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Internet Marketing & e-CommerceWard Hanson

Kirthi Kalyanam

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PERMISSIONS DEPARTMENTTHOMSON BUSINESS and ECONOMICS

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Part One: Chapter ThreeNetworks

“The science of networks has taught us that distance is deceiving. That two individuals can be connected through a short chain of network ties – through only six degrees – is a claim about the social world that has fascinated generation after generation.”

Duncan Watts, Six Degrees: The Science of a Connected Age

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The Evolving Internet

• A decade of rapid growth ends with the transition to a more mature market

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The Evolving Internet

• A decade of rapid growth ends with the transition to a more mature market

• Experienced users more likely to engage in online commerce and upgrade to faster connection services

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

The Evolving Internet

• A decade of rapid growth ends with the transition to a more mature market

• Experienced users more likely to engage in online commerce and upgrade to faster connection services

• The seasoned user also moves away from exploratory “surfing the Net”

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

The Evolving Internet

• A decade of rapid growth ends with the transition to a more mature market

• Experienced users more likely to engage in online commerce and upgrade to faster connection services

• The seasoned user also moves away from exploratory “surfing the Net”

• A shift to deeper connections

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Changing Patterns in Global Net UseThe declining share of U.S. Internet users

UnitedStates

Europe AsiaPacific

Japan ROW

19982007e

Source: World Bank, U.S. Census

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An Information Explosion, On the Go

• Music, books, x-rays and home videos all contribute to a sea of information

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An Information Explosion, On the Go

• Music, books, x-rays and home videos all contribute to a sea of information

• Internet users increasingly obtain information from mobile devices

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

An Information Explosion, On the Go

• Music, books, x-rays and home videos all contribute to a sea of information

• Internet users increasingly obtain information from mobile devices

• Instant messaging and text messaging create new frontier for marketers

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

An Information Explosion, On the Go

• Music, books, x-rays and home videos all contribute to a sea of information

• Internet users increasingly obtain information from mobile devices

• Instant messaging and text messaging create new frontier for marketers

• Blogs, podcasts and beyond create new challenges for reaching audience

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Age Gap: Email vs. Instant Messaging

Internet users who use IM

Users who use IM more than email

Users who emailmore than IM

Gen Y 62% 57% 19%

Gen X 37 16 24

Trailing Boomers 33 18 24

Leading Boomers 29 7 16

Matures 25 <1 7Source: Pew Internet & American Life Project Training Survey, February 2004

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Second Generation Internet

• The early Internet served basic documents to anonymous users, helping drive widespread use but limiting its performance and security

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Second Generation Internet

• The early Internet served basic documents to anonymous users, helping drive widespread use but limiting its performance and security

• Second Generation Internet focuses on more descriptive content – the semantic web – and ways to reliably authenticate users

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Understanding Social Networks

• Network connections grow faster than the number of participants

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Understanding Social Networks

• Network connections grow faster than the number of participants

• Extensive local clustering: friends tend to have the same group of friends

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Understanding Social Networks

• Network connections grow faster than the number of participants

• Extensive local clustering: friends tend to have the same group of friends

• Small worlds: connecting any two people on a network with limited steps

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Understanding Social Networks

• Network connections grow faster than the number of participants

• Extensive local clustering: friends tend to have the same group of friends

• Small worlds: connecting any two people on a network with limited steps

• Hubs and Connectors spread information more quickly than other members

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Understanding Social Networks

• Network connections grow faster than the number of participants

• Extensive local clustering: friends tend to have the same group of friends

• Small worlds: connecting any two people on a network with limited steps

• Hubs and Connectors spread information more quickly than other members

• OK to lose members randomly, but networks vulnerable to deliberate attack

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Metcalfe’s Law

Growth of a communications network strongly enhances its value

• Assuming equal value among network members, if v = 1, full value of a conversation is $2

• In networks with changing communication value, value rises at a slower rate

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The value of a complete network rises rapidly, but not every link shares the same value

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Clusters and Connections

• Within clusters, connections made even more rapidly

• Any two members can usually be connected with only a few links

• Kevin Bacon and Six (or fewer) Degrees of Separation

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Marketing Value in Networks

• Networks are most valuable when they are ubiquitious: the power of the ever present

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Marketing Value in Networks

• Networks are most valuable when they are ubiquitious: the power of the ever present

• Increased speed can transform business

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Marketing Value in Networks

• Networks are most valuable when they are ubiquitious: the power of the ever present

• Increased speed can transform business• Participants expectations are important and

can be shaped by publicity and hype

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Marketing Value in Networks

• Networks are most valuable when they are ubiquitious: the power of the ever present

• Increased speed can transform business• Participants expectations are important and

can be shaped by publicity and hype • Resource sharing benefits knowledge

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Marketing Value in Networks

• Networks are most valuable when they are ubiquitious: the power of the ever present

• Increased speed can transform business• Participants expectations are important and

can be shaped by publicity and hype • Resource sharing benefits knowledge• Greater opportunity for specialization and

challenges in branding

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Virtual Value Activities

• Creating value from reams of available information is a key skill in online marketing

– First step: Gathering– Second step: Selecting and Organizing– Third step: Synthesizing– Fourth step: Distributing