Note that as customers move from site to site, they establish their KT clickstream behavior KT, a pattern of their movements on the Internet, which can be seen in their transaction logs. Both ISPs and individual websites are capable of tracking a user’s clickstream (see coming discussion of clickstream analysis).

Cookies, Web Bugs, and Spyware.

Cookies and Web bugs can be used to supplement transaction-log methods. Cookies allow a website to store data on the user’s PC; when the customer returns to the site, the cookies can be used to find what the customer did in the past (see ‘cookies’ at marketingtimes.com). Cookies are frequently combined with Web bugs-tiny graphics files embedded in e-mail messages and on websites. Web bugs transmit information about the user and his or her movements to a monitoring site.

Spyware is software that gathers user information through an Internet connection without the user’s knowledge. Originally designed to allow freeware authors to make money on their products, spyware applications are typically bundled together with freeware that is downloaded onto users’ machines. Many users do not realize that they are downloading spyware with the freeware. Sometimes the freeware provider may indicate that other programs will be loaded onto the user’s computer in the licensing agreement (e.g., “may include software that occasionally notifies users of important news”). Spyware stays on the user’s hard drive and continually tracks the user’s actions, periodically sending information on the user’s activities to the owner of the spyware. It typically is used to gather information for advertising purposes. Users cannot control what data are sent via the spyware, and unless they use special tools, they often cannot uninstall the spyware, even if the software it was bundled with is removed from the system. Effective tools for fighting spyware include Ad-Aware see Ad-Aware atlavasoft.com and see ‘Webwasher Spyware from Secure Computing’ at securecomputing.com; now owned by McAffee).

The use of cookies and Web bugs is controversial. Many believe that they invade the customer’s privacy see ‘customer privacy’ at privacyfoundation.org. Tracking customers’ activities without their knowledge or permission may be unethical or even illegal.

Web Analytics and Mining.

Web analytics deals with the monitoring collection, measuring and evaluating, and reporting tasks related to Internet data and activities. Web analytics help us to understand and optimize Web usage. Such analysis is done for example, retailers for market research. For example, see ‘software from Coremetrics’ at coremetrics.com; now part of IBM Enterprise Marketing Management) enables retailers manage online marketing campaigns and e-commerce initiatives, and track customer satisfaction. Also, a company can use Web analysis to improve its website look and operation. Web analytics can provide quick feedback from customers to help marketers decide which products to promote. For tutorials on data mining and Web mining, see ‘tutorials on data mining and Web mining’ at autonlab.org/tutorials, also watch the video “Beginning Analytics” at youtube.com.

For details and methods used see at Wikipedia and Clifton(2012). A special type of Web Analytics is clickstream analysis or just click analysis.

Clickstream Analysis.

Clickstream data are data that describe the users’ activities in specific websites, (on-site) including time spent and the sequence of activities, including those in the e-mails. By analyzing clickstream data, which can be maintained in a special database or data warehouse, a firm can find out, for example, which promotions are effective and which population segments are interested in specific products. The list of information provided by clickstream data is available in Online File W9.5. For technologies, metrics see wikipedia.

Several companies offer tools that enable such an analysis. For example, Analytics 10 and higher (from Webtrends, Inc.) features several advanced tools for analyzing clickstream data (e.g., see ‘analyzing clickstream data’ at webtrends.com). Finally Google Analytics can be used for such analysis.

Web Mining.

Web mining refers to the use of data mining techniques for discovering and extracting information from Web documents. Web mining explores both Web content and Web usage. The usage analysis is derived from clickstream data. Web mining has the potential to change the way we access and use the information available on the Web.

LIMITATIONS OF ONLINE MARKET RESEARCH AND HOW TO OVERCOME THEM

One problem with online market research is that too much data may be available. To use data properly, one needs to organize, edit, condense, and summarize it. However, such a task may be expensive and time-consuming. One solution to this problem is to automate the process by using data warehousing and data mining. The essentials of this process, known as business intelligence, are provided in Online File W8.2, and in Turban et al. (2011).

Some of the limitations of online research methods are accuracy of responses, loss of respondents because of equipment problems, and the ethics and legality of Web tracking. In addition, focus group responses can lose something in the translation from an in-person group to an online group. A researcher may get people online to talk to each other and play off of each other’s comments, but eye contact and body language are two interactions of traditional focus group research that are lost in the online world. However, just as it hinders the two-way assessment of visual cues, Web research can actually offer some participants the anonymity necessary to elicit an unguarded response. Finally, a major limitation of online market research is the difficulty in obtaining truly representative samples.

Concerns have been expressed over the potential lack of representativeness in samples of online users. Online shoppers tend to be wealthy, employed, and well educated. Although this may be a desirable audience for some products and services, the research results may not be extendable to other markets. Although the Web-user demographic is rapidly diversifying, it is still skewed toward certain population groups, such as those with convenient Internet access (at home or work). Another important issue concerns the lack of clear understanding of the online communication process and how online respondents think and interact in cyberspace.

It is important for a company to identify the intended target audience or demographic so that the right kind of sampling can be performed. Web-based surveys typically have a lower response rate than e-mail surveys, and there is no respondent control for public surveys. If target respondents are allowed to be anonymous, it may encourage them to be more truthful in their opinions. However, anonymity may result in the loss of valuable information about the demographics and characteristics of the respondents. Finally, there are still concerns about the security of the information transmitted, which also may have an impact on the respondents’ truthfulness. To overcome some of the limitations of online market research, companies may outsource their market research to large and experienced companies that have specialized market research departments and expertise.

BIOMETRIC MARKETING

One problem with Web analytics, Web mining, clickstream data, and so on is the representativeness. That is, we observe and follow a computer, not knowing who is actually moving the mouse. Many households have several users; thus, the data collected may not represent any one person’s preferences (unless, of course, we are sure that there is one and only one user, as in the case of smart cell phones). A potential solution is suggested by Pons (2006) in the form of biometric marketing.

Abiometric is one of an individual’s unique physical or behavioral characteristics that can be used to identify an individual precisely (e.g., fingerprints; see list in Chapter 9). By applying the technology to computer users, we can improve security and learn about the user’s profile precisely. The question is how to do it. Indeed, there are programs by which users identify themselves to the computer by biometrics, and these are spreading rapidly. Utilizing the technology for marketing involves social and legal acceptability. For these reasons, advertisers are using methods that target individuals without knowing their profiles. An example is search engine-based methods, such as Adwords used by Google (see Section 9.8).

Section 9.6 Ÿ Review Questions

1. Describe the objectives of market research.

2. Define and describe market segmentation.

3. Describe how market research is done online and the methods used by comScore.

4. Describe the role of Weblogs and clickstream analysis.

5. Define cookies, Web bugs, and spyware, and describe how they can be used in market research.

6. Describe how the issue of privacy relates to online market research.

7. Describe the limitations of online market research.

8. Describe how biometrics and cell phones can improve market research and advertising.

9.7 Web Advertising

Advertising on the Web plays an extremely important activity in e-commerce. Internet advertising is growing very rapidly, especially in B2C, and companies are changing their advertising strategies to gain a competitive edge. Since the Internet provides interactivity, online ads are also useful for brand building directly through response ads. Online ad revenue reached a record high of $15 billion in the second quarter of 2011 in the United States alone, which is a 23 percent increase from the previous year (reported by Rao 2011). Spending is expected to increase rapidly on all types of online advertising methods, including in social networks (e.g., of the $6 billion spent in 2011, Facebook accounted for about $4 billion [Hof 2011]).. In this chapter we concentrate on generic Web advertising. We will cover social networking advertising in Chapter 7. For more information, see Fox (2012).

Overview of Web Advertising

Advertising is an attempt to disseminate information in order to influence people to buy. Traditional advertising was impersonal, one-way mass communication that was paid for by sponsors. Telemarketing and direct mail ads were attempts to personalize advertising to make it more effective. These direct marketing approaches worked fairly well but were expensive and slow and seldom truly one-to-one interactive. The cost-benefit was poor. For example, say a direct mail campaign costs about $1 per person and has a response rate of only 1 to 3 percent. This makes the cost per responding person in the range of $33 (for a 3 percent response) to $100. Such an expense can be justified only for high-ticket items (e.g., cars).

One of the problems with direct mail advertising was that the advertisers knew very little about the recipients. Market segmentation by various characteristics (e.g., age, income, gender) helped a bit but did not solve the problem. The concept of interactive marketing, enables marketers and advertisers to interact directly with customers.

On the Internet, a consumer can click an ad to obtain more information or send an e-mail to ask a question. The customer can conduct live chat with the merchant (person or avatar), or with peers in a social network chat room. The Internet enables truly one-to-one advertising. A comparison of mass advertising, direct mail advertising, and interactive online advertising is shown in Online File W9.6.

The two major business models for advertising online are (1) using the Web as a channel to advertise a firm’s own products and services and (2) making a firm’s site a public portal site and using captive audiences to advertise products offered by other firms (usually using affiliate marketing, see Chapter 1 and Section 9.7). For example, the audience might come to a P&G website to learn about Tide, but they might also get additional ads for products made by Coca-Cola.

The Advertising Cycle

With closed-loop campaign management, companies are treating advertising as a cyclical process, as shown in Exhibit 9.4. The cyclical process entails carefully planning a campaign to determine who the target audience is and how to reach that audience. Then, analyzing a campaign after its completion assists a company in understanding the campaign’s success. This new knowledge is then used when planning future campaigns.

[Insert Exhibit 9.8 here]

Before we describe the various steps in the cycle as it is implemented in Web advertising, let’s learn some basic advertising terminology.

Some Basic Internet Advertising Terminology

The following list of terms and their definitions in the marginal glossary will be of use as you read about Web advertising.

ƒ˜ Ad views

ƒ˜ Button

ƒ˜ Page

ƒ˜ Click (ad click)

ƒ˜ CPM (cost per mille, i.e., thousand impressions)

ƒ˜ Conversion rate

ƒ˜ Click-through rate/ratio (CTR)

ƒ˜ Hit

ƒ˜ Visit

ƒ˜ Unique visit

ƒ˜ Stickiness

Why Internet Advertising?

The major traditional advertising media are television, newspapers, magazines, and radio. However, the market is changing as many consumers are spending more time on the Internet (about 25 percent annual growth) and using mobile devices. Internet advertising is getting more attention. The estimates for 2011 range from $42 billion to $106 billion, depending on how you define what you measure.

Advertising Online and Its Advantages

The major advantages of using the Internet over mass advertising are precise targeting, interactivity, rich media (grabs attention), cost reduction, efficiency, and better customer acquisition. In comparison to traditional media, the Internet is the fastest growing communication medium by far. Worldwide, the number of Internet users surpassed 1 billion in 2005; and 2 billion in 2011, see the updated information at physorg.com.Of course, advertisers are interested in a medium with such potential reach, both locally and globally.

Other reasons why Web advertising is growing rapidly include:

ƒ˜ Cost. Online ads are sometimes cheaper than those in other media. In addition, ads can be updated at any time with minimal cost.

ƒ˜ Richness of media. Web ads can effectively use a combination of text, audio, graphics, video, and animation. In addition, games, entertainment, and promotions can be easily integrated in online advertisements.

ƒ˜ Personalization. Web ads can be interactive and targeted to specific interest groups and/or individuals; the Web is a much more focused medium.

ƒ˜ Timeliness. Internet ads can be fresh and up-to-the-minute.

ƒ˜ Location-based. Using wireless technology and GPS, Web advertising can be location based; Internet ads can be sent to consumers whenever they are in a specific time and location (e.g., near a restaurant or a theater providing customers with discount coupons).

ƒ˜ Linking to shopping. It is easy to link from an online ad to a storefront-one click does it.

[Comp: please shade the bullet list]

Traditional Versus Online Advertisement

Each advertising medium, including the Internet, has its advantages and limitations. Online File W9.7 compares the advantages and limitations of Internet advertising against traditional advertising media. Pfeiffer and Zinnbauer (2010) compared traditional advertising against Internet advertising (including social networks). They concluded that not only is Internet advertising more cost efficient, but the business impact of Internet ads is larger than traditional ads.

Section 9.7 Ÿ Review Questions

1. Define Web advertising and the major terms associated with it.

2. Describe the reasons for the growth in Web advertising.

3. Describe emerging Internet advertising approaches.

4. List the major benefits of Web advertising.

5. Draw and explain the advertising cycle.

6. What is the impact of online advertising on newspapers, TV, and billboard viability?

9.8 Online Advertising Methods and Strategies

A large number of online advertising methods exist. For a list and description please see Wikipedia. Next, we discuss a few major categories of ads.

Major Categories of Ads

Ads can be classified into three major categories: classified, display, and interactive.

Classified Ads

These usually use text, but lately may include photos. The ads are grouped according to classification (e.g., cars, rentals). They are the least expensive.

Classified ads can be found on special sites (e.g., see classified ads at craigslist.org and superpages.com), as well as on online newspapers, e-markets, and portals. In many cases, posting regular-size classified ads is free, but placing them in a larger size, in color, or with some other noticeable features is done for a fee. For examples, see more information at traderonline.com and advertising.microsoft.com.

Display Ads

These use graphics, logos, colors, or special designs. They are an illustrated advertisement. The ads are usually not classified, but they can be combined. Display ads are popular offline in billboards, yellow pages, and movies. They are becoming very popular on the Internet as well. All major search advertising companies (e.g., Google, Yahoo!, Microsoft, AOL) are leveraging their online positions in search advertising into the display ad business.

Interactive Ads

These use online or offline interactive media to interact with consumers and to promote products, brands, and services. This is most commonly performed through the Internet; often using video content as a delivery medium.

In each of these categories there are several variations. For example, banner ads are a type of display ad. Some methods can be listed in more than one category. The major methods are presented next.

Banners

A banner is a graphic display that is used for advertising on a Web page (embedded in the page). A banner ad is frequently linked to an advertiser’s Web page. When users “click” the banner, they are transferred to the advertiser’s site. A banner must be designed to catch consumers’ attention. Banners often include video clips and sound. Banner advertising including pop-up banners is the most commonly used form of advertising on the Internet.

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There are several sizes and types of banners. The sizes are standardized by IAB and they are measured in pixels. For examples and details, see Wikipedia. Keyword banners appear when a predetermined word is queried from a search engine. They are effective for companies that want to narrow their target audience. Random banners appear randomly, not as a result of some action by the viewer. Companies that want to introduce their new products (e.g., a new movie or CD) or promote their brand use random banners. Static banners are always on the Web page. Finally, pop-up banners appear when least expected, as will be described later.

If an advertiser knows something about a visitor, such as the visitor’s user profile, or area of interest, the advertiser will try to match a specific banner with that visitor. Obviously, such targeted, personalized banners are usually most effective.

Amazon.com greets return customers and offers them products of their interest. Such personalized banners are being developed, for example, by Dotomi see ‘personalized banners’ at dotomi.com. Dotomi delivers ads to consumers who opt-in to view its system. Initial results show a 14 percent click-through rate, which measures the success of a banner in attracting visitors to click, versus 3 to 5 percent with nonpersonalized ads.

Live banners are ads that can be created at the time they pop up with variable content that can be modified at will instead of being preprogrammed like banner ads. They usually are media rich. For details and examples, see the Wikipedia.

Benefits and Limitations of Banner Ads

The major benefit of banner ads is that, by clicking on them, users are transferred to an advertiser’s site, frequently directly to the shopping page of that site. Another advantage of using banners is the ability to customize them for individual surfers or a market segment of surfers. Also, viewing of banners is common, because in many cases customers are forced to see banner ads while waiting for a page to load or before they can get the free information or entertainment that they want to see (a strategy called forced advertising, and it is banner spam). Finally, banners may include attention-grabbing multimedia.

The major disadvantage of banners is their cost. If a company demands a successful marketing campaign, it will need to allocate a large percentage of its advertising budget to place banners on highly-visited websites. Another drawback is that a limited amount of information can be placed on the banner. Hence, advertisers need to think of a creative but short message to attract viewers.

However, it seems that viewers have become somewhat immune to banners and simply do not notice them as they once did. The click-through rate has been declining over time. Because of these drawbacks, it is important to decide where on the screen to place banners (e.g, right side is better than left side, top is better than bottom). Companies such as QQ.com and Taobao.com in China have built behavior labs to track eye movements of consumers to understand how screen location and Web page design may affect viewer attention. For more on the efficient use of banner ads, see Online File W9.8.

Banner Swapping and Banner Exchanges

Banner swapping means that company A agrees to display a banner of company B in exchange for company B’s displaying company A’s banner. This is probably the least expensive form of banner advertising, but it is difficult to arrange. A company must locate a site that will generate a sufficient amount of relevant traffic. Then, the company must contact the owner/Webmaster of the site and inquire if the company would be interested in a reciprocal banner swap. Because individual swaps are difficult to arrange, many companies use banner exchanges.

Banner exchanges are markets where companies can trade or exchange placement of banner ads on each other’s websites. A multi-company banner match may provide a better match, and it will be easier to arrange than a two-company swap. For example, company A can display B’s banner effectively, but B cannot display A’s banner optimally. However, B can display C’s banner, and C can display A’s banner. Such bartering may involve many companies.

Pop-Up and Similar Ads

One of the most annoying phenomena in Web surfing is the increased use of pop-up, pop-under, and similar ads. A pop-up ad, also known as ad spawning, appears due to the automatic launching of a new browser window when a visitor enters or exits a website, when a delay occurs, or when other triggers cause the display. A pop-up ad appears in front of the active window. A pop-under ad is an ad that appears underneath (in back of) the current browser window. When users close the active window, they see the ad. Pop-ups cover the user’s current screen and may be difficult to close. Pop-up and pop-under ads are controversial: Many users strongly object to this advertising method, which they consider to be intrusive. Most browsers provide an option that allows the viewer to block pop-up windows. Legal attempts have also been made to control pop-ups because they are basically a form of spam.

Several other tactics, some of them very aggressive, are being used by advertisers, and their use is increasing. These tactics may be accompanied by music, voice, and other rich multimedia. For details information see Wikipedia.

Pop-up Videos

Along with the increased popularity of videos comes the pop-up commercial in front of them. Some can be skipped, others are difficult to delete. The commercials usually last 20-30 seconds, similar to TV commercials. These pop-ups may or may not be related to the content of the video you want to view.

E-Mail Advertising

E-mail marketing refers to the use of e-mail as a means of communicating commercial messages to an audience. E-mail marketing may occur in different formats and for different purposes. Pixel Vector consulting (2012) list four e-mail marketing formats.

Sending company or product information to people or companies that appear on mailing lists has become a popular way to advertise on the Internet. E-mail messages may be combined with brief audio or video clips to promote a product; some messages provide links that users can click on to make a purchase. Sending coupons and special offers is done by all major retailers, including department stores and supermarkets. Airlines, banks, educational institutions, and anyone else who can get your e-mail will send you e-mail ads.

The Major Advantages and Limitations of E-Mail Advertisement

The major advantages of e-mail advertising are:

• It is a low-cost and effective method.

• Advertisers can reach huge number of consenting subscribers.

• Most Internet users check or send e-mail on a typical day. So ads reach customers quickly.

• E-mail is an interactive medium that can combine advertising and customer service.

• E-mail ads can include a direct link to any URL, so they act like banners. A consumer may be more likely to respond to relevant e-mail messages especially when discounts or special sales are provided.

[Comp: please shade the bullet list]

For further details see Strauss and Frost (2012).

Limitations.

Using e-mail to send ads (sometimes floods of ads) without the receivers’ permission is considered spamming.

The quantity of e-mail that consumers receive is exploding. In light of this, marketers employing e-mail must take a long-term view and work toward motivating consumers to continue to read the messages they receive. As the volume of e-mail increases, consumers’ tendency to screen and block messages will rise as well. Today most e-mail services permit users to block messages from specific sources or automatically filter certain ads to junk mail.

Implementing E-Mail Advertising

A list of e-mail addresses can be a very powerful tool for a company, helping it to target a group of people that it knows something about. In many cases the mailing list is based on membership and loyalty programs, such as the airlines’ frequent flyer program. For information on how to create a mailing list, consult groups.yahoo.com (the service is free) or topica.com.

E-mail can also be sent to mobile devices. Mobile phones, in particular, offer advertisers a real chance to advertise interactively and on a one-to-one basis with consumers-anytime, anyplace. In the future, e-mail ads will be targeted to individuals based not only on their user profiles but also on their physical location at any point in time. See Chapter 6 for a description of this concept, known as l-commerce.

E-Mail Hoaxes. E-mail hoaxes are very popular; some of them have been going on for years (e.g., Neiman Marcus’s cookie recipe, the Nigerian treasure, the Koran and the Iraq invasion). Some of these are scams. For details, see ftc.gov and Chapter 9.

Fraud. Fraud is also a consideration. For example, a person may receive an e-mail stating that his or her credit card number is invalid or that his or her MSN service will be terminated unless another credit card number is sent in reply to the e-mail. For protection against such fraudulent practices, see scambusters.org and Chapters 9 and 14.

E-Mail Advertising Methods. E-mail advertising can be done in many different ways, as shown in Online File W9.9.

Search Engine Advertisement

Search advertising is a method of placing online advertisements on the Web pages that show results from search engine queries. Search engines are a good mechanism for most people to find information and, therefore, a good platform for online advertising. Note that search advertising includes mobile search and social network search (see Adhikari 2010). The two major forms of search engine advertising are keyword advertising and listing URLs.

Keyword Advertising

Google has created a new advertising technology by linking an advertisement with the user’s keywords. Advertisers choose the keywords to which their advertisements will link. Advertisements appear on the screen along with the search results when the chosen keywords are searched. This can substantially increase the likelihood that the advertisement will be viewed because of its high relevance to user interests. This innovation has resulted in the great success of Google. In a single year, more than 1.5 million U.S. marketers used Google as their advertising channel. In fact, more than 90 percent of Google’s revenue is generated from this creative technology. Furthermore, Google allows the advertisers to bid for the order of appearance.

URL Listing

Most search engines allow companies to submit their Internet addresses, called URLs (Universal Resource Locators) for free, so that these URLs can be searched electronically. Search engine spiders crawl through each site, indexing its content and links. The site is then included as a candidate for future searches. Because there are quite a few search engines, advertisers who use this method should register URLs with as many proper search engines as possible. In some cases, URLs may be searched even if they are not submitted.

However, the URL method has several drawbacks. The major one is location on the list provided by the search engine. Search engines maintain a huge amount of Web pages and get even larger because it is the collection size that attracts users to create value. Hence, the chance that a specific site will be found and placed at the top of a search engine’s display list (say, in the first 10 items) is very slim. (See the discussion of search engine optimization that follows.)

Search Engine Optimization (SEO)

It is very difficult for a company to be placed at the top of search results. Therefore, many marketers are trying to outsmart the ranking algorithm and find shortcuts that can lead to a better position in the search results. This is the basic idea behind search engine optimization. Search engines use algorithms to determine the position of a Web page in a search result based on certain criteria, such as popularity (e.g., the click-through rate). Ads with low click-through rates can be pushed down to subsequent pages. Therefore, it pays to find methods for optimizing keyword selection. For methods and details, check the information at Wikipedia.

Search engine optimization (SEO)

 

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