branding advertising & traffic building. branding b as internet grows, branding becomes even...

BrandingBranding

Advertising & Traffic BuildingAdvertising & Traffic Building

BrandingBranding

As Internet grows, branding becomes As Internet grows, branding becomes even more importanteven more important• short run, strong brands: Amazon, EBayshort run, strong brands: Amazon, EBay

Brand includes Brand includes • name, symbol, design or other elementsname, symbol, design or other elements• provides meaning & identifies ownershipprovides meaning & identifies ownership• differentiates the product from differentiates the product from

competitioncompetition

Building a BrandBuilding a Brand

Branding EffortsBranding Efforts• AwarenessAwareness• Brand promiseBrand promise• Character/PersonalityCharacter/Personality• Create RelationshipCreate Relationship• Shape behaviorShape behavior• Provide Reinforcement Provide Reinforcement

How to Build Brand How to Build Brand Awareness OnlineAwareness Online

Must use on & off-line promotionsMust use on & off-line promotions• Advertising, sales promotions, direct Advertising, sales promotions, direct

marketing, personal selling, & publicitymarketing, personal selling, & publicity– 70% of consumers went to a site because of 70% of consumers went to a site because of

TV, newspaper, & WOMTV, newspaper, & WOM

Can use viral marketing to create a Can use viral marketing to create a buzzbuzz• Chat rooms, Screen beans, Tell a friend Chat rooms, Screen beans, Tell a friend

campaigncampaign

PillsburyPillsbury

Begun as flour milling company in 1869Begun as flour milling company in 1869• Marketed in more than 70 countriesMarketed in more than 70 countries

Pillsbury bake-off competitionPillsbury bake-off competition– Over 50 years oldOver 50 years old

• Utilizes viral marketing with its own Utilizes viral marketing with its own websitewebsite– $1 Million prize$1 Million prize– 50% of its 10,000 entries are received online50% of its 10,000 entries are received online– Recipes on site emailed to friendsRecipes on site emailed to friends

Burger KingBurger King

The subservient chickenThe subservient chicken• ““Have it Your Way” mottoHave it Your Way” motto• Get the chicken to do what you wantGet the chicken to do what you want

– 300+ actions300+ actions

Created by Crispin, Porter & Created by Crispin, Porter & Bogusky ad agency (2004)Bogusky ad agency (2004)

Targeted toward 20-30 year oldsTargeted toward 20-30 year olds

Burger KingBurger King

Viral Marketing TechniqueViral Marketing Technique• Promotions that spread word-of-mouthPromotions that spread word-of-mouth

Launched on April 7, 2004Launched on April 7, 2004• Only 20 people told about itOnly 20 people told about it

– Friends of those at agencyFriends of those at agency

• 20+ million hits 20+ million hits • Six minutes average stickinessSix minutes average stickiness• Since promoted site in TV adsSince promoted site in TV ads

Advertising & TrafficAdvertising & Traffic

Novelty no longer guarantees trafficNovelty no longer guarantees traffic• Estimated to be over 2 billion websites Estimated to be over 2 billion websites

(2005)(2005)

Building traffic expensive & difficultBuilding traffic expensive & difficult

Essential beginning pointsEssential beginning points• Search engines Search engines • Email marketingEmail marketing

Search EnginesSearch Engines

Search Engine UsageSearch Engine Usage

Search Engine AdvertisingSearch Engine Advertising

Domain NamesDomain Names

Search Engine UsageSearch Engine Usage

90% of Internet users access a 90% of Internet users access a search enginesearch engine

Most consumers type in product Most consumers type in product name on search engine (28%)name on search engine (28%)• 23% link directly to domain name23% link directly to domain name• 9% type in brand name9% type in brand name

Importance of meta-tagsImportance of meta-tags

Search Engine Advertising Search Engine Advertising

Google Google • Started in 1998Started in 1998• 150 million searches per day150 million searches per day• Scans over 2 billion web sitesScans over 2 billion web sites

Adwords program (2002)Adwords program (2002)• Bid for listing at top of searchBid for listing at top of search

– Average is .19 cents per clickAverage is .19 cents per click

• Pay based on clicks on linkPay based on clicks on link

Search Engine AdvertisingSearch Engine Advertising

Search generates too many results Search generates too many results • Few users go beyond first few pages in Few users go beyond first few pages in

searchsearch

List with ALL search engines List with ALL search engines • Use meta-tags to improve placementUse meta-tags to improve placement

Smaller firms most likely to benefit from Smaller firms most likely to benefit from search engine optimizationsearch engine optimization• 38% of small business owners report that 38% of small business owners report that

they use some form of online advertisingthey use some form of online advertising


Until 1984, Internet addresses had a 10-Until 1984, Internet addresses had a 10-digit numeric numberdigit numeric number

Domain names introduced as letters Domain names introduced as letters instead of numbersinstead of numbers

Hierarchical order of domainsHierarchical order of domains• Top level: .edu, .com, .net, .org, .gov, .mil Top level: .edu, .com, .net, .org, .gov, .mil

– And two digit country codeAnd two digit country code

• More names added in More names added in 2000: .info, .biz, .name, .museum2000: .info, .biz, .name, .museum

Brand hierarchy issueBrand hierarchy issue


Not to exceed 67 charactersNot to exceed 67 characters Name should be trademarkedName should be trademarked Can register name online Can register name online

• 80 different companies80 different companies• Verisign was the firstVerisign was the first

– 16 million names registered in 200116 million names registered in 2001

Own contract for 1-10 yearsOwn contract for 1-10 years


Brand needs a great nameBrand needs a great name Domain name should:Domain name should:

• reinforce brandingreinforce branding– short, descriptive, associated with short, descriptive, associated with

firm/product, easy to rememberfirm/product, easy to remember

• build trafficbuild traffic• anticipate consumer behavior & anticipate consumer behavior &

mistakesmistakes• avoid clutteravoid clutter

Email MarketingEmail Marketing

Valuable toolValuable tool• Better reach of market segmentBetter reach of market segment• Lower costLower cost

Email lists cost about .10 - .50 per Email lists cost about .10 - .50 per namename• Includes rental, email distribution, Includes rental, email distribution,

tracking, & final reportingtracking, & final reporting Direct mail marketing: 1-2% response Direct mail marketing: 1-2% response

raterate• Permission email gets 30-40% responsePermission email gets 30-40% response

Easymail InteractiveEasymail Interactive

Oldest independent email list Oldest independent email list broker (1999)broker (1999)

1500+ unique email lists 1500+ unique email lists • Sorted by categorySorted by category• 276+ million opt-in consumer email 276+ million opt-in consumer email

addressesaddresses• 35+ million B2B 35+ million B2B • 105 million international105 million international

Other Traffic BuildersOther Traffic Builders

Sales PromotionsSales Promotions

Personal SellingPersonal Selling

Public Relations & Publicity Public Relations & Publicity

AdvertisingAdvertising

Sales PromotionsSales Promotions

Temporary inducements to Temporary inducements to stimulate demand, build traffic, stimulate demand, build traffic, increase sales, influence channel increase sales, influence channel membersmembers• found on 93% of commercial web sitesfound on 93% of commercial web sites

– contests, sweepstakes, couponscontests, sweepstakes, coupons– games, free samples, club membershipsgames, free samples, club memberships

Marketers spent over $10 billion on Marketers spent over $10 billion on these efforts in 2004these efforts in 2004

Personal SellingPersonal Selling

Sales person interacts with customerSales person interacts with customer• Email or instant messaging/chatEmail or instant messaging/chat

Can be effective online Can be effective online • Uncomplicated purchasesUncomplicated purchases• Or to support the offline saleOr to support the offline sale

IBM combines online information with IBM combines online information with offline sales negotiations for its high-offline sales negotiations for its high-end enterprise computer systemsend enterprise computer systems

Public Relations & Public Relations & PublicityPublicity

Sponsored programs to build image Sponsored programs to build image & goodwill of firm& goodwill of firm• community based events, plant tours, community based events, plant tours,

etc.etc.• live chats with executiveslive chats with executives• schedule online events to launch schedule online events to launch

product or web siteproduct or web site

Volvo (2000) conducted the first Volvo (2000) conducted the first digital automobile launchdigital automobile launch

Public Relations & Public Relations & PublicityPublicity

Providing information to the media Providing information to the media to generate positive consumer to generate positive consumer word of mouthword of mouth

• email press releases to other mediaemail press releases to other media

• most corporate web sites have most corporate web sites have pressrooms with archived press pressrooms with archived press releasesreleases

Online AdvertisingOnline Advertising

First banner ad displayed by IBM on First banner ad displayed by IBM on Hotwire.com in 1994Hotwire.com in 1994

$263 billion total advertising dollars $263 billion total advertising dollars in marketplacein marketplace

$9.6 billion spent on online $9.6 billion spent on online advertising (2004)advertising (2004)• 25% of total US advertising spending25% of total US advertising spending

– structural changes & growth ($0 in 1994)structural changes & growth ($0 in 1994)

Online AdvertisingOnline Advertising

Largest spenders are in consumer Largest spenders are in consumer brandsbrands• retail, music, & automotiveretail, music, & automotive

Most Most direct response• solicit immediate response with a clicksolicit immediate response with a click

Focus on branding, awareness, Focus on branding, awareness, positioning, and product positioning, and product features/benefitsfeatures/benefits

Banner AdsBanner Ads

35% of total Internet advertising 35% of total Internet advertising (2001)(2001)• Interactive bulletin boardsInteractive bulletin boards

Response rate average .75 - .3% Response rate average .75 - .3% (2002)(2002)• First banner in 1994 garnered 30% click First banner in 1994 garnered 30% click

throughthrough

More effective for national firmsMore effective for national firms

Banner AdsBanner Ads

Higher click throughHigher click throughbold colorsbold colors top of page placementtop of page placement

animationanimation call to actioncall to action

limited exposurelimited exposure larger size larger size

Getting larger over timeGetting larger over time• Large frames can increase awareness Large frames can increase awareness

by 40%by 40%

Flash increases click rate by 19%Flash increases click rate by 19%

Other Forms of AdvertisingOther Forms of Advertising

House Ads: pop-ups on own web House Ads: pop-ups on own web site (AOL)site (AOL)• Approximately 28% of advertising Approximately 28% of advertising

space on top rated web sites (2000)space on top rated web sites (2000)

Sponsorships: small button near Sponsorships: small button near sponsor’s product/web site contentsponsor’s product/web site content• Approximately 25% of all online Approximately 25% of all online

advertising revenue (2001)advertising revenue (2001)


Interstitials--rich media ads on web Interstitials--rich media ads on web sitessites• Like small TV ads Like small TV ads • 5-30 seconds5-30 seconds

Minimovies--cinema type ads filmed Minimovies--cinema type ads filmed for Internet showingfor Internet showing• 5-6 minutes5-6 minutes• viral marketingviral marketing

BMW minimoviesBMW minimovies

Created by ad agency Fallon WorldwideCreated by ad agency Fallon Worldwide• 85% of BMW buyers research car online 85% of BMW buyers research car online

before buyingbefore buying• BMW drivers spent more time with the BMW drivers spent more time with the

brand online than through television adsbrand online than through television ads• Cost $15 million to produceCost $15 million to produce• Launched in April 2001Launched in April 2001

– By July, 2001 over 6 million downloadsBy July, 2001 over 6 million downloads– Average 16 minutes stickiness on siteAverage 16 minutes stickiness on site


Yellow Pages Advertising--1.5% click through Yellow Pages Advertising--1.5% click through rate onlinerate online• localized by zip codelocalized by zip code

Classified ads--newspapers or portals (Yahoo)Classified ads--newspapers or portals (Yahoo)• can search local or nationalcan search local or national

Webcast ads--streaming audio/video Webcast ads--streaming audio/video broadcastsbroadcasts• stream ads in web content stream ads in web content • 34% of all Internet users listen to web radio34% of all Internet users listen to web radio

Purchasing web Purchasing web advertisingadvertising

Traditionally sold as CPMs Traditionally sold as CPMs • Moving toward bid formatMoving toward bid format

Can purchase ad space directly from Can purchase ad space directly from web site web site

Can share links for free in co-opsCan share links for free in co-ops

Affiliate marketingAffiliate marketing• Members get small fee for consumer who Members get small fee for consumer who

clicks & buys from sponsorclicks & buys from sponsor

PricingPricing

Standard PricingStandard Pricing

Based on demand, set to maximize Based on demand, set to maximize profitsprofits

However, many factors influence priceHowever, many factors influence price– internal objectives, cost, economy, internal objectives, cost, economy,

competitors, government, seasons, etc.competitors, government, seasons, etc.– cross-channel pricing (same in industry)cross-channel pricing (same in industry)– multitier pricing (level of service)multitier pricing (level of service)

Prices often fall in range--ceiling, floor, Prices often fall in range--ceiling, floor, acceptable level acceptable level

Online Pricing IssuesOnline Pricing Issues

Price sensitive consumers lead to Price sensitive consumers lead to increased price competitionincreased price competition

Information symmetryInformation symmetry

Price transparencyPrice transparency– Intelligence agents (MySimon)Intelligence agents (MySimon)

Shipping/handling fees also relevant to Shipping/handling fees also relevant to price for consumersprice for consumers

Factors Affecting Online Factors Affecting Online PricingPricing

Unique value asset• unique features & benefits, higher priceunique features & benefits, higher price

Substitute awareness effect• awareness of alternatives impacts priceawareness of alternatives impacts price• easier to search for substitutes onlineeasier to search for substitutes online

Total expenditure effect• spend a lot on purchase, shop for best spend a lot on purchase, shop for best

priceprice

Factors Affecting Online Factors Affecting Online PricingPricing

Shared cost effect• different people choosing product versus different people choosing product versus

paying leads to higher pricespaying leads to higher prices Price-quality effect

• before buying use cues & signals to judge before buying use cues & signals to judge qualityquality

– trust, confidence, & role of established brandstrust, confidence, & role of established brands

Inventory effect• swing in price is greater for perishablesswing in price is greater for perishables

Different Pricing ModelsDifferent Pricing Models

Fixed prices--one preset priceFixed prices--one preset price– SaturnSaturn

Negotiated prices--haggle over priceNegotiated prices--haggle over price– HondaHonda

Auctions--forward auction--bid up price, Auctions--forward auction--bid up price, highest winshighest wins

– EbayEbay

Demand collection/name your own priceDemand collection/name your own price– Priceline.comPriceline.com

Different Pricing ModelsDifferent Pricing Models

Falling price game--prices fall Falling price game--prices fall daily, buyer can bid at price pointsdaily, buyer can bid at price points

– JCPenney (2001); Discontinued (2002)JCPenney (2001); Discontinued (2002)

Barter--non-monetary exchangeBarter--non-monetary exchange– Spun.com’s videogame tradeSpun.com’s videogame trade

Bundling--combine products into Bundling--combine products into larger packages for single feelarger packages for single fee

– Sprint --telecommunications and moreSprint --telecommunications and more

Dynamic PricingDynamic Pricing

Offered price that reflects demand, Offered price that reflects demand, inventory level, & buyer inventory level, & buyer characteristics at that timecharacteristics at that time• more easily implemented onlinemore easily implemented online• perceived fairness issueperceived fairness issue

Similar to real-time pricingSimilar to real-time pricing• rental markets, yield management, rental markets, yield management,

auctionsauctions

Rental marketsRental markets

Real-time pricing works well with Real-time pricing works well with real-time usersreal-time users

Product rental is an immediate Product rental is an immediate needneed

– digital goodsdigital goods– software rentalsoftware rental– charge for each usecharge for each use

Yield ManagementYield Management

Matching of price & available capacityMatching of price & available capacity• create restrictions, give lower price to create restrictions, give lower price to

discriminate by sensitivitydiscriminate by sensitivity– airlinesairlines

Yield management most effective:Yield management most effective:– fixed, perishable capacity servicesfixed, perishable capacity services– high level of fixed costshigh level of fixed costs– identifiable customer base with segmentsidentifiable customer base with segments– demand uncertainty & technology to deal with demand uncertainty & technology to deal with

itit

Yield managementYield management

Can smooth uncertainties in Can smooth uncertainties in demanddemand• combined with web application could combined with web application could

be applied to various industries be applied to various industries

– tax preparationtax preparation– hair stylinghair styling

Trust, Security, & PrivacyTrust, Security, & Privacy

And Ethical ConsiderationsAnd Ethical Considerations

Some Areas of ConcernSome Areas of Concern

Marketing to ChildrenMarketing to Children• Advertising & entertainmentAdvertising & entertainment• Children more likely to discloseChildren more likely to disclose• Children’s Online Privacy Protection Children’s Online Privacy Protection

ActAct

Marketing Restricted ProductsMarketing Restricted Products• Alcohol & tobaccoAlcohol & tobacco


Online Consumer ResearchOnline Consumer Research

Privacy of dataPrivacy of data• ChoicePoint fired by Pennsylvania DOT ChoicePoint fired by Pennsylvania DOT • Posted private drivers’ license records Posted private drivers’ license records

on the webon the web

• 2005 Government security report: SEC 2005 Government security report: SEC not adequately protecting privacy of not adequately protecting privacy of sensitive financial datasensitive financial data


Information useInformation use• Census data used in 1942 to round up Census data used in 1942 to round up

Japanese Americans for war campsJapanese Americans for war camps• 2000 Census first online data collection2000 Census first online data collection

– 65% response despite law requiring participation65% response despite law requiring participation

Information accuracyInformation accuracy• 2002 ChoicePoint sued for selling 2002 ChoicePoint sued for selling

unregulated data to US Governmentunregulated data to US Government– FBI, IRS, Drug Enforcement, ImmigrationFBI, IRS, Drug Enforcement, Immigration

Some Areas of Concern Some Areas of Concern

CyberterrorismCyberterrorism• Coined in 1980sCoined in 1980s• Any major based computer attack on Any major based computer attack on

government or economygovernment or economy• HackersHackers

– Civil disobedienceCivil disobedience– Attention to causeAttention to cause– Spread fearSpread fear

Cyberterrorism Cyberterrorism

Since 9/11: unlawful attacks and threats Since 9/11: unlawful attacks and threats of attach against computers, networks, of attach against computers, networks, and the information stored therein when and the information stored therein when done to intimidate or coerce a done to intimidate or coerce a government or its people in furtherance government or its people in furtherance of political or social objectivesof political or social objectives

• Example: Denial of Service Attacks (2000)Example: Denial of Service Attacks (2000)– Ebay, Yahoo, CNN caused over $1 billion in lossesEbay, Yahoo, CNN caused over $1 billion in losses


49% of IT professionals say a major 49% of IT professionals say a major cyber attack on the US government is cyber attack on the US government is imminentimminent

72% say that the government will have 72% say that the government will have a hard time defending against ita hard time defending against it• 74% believe financial institutions will be hit74% believe financial institutions will be hit• 67% communication system67% communication system• 67% transportation infrastructure67% transportation infrastructure• 64% utilities64% utilities


Speculated attacksSpeculated attacks• Bomb or electromagnetic weapon Bomb or electromagnetic weapon

destroys Internet infrastructuredestroys Internet infrastructure• Viruses, denial of service attacksViruses, denial of service attacks• Stolen classified informationStolen classified information• Remote hijacking of control systemsRemote hijacking of control systems

– Financial markets, media broadcasts, Financial markets, media broadcasts, infrastructure (dams, power grids)infrastructure (dams, power grids)


In first half of 2002, Internet In first half of 2002, Internet attacks toward 400 companies in attacks toward 400 companies in 30 countries grew 64%30 countries grew 64%

Private companies were twice as Private companies were twice as likely to be attackedlikely to be attacked• Compared to private, non-profit, & Compared to private, non-profit, &

government entities combinedgovernment entities combined

TrustTrust

68% of consumer found profiling 68% of consumer found profiling acceptableacceptable• 9% found it acceptable to make profits 9% found it acceptable to make profits

from selling personal information to third from selling personal information to third partiesparties

Consumers do not mind organizations Consumers do not mind organizations using data for better serviceusing data for better service• Concern is sharing of dataConcern is sharing of data

TrustTrust

Privacy Policies make clear to Privacy Policies make clear to consumers type of information consumers type of information collected & how it us usedcollected & how it us used• 92% of web sites collect personal 92% of web sites collect personal

informationinformation• 86% do 86% do notnot disclose what they will do with disclose what they will do with

that informationthat information– legal implicationslegal implications– lack of consumer trustlack of consumer trust– bankruptcy issuesbankruptcy issues

SecuritySecurity

Needs for information controlNeeds for information control• server security server security • encryption softwareencryption software

Staff responsibility: keeping Staff responsibility: keeping information current & stay abreast information current & stay abreast of policies on information accessof policies on information access

FraudFraud

Intentional exploitation of person, Intentional exploitation of person, group or enterprisegroup or enterprise• FBI collected 49,000+ complaints in 2001FBI collected 49,000+ complaints in 2001

– $17.8 million dollar loss$17.8 million dollar loss

• Most fraud reported on auction sites Most fraud reported on auction sites (42.8%)(42.8%)– non-deliverable purchase/payments (20.3%)non-deliverable purchase/payments (20.3%)

• 76% C2C fraud, 24% B2C fraud76% C2C fraud, 24% B2C fraud– common states: California, Florida, New York, & common states: California, Florida, New York, &

TexasTexas

LiabilityLiability

Duty, responsibility or obligation to Duty, responsibility or obligation to consumersconsumers• responsible for not selling defective responsible for not selling defective

productsproducts Web sites often create disclaimers Web sites often create disclaimers

as a disavowal of liabilityas a disavowal of liability• few guidelines on disclaimersfew guidelines on disclaimers• do not necessarily limit liabilitydo not necessarily limit liability

Build credibility & trustBuild credibility & trust

How to build consumer confidence How to build consumer confidence • E-Trust, independent ratingsE-Trust, independent ratings• Ebay’s ratings of seller credibilityEbay’s ratings of seller credibility

– verification of identitiesverification of identities– insurance against fraudinsurance against fraud– escrow accountsescrow accounts– ban on bidding on own productsban on bidding on own products– ban on buyers who do not complete saleban on buyers who do not complete sale

Tips for Smart Web Tips for Smart Web ShoppingShopping

Is Business Legitimate?Is Business Legitimate? Prices/conditions clearly stated?Prices/conditions clearly stated? Transaction current calculated?Transaction current calculated? Ordering secure?Ordering secure? Privacy respected?Privacy respected? Is there recourse?Is there recourse? Is the credit card statement correct?Is the credit card statement correct?

Legal Issues Related to the Legal Issues Related to the InternetInternet

Local law firm specializing in e-commerce:Local law firm specializing in e-commerce:

Kennedy Covington Lobdell & Hickman, L.L.P.Kennedy Covington Lobdell & Hickman, L.L.P.

Bank of America Corporate Center, 100 North Bank of America Corporate Center, 100 North Tryon Street, 42nd Floor, Charlotte, North Tryon Street, 42nd Floor, Charlotte, North Carolina 28202-4006Carolina 28202-4006

Legal IssuesLegal Issues

Pace of online competition creates Pace of online competition creates problems problems

Laws often develop Laws often develop after a practice a practice has been establishedhas been established

– law is well behind the practicelaw is well behind the practice

• Example legal issues: Example legal issues: – unsolicited communication unsolicited communication – personal jurisdictionpersonal jurisdiction– intellectual propertyintellectual property

Unsolicited Commercial EmailUnsolicited Commercial Email

California Business & Professions Code California Business & Professions Code (1998)(1998)

• Illegal to send UCE with out true domain name Illegal to send UCE with out true domain name source source – Internet Service Providers can regulate spammersInternet Service Providers can regulate spammers

• UCE must include the phrase ADV for normal UCE must include the phrase ADV for normal advertising & ADV:ADLT for adult materialadvertising & ADV:ADLT for adult material

Federal & many state governments are Federal & many state governments are considering similar SPAM laws considering similar SPAM laws

Personal jurisdictionPersonal jurisdiction

A lawsuit may be brought against A lawsuit may be brought against individual in state where:individual in state where:• person residesperson resides• business is transactedbusiness is transacted• harm occursharm occurs• contract was createdcontract was created

A lack of geography complicates A lack of geography complicates jurisdictionjurisdiction• jurisdiction can be created without physical jurisdiction can be created without physical

presencepresence

Personal jurisdiction casePersonal jurisdiction case U.S. v. Jay CohenU.S. v. Jay Cohen (2000)(2000)

• Outcome: first conviction for illegally Outcome: first conviction for illegally accepting bets & wagers from Americans accepting bets & wagers from Americans over the Internet & telephonesover the Internet & telephones– Federal Wire Wager Act (1964), 5 years in prison Federal Wire Wager Act (1964), 5 years in prison

& a $250,000 fine& a $250,000 fine

• Kyl Bill (1998/2001) updates Wire Wager ActKyl Bill (1998/2001) updates Wire Wager Act– Illegal to offer online gambling, 4 years in prison Illegal to offer online gambling, 4 years in prison

& $20,000 fine& $20,000 fine– Failed in the HouseFailed in the House

Jurisdiction TestsJurisdiction Tests

Interactive/Passive Interactive/Passive Relations TestRelations Test

Interaction with Interaction with target market in target market in given locationgiven location• 800# (two-way, 800# (two-way,

active)active)• one-way one-way

information on information on website (passive)website (passive)

Upload/Download Upload/Download Status TestStatus Test

Country where Country where server’s site is server’s site is located has located has jurisdictionjurisdiction• nation has prioritynation has priority• not all cases have not all cases have

followed this rulefollowed this rule

Changes in Jurisdictional Changes in Jurisdictional ReachReach

2001 US Patriot Act greatly expands 2001 US Patriot Act greatly expands US government monitoring of email, US government monitoring of email, Internet, & cell phone Internet, & cell phone communicationscommunications

Unprecedented access to Unprecedented access to communicationscommunications

Gives US government dominance Gives US government dominance over Internet backboneover Internet backbone

Intellectual PropertyIntellectual Property

Copyright: the exclusive legal right to the exclusive legal right to reproduce, publish, & sell the matter and reproduce, publish, & sell the matter and form of a literary, musical, or artistic workform of a literary, musical, or artistic work

– easy to draw on other peoples’ work onlineeasy to draw on other peoples’ work online– P2P exchange controversyP2P exchange controversy

Trademark: a brand of a firm is given legal a brand of a firm is given legal protection because it is capable of exclusive protection because it is capable of exclusive appropriationappropriation

– the firm has exclusive rights to the brand name the firm has exclusive rights to the brand name and/or brand markand/or brand mark

Using copyrighted Using copyrighted materialmaterial

Not illegal to use material that is:Not illegal to use material that is:• already in the public domainalready in the public domain

– time limit; US government material; idea or time limit; US government material; idea or formulaformula

Fair UseFair Use provision says that: provision says that:– can use material for noncommercial purposescan use material for noncommercial purposes– can use material that is primarily informationalcan use material that is primarily informational– less material used, more covered by fair useless material used, more covered by fair use– less negative economic impact, more likely fair less negative economic impact, more likely fair

useuse

Domain namesDomain names

Steps: register domain name, pay Steps: register domain name, pay for ownership, & research whether it for ownership, & research whether it violates existing copyright lawsviolates existing copyright laws

• for example, .com, .edu, .org, .net have for example, .com, .edu, .org, .net have been sold by Verisignbeen sold by Verisign

Once you own the domain name, Once you own the domain name, maymay be able to sell it to other be able to sell it to other partiesparties

Domain namesDomain names

Responsibility of individual (not Verisign) Responsibility of individual (not Verisign) to verify that there is no claim on a nameto verify that there is no claim on a name

Existing businesses & organizations Existing businesses & organizations retain their domain name rights even if retain their domain name rights even if they have not taken action to secure the they have not taken action to secure the namename

Each country has its own copyright laws Each country has its own copyright laws leading to further complicationsleading to further complications

Meta-tagsMeta-tags

Key words in HTML code on web Key words in HTML code on web sites used by search engine sites used by search engine

• can see them under “view page can see them under “view page source”source”

Cannot substitute inappropriate Cannot substitute inappropriate trademark phrases in meta-tagstrademark phrases in meta-tags

Intellectual Property CasesIntellectual Property Cases

Net-related Copyright InterpretationsNet-related Copyright Interpretations

• Religious Technology Center v. Religious Technology Center v. Netcom Online Communication Netcom Online Communication Services et al.Services et al. (1995)(1995)– Outcome: the World Wide Web “multiplies Outcome: the World Wide Web “multiplies

the effect of market substitution”the effect of market substitution”

• U.S. v. LaMacchiaU.S. v. LaMacchia (1994)(1994)– Outcome: No profit, no infringementOutcome: No profit, no infringement

Intellectual Property LawIntellectual Property Law

No Electronic Theft (NET) Act of 1997No Electronic Theft (NET) Act of 1997• First Web-oriented copyright legislation; First Web-oriented copyright legislation;

intended to close the “LaMacchia intended to close the “LaMacchia loophole”loophole”

– Federal crime to distribute or possess illegal Federal crime to distribute or possess illegal electronic copies of copyrighted materials electronic copies of copyrighted materials valued over $2,500 (even when profit is not valued over $2,500 (even when profit is not involved)involved)

– Maximum penalty: five (5) years in prison and Maximum penalty: five (5) years in prison and a $250,000 finea $250,000 fine

Intellectual Property CasesIntellectual Property Cases

Net-related Trademark InterpretationsNet-related Trademark Interpretations• Avon v. Carnetta WongAvon v. Carnetta Wong (1996)(1996)

– Outcome: initial (court-based) Outcome: initial (court-based) understanding of the relationship understanding of the relationship between trademarks and domain namesbetween trademarks and domain names

• Oppendahl & Larson v. Advance Oppendahl & Larson v. Advance ConceptsConcepts (1997) (1997)– Outcome: Infringement occurs even if a Outcome: Infringement occurs even if a

company’s name is hidden from viewcompany’s name is hidden from view

Intellectual Property LawIntellectual Property Law

Anticybersquatting Consumer Protection Anticybersquatting Consumer Protection Act of 1999Act of 1999• First Web-specific trademark legislation; First Web-specific trademark legislation;

seeks to prevent “bad faith” registration of seeks to prevent “bad faith” registration of domain namesdomain names

World Intellectual Property Organization World Intellectual Property Organization • Arbitration of allocation.com case (2001)Arbitration of allocation.com case (2001)

– Outcome: party may keep domain name even Outcome: party may keep domain name even though its held by someone else (generic term)though its held by someone else (generic term)

Property ProtectionProperty Protection

““Foxing”Foxing”• netiquette term referring to FOX netiquette term referring to FOX

Broadcasting’s self-policing activitiesBroadcasting’s self-policing activities

Rapid speed is a concernRapid speed is a concern– Gnutella softwareGnutella software– MoviesMovies

Can intellectual property be protected?Can intellectual property be protected?• Are laws enforceable on the Internet?Are laws enforceable on the Internet?

Another consideration, Another consideration, TaxesTaxes

Sales tax from 0-8.5% in statesSales tax from 0-8.5% in states Can avoid tax if firm has no physical Can avoid tax if firm has no physical

presence in state & information is presence in state & information is downloadabledownloadable

– based on 1992 court ruling, called nexusbased on 1992 court ruling, called nexus

Nexus issues:Nexus issues:• choice of state to locate activitieschoice of state to locate activities• choice of customer support storeschoice of customer support stores• sale of products that are online or in shrink wrapsale of products that are online or in shrink wrap

Taxes continuedTaxes continued

Internet Tax Freedom Act of 1998Internet Tax Freedom Act of 1998• Postponed tax on Internet transactions Postponed tax on Internet transactions

until 2001until 2001– presidential commission to decide future of presidential commission to decide future of

online sales tax online sales tax

• In 2001, Congress extended the tax In 2001, Congress extended the tax moratorium for two more years (and moratorium for two more years (and continues to do so)continues to do so)– Bush signed the Bill, but stated that he Bush signed the Bill, but stated that he

preferred a much longer extensionpreferred a much longer extension

Another Consideration, Another Consideration, ContractsContracts

Digital Signatures Digital Signatures • Electronic Signatures in Global & Electronic Signatures in Global &

National Commerce Act (ESIGN, 2000)National Commerce Act (ESIGN, 2000)– Allows digital signatures to have same Allows digital signatures to have same

authority as traditional signatures on authority as traditional signatures on paper documentspaper documents

– encrypted certificates like a sealencrypted certificates like a seal

• one virus found trying to steal these one virus found trying to steal these signaturessignatures

Web Business ModelsWeb Business Models

The Business ModelThe Business Model

Essentially, a plan for earning profitEssentially, a plan for earning profit Income statementIncome statement

• Revenues-Expenses = Net IncomeRevenues-Expenses = Net Income• Two ways to impact bottom lineTwo ways to impact bottom line

Expensive to garner new customers Expensive to garner new customers • 70% of revenues of the average web firm’s 70% of revenues of the average web firm’s

revenues devoted to marketingrevenues devoted to marketing

• Burn Rate: how many months to burn Burn Rate: how many months to burn through investment capitalthrough investment capital– average European e-commerce firm: 20 monthsaverage European e-commerce firm: 20 months

Expense Based Business Expense Based Business ModelsModels

To Make Improvements & Provide To Make Improvements & Provide inexpensive benefits to the firminexpensive benefits to the firm• Enhance the Brand Building EffortsEnhance the Brand Building Efforts

– online enhancement of external brandonline enhancement of external brand

• Enhance Category Building Enhance Category Building – use web site to educate consumers on use web site to educate consumers on

category capabilitycategory capability

• Enhance Product Quality Enhance Product Quality – augment existing products with digital inputs augment existing products with digital inputs

for less money & greater efficiency for less money & greater efficiency

Expense Based Business Expense Based Business ModelsModels

To Increase Effectiveness & Create To Increase Effectiveness & Create stronger supply chain supportstronger supply chain support

– inexpensive & more efficient service to inexpensive & more efficient service to vendors, dealers, & distribution partnersvendors, dealers, & distribution partners

To Increase Efficiency & Reduce costs To Increase Efficiency & Reduce costs for firmfor firm

– move human resource manuals onlinemove human resource manuals online– customer support documents onlinecustomer support documents online– free trials, rebates, even sales pitch accessed onlinefree trials, rebates, even sales pitch accessed online

» replace high cost service encountersreplace high cost service encounters

Revenue Based Business Revenue Based Business ModelsModels

Provider Pays: content sponsorship Provider Pays: content sponsorship (like old time radio)(like old time radio)• exclusive deal for web site allianceexclusive deal for web site alliance

Provider Pays: retail alliancesProvider Pays: retail alliances• valuable locationsvaluable locations

– preferred vendors featured on web sitepreferred vendors featured on web site– given prominent spot for banners, links, etc.given prominent spot for banners, links, etc.

Provider Pays: banner advertisingProvider Pays: banner advertising• numerous firms purchase ad spacenumerous firms purchase ad space

Revenue Based Business Revenue Based Business ModelsModels

Provider Pays: prospect feesProvider Pays: prospect fees– pay for visitors that complete an actionpay for visitors that complete an action– leads, visits to site, download softwareleads, visits to site, download software

Provider Pays: sales commissionsProvider Pays: sales commissions– affiliate programs, where paid based on affiliate programs, where paid based on

actual salesactual sales

User Pays: business/consumer salesUser Pays: business/consumer sales– sales of product, subscription fees, & pay-sales of product, subscription fees, & pay-

per-use transactionper-use transaction

branding advertising & traffic building. branding b as internet grows, branding becomes even...

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