, this article had offered "opt-in" and "opt-out" mechanisms to avoid the spam issue.

Two other resources had contributed to the information in this area. Hofacker (1999) had briefly described classified advertisements and Oikle (1997) had detailed newsgroups and newsletters. Hofacker (1999) had treated advertising in a different way. His book had detailed Internet marketing and how to create a Web site, how it should look, and the communication aspect of it. His book was more of a "how-to" versus a chronological history of advertising online. However, it was an excellent resource.

Oikle (1997) had detailed the power of email marketing with newsgroups and newsletters. Her article had briefly described what they were but also had provided an area of how to get started. She listed sites where a person could have easily sign up for either one of these. Her resource had provided another viewpoint on newsgroups and newsletters.

Current Trends

Sterne (1997) had provided the main foundation of this area, at least for the advertising model - banners. For the affiliate area, most of the resources had come from online sources. In conjunction with Sterne (1997), McGalliard (1998), and Mand (1998) had provided additional insight to banners. McGalliard (1998) had detailed animated banners. Her article had not only described why animated gifs were important, but also how they had worked. It had gone into scripting and frame compilers. These were well beyond the scope of this project, but her basic definition was utilized.

Mand (1998) had detailed the end of the static banner. His article had described the new technologies that have been used in banners such as plug-ins, Java, and streaming media. This was known as "rich media." The article had also stated that click-through rates of static banners were in the single digits and it was time for something new. These new animated and interactive banners were the trick.

Haar (1998) had briefly described the “hottest” online advertising model – affiliate programs. Amazon.com had led the path to this online advertising model. It was used as the introduction to affiliate programs. In addition, he had detailed GeoCities’ affiliate program, which had promoted affiliate partnerships on behalf of retailers such as Amazon.com and CDnow, Inc.

Horwitt (1998) had described how affiliate programs worked well with context-sensitive advertising. This was the practice of embedding more narrowly focused advertisements. CDNow had sworn by this advertising (Horwitt, 1998). Even BarnesandNoble.com had offered 150 types of links so their affiliates would have customized pages to particular events or promotions. The article was utilized to describe this benefit.

Lastly, ClickQuick (1999) had provided the definitions to the types of affiliate programs as well as the examples. Their Web site was an excellent resource for an in-depth review of these programs. The programs were categorized according to topic as well as the types (i.e. two-tier income or pay-per-lead). All affiliate programs were rated and had detailed how much commission an affiliate would make.

Future

Savitz (1999) had showed how the current online advertising models had not really been working. His article had listed many reasons for why online advertising was not working. The one that was used in this paper was jingles. As with television, advertising would generally have a memorable song or jingle. In the online world, it would have made this more difficult.

Kroll, Pitta, & Lyons (1998) had provided an excellent article on how advertising will eventually be EC. This was used as the reason why online advertising was not really brand recognition. In addition, it had provided an insight to the future of online advertising. The article had explained why advertising was the wrong model for Web marketing.

In continuing with the brand recognition issue, Jacobson (1999) had detailed how companies have been approaching branding incorrectly. The article had explained how a reputation would have to precede a product or service. It was only then that brand recognition would have set in. The idea of banner advertisements or any other online advertising would not have built this reputation for any company.

Schwartz (1999) had some thoughtful ideas on brand recognition also. He had felt that the online community had been viewing brand recognition and online advertising incorrectly. His example of Peapod, the well-known online grocery store, has had branding problems. This example was used to highlight the fact that companies should not be so focused on brand recognition or online advertising but on solution branding.

Next, the issue of local business advertising was discussed. Ward (1999) had surfaced how targeting a local audience and uncertainty had created problems for local businesses. The article had given the example of how a Presbyterian Church had done some online advertising and had generated more of a national and international interest. Ward (1999) had also detailed how local businesses were unsure of doing business without some face-to-face rapport.

In the consumer issue section, Marx (1999) had detailed how consumers have been dissatisfied with banner advertisements. Consumers had been finding these types of online advertisements annoying. In addition, Partovi (1999) had detailed how consumers do not have the right equipment to view rich media. His article had also stated how technology would have put more of a distance between the company and the consumer.

Leonard, Pollard, & Leong (1998) had highlighted the consumer privacy issue. The article had detailed the Internet, EC boom, and the issues that were affecting it. It had gone into many legislation and legal issues. Most of them were beyond the scope of this paper. However, one of the issues was consumer privacy. It had detailed the issue how consumers would have been unsure how their information was collected and used.

Electronic commerce: Robert Lewin (1999) had highlighted the fact that without consumer trust, the EC economy would have been crippled. This article had addressed the consumer privacy issue and had talked about TRUSTe. The company TRUSTe was not discussed in this research paper; however the issue the company was trying to solve was.

Disney and GO Network…(1999) had detailed how Disney and GO Networks were no longer going to advertise on Web sites who had not posted a privacy policy. This article had also provided information on the consumer privacy issue.

Increase in ad spending (1999) had detailed how Web advertising spending would have been less. This was because many companies would have been looking to the traditional advertising models such as television, radio, and magazines. This was used as one of the possible theories of future advertising models. The article had detailed the billions of dollars that would have been spent in online advertising. However, this information was not used.

Krauss (1998) had also supported that television would become the next online advertising model. The article had predicted other items in Internet advertising such as measurement of Web advertising efficiency and the next “hot” career opportunity would have been in advertising. These predications were not used but were enlightening.

Olson (1999) had talked about the relationship with the customer especially online. The article had highlighted the “sticky” factor. Businesses such as Best Buy had doubts about the Internet’s staying power. This had led to the predication of incentive/loyalty programs.

Summary

All of these references have provided an excellent source of information. Each of them had provided useful insights to the world of Internet advertising. The literature review was organized by subject headings. The subjects covered were: Introduction, History, Current Trends, and Future. The following chapter was divided in two parts. The first part was the history of online advertising. This was followed by current trends in advertising on the Internet.

Chapter 3

Part I - History

Each new communication media must prove its value. It was just 40 years ago when television was considered new media. Cable television was thought of the same fifteen years ago. Morgan Stanley and a team of researchers closely examined the adoption rate of these new media when they were invented. They investigated how long it would take each media to reach 50 million users (Hyland, 1998). Radio took 28 years before there were even 50 million listeners. However, it has taken the Internet only five years (Sterne, 1997). It is no wonder the Internet and the WWW are the latest buzzwords.

Definition of Online Advertising

The Internet and the WWW has created a fast moving industry. Within this industry, the world of online advertising has grown rapidly in just three short years (Zeff and Aronson, 1997). It is expected that a larger portion of advertisers' media budgets, within the next decade, will be dedicated to this new online form.

Online advertising does not neatly fit into the mold of any traditional advertising model. It disseminates information in order to affect a buyer-seller transaction, as would any traditional model (i.e. television, radio, newspaper, magazine, etc.) (Zeff and Aronson, 1997). However, there are four major differences between the online versus the traditional method. They are interaction, customization, tracking, and deliverability (Zeff and Aronson, 1997).

Web advertising enables direct interaction with the advertisement (Zeff and Aronson, 1997). The goal is to enthrall the consumer with a brand or product. This is done effectively since the consumer has the option to interact with the advertisement. A consumer can use his/her mouse and click on the advertisement for additional information. He/she can also take the next step and purchase the product/service in the same online session.

The other advantage of online advertising is customization (Zeff and Aronson, 1997). Companies can tailor the advertisements to a precise target audience or even deliver advertisements that are customized to the consumer. They can focus on specific geographical regions, computer platform, time of day, nation, or even the type of browser (Zeff and Aronson, 1997). However, they cannot accurately target gender or other demographic parameters. Nevertheless, advertising to consumers' preferences is something traditional models cannot do.

Tracking is another benefit (Zeff and Aronson, 1997). This is the feedback loop to the advertising company. Advertisers can track how consumers interact with their brands and learn what interests them. They can also precisely measure the response to an advertisement by sampling click-through rates (Zeff and Aronson, 1997). Television, radio, and print cannot do this.

Lastly, deliverability is another importance (Zeff and Aronson, 1997). Online advertising can be delivered anytime of the day and in real time. In addition, advertisements can easily be launched, updated, or cancelled immediately. This flexibility is not seen in the traditional methods where it takes until the next edition of a newspaper to change a published advertisement (Zeff and Aronson, 1997).

It is true neither the Internet nor the WWW has changed the basic concept of advertising. However, it has put a whole new spin on it (Everett-Thorp, 1997). Next, a look at the era known as "prior to the banner" is detailed.

"Prior to the Banner."

In the beginning, online advertising began with a commercial service called Prodigy. Prodigy went live in 1990 and adopted advertising as a revenue source (Zeff and Aronson, 1997). It was the lone experimenter in this field as other commercial online services (i.e. AOL and CompuServe) shied away. CompuServe and AOL did not incorporate advertising until 1995 (Zeff and Aronson, 1997).

While Prodigy was testing the waters of online advertising within its subscriber-only environment, others were testing the Internet. The first advertising on the Internet was the case of the green card lawyers (Zeff and Aronson, 1997). In 1994, the law firm, Canter and Siegel, posted an advertisement for green card assistance to over 7,000 newsgroups. They did receive requests for green card assistance, however the resulting outrage hurt the firm's reputation within the online community (Zeff and Aronson, 1997).

Because of their online advertising strategy, Canter and Siegel were hounded, mail-bombed, and kicked off one service provider after another. Unfortunately, this strategy was labeled spamming (Sterne, 1997). Spamming is a term borrowed from a Monty Python sketch. The definition describes the repetitious serving of the same message to group after group after group (Sterne, 1997).

In the Internet world, there are proper etiquette rules that must be followed. One of the rules is discussion forums are not to be used to post blatantly commercial materials that have nothing to do with the subject of the discussion group (Sterne, 1997). This is labeled spamming as seen above. Spamming is just plain bad marketing. "Annoying 95 percent of your audience in order to reel in one percent of them does not make sense" (Sterne, 1997).

From this minor setback in online advertising came other forms. These forms consisted of email, newsgroups, newsletters, list servers, and classifieds. They were less intrusive and did follow proper Internet etiquette (known as netiquette).

Email.

In the early Internet days, email marketing was primarily advertisements for the get-rich- quick schemes and promotions for pornography sites (Tedeschi, 1998). Now, a consumer has the say of whether he/she would like having email versus it being thrust upon them. It is true many people like to be a part of a community. Nevertheless, many people like getting email as long as it is of personal interest (Sterne, 1997).

There are two basic avenues for a consumer to get email advertisements of his/her choice. One is the "keep me informed" button and the other is "opt-in/opt-out" mail list (Sterne, 1997). The "keep me informed" button is generally a button on each page of a Web site that a consumer can click in order to become a member of the informed club. It is an easy way to send out announcements about a specific product/service (Sterne, 1997).

Historically, the anti-spam faction has pushed for the "opt-in" system. This "opt-in" is where advertisers can only send email pitches to people who have signed up (To spam or not to spam?, 1998). The Direct Marketing Association has pushed for the "opt-out" system. This would only require advertisers to honor the requests not to receive email advertisements or to be removed from lists (To spam or not to spam?, 1998).

It is no surprise that email is increasingly being used by legitimate businesses to communicate targeted messages. It has the one-to-one directness and economy of scale. "It's estimated that roughly half of all e-commerce sites will use email registration schemes by mid-1999" (To spam or not to spam?, 1998). Yes, spam may slowly be dying, but the email box keeps getting fuller and fuller.

Newsgroups.

Newsgroups represent more than 15,000 topic-specific topics worldwide. Topics range from chocolate mousse recipes to general business news. In a newsgroup, a person can post questions or comments while interested parties may choose to respond to the discussion. The newsgroup is not "live," but a message board where a person can post at his/her convenience. This is one of the earliest applications on the Internet (Zeff and Aronson, 1997).

Businesses find newsgroups a valuable advertising forum (Oikle, 1997). It provides a way to improve customer relations, increase visibility, and position themselves as experts by offering questions and answers. This used to be a great way to do guerrilla advertising on the Internet. However, newsgroups have become "so full of clutter" that they are deemed useless. DejaNews, http://www.dejanews.com , is still one of the best newsgroup resources (Oikle, 1997).

Newsletters.

Newsletters are email messages that a person signs up to receive. It is dedicated to a specific topic. A newsletter is a one-way editorial product (Oikle, 1997). It can be delivered daily, weekly, monthly, etc.

There are many newsletters on the Internet. For example, Yahoo has 64 different categories of newsletters. Advertisements in these documents usually end up at the bottom as a tail-end offering (Sterne, 1997).

List Servers.

A list server is similar to a newsgroup, but individual posts come right to the email box instead of some news server (Sterne, 1997). It is a discussion list where a person can participate. As with newsletters, there are an infinite number of list servers to choose from in a variety of topics.

Generally the emailed advertisement solicits comments from the readers, reproduces their comments, and then delivers the reproductions to every subscriber. This type of communication medium benefits advertisers because turn-around time can be in minutes instead of days and subscribers become more tightly focused groups where targeting is easier (Sterne, 1997).

Classifieds.

Classified advertisements are used to match up buyers and sellers generally within a limited geographic region (Hofacker, 1999). This category is easily overlooked since it has traditionally been the province of the "for-sale-by-owner" crowd. However, many portals now offer classifieds.

One of the biggest classified audience is Classified2000, http://www.classifieds2000.com . Here all private-party listings placed in this service are collectively managed and shared among other partner sites. The advertising model is visibility. There are many eyeballs looking at these advertisements (Sterne, 1997).

Summary

All of these direct marketing models were just the beginning of online advertising. However, something happened - response rates began to drop off and businesses had to find new advertising models. Spamming was deemed an unacceptable advertising model in the online world. These advertising forms are still blurring the lines of spamming. Today, though, new advertising strategies have become quite popular. They are the banner and affiliate programs. Next, these current advertising trends are detailed.

Chapter 3

Part II – Current Trends

Banners

Lights, camera, and action! Color, animation, and video are techniques used for this advertising model. Banners are the predominant online advertising models. In fact, they account for approximately 54 percent of the total online advertising revenue (Hyland, 1997).

It was October 1994 that marked the beginning of the banner era. At this time, Netscape Navigator 1.0 was released. Little did HotWired magazine know that when it started taking advertisements and placing them into banner form they would be setting a defacto standard (Sterne, 1997).

The banner has become the mainstay of Internet advertising. A banner is typically a rectangular graphic element, which acts as an advertisement and entices a viewer to click it for further information. They are generally found on an advertiser’s Web site (Sterne, 1997). They are easy to understand and simple to explain. Their main objective is to derail the consumer’s train of thought. Banners have a harder time accomplishing this goal than any other communication media. A consumer is generally surfing the WWW for a specific reason with a goal in mind whereas watching television is just a form of relaxation (Sterne, 1997). Therefore, these little boxes need to be creative, innovative, and enticing.

Along with trying to distract a consumer, banners have been subjected to the realm of standards. Two organizations have established banner guidelines. They are The Coalition for Advertising Supported Information and Entertainment (CASIE) and The Internet Advertising Bureau (IAB). These two organizations establish the marketing value of Internet advertising. Listed below are the guidelines for banner sizes (Zeff and Aronson, 1997):

Type Pixel Size

Full banner 468 x 60

Full banner 460 x 55

Full banner with vertical navigation bar 392 x 72

Half banner 234 x 60

Square button 125 x 125

Button 120 x 60

Micro Button 88 x 31

Vertical Banner 120 x 240

The standards set forth by CASIE and IAB are on a voluntary basis (Sterne, 1997). This means an advertiser is free to experiment, adopt, create, and propose other banner types. Web sites that chose to implement these standards do so over a period of several months to allow those who sell space or create banner advertisements to make adjustments. The ones listed above provide a baseline model to eliminate the confusion and inefficient use of many banner types in the online community (Sterne, 1997).

Some individuals felt this has stifled the creativity and individuality of banner invention. However, advertising producers and companies buying advertisements felt this has helped enormously. For without one, there would have been a significant amount of time and money lost. Moreover, once Microsoft circulated a letter to sites selling advertisements stating they would only accept standard size banners in their media-buying criteria, then everyone was on the bandwagon of banner standardization (Sterne, 1997).

Banners come in many forms. The most common forms are the buttons, the moving banner, and the full service banner. Next, an examination of these types with examples is provided.

The Button.

Button advertisements are typically the smallest of the banner types. They can be placed anywhere on a Web page. One of the major benefits of a button is their simplicity in what they offer. This is one of the reasons why this advertising form was accepted quicker than the full size banner (Zeff and Aronson, 1997).

For example, download or go to buttons are quite popular. Look at the Electronic Library button shown in Figure 1. Once a consumer clicks on it, it goes directly to the Electronic Library and brings up articles on whatever the consumer was searching for. This button generally appears at searching portals. In this case, it was hotbot, http://www.hotbot.com.

Figure 1. Go to advertising banner button.

Moving Banners.

The era of the static banner has ended. New technologies such as Java script, HTML, and streaming media are being accepted as the advertising norm. Animation and interactivity has come just in time as click-through rates of banners has marred into the single digits (Mand, 1998).

It was late 1996 when moving banners came to the WWW. In December of that year, Alta Vista’s first advertisement was an animated gif (Sterne, 1997). In the animation world, graphic pictures (i.e. gif files) work like a digital flipbook in which a series of pictures automatically change at set time increments. As advertisers found out, animated banners were more attention grabbing. In fact, there was a 25 percent increase in click-through rates versus static banners (McGalliard, 1998).

After animation, came interaction. Shockwave, by Macromedia, was a browser plug-in that allowed interfacing with the consumer (McGalliard, 1998). Games could now be a part of the moving banner. However, it was not limited to just games, a consumer could search or answer poll questions. Moving banners were the ultimate eyeball-catching advertising models (McGalliard, 1998).

Below is an enticing and animated advertisement by Onsale as shown in Figure 2. The coconut shells move around and the middle one is uncovered stating "Don't play games with your Money. Click here for the Best deals on Computer Products." Clicking on the banner takes a consumer to the computer department on Onsale at Cost.

Figure 2. Animated advertising banner.

Full Service Banners.

Lastly, full service banners are a little more technologically advanced than the moving banner. These banners have stopped being passive imagines trying to cajole consumers who are browsing the WWW (Zeff and Aronson, 1997). Yes, there is the animation and interaction, but the main purpose of this banner is not to derail a consumer’s train-of-thought but to become the one-stop shop.

Figure 3. Full service advertising banner.

Figure 3 is by Insight. The animation in this banner includes Insight blinking and the $129 fading in and out. When a consumer clicks on it, it pops up a new window with the information on the monitor and the cart filled in with a quantity of one. All the consumer needs to do is click "add to my cart" and checkout. The greatest benefit of this advertising banner is the customer does not lose his/her original Web page since a new window pops up. Once done with ordering, the consumer can go back to whatever he/she was doing.

Affiliate Programs

The race is on for this one-stop-shop advertising model. Thus, affiliate programs are filling the void. The basic role of affiliate programs is partnerships in which merchandisers pay commission to sites that send them paying customers. These new programs fill the role of the middleman between retailers and publishers (Haar, 1998).

Amazon.com, http://www.amazon.com, pioneered the very first affiliate program more than three years ago (Haar, 1998). It was a tool to build an independent sales channel rather then the normal high-dollar advertising models (i.e. banners). Today, Amazon has over 100,000 sites that participate in their program (Haar, 1998).

Affiliate programs are also excellent advertising models for context sensitive material. It is becoming common practice of embedding more narrowly focused advertisements such as products or short-term promotions (i.e. sponsorships) (Horwitt, 1998). Affiliate sites can often be persuaded to run special advertisements on different Web pages in hopes of boosting sales and therefore their own commission. This also allows merchants to place multiple advertisements without the fear of wasting money. For example, BarnesandNoble.com has over 150 types of links to its site so affiliates can customize pages to particular products, promotions, or even events (Horwitt, 1998).

There are two basic types of affiliate programs. They are pay-per-lead and two-tiered income programs. The pay-per-lead is synonymous with pay-per-click (ClickQuick, 1999). These programs offer the opportunity to earn commissions without visitors needing to make a purchase. A two-tiered income program pay commissions at least two-levels deep. For example, referring new affiliates, a person will receive a portion of their sales in addition to whatever commissions on the sales he/she makes (ClickQuick, 1999).

An example of these two types is discussed next. For the best resource on the types of affiliate programs and a detailed review of the available ones with ratings, visit ClickQuick, http://www.clickquick.com. The affiliate programs are classified according to type as well as category (i.e. art, clothing, computer, etc.).

Pay-per-lead.

Transact! is rated very well. It has a rating of four dollar signs out of four by ClickQuick. Becoming an affiliate with them, a person is provided with a variety of offers from companies that use the Transact! service. Commissions are generated when a person visits and requests more information or requests a trial of a product.

What makes the program more appealing than the others are that all of the offers are free. This allows a person to make a commission without a visitor having to purchase anything. Commissions are generally in the range of $.75 to $10 per lead with the average being around $1 to $2 (ClickQuick, 1999).

Two-tiered income.

Diston Global Services is rated three and half dollar signs out of four by ClickQuick. They offer a variety of Internet services including Web hosting and marketing. However, their main product is a $29.95 guide to improve search engine rankings. This offer is also combined with free services such as site submission to the top 20 search engines.

An affiliate of Diston will receive $10 commission if the referred person purchases one of their services. In addition, he/she could receive an additional $2 for each sale a new affiliate makes that he/she referred. This is where the second tier came in. As an added bonus, if an affiliate has made at least one sale per month, he/she will get the Diston marketing services free (ClickQuick, 1999).

Summary

Online advertising began when the very first email solicited individuals of the get-rich-quick schemes and pornography. However, soon this advertising model was coined as “spamming.” Spamming has forced the Internet community to create new advertising models. Currently, there are two popular models. They are the banner and affiliate programs. Both of these models avoided the pitfalls of the early advertising days.

Now the time has come where these popular advertising models are just not making the dollars. Many businesses are seeing click-through rates drop and their banners being ignored. New problems seem to be cropping up just as the Internet marketers were getting use to these advertising models.

Issues such as brand recognition, local business advertising, and consumer issues are pushing for a new online advertising model. Online advertising may again go through a transformation. Some claim the “old boss” will become the “new boss.” This new boss is the traditional advertising model such as television, radio, and magazines. Others disagree. Could EC become the new online advertising model? Time will tell. Therefore, the next chapter is dedicated to the future of online advertising and the issues requiring it to change.

Chapter 4

Future

The Issues

It seems the road to the online advertising paradise has turned into potholes. There are three main issues affecting the world of online advertising. They are brand recognition, local business advertising, and consumer issues. Each of these topics is discussed below.

Brand Recognition or Not?

Is online advertising really brand recognition? With banners and other forms of online advertising, who can remember what he/she has seen? There are no jingles, no memorable songs; nothing but the dot com. Television revolutionized brand recognition with its jingles and songs. Individuals remember “plop, plop, fizz, fizz” (Savitz, 1999).

In the online world, advertising seems to require more of an immediate response such as a purchase or registration. “But the Web isn’t media – it’s a store, a Mall of America writ large. It isn’t about capturing eyeballs, it’s about fingertips clicking on the buy button” (Kroll, Pitta, & Lyons, 1998). This is not brand recognition. How would Coca-Cola advertise when they do not sell Coke over the Internet? The most the online advertisement could do is provide information about the Coke product.

In addition, online advertising and brand recognition seem to have the problem of the “chicken and egg” approach. Brands/trademarks are usually associated with products/services that have reputations that precede the brand itself (Jacobson, 1999). A product/service acquires a reputation and is then associated with this brand/trademark. Only then, does brand recognition set in with the consumer (Jacobson, 1999). However, companies who are online, are approaching this process in reverse – brand first, reputation later.

Lastly, is brand recognition really the key? Building the “brand” has become the mantra of the Internet (Schwartz, 1999). Millions, if not billions, of dollars are being spent for online advertising. However, brand recognition does not exist on the Web or even television for that matter. “A brand is a set of differentiating promises that link a product or service to its customers” (Schwartz, 1999).

Many individuals have not understood this, especially Internet executives. For example, Peapod is the country’s best-known online grocery brand. However, its stock market and financial performance have been less than desirable. The more customers it signs up, the more money it loses. Peapod had $50 million in losses in the last four years (Schwartz, 1999). They have seemed to lose sight of its promise of being a life simplifying service.

In order to recover this huge loss, Peapod focuses on the makers of the products it sells. Thus, every click, every purchase, and every move the consumer makes is captured and sold to companies like Proctor & Gamble (Schwartz, 1999). This proves that maybe the Internet community is viewing brand recognition and online advertising models all wrong. The real answer is building a “solution brand” that cannot be done by just catching “eyeballs” (Schwartz, 1999).

Local Business Advertising

The main issue with local business advertising is the Web is not delivering on the promised precision-targeted audiences (Savitz, 1999). Local businesses can easily generate traffic that they do not want. For example, a Fifth Avenue Presbyterian Church in New York City spent $1,000 to advertise in Microsoft’s local city guide for six months. They wanted to expand their parish. However, a problem quickly surfaced. The advertisement generated national and international interest (Ward, 1999). The church could not support that kind of interest.

Another issue is local businesses face uncertainty. When placing an advertisement on the Web, it is done generally without any face-to-face rapport. “The local butcher is more likely to listen to an offer of expanded services from a known Yellow Pages advertisement representative than from a salesperson at AnyCityGuide.com” (Ward, 1999). Besides, why would a local business pay for online advertising when various local guides give it away free?

Consumer Issues

First, Web surfers no longer see anything special about those banners – even the interactive ones. Less than one percent of all advertisements gets a follow-up ‘click’ with the mouse (Kroll, Pitta, & Lyons, 1998). Click-through rates continue to shrink and they are not sidetracking the surfer from their original objective, but have become more of a nuisance.

One of the reasons for this low click-through rate is consumers are being inundated with banners (Marx, 1999). There used to be one banner at the top of a Web site. Now, there can be more than one dozen. This gives the consumer a dizzy array of choices and does not provide any compelling reason to click on one over another. This is similar to watching television and all of a sudden, numerous commercials appear on the screen (Marx, 1999).

Another issue is the more “rich” the advertisements become, the less likely consumers are willing to wait. Most consumers barely have connections that are fast enough and only a fraction have the right software to support the multitude of formats. “Less than 15 percent of Web users have browser plug-ins to support LiveAudio, QuickTime or AVI files, the most popular audio and video formats” (Patrovi, 1999).

In addition, many consumers are not technology enthusiasts. In most cases, the consumer is on the Internet to find, learn, or buy things quickly and easily. Most prefer to do this without having to learn a new interface or wait for new technology to download. Besides, every time new technology is put between the consumer and the company, he/she is most likely to lose interest (Patrovi, 1999).

Lastly, there is the issue of consumer privacy. The convergence of technology and the Internet has led to an increasing number of personal linkages and means of transferring information (Leonard, Pollard, & Leong, 1998). Information is transmitted easily and quickly. Information is generally located in computer storage systems. This is vulnerable to unauthorized access and misuse. Thus, the consumer does not know what information is available about him/her. In addition he/she does not know who is accessing it and for what purpose (Leonard, Pollard, & Leong, 1998).

This creates a problem for the consumer. He/she is unable to verify or even correct the information if it is wrong. In addition, many Web sites do not post policies regarding the collection and use of this personal information. This lack of trust has staggering implications on advertising as well as EC (Electronic commerce: Robert Lewin, 1999). “Consumers expect and deserve a detailed explanation of how their personal information is being used and collected” (Disney and GO Network…, 1999).

The Future of Online Advertising Models

All of the issues listed above are creating a revolution in the world of advertising. As problems arise, new models need to be created. Some industry experts are even questioning whether online advertising is even a business model, let alone the correct one.

“Online advertising is not a business model – it is an equation for failure” (Kroll, Pitta, & Lyons, 1998). George Garrick, CEO of Flycast, stated the Internet community ended up with banners for all the wrong reasons. “It was the first thing someone came up with. It was not the result of any sort of trial-and-error research”(Ward, 1999).

Also, do not be surprised if brand advertisers lose interest. Proctor & Gamble recently stated that they would only pay five dollars per thousand banners served. This is considerable lower than the estimated industry average of $36 per thousand (Kroll, Pitta, & Lyons, 1998). Yes, the Web may be the future but it does not lie in advertising revenues.

So, where does the future of online advertising lay? It is hard to predict the advertising practices of the Web. However, there are a few theories. They are traditional models, incentive/loyalty programs, and EC.

The Traditional Models

eMarketer feels that the rate of online advertising growth will continue to slow in the coming years. As the industry stabilizes, standards develop, and measurement of ROI created, then the “urgency” of advertising on the Web will subside (Increase in Ad Spending…, 1999).

The battle of the “brand” will more than likely appear in the traditional sense. Radios, television, and magazines will be the media of choice by many businesses. Even company Web sites will start including more advertisements. This is where the “real” consumer interaction takes place (Increase in Ad Spending…, 1999).

In addition, some industry experts claim it will be similar to television today. This is because Internet advertising is about controlled message delivery and persuasion, which is the same fundamentals used in television (Krauss, 1998). Agencies are not going to discard broadcast techniques that have been developed since the 1950s. More accurately, they will just be adapted to the Internet (Krauss, 1998).

Incentive/Loyalty Programs

The online advertising model is starting to be viewed as a new distribution model. The long-term strategic goal is to expand the customer base. This ultimately could mean that the Internet customer is nothing like the brick and mortar customer. Therefore, businesses need to create that “staying power” or “stickiness factor” (Olson, 1999).

Many customers love to get something for nothing. In a NFO Interactive survey of 1,905 online consumers, 53 percent would gladly increase the amount they spent in transactions at a specific Web site as long as loyalty points or incentives were offered. Forty-seven percent of these same individuals would regularly visit the Web site if they received loyalty points or incentives (Steinberg, 1999).

This new marketing strategy is about the "gimme" factor. Online consumers want EC businesses to make it worth their while to shop. The reward/incentive programs are the most powerful tool EC businesses can use today to drive customer retention and develop customer loyalty (Steinberg, 1999). Thus, incentive/loyalty programs seem like the next logical step in advertising.

Electronic Commerce (EC)

Incentive/reward programs are paving the way towards the ultimate advertising and selling solution. The future of online advertising seems to be “blurring” right into EC. It is believed Internet advertising will become the next shopping mall. In the online world, it is all about the consumer (Kroll, Pitta, & Lyons, 1998).

What seems to matter in the physical world as well as the online one is location, location, and location (Kroll, Pitta, & Lyons, 1998). It is not just about being seen but actually getting something. James Barksdale, chief executive of Netscape, stated in the beginning they felt they had proved the banner advertising model worked. Now it has become clear that something needs to be got from making that click. As online advertising models (i.e. email, banners, sponsorships) fade, EC looms ahead (Kroll, Pitta, & Lyons, 1998).

Summary

What creates a change is usually problems or issues that need to be resolved. This is the case with advertising on the Internet. Many issues seem to be cropping up just when the Internet community was getting use to banners and affiliate programs. However, questions arising about brand recognition, local business advertising, and consumer issues are requiring these online advertising models to change.

Change is good. However, it is unclear which path online advertising will follow. The tried-and-true method of advertising maybe an essential player. Television, radio, and magazines still have a fighting chance especially since these models have been in use from the beginning. However, the competition is not easily overcome. With technology moving at record breaking speed, EC could be the ultimate winner. Loyalty/reward programs could be just the incentive to get it there too.

Chapter 5

Conclusion

This research paper has covered the evolution of advertising on the Internet. From its inception of direct marketing (i.e. email) to the current business models (i.e. banners and affiliate programs), online advertising has taken on many shapes as well as sizes. Presently, there are numerous issues affecting online advertising and how it is done. These issues range from brand recognition to consumer concerns.

Since advertising is about a business trying to establish itself with a consumer, the consumer issue of privacy seems to be the main proponent in driving a new advertising model. There are many theories for this new advertising model. The traditional model of advertising (i.e. television, radio, and magazines) may come back in style just like platform shoes. However, I believe it will ultimately revolutionize to EC.

In the interim, online advertising should be mixed with the traditional model of advertising and incentive/reward programs. This would create a full synergic effect that would push EC and online advertising into one. All in all, the Web is a store, the service center, the 800 number, the customer service office, rolled into one and more tied together than ever before. “Conventional businesses may dislike it, but that’s the way it is” (Kroll, Pitta, & Lyons, 1998).

Reference List

ClickQuick. (1999). In-depth reviews of affiliate and pay-per-click programs.

[Online]. Available: http://www.clickquick.com. [1999, March 28].

Davis, S. and Meyer, C. (1998). Blur: The speed of change in the connected economy.

MA: Ernst & Young LLP.

Disney and GO network institute comprehensive new advertising policy to promote

industry adoption of online privacy standards. (1999, June 29). Business Wire.

[Online]. Available: The Electric Library. [1999, July 20].

Doyle, B., Modahl, M. A., & Abbott, B. (1997). What advertising works? Internet

Advertising Bureau (IAB). [Online]. Available:

http://www.iab.net/advertise/content/wayscontent.html. [1999, March 28].

Electronic commerce: Robert lewin. (1999, July 13). Congressional Testimony.

[Online]. Available: The Electric Library. [1999, July 20].

Everett-Thorp, K. (1997, December 16). Web advertising secrets. CNet. [Online].

Available: http://www.builder.com/Business/Advertising. [1999, March 28].

Ginsburg, S. (1999, February 9). Internet advertising revenues exceed $1 billion for the

first time. Internet Advertising Bureau. [Online]. Available: http://www.iab.net.

[1999, March 28].

Haar, S. V. (1998, December 21). GeoCities, M’soft think affiliates. Inter@ctive Week.

[Online]. Available: ZDNet. [1999, March 22].

Hofacker, C. F. (1999). Internet Marketing. Dripping Springs: Digital Springs, Inc.

Horwitt, E. (1998, June 8). Your ad goes here. Computerworld. [Online]. Available:

ProQuest Direct. [1999, March 28].

Hyland, T. (1997). Advertising ABC's. Internet Advertising Bureau (IAB). [Online].

Available: http://www.iab.net/advertise/content/webgrowth.html. [1999, March 28].

Hyland, T. (1998, November 19). Why internet advertising. Internet Advertising

Bureau (IAB). [Online]. Available

http://www.iab.net/advertise/content/adcontent.html. [1999, March 28].

Increase in ad spending predicted. (1999, March 25). CyberAtlas. [Online]. Available:

http://www.cyberatlas.com/segments/advertising/emark.html. [1999, March 28].

Internet advertising revenues exceed $1 billion for the first time. (1999, February 9).

Internet Advertising Bureau (IAB). [Online]. Available:

http://www.iab.net/news/content/billion.html. [1999, March 28].

Jacobson, B. (1999, February 12). The Net's brand-new brand. The Industry Standard.

[Online]. Available: http://www.thestandard.net/articles/display/0,1449,3491,00.html.

[1999, March 22].

Kroll, L., Pitta, J. & Lyons, D. (1998, December 28). World weary web. Forbes.

[Online]. Available: Proquest Direct. [1999, March 22].

Leonard, P., Pollard, S. & Leong, V. (1998, June). Ecommerce: Novel issues in selling to

the world – the australian experience. Gilbert Tobin. [Online]. Available:

http://www.gtlaw.com.au/pubs/ecommnovelissues.html. [1999, July 20].

Lohr, S. (1999, March 22). Survey suggests consumers are taking to e-commerce.

The New York Times on the Web. [Online]. Available: http://www.nytimes.com.

[1999, March 22].

Mand, A. (1998, April 27). There’s gold in them banners! Brandweek. [Online].

Available: Proquest Direct. [1999, March 28].

Marx, A. (1999, June 28). Dissatisfaction with banner ads is on the rise. Internet World.

McGalliard, K. (1998, May). Animate your web site gif graphics. Editor and Publisher.

[Online]. Available: Proquest Direct. [1999, March 28].

McWilliams, B. (1997, February 27). Nevada moves to bam spam. PC World News.

[Online]. Available: http://www.pcworld.com/pcwtoday/article/0,1510,4317,00.html.

[1999, March 28].

Offline stores are moving online - in a big way. (1999, February 22). eMarketer.

[Online]. Available: http://www.emarketer.com/enews/022299_stores.html.

[1999, March 28].

Oikle, J. (1997). The power of e-mail marketing. Intrepid Net Marketing. [Online].

Available: http://www.intrepidmarketing.com/Articles/emailmarketing.html.

[1999, March 28].

Olson, C. A. (1999, March 13). Internet commerce. Billboard. [Online]. Available:

ProQuest Direct. [1999, March 22].

Partovi, A. (1999, May 31 – June 7). Poor rich media. The Industry Standard.

Savitz, E. (1999, February 15). Web advertisers search for the promised land.

The Industry Standard. [Online]. Available:

http://www.thestandard.net/articles/display/0,1449,3473,00.html. [1999, March 28].

Schwartz, E. I. (1999, May 10). Brands aren’t everything. The Industry Standard.

Steinberg, A. (1999, June 28). Incentive and reward programs spur online purchasing and

customer loyalty; NFO interactive queries online consumers. Business Wire. [Online].

Available: The Electronic Library. [1999, July 10].

Sterne, J. (1997). Advertising on the Web. Que Education & Training.

Tedeschi, B. (1998, December 8). Marketing by e-mail: Sales tool or spam?

E-Commerce Report. [Online]. Available: http://www.nytimes.com.

[1999, March 28].

To spam or not to spam? (1998, December 14). eMarketer. [Online]. Available:

http://www.emarketer.com/enews/121498_spam.html. [1999, March 28].

Ward, J. (1999, March 15). It’s not easy acting locally. The Industry Standard. [Online].

Available: http://www.thestandard.net/articles/display/0,1449,3780,00.html.

[1999, March 15].

Zeff, R. L., and Aronson, B. (1997). Advertising on the Internet. John Wiley & Sons.