introduction to the internet. unit outline n the yahoo story n a variety of perspectives n the...
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Introduction to the Internet
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Unit Outline
The Yahoo Story A Variety of Perspectives The Internet The Web Hierarchy of Effects Explanation Internet Business Models The Web and the Economy
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The Yahoo Story
“Jerry’s Guide to the World Wide Web” Human compiled index Yahoo! Index Advertising revenues nearly $100
million Stock rose from $13 to $172 per share
between April 1996 to July 1998
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The Yahoo Story
Way to go Jerry (Yang) and Dave (Filo)!
Current Yahoo! Stock price?
Yahoo!
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A Variety of Perspectives
A technology
Social space
Marketing tool
Information publishing
Economic, social and business contexts
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The Internet
A network of computers (similar to a
telephone system)
WWWeb was a “child” of the internet and
the part of the internet that can be “surfed”
The child is now larger than the parent
When people say “internet” usually they
mean WWW
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The Internet as Technology
Bits are the essential building blocks of digital
information
Takes on a zero or one value
Grouping bits forms more complex information
The Internet is all about moving bits from place
to place
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The Internet as Technology (Cont.)
Speed is important
Internet is currently too slow
Video on demand is the holy grail
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The Internet as Technology (Cont.)
WWW was developed to make it easier
for users to exchange bits
A point and click graphical interface
Sound, picture and video elements
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The Internet as Social Space
A place where users communicate– e-mail– Usenet– Web
• Chat rooms• Conferencing• Video conferencing • Internet phone• Interactive games Geocities
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The Internet as a Marketing Tool The Marketing Concept
– An organization exists to satisfy customer wants
and needs while meeting organization objectives
Mass customization of communications and
products is now possible
Increasingly smaller target markets
– A target market of one!
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The Internet as a Marketing Tool (Cont.)
Used in Marketing for
– Information gathering for planning
– New products
– Digital distribution channel and electronic
storefront
– Promotion that allows for two-way communication
50 million users in four years (television took
13)
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The Web
In 1991 the National Science Foundation decided to allow commercial use of the Net
Three stages– Information publishing– Transaction-based systems– Mass customization
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The Web - Information Publishing
Business began with informational home
pages (brochureware)
Evolved to new product for some
businesses (magazines, newspapers)
People do research on the WWW
Selling ads and sponsorships supports the
content
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The Web - Information Publishing (Cont.)
Portals
– Entry points to the web
– Index and retrieve information from other
content providers
– Largest is Yahoo!
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The Web - Transaction-Based Systems
Allows firms to communicate and sell
online
More difficult (and expensive)
– Online storefronts
– Business to business commerce
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The Web - Transaction-Based Systems (Cont.)
Web page must link to backend
computer systems to validate and
manage transactions and inventories
Backend because the user never
interacts with them directly
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The Web - Mass Customization
Mass Customization
– Creating systems that can personalize
messages to a target audience of one.
Two kinds - automatic and manual
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The Web - Mass Customization (Cont.)
Automatic customization
– Software tailors content to user based on
info about user’s historical surfing behavior
– Example is Amazon.com
– Ethically controversial
– What is the benefit delivered?
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The Web - Mass Customization (Cont.)
Manual customization
– Relies on explicit instructions from user
– Common in the news delivery service
– Example is CNN Interactive
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Lavidge & Steiner’s
Hierarchy of Effects Model
Awareness (think) Knowledge (think) Liking (feel) Preference (feel) Conviction (do) Purchase (do)
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What is Involvement?
The extent to which something is somehow important to the consumer
Driven by risk– Financial– Social – Performance– Psychological
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Impact of Involvement
The greater the level of involvement, the
greater the
– time spent in search
– effort expended in search
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Hierarchy of Effects Explanation
High Involvement
Awareness
Knowledge
Liking
Preference
Conviction
Purchase
Cognitive (think)
Affective (feel)
Conotive (do)
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Hierarchy of Effects Explanation
Low Involvement
Awareness
Knowledge
Liking
Preference
Conviction
Purchase
Cognitive (think) (low levels)
Affective (feel)
Conative (do)
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Internet Business Models
Hierarchy of Effects Business Model
Cognitive and Attitude
Stakeholder communicationBranding lead generationCustomer serviceE-mail databases
Transactive Behavior (Revenue Generating)
Sell productElectronic publishing Sell Content Sell adsAgent services
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Internet Business Models
Stakeholder Communications
– information about the company and its brands
(www.mcdonalds.com)
– stockholders, consumers, employees,
suppliers, media, government are all
stakeholders
– When the web site is stricly informational, this
is brochureware
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Internet Business Models
Branding
– Selecting a brand name and/or mark and
supporting with marketing communication
– Object is to build brand equity - brand
advertising
– Internet has not been strong, but predicted
growth - what do you think?
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Internet Business Models
Sales promotions
– Build short-term sales
• Coupons (J. Crew)
• Sampling (Hallmark)
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Internet Business Models
Lead generation
– Company uses e-mail or its web site to
gather names of potential customers
(HermanMiller)
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Internet Business Models
Customer Service
– Information for customers (Rollerblade)
– Feedback mechanisms for communication
with customers
• e-mail - and databases, avoid spam
• Customer satisfaction surveys
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Internet Business Models
Sell Product
– Online transactions
– Largest segment business to business
markets (about 2/3s of all dollars) but
– Consumer transactions growing
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Internet Business Models
Electronic Publishing
– A subset of selling products
– Media create online versions of product and
either
• 1) charge a subscription rate and/or
• 2) sell advertising space
• New York Times
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Internet Business Models
Agent Services
Firm acts as middleman but never takes
posession
– Aggregators (advertising, travel, commodities) (Travelocity)
– Intermediaries (searching for lowest prices)
– Syndicated selling (commisions to other web sites for
customer referrals) (Amazon)
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Internet Business Models
Agent Services
– Be aware that the internet is a global
medium!
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The Web and the Economy
Real cost of a product is the nominal cost +
search costs (Stigler)
The cost of information is decreasing
radically as a result of information on the web
How does cheaper information lead to
greater wealth?
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The Web and the EconomyInternet Stocks are Up!
Internet stocks are up (with some recent
- late spring 1999 - fluctuations)
This, despite the fact that most inernet
companies are NOT making money
Stock trading online is big
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The Web and the EconomyNew Media Revenues
New media industry “combines elements of computing technology,
telecommunications, and content to creaate products
and services which can be used interactively by
consumers and business users” (Coopers & Lybrand
1977, p.16)
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The Web and the EconomyReduced Inflation
Commerce Department believes digital
technology has helped keep inflation in
check (from 3.1% down to 2%)
Conflict between lower cost of
information and bidding up of goods and
services?
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The Web and the EconomyEfficiency and Effectiveness
Efficiency: minimized input to output
ratio
Effectiveness: making the right choices
in order to maximize the company’s
competitive advantage
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The Web and the EconomyGains to Efficiency
Purchasing
– automation, lower costs, downward price pressures through
online bidding
Inventory management
– JIT and electronic ordering, reduced inventory holding costs
Cycle times (new product development)
Customer service (cost shifting?)
Sales and marketing
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The Web and the EconomyGains to Effectiveness
Purchasing
– locating hard-to-find components
Inventory management
– Incorporate latest technology
Cycle times (new product development)
– Respond quickly to changes in the marketplace
Customer service
– Greater satisfaction, likelihood of repeat purchase
Sales and marketing
– Superior service, greater customer satisfaction
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The Web and the EconomyJobs
– New media payrolls increased to $2.73 BILLION by mid
1997
– Number of new media companies grew by 16% and the
number of employees grew by 31%
– Marketing and sales positions in new media have
quintupled during the 18 months ending in mid-1997
– 31% of new media managers own equity in the business
– New media companies represent the largest and fastest
growing U.S. Industry sector in 20 years