The purpose of this study is to investigate what is available for marketers on the Internet, as well as what is meant by the phrase "marketing on the Internet." Specifically, a historical survey of the development and evolution of the Internet as a marketing and communications vehicle is explored, while major controversial issues associated with marketing on the Internet, regardless of their origin are discussed. Two primary research studies were conducted, one to assess advertising agencies' opinions of perceived effectiveness of the Internet, and the other to assess clients' opinions concerning agency support for Internet marketing efforts.
The author dedicates this paper to her family, Albert and Marcia Butler, Patricia and Dennis Lint, and in loving memory of her grandfather, Darrell J. Mase Sr., Ph.D.
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Foremost, for the Lord, whose gifts of grace and compassion have made this paper possible (Phil. 4:13).
The author recognizes John H. Murphy II, Marye Tharp, and Jef Richards of the University of Texas, as well as Larry Spiegel of The Richards Group, and Melvin Evans of QMS, Inc. Deepest gratitude for your continuing interest and assistance in developing this paper as we pioneer the challenge of marketing on the Internet.
The author acknowledges her family, whose foundation of unending support has built a house of love best known as "home." Thank you for showing me that home is as close as the warmest corners of my heart.
The author recognizes her dearest friends from The University of Texas at Austin: Shannon Cotrell, Stacie Duncan, Rachel Howald, Andria Milstein, Jeff Myer, Jeff and Janelle Neely, Eric Robeson, and Are Thu. Special thanks to Jennifer Tuthill, Trey Halbert and Corinne Wilks (Philem. 7). Thank you for making graduate school such an enlightening journey and a pleasant memory.
Submitted to the Committee for approval on April 10, 1995.
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There is currently a proliferation of information, specifically business-related articles concerning the Internet and its use as a marketing vehicle. Interestingly enough, certain "buzzwords" have become commonplace in trade magazines and newspapers. The tables below show the increase in certain "buzzword" usage.
October 1992 - October 1993 -
September 1993 September 1994
Advertising Age 5 145
Major Papers 321 4,201
Table 1: "Information Superhighway" mentions (Fisher 1994)
October 1992 - October 1993 -
September 1993 September 1994
Advertising Age 194 834
Major Papers 5,211 10,103
Table 2: "Interactive" mentions (Fisher 1994)
October 1992 - October 1993 -
September 1993 September 1994
Advertising Age 3 117
Major Papers 653 5,289
Table 3: "Internet" mentions (Fisher 1994)
The increasing popularity of the Internet as a business tool can be attributed to its current size and prospected growth, as well as its attractive demographics (Hoffman and Novak 1995). The Internet's potential to provide an efficient channel for advertising and marketing efforts is overwhelming, and yet no one is really sure how to use the Internet for these activities.
Clearly, things are different "out here." The costs, strategies, and effectiveness measures for marketing on the Internet differ greatly from conventional marketing. A recent estimate of conventional marketing costs versus marketing on the Internet put conventional marketing at four times more expensive than the Net (Verity and Hof 1994). These estimates are complimented by the suggestion that marketing on the World Wide Web results in "Ten times as many units sold with one-tenth the advertising budget" (Potter 1994). Firms who are used to doing business in a traditional manner are re-thinking what was taught about marketing in their MBA programs. Every facet of conventional marketing strategy is challenged by this new medium, and thus mandates that we develop new, or at least revised methods of marketing.
In the 1990's, people have coined the phrase "cyberspace" to represent what's "out there" on the Internet. Actually, the term was first used by William Gibson in his novel, Neuromancer, to represent a universe sustained by a vast network of computers and telecommunications lines. Gibson's novel is relevant in describing the rush of people to the Internet, and the subsequent overwhelming sense of being lost in this "cyberspace." The feeling that there is something, although not yet clearly defined, "out there" for businesses, is exactly how Gibson descibes his "cyberspace." In referring to this "cyberspace," Gibson makes the following observations:
People jacked in so they could hustle. Put the trodes on and they were out there, all the data in the world stacked up like one big neon city, so you could cruise around and have a kind of grip on it, visually anyway, because if you didn't, it was too complicated, trying to find your way to a particular piece of data you needed (Gibson 1984).
The Internet is the name for a group of worldwide information resources. These resources are so vast as to be well beyond the comprehension of a single human being. Not only is there no one who understands all of the Internet, there is no one who even understands most of the Internet(Hahn and Stout 1994). Therefore this paper will inevitably become an incomplete source for marketing on the Internet. Rather, this paper seeks to open a dialog and begin to discover the seemingly limitless possibilities for business on the Internet.
The purpose of this study was to investigate what is available for marketers on the Internet, as well as what is meant the phrase "marketing on the Internet." The primary research will seek to understand how the effectiveness of marketing on the Internet is perceived by agencies and clients.
Specific objectives were as follows:
1) to conduct a historical survey of the development and evolution on the Internet as a marketing and communications vehicle
2) to examine major controversial issues associated with marketing on the Internet, regardless of their origin
3) to assess advertising agencies' opinions of perceived effectiveness of the Internet
4) to assess clients' opinions concerning agency support for Internet marketing efforts.
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Understanding the history of the Internet is paramount to understanding what is happening today on the Internet. Customs, rules, and many layers of technical protocols were designed with the goals and objectives of the sponsors and inhabitants of the original networks (Ellsworth and Ellsworth 1994). While the Internet is changing rapidly now, it is still a product of this history.
Put simply, the Internet allows millions of people all over the world to communicate and to share. Thus the Internet is much more than a computer network or an information service. It is living proof that human beings who are able to communicate freely and conveniently will choose to be social and semi-selfless. Overall, what is most important is the people of the Internet. The Internet is the first global forum and the first global library (Hahn and Stout 1994). Anyone can participate, at any time: the Internet never closes. Moreover, no matter who you are, you are always welcome. You will never be excluded for wearing the wrong clothes, having the wrong colored skin, being the wrong religion, or not having enough money.
A cynic might say that the reason that the Internet works so well is that there are no leaders (Hahn and Stout 1994). Actually, there is some truth to this. As unbelievable as it sounds, nobody actually "runs" the Internet. Nobody is "in charge" and no single organization pays the cost. The Internet has no police and no army, and laws are only beginning to be made here. There are no real ways to hurt another person, but several ways to be kind. Perhaps, under the circumstances, it is only natural for people to learn how to get along.
What we call the Internet today has its roots in a network set up by the United States Department of Defense in the early 1970s (Ellsworth and Ellsworth 1994). This network (ARPAnet), established by the Advanced Research Projects Agency (ARPA), connected various military and research sites and was itself a research project in how to build reliable networks. In particular, research about how to build networks that could withstand partial outages (like bomb attacks) and still function (Krol 1992). In the ARPAnet model, communication always occurs between an source and a destination computer. The network itself is assumed to be unreliable; any portion of the network could disappear at any moment. Any segment of the network could suffer an outage and the communication would still take place using any available alternative route across the network (Fraase 1994). It was designed to require a minimum of information from computer clients. The methods they developed included a "protocol" allowing dissimilar computer systems to communicate, and a method that routed data through multiple communications paths using groups of data with their own destination addresses built in packets (Ellsworth and Ellsworth 1994). Prior to this technology, even with machines that were compatible, the user had to physically carry magnetic tapes or punched cards and insert them into another machine to transfer data from one computer to another (Kantrowitz and Rogers 1994). With the new technology, a computer simply had to put its data in an envelope, called an Internet Protocol (IP) packet, and "address" the packets correctly to send a message on the network. The communicating computers were also given responsibility for ensuring that the communication was accomplished (Krol 1992). The philosophy was that every computer on the network could talk with any other computer. On November 21, 1969, the first official demonstration of this technology occurred (Kantrowitz and Rogers 1994).
Around midday,...a half-dozen scientists gathered at UCLA's Boelter Hall, home of the computer-science department, and watched as one computer hooked up with another hundreds of miles away at Doug Englebart's lab at the Stanford Research Institute. It was a historic event, but the only visual record is in the memories of those who were there. "There wasn't a photographer present," says [Steve] Crocker, "and it didn't occur to us that we should have one."
What did the first message say? What was the equivalent of "Mr. Watson, come here, I want you"? Hardly anyone remembers." "The connection worked," says Crocker. "That was all that mattered (Kantrowitz and Rogers 1994).
These methods were so successful that many other networks adopted these standards, known today as TCP/IP (Ellsworth and Ellsworth 1994).
These decisions, like the assumption of an unreliable network, may sound strange, but history has proven that most of them were reasonably correct (Krol 1992). With these assumptions, the United States was able to develop a working network, and the academic and research users who had access to it were soon addicted. Demand for networking quickly spread. Although the Organization for International Standardization was spending years designing the ultimate standard for computer networking, people could not wait. Internet developers in the United States, United Kingdom, and Scandinavia, responding to market pressures, began to put IP software on every conceivable type of computer (Krol 1992). It became the only practical method for computers from different manufacturers to communicate. This was attractive to governments and universities, which did not have policies saying that all computers must be bought from the same vendor. Everyone bought whichever computer they liked and expected the computers to work together over the network.
About the same time as the Internet was coming into being, Ethernet local area networks (LANs) were developed. LAN technology matured quietly until roughly 1983, when desktop workstations became available and local networking exploded (Krol 1992). Most of these workstations came with Berkeley UNIX, which included IP networking software. This created a new demand: rather than connecting to a single large timesharing computer per site, organizations wanted to connect their entire local area network to the ARPAnet. This would allow all the computers on that LAN to access ARPAnet facilities. At the same time, many companies and other organizations started building private networks using the same communications protocols as the ARPAnet: namely, IP.
Beginning in the late 1980s the National Science Foundation (NSF), a federal agency, started expanding its own NSFNET in steps, using the technology developed by ARPAnet, and a high-speed backbone network. At first this was done by creating five supercomputer centers at major universities, to allow these universities and research centers to use NSF's supercomputers, but increasingly the connections were used for e-mail and for transferring data and information between sites. The five centers were created with the intent that they had to be shared, because they were so expensive. This created a communications problem: they needed a way to connect their centers together and to allow the clients of these centers to access them. At first, the NSF tried to use the ARPAnet communications, but this strategy failed because of bureaucratic and staffing problems (Krol 1992).
In response, the NSF decided to build its own network, based on the ARPAnet's IP technology. It connected the centers with 56,000 bits per second telephone lines (Fraase 1994). This is roughly the ability to transfer two full typewritten pages per second. That is slow by modem standards, but reasonably fast in the mid 80s (Krol 1992). Since these telephone lines were paid for by the mile, it was obvious that they would not be financially able to connect every university directly to a supercomputing center. Therefore, they decided to create regional networks. In each area of the country, schools would be connected to their nearest neighbor in a daisychain fashion (Fraase 1994). Each chain was connected to a supercomputer at one point, and the centers were connected together. With this configuration, any computer could eventually communicate with any other by forwarding the conversation through its neighbors (Krol 1992).
The solution was successful--temporarily. Sharing supercomputers also allowed the connected sites to share a lot of other things not related to the centers. Suddenly these schools had a world of data and collaborators at their fingertips. The network's traffic increased until, eventually, the computers controlling the network, and the telephone lines connecting them, were overloaded (Fraase 1994). In 1987, a contract to manage and upgrade the network was awarded to Merit Network Inc., which ran Michigan's educational network in partnership with IBM and MCI (Krol 1992). The old network was upgraded with telephone lines that were 20 times faster as well as with faster computers (Fraase 1994).
The process of running out of horsepower and getting bigger engines and better roads continues to this day. Unlike changes to the highway system, however, most of these changes are not noticed by people trying to use the Internet for daily work. You will not go to your office, log on to your computer, and find a message saying that the Internet will be inaccessible for the next six months because of improvements. Perhaps even more important is that the process of running out of capacity and improving the network has created a technology that is extremely mature and practical. The ideas have been tested; problems have appeared, and problems have been solved.
With this growth, of what came to be called the Internet, and the subsequent upgrading of the system, came broader understandings of the goals of the Internet and the groups that should have access to it. (Ellsworth and Ellsworth 1994).
For our purposes, the most important aspect of the NSF's networking effort is that it allowed everyone access to the network. Up to that point, Internet access had been available only to researchers in computer science, government employees, and government contractors. The NSF promoted universal educational access by funding campus connections only if the campus had a plan to spread access to everyone on campus and in the surrounding community (Krol 1992). So everyone attending a four-year college could become an Internet user.
Now that most four-year colleges are connected, people are trying to get primary and secondary schools connected, along with local libraries. People who have graduated from college and know what the Internet is good for, are talking to their employers about getting corporations connected. Other networks communicating among themselves and through the Internet have, in the last three years, brought a large commercial presence to the Internet and much easier access to individuals who are not part of a government or educational institution (Fraase 1994).
In the early 1990's, the network was opened up to a few large commercial sites, and international Internet access has also started expanding rapidly (Fraase 1994). All of this activity points towards continued growth, networking problems to solve, evolving technologies, and job security for networkers. Many people are going further: After getting a connection at work, the next logical step is to get a connection in their home.
The Internet backbone provides high-speed links. It is funded by the National Science Foundation (NSF) and is currently managed by Advanced Network System (ANS) (Ellsworth and Ellsworth 1994). There are more than 5,000 attached regional, state, federal, campus, and corporate networks. Links to networks in Canada, Japan, Australia, Central America, and South America are in place. There are more than 2 million computers and workstations of various sizes connected to the Internet with millions of users (Fraase 1994).
The Internet is growing at a rate of about 10 percent per month as more colleges, universities, and businesses come online (Fraase 1994). Because the Internet is made up of over 25,000 networks that can transfer data via many routes, it is nearly impossible to pin down any exact numbers concerning its size. What we do know is that its growth is unparalleled in any other industry.
The future of the Internet lies in three key areas: commercialization, privatization, and bandwidth.
Large multinational corporations have been on the Internet for years, although their access has been limited to research and engineering departments. In 1992, many of the restrictions on commercial use of the Internet began to change. In fact, there are already more commercial sites on the Internet than educational and research sites combined. According to statistics gathered by the National Science Foundation, commercial addresses now comprise fifty-one percent of network domains. Educational and research domains account for approximately thirty-three percent of network registrations (Ellsworth and Ellsworth 1994).
Internet proponents have always wanted the various telephone companies to provide Internet connections. They claim you should be able to order an Internet connection just like you order call waiting or a second line for your telephone. The telephone companies have not jumped on this idea right away, but the recent corporate interest in the Internet has not gone unheeded, and this attitude is slowly changing (Fraase 1994).
Before the Internet is completely privatized, users must find a method for funding connections that are already in place. As soon as enough small businesses and individuals decide that connection to the Internet is an important asset, privatization of the Internet will occur quickly (Fraase 1994).
Bandwidth is, "the range of transmission frequencies a network can use" (Fraase 1994). What this means is that as bandwidth increases, you can transfer more information faster. Increasing available bandwidth will not necessarily change the way most people use the Internet, but it will improve the speed at which we conduct our business on the Internet.
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Commercial businesses are the fastest growing segment of the Internet, for many reasons: You can gather information, communicate, and actually transact business on the Internet. Below is a list of the reasons and ways that businesses are using the Internet. Each will be discussed subsequently, in relation to their base Internet tools, such as Gopher, FTP, Telnet, etc. Although the more familiar of Internet tools for business use is certain to be the World Wide Web and its browsers, it is necessary to understand first the functions of the basic tools of Internet business. Then we will discuss the Web, which uses all of these tools in a graphics-based environment.
Internet business tools have several functions, listed here. These are discussed in the later sections of this chapter.
(Ellsworth and Ellsworth 1994)
Internal and External Communication
E-mail is a low-cost method for maintaining local, regional, national, and international communication. Messages can be exchanged in minutes as opposed to days or even months using regular mail. E-mail is a utility for sharing information and is said to be one of the most important productivity packages around. Often, the primary and most frequent business use of Internet connectivity involves internal and external communications (Ellsworth and Ellsworth 1994). Use of the Internet lets a business be in touch with branches and work teams at many locations, and permits high-speed access to vendors and customers. This can even create a virtual community in which people who might normally never meet or communicate, find themselves in conversation about important issues. Corporate culture is affected by e-mail--some introverted people become more extroverted and "vocal" because they prefer sending e-mail to talking on the phone or in person.
Listserv software, similar to electronic mailing lists, allows work groups to communicate in an open manner similar to virtual meetings, and can serve as a tool for Total Quality Management (TQM) or a tool for reengineering projects. This can help team members keep in touch and involved even while they are traveling. Listserv can also assist group members in obtaining the most up-to-date versions of collaborative work, and provide current versions and comments to all members simultaneously. The use of e-mailing lists simplifies the investment of time and effort involved in group conferencing, members can participate at various times, and from various locations, the end to scheduling conflicts.
Improving communication with colleagues, government agencies, the academic community, researchers, and even competitors, can help improve the industry in general. The culture of the Internet is such that genuine exchanges on industry-wide questions and improvement are increasingly more common (Ellsworth and Ellsworth 1994).
Corporate Logistics
Logistical concerns that can dominate production planning can be eased through better contact via the Internet. The Internet is the "anytime/anywhere" network, so exchanges with markets across time zones can be facilitated by the use of e-mail and conferencing. Actual "real time" communication is also possible, through the use of Talk, MOOs, and Internet Relay Chat (IRC). Distance and time barriers are lessened by using the Internet for communication (Krol 1992).
It is increasingly common for companies to support telecommuting employees (Ellsworth and Ellsworth 1994). Work teams can be formed online, allowing these telecommuters to become a part of the team. This can also be accomplished when employees are out of town or temporarily off-site.
In some cases, businesses have created a virtual company composed of individuals who work at a distance from one another. They may meet face-to-face only occasionally (Ellsworth and Ellsworth 1994).
Globalization and Leveling a Playing Field
Using the Internet, many organizations are able to bring a global edge to a homespun business. With the Internet, you are much less aware of national boundaries and distance. Individuals from Norway converse with others in Toronto, Taiwan and Austin, Texas, easily. This opportunity for rapid communications can increase a business's visibility from local to global overnight.
For many companies, the use of the Internet creates a level playing field. Small businesses can create an image on the network to compete with large businesses. It makes the pursuit of customers, vendors, and resources possible worldwide--allowing competition in a world market.
Gaining and Maintaining Competitive Advantage
Increasingly, businesses are taking a look at their own organizational structures and procedures in an effort to become more competitive. The Internet is a wonderful tool for engaging in these activities. Many companies are using e-mail and group conferencing to maintain good communication and exchange data and documents, which is critical to the task of reengineering their business procedures (Ellsworth and Ellsworth 1994).
Competitive advantage can be increased due to access to state-of-the-art information on products, material, new ideas and even the status quo in a given industry. Many corporations use the Internet to engage in what some call "techno watch" --keeping a finger on the pulse of emerging and new technologies, and the market response to those technologies, both anecdotal and in terms of financial performance and the stock market (Ellsworth and Ellsworth 1994).
The public information and discussion groups available on the Internet provide insight and feedback that is hard to get in any other manner. Here, workers at all levels of industry, researchers, and the public exchange of information on marketing, research, technological developments, internal processes such as accounting and personnel, and external activities such as purchasing and public relations. These discussion groups are useful both for the information presented in them and for the pointers they provide to important sites, contacts, and databases. Having the most up-to-date information about your markets and the state-of-the-art in your industry allows you to keep or increase your competitive edge.
In some cases, the Internet is a tool for solving problems by accessing information, documents, and experts. Many companies cannot afford in-house experts on every process or activity, and use the Internet to locate and network with experts, through mailing lists or e-mail (Vine 1995).
Cost Containment
Many businesses are using the Internet to contain long distance telephone and mailing costs. Recent studies have shown that businesses can save thousands of dollars using e-mail, in lieu of some long distance phone calls and postal deliveries (Vine 1995).
With first class letters costing $ .32 each, a mailing of 1,000 pieces to customers would cost $320 for postage alone, whereas the same information sent by e-mail would cost 2 to 3 cents each--and the messages would arrive in seconds as opposed to days. Overnight mail (which typically costs $8-$12 for each delivery) cannot compete with e-mail for speed or cost.
Collaboration and Development
It is increasingly common for companies to form partnerships and collaborative development efforts--even IBM and Apple have done so (Ellsworth and Ellsworth 1994). The development team and project participants often use the Internet to keep in touch, and to exchange data, programs, and working papers from far-flung locations. The Internet also allows several small businesses to band together much more easily for product development.
Formerly, companies tended to maintain separate projects, or would create a new division or production unit to handle a specific problem. Now, many companies are temporarily pooling resources to put out a new product or service, and are using the Internet to do this through e-mail, group conferencing, and exchange of spreadsheets, documents, drawings, pictures, and sound files. Such groups allow those in marketing, research, engineering, and accounting to keep track of and provide input on a project through every step of its development. This ongoing discussion helps to keep projects on track by insuring that the needs of sales, marketing, accounting, and so on, are included as essential parts of a plan. Such groups also tend to develop enthusiasm and nurture a creative atmosphere.
Information Retrieval and Utilization
Rich in resources, the Internet provides software, communications connections worldwide, and files of text, data, graphs, and images. The Internet provides access to databases, books, manuals, training information, experts in various fields, even sound and video clips.
And much of that information is free. With roughly 2.5 million machines connected to the Internet, with databases, Usenet, Gopher servers, FTP archives, and conferences, the amount of information available is astounding (Fraase 1994).
Scientific and research data is available in large quantities. There are electronic newsletters, searchable databases, online experts--in some cases causing information overload. Some have compared using the Internet to drinking from a fire hose (Ellsworth and Ellsworth 1994).
Marketing and Sales
As businesses use the Internet more, and Internet users become more accustomed to marketing activities, Internet marketing is becoming much more popular. Marketing on the Internet involves both research and active outflow of information.
Marketing research is common on the Internet, where attitudes are tested, conversations actively pursued, and opinions solicited from many groups (Ellsworth and Ellsworth 1994). Marketing plans are increasingly counting on Internet access for success.
One of the prime business uses of the Internet is in the area of customer support. Customers can reach a company on their own schedules--day or night--and obtain information from conferences, FTP, e-mail, and Gopher. The customer support information only has to be transferred to an archive once, and yet it may be accessed by thousands of customers and potential customers--a labor-efficient and cost-effective way of distributing information. In addition, a business with a presence on the Internet is perceived as modern, advanced, and sophisticated.
In these days of a highly competitive global marketplace, the company that can reach and satisfy customers will have an advantage--and the Internet can help in maintaining relationships with customers. The Internet is also a fast and efficient way of networking with vendors and suppliers. With its global reach, the Internet can assist businesses in locating new suppliers and keeping in better touch with them to aid, for example, zero inventory planning. A business might locate and coordinate with suppliers in Taiwan, Norway, and Austin, Texas; and the Internet system in some countries is often more stable than telephone service, which is often less reliable and less convenient.
Maintaining up-to-date postings of a company's product information and prices also allows vendors to have continuous access to the information that is needed in order to promote and sell your products. Small suppliers find that they can compete with larger industries by being easily available via the Internet (Ellsworth and Ellsworth 1994).
In a business where the concept of getting closer to the customer is prevalent, the Internet is becoming increasingly important. Internet-assisted sales, where customers are sought and served online through Gophers and a variety of virtual storefronts, are also becoming more popular. Customers are sought before the sale and supported after the sale.
Customer and product support and technical assistance by way of the Internet is time efficient. Many companies provide e-mail assistance, including both individual and automated replies to e-mail questions and requests for information (Hahn and Stout 1994). Technical sheets, specifications, and support are offered through Gophers and FTP. Relationships with vendors and outlets are maintained via the Internet.
In some cases, companies are doing actual product sales transactions on the Internet. In addition, if the product is amenable to Internet delivery, as with software and information, the actual product is delivered via the Internet. Some companies are arranging product delivery through the Internet, where companies can create and support actual distribution channels.
Transmission of Data
Many companies have been using the Internet for the transmission of data. The major financial institutions in the world use the Internet extensively for exchanging information and files. Publishers are using the Internet to receive manuscripts, and transmit files for printing over the Internet. Books are written and collaboratively edited using the Internet (Fraase 1994).
The Internet protocols allow the exchange of both ASCII and binary information. Binary information includes executable programs (software), program data files (word processing files, spreadsheets, databases, etc.), graphics (pictures, maps, digitized images, CAD/CAM files, etc.), and sound files. The network's backbone can send the equivalent of a 20-volume set of an encyclopedia in just seconds (Ellsworth and Ellsworth 1994).
Research and scientific organizations and educational institutions, the original inhabitants of the Internet, are using the Internet to transmit large quantities of data as well, but corporate users now transfer the largest portion of data (Ellsworth and Ellsworth 1994).
Corporate Presence on the Internet
By creating a corporate presence on the Internet, businesses can participate in all the benefits of online marketing, publicity, and sales. They can use such tools as Gopher, FTP Telnet, e-mail, and Usenet to build a virtual storefront, create catalogs that can be browsed online, announce products, take orders, and get customer feedback. Yet the most interesting and comprehensive of resources available to businesses on the Internet is the World Wide Web. The Web provides businesses and their consumers with all of these tools, accessible through a graphics-based Web-browser. The available Web-browsers vary in name, but their functions are indistinguishable. Web-browsers provide consumers with the information they want at their fingertips, just a click away from a sale.
The World Wide Web
The World Wide Web is seen by some technologists as the key to widespread commercial and civic uses of the Internet, because the Web adds buoys, channel marketers and sea lanes to an otherwise fathomless ocean of information (Lewis 1994).
The World Wide Web, or WWW, is the newest information resource to the Internet (Krol 1992). It is based on the technology called HTML, or hyper-text markup language. Hypertext is a method of presenting information where selected words in the text can be expanded at any time to provide other information about the word. These words are actually links to other documents, which may be text, files, pictures, or sound. The presentation of information on the Web is much more friendly than the older, more traditional methods, and the uniform interface provided by Web-browsers provide for a user-friendly environment (Rudyk 1995). This friendly atmosphere, combined with the ability to use any of the Internet's tools within the hypertext culture, has been the catalyst for businesses to rush to the Internet in record numbers (Ellsworth and Ellsworth 1994).
"Home pages" is the term given to the first page of any organization's premiere hypertext document on the Web. Although there is little evidence that anyone is getting rich yet from this method of marketing, companies are "flocking to the Web in anticipation" (Lewis 1994). Some companies build and maintain their own home pages, while others spend thousands of dollars a month to let experts like CompuServe or O'Reily and Associates create the cyberspace-equivalent of fancy front doors and reception areas (Lewis 1994).
The most publicized attempt to create a new presence on the Web was MecklerWeb, an effort to create a publishing and marketing center. The project was restructured in October of 1994, because after several months of solicitations, Mecklermedia emerged with one and only client, Arthur Andersen consulting firm (Lewis 1994). Yet none of this is keeping the thousands of businesses from running to the Web. Web-browsers are currently free-ware, and this has helped spur some of the Web's growth. While the Internet is doubling in size every year, the Web is doubling every few months (Lewis 1994).
The Web did not exist until 1989, when it was conceived at the European Laboratory for Particle Physics in Geneva (Lewis 1994). The Web was originally a method of distributing text to high-level physicists across the globe. A few years later, the National Center for Supercomputing Applications (NCSA) at the University of Illinois Urbana-Champaign developed the graphics-based browser Mosaic, upon which most browsers are based today. Then the Web took a leap from being a DOS-like, text-based format to a graphical, Windows-like interface (Rudyk 1995). Mosaic, provided free to anyone who wants to download it from the Internet was challenged last year by Jim Clark, ex-Chairman of Silicon Graphics. Clark conducted the commercial equivalent of a midnight raid on the NCSA, and hired the entire development team that built Mosaic to start a company called Netscape (Rudyk 1995). His Web-browser, also called Netscape, is a better Mosaic. The server software costs as much as $5,000, but the client software is free (Lewis 1994). By the summer of 1994, Netscape had captured 18% of the market. But by late 1994, 62% of Internet users were using Netscape. This is the equivalent of a multimillion dollar marketing coup, made possible by the Internet (Rudyk 1995).
Digital Equipment Corporation, which is emerging as a leader in both the development of the Internet and World Wide Web services, maintains more than 100 Web servers for internal use, using them for product brochures, organizational charts, policy handbooks, interactive training tools and links to stock quotes (Lewis 1994). In addition, they have their own public server, and they sponsor several other companies' Web services.
"The Web, by any measure is the Internet's killer application," said Tony Ritkowski, executive director of the Internet Society, a trade group. "No form of electronic communications in history has occurred on the same scale as rapidly as the Web" (Lewis 1994).
The virtual community has strong opinions about how the Internet should be used. To develop and maintain a positive image and customer acceptance, businesses need to be aware of the acceptable uses and customs of the Internet. Since the broadcasting of advertising is restricted on virtually all networks, the only way a marketing plan will work is if the Internet community has a good impression of, and wants to patronize your service.
The Internet is not a mass market--businesses market one on one, group by group, or to temporary groupings and virtual communities (Ellsworth and Ellsworth 1994). Because of its global reach, the Internet is breaking down some of the traditional market segments such as urban and rural, local and global.
"Giving back to the Internet" is an important concept for networkers. The Internet custom is that you can market your goods or services if you return something of genuine value (Ellsworth and Ellsworth 1994). A similar concept, and closer to marketers' MBA backgrounds, is that of "value added" services, again pointing to the idea of an obligation to provide something to the network community. The Internet is a place where valuable information and assistance is routinely given freely. This freely given information accounts for the vast majority of information available on the Internet (Fraase 1994).
There are numerous ways to create a business presence on the Internet. How a business chooses to use the Internet is simply a function of planned business goals, the marketing plan, and the level of market penetration desired.
In The Internet Business Book, Ellsworth and Ellsworth (1994) present the four models for creating a business presence on the Internet that are most common. As companies become familiar with the Internet, they may expand beyond these four basic models, and allocate more resources to market on the Internet (Ellsworth and Ellsworth 1994).
The Billboard model is concerned with the posting of information for others to read and take action on. These are visible, without being too obtrusive. The object is to place a small bit of your information in view without coming on too strong. Usually these notices are for telling others where more complete information is available. The Billboard approach works best for those just starting to use the Internet for business. It is a relatively low-cost strategy that can place your business information in the hands of Internet users. This approach is suitable for those with businesses that are traditionally outside of the Internet, and does not involve offering actual products or services over the network. People usually put notices in the following places:
(Ellsworth and Ellsworth 1994)
The Yellow Pages approach is concerned with providing directory information similar to the telephone yellow pages. Essentially, you create a menu, with each item on the menu pointing toward other sources and providing small bits of information. By providing directory information and a useful service, businesses are "giving back to the Net." This is a middle ground approach. The Yellow Pages approach requires heavier investments of time and money, but it creates a higher profile for the business. This requires some Internet experience, and is for products and services that are ready for Internet promotion, and those with steady Internet access. Common Yellow Pages models are:
(Ellsworth and Ellsworth 1994)
The Brochure approach features the provision of information sheets, brochures, and other informational items. The emphasis here is on the information itself, with only a small amount of promotional material. This is similar to the Yellow Pages approach, but with the added requirement that you maintain a good-sized inventory of useful information pieces. Some of the vehicles for brochures include:
(Ellsworth and Ellsworth 1994)
The Virtual Storefront is a full information service designed to include the marketing of your services and products, and in some cases, to allow online purchasing, customer support, and more. The Virtual Storefront should be approached cautiously. It requires a fairly heavy investment of time and effort. A Storefront can be extremely costly if a business maintains its own dedicated line and site, but it can also be maintained on a rental basis with a full-service Internet provider. The Storefront is particularly suited to businesses that are information-based. It combines some of the activities from all of the other models, but in a more coordinated approach.
(Ellsworth and Ellsworth 1994)
Many regular business marketing activities can be adapted to Internet methods. Below is a chart that rates each of the Internet tools with regard to its usefulness in providing marketing information.
E-mail .sig .plan Lists Gopher FTP News-l WWW WAIS
etters
Communication X X X X X X
Logistics X X X X
Globalization X X X X X X X
Competitive X X X X X X X X
Advantage
Cost X X X X X
Containment
Collaboration X X X X X X X
Information X X X X X X X X X
Marketing/ X X X X X X X X
Sales
Data X X X X X X X
Transfer
Table 4: Internet Tools in Regard to Usefulness in Providing Market Information (Ellsworth and Ellsworth 1994)
Creating a business presence on the Internet is a multi-faceted endeavor. There is obviously much time and effort involved in developing a marketing presence on the Internet. Although it can involve almost every Internet tool, it is often more successful when it is based on a more modest approach.
Using the Internet as an entrepreneurial tool is an audience participation sport--two way communication is the valued and expected norm. Here is an appropriate Internet advertising motto developed by Ellsworth and Ellsworth: "Think Dialog, Not Monologue. Think Information, Not Hype." (Ellsworth and Ellsworth 1994). The Internet encourages interaction, and encourages customers to be providers as well. Before we continue to look at the tools available for Internet business, let us look at how people communicate on the Internet, and how the Internet is different from traditional communications methods.
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In this early phase of commercializing the Internet, there are no clear answers, but several questions (McBride 1994). The main question to be answered is: How do we as marketers best market our products and/or services on the Internet? In order to understand these questions more fully, we might examine some areas of interest:
One of the major challenges posed to these Internet marketers is the method by which they are communicating. In traditional media, the firm(s) provide a message to the medium, which disseminates to a mass market of consumers (Hoffman and Novak 1995).
In the new medium, the consumers and firm(s) can interact with the medium, as in "Net surfing," as well as provide the medium, to the point of setting up their own Internet servers. The most radical departure from traditional marketing environments is that consumers can provide product-related content to the medium. Marketers must reconstruct the function of advertising to reflect this "many-to-many" communication method (Hoffman and Novak 1995).
A poor example of marketing on the Internet is the well-known case of Canter & Siegel, a law firm who chose to use the more conventional business plan of mass marketing for advertising their firm's activities in a green card pool. A green card pool is a government-sponsored lottery to allow immigrants temporary permission to reside in the United States. Canter & Seigel advertised their legal services for this event through several unrelated newsgroups and listservs. This highly untargeted marketing is discouraged on the Internet, and Canter &Seigels's multiple "mailings" resulted in a phenonmenon called "spamming." Spamming is when a message is received multiple times by the same user in an unrelated forum. Netizens staged a full-force revolt against the firm. This agitation should not be attributed to a revolt against advertising on the Net, instead, the frenzy was more likely caused by the use of the traditional model for mass communication, rather than the many-to-many model of communication (Hoffman and Novak 1995). Canter & Siegel's complete disregard for the culture and idiosyncratic communication theory of the Internet demonstrates irresponsible Internet marketing communication.
The NSFNET Backbone services provided an "Acceptable Use Policy" in 1992. Among other elements of the policy, the NSFnet General Principle should be followed when examining responsible Internet communication.
NSFNET Backbone services are provided to support open research and education in and between US research and instructional institutions, plus research arms of for-profit firms when engaged in open scholarly communication and research. Use for other purposes is not acceptable.
...Specifically acceptable uses:...announcements of new products or services for use in research or instruction, but not advertising of any kind.
...Unacceptable uses:...Use for for-profit activities, unless covered by the General Principle or as a specifically acceptable use.
Extensive use for private or personal business.
(Ellsworth and Ellsworth 1994)
Although upon examination the General Principle would seem to discourage marketing on the Internet, clearly these guidelines request the posting of useful information. If the marketing activity provides useful information to the consumer, it should be allowed, much like federal agencies view competitive advertising.
Responsible communication on the Net is characterized by two marketing strategies: (1) the marketing activity should further the development of the medium itself, and (2) the activity should work with consumers to develop a shared understanding of the consumer benefits of the Internet (Hoffman and Novak 1995). As a contribution to the open forum concerning the Internet and commercialization, Ogilvy & Mather Direct, New York, a premiere agency in interactive communications, developed six guidelines for Internet marketing communications. These are excellent strategies to be adhered to as examples of how the many-to-many communication model can be best utilized. O & M suggests that rather than being seen as "rules," these are "guidelines" for responsible participation on the Internet. "Unbridled commercialization will likely crush what is most precious about the Internet" (Nisenholtz 1994).
1. "Intrusive e-mail is not welcome" (Nisenholtz 1994).
No one should receive a message that s/he has not requested. Relevant information may be sent, for example, category information as well as product specific information. However under no circumstances should the consumer be subjected to intrusive and annoying "junk mail."
2. "Internet consumer data is not for resale without the express permission of the user" (Nisenholtz 1994).
This is a matter of privacy, and respect for the sensitive nature of information on the Internet. If someone has requested your product information, it is not acceptable for the marketer to turn around and resell that consumer's behavioral data to another interested marketer. Although this is viewed as ethical in traditional marketing, is it seen as an invasion of privacy at the online level.
3. "Advertising is allowed only in designated newsgroups and listservs" (Nisenholtz 1994).
The most objectionable marketing communication on the Internet is that which is posted to an off-topic newsgroup or listserv. Often these are cross-posted to dozens or hundreds of groups. (Canter & Siegel were so kind as to test this one for all of us!) Worse than not targeting your consumer correctly, these types of postings generate harsh flames, which are extremely negative postings or e-mail messages.
4. "Promotions and direct selling are allowed, but only under full disclosure" (Nisenholtz 1994).
Marketers should be free to offer promotions, but users should be allowed ample opportunity to clearly review all rules, guidelines, and parameters before committing. Shopping via the Internet should be similar to the Direct Marketing Association's guidelines, with special consideration for the unique features of electronic delivery.
5. "Consumer research is allowed with the consumer's full consent" (Nisenholtz 1994).
Although this nearly eliminates blind studies on the Internet, the sensitive nature of electronic privacy issues mandates that respondents should have access to information outlining the uses and implications of participating in the market-research survey.
6. "Internet communications software must never hide concealed functions" (Nisenholtz 1994).
This last point may seem trivial, however several years ago, a commercial online service was accused of using its terminal software to scan user's hard disks for text that appeared to be an address. The program then would collect this data and send the information to the service for use in compiling mailing lists.
Although these guidelines are simply a base line for establishing a responsible marketing presence on the Internet, it is interesting to hear this information echoed by John Scully (Apple), a leader in the technology industries.
The most successful companies are the ones that start not with technology, but with the customer. What I have learned is that the launch of a new technology has almost nothing to do with the adoption of new technology. Just because you can do it and demo it doesn't mean anybody is going to change their behavior.
Peter Druker once said that in order to get someone to fundamentally change their behavior, what you want them to change must be closely related to something they are already doing, so they will recognize it, and about an order of magnitude better that what they were doing before...So people don't change nearly as quickly as technology changes.
...I look at the Internet as a marketing enabler, much like an 800 number...Using the Internet...we are going to be able to revolutionize marketing...That is going to fundamentally change marketing. It will never be the same again. (Coursey 1994)
No doubt marketing on the Internet will be incredibly different from anything we have ever done. Yet the old adage seems to ring true here, and I agree with my predecessors in the meaning of the message, "When in Rome, do as the Romans do." Netizens will be slow to adopt to guerrilla marketing strategies, and so as responsible marketers, we are inclined to do things according to the culture, needs and wants of the consumer. Ah, but isn't that the marketing concept revisited?
Noisy, intrusive, content-free advertising is not welcomed on the Internet as discussed previously. As viewed on the Internet, advertising is intrusive, whereas marketing can be active and can provide valuable information and services as part of its effort to provide those products and services. Businesses must make the paradigm shift from something highly intrusive and image-oriented to something highly content-oriented in order to be successful on the Internet (Ellsworth and Ellsworth 1994).
In Alvin Toffler's book, The Third Wave, published in 1980, Toffler discusses the impact of the global society moving away from an industrial society (second wave) to a society of information (Toffler 1980). In the book, How to Advertise on the Internet, Michael Strangelove draws a comparison of paradigms which seems to summarize what the Third Wave that Toffler spoke about really is, today in this electronic society (Strangelove 1994).
This comparison of paradigms (shown below) is meant to influence marketer's beliefs about how business is conducted on the Internet. It is important to note that this information wave has shifted market power from the hierarchical marketplace to the community. This demands that advertising functions as an information resource (as the Internet community has traditionally been driven), rather than a manipulative, content controlled resource.
DECAYING PARADIGM EMERGING PARADIGM
manufacturer-based wired, digital
economy information-based
economy
MEANS OF
PRODUCTION
centralized and decentralized/public
privatized (the (mind plus networked
factory) computer)
MEANS OF
DISTRIBUTION
physical digital dissemination
transportation through open and
systems distributed networks
(the Internet)
TIME AND PLACE
regimented and not relevant
monitored
MASS COMMUNICATION
uni-directional and omni-directional and
private public
controlled content uncensored
passive audience mulitcasting
elite as censor interactive audience
advertiser sponsor community as censor
user sponsored
POWER
entrenched in the distributed among
marketplace community
hierarchical consensual
ADVERTISING
manipulation through meeting information
controlled content needs of the consumer
Table 5: Strangelove's Paradigm Shift (Strangelove 1994)
This information is essentially the marketing mix (product, price, promotion, and place) with a respect for Toffler's Third Wave, the information wave. In a medium that is traditionally information driven, this is paramount. By shifting the current perceptions of the marketing mix (industry-driven), to these progressive viewpoints (information-driven), marketers can increase the liklihood of effective Internet communication.
Several sources have reported conflicting opinions about the size of the Internet. In August of 1994, Peter Lewis of The New York Times argued that the commonly cited 20 to 30 million Internet users was a gross overestimation (Lewis 1994). He suggested that the actual number was in the low millions.
The discrepancy in numbers is because the numbers use surveys that make fallible assumptions. The current methodology for surveying the Internet involves two steps: 1) estimating the number of computers as nodes, or "hosts," and 2) estimating the number of users for each node. Two of the most commonly cited surveys are John Quarterman's TIC/MIDS Internet Demographic Survey, and Mark Lottor's Internet Domain Survey (Hoffman and Novak 1994).
The number of estimated hosts ranged from 1 to 1.4 million in July of 1994, according to Quarterman (Quarterman 1994). Lottor estimated from 707,000 to 3.2 million hosts (Hoffman and Novak 1994). Estimates of the number of users per host are just as confounding. Quarterman estimated 3.5 users per host, while other use numbers like 5, 7.5, and 10 (Quarterman 1994). Depending on which numbers you choose to use, estimated usership varies between 2.5 and 32 million users. More significantly, both surveys rely on estimating the number of machines, rather than people.
Hoffman and Novak (Hoffman and Novak 1994) recommend that an "Internet Measurement Advisory Panel" be formed to research Internet users and their characteristics. The focus should base the survey upon a theoretical model of Internet usage. For example, adoption process models for new products and services should be applied in order to gain insight and allow the instrument to predict movement through stage levels through time. "-today's e-mail newbie is tomorrow's web surfer" (Hoffman and Novak 1994).
The Internet's capabilities as a communication tool, as well as a marketing tool mandate that a proper study be conducted of this form. Although the Internet has changed dramatically in terms of size and importance, it may not evolve further without careful measurement of its users.
Becoming interactive requires several changes for large advertising agencies. Agencies that specialize in promotional marketing and direct marketing are more likely to be prepared to tackle interactive marketing because of the skills they have built in their specializations (Robinson and Maites 1994). Big advertising agencies do not work the same way as these smaller, more pro-active agencies. The sluggish "business as usual" attitude for larger agencies will make it significantly more difficult for them to make the paradigm shift suggested by Strangelove (Strangelove 1994). Yet in spite of their ambitious efforts, the smaller agencies will also have to make this paradigm shift, which will inevitably require certain thinking skills, some of which are currently used by direct marketing and promotions agencies. These skills, first outlined by Robinson and Maites, are expanded upon below, as skills necessary for marketing communications of the future technologies.
1. They aim to change behavior (Robinson and Maites 1994).
The word is interactive. Active being the key element. Action, not awareness will be the key element of marketing communications on the Internet. Action has been the primary goal of promotion and direct marketing agencies. The techniques that direct marketers use to change behavior will be useful in the interactive medium.
2. They try to satisfy individual needs (Robinson and Maites 1994).
That's the big advantage of interactive communications. In the future, a marketer can run many campaigns, each targeting a specialized set of prospects. The Internet works this way by consumer self-selection. The consumer chooses which message s/he would like to see next. Knowing the consumer well enough to predetermine what that message will be is the key to this skill.
3. They know how to create a dialog (Robinson and Maites 1994).
This was discussed earlier in the mantra set forth by Ellsworth and Ellsworth (1994). Think dialog, not monologue. Direct marketing communications generates response, as interactive technology does as well. Being skilled in starting this dialog is important because the one-on-one relationship with the consumer is vital to interactive communication.
4. They know how to integrate marketing at all levels (Robinson and Maites 1994).
Interactive will turn marketing communications topsy-turvy. Elements that directly drive behavior--direct mail and promotions are extensions. As behavior change replaces simple awareness as the key objective, all those extensions will become the core of the campaign.
5. They know how to make money (Robinson and Maites 1994).
Promotion and direct marketing agencies have always had to base their pay on performance rather than commission. Work accomplished and results generated are the basis of this compensation system, as they will be in the future, Direct marketing firms as well as promotions agencies stand at an advantage for making money since their compensation systems are already in place. Big agencies will have to learn how to make money in interactive.
Although there has been much controversy surrounding the use of the Internet as an advertising medium (Canter & Seigel, and Mecklermedia), advertising agencies have not stopped talking about it since 1992, when the Web became user-friendly. Bob Metcalfe of Infoworld magazine said, "Paid advertising, mostly as we have come to know and love it since the early settlement of Madison Avenue, can save the Internet" (Metcalfe 1994). Although this view is a bit extreme, Metcalfe has some validity to his point. Paid advertising may make the Internet sustainably inexpensive, like television, newspapers, and other traditional media. Advertising on the Internet may also provide practical incentives for attracting the attention of Internet citizens to the information they need. Metcalfe expands this argument by indicating that the Internet is growing rapidly, and he argues, it is outgrowing its quaint netiquette as new users log on (Metcalfe 1994).
If indeed advertising can save the Internet, as Metcalfe argues, where is Madison Avenue in all of this? Slowly, advertising agencies are becoming aware of the Internet as a marketing vehicle. Yet the $138 billion advertising industry seems unprepared for what lies ahead. The ad business is still recovering from the severe recession of the late eighties, and layoffs and cutbacks have left advertising agencies without the resources to invest in interactive technologies (Smith and King 1993). A few of the bigger agencies, including Foote, Cone & Belding Communications Inc., Omnicom Group's DDB Needham, and WPP Group's Ogilvy & Mather, and McCann-Erickson are formally and actively looking into interactive media. But most efforts are small scale and highly theoretical, according to a recent Wall Street Journal article (Smith and King 1993). Interestingly enough, coming late into the information superhighway could be especially dangerous for advertising agencies, which have traditionally held strong stances among the media. Martin Nisenholtz, senior vice president and director of electronic marketing at Ogilvy & Mather is quoted as saying that ad agencies "are going to get killed if they don't wake up soon. It's the largest single case of denial I have ever seen" (Smith and King 1993). It seems that many of the agencies are signing up with online services such as Prodigy and America Online, yet fewer are willing to establish an Internet presence. BBDO New York announced their presence on Compuserve on October 26, 1994 (Elliot 1994). Yet this agency presence was still not an attempt to establish a presence for the purpose of conducting business for clients. Instead, BBDO New York's presence online encouraged subscribers to participate in surveys, read about advertising, enter contests and take part in ad trivia games (Elliot 1994).
Three agencies are to be commended for their commercial presence on the World Wide Web. Chiat/Day, Fallon McElligott, and Poppe Tyson, a division of Bozell, Jacobs, Kenyon & Eckhardt, all have Web sites. Chiat/Day's presence is expected. Jay Chiat brought the virtual office into reality, and Chiat is known for trailblazing in actual commercials such as Apple's 1984 Big Brother Spot (Goldman 1994). The agencies are starting to realize that more consumers are getting their information from the Internet. Walt Guarino, general manager at Poppe Tyson adds, "we want to put clients on it, and if we're not in it, we look dumb" (Goldman 1994).
Research concerning online and Internet application concentrates largely on the consumer's perspective, awareness and attitudes towards interactive media. Unfortunately, there are no formal research studies concerning advertising agencies and their use of online or Internet applications. There have been several trade publications that discuss new media, briefly interview agency people and their intentions, but no data are available for this activity. Agencies seem to have proprietary data that reflect a competitive analysis, but there are no publicly available sources about the results of using these media to promote specific products.
In a recent study by Market Facts Telenation for Advertising Age (Ward 1994), only 31.4% of the 1,000 adults surveyed said they were aware of the term "interactive media"--not necessarily what it means. This is an increase from 19.1% in 1993, but it still reveals that most American adults do not know what interactive media are or how they could improve their lifestyles.
The interactive media concept is more familiar among men (39.9%) than women (25.5%). Not surprisingly, more young adults are aware of the concept than older adults. The study found that 37.7% of all 18-24 year-olds are aware of the term "interactive media" while awareness slips to 23.3% among 55-64 year-olds and 12.2% adults 65 and over (Ward 1994).
Johns S. Quarterman conducted a similar study in late 1993 to develop a temporary demographic profile of Internet users (Quarterman 1994). 4,751 questionnaires were distributed randomly via e-mail, and 662 responses were able to be used. His results strongly resemble those within the demographic section of the Market Facts Telenation study for Advertising Age (Ward 1994).
Quarterman found that people with higher incomes are more likely to be familiar with interactive media. More than 46% of households with incomes $40,000 or more are aware of it, compared with 12.1% of those making $25,000 to $40,000. It is important to notice that the questionnaire was distributed via an electronic medium which could be considered relatively high tech, yet the responses concerning interactive media are relatively low (Quarterman 1994).
The consumer studies that relate directly to attitudes and behaviors on the Internet are of particular interest to both advertising practitioners and consumer researchers. In order to understand the importance of these studies, it is imperative that we examine the hardware available to consumers.
According to a study conducted for The Times Mirror Center for The People The Press (The Richards Group 1994), in 1994, 27% of all American households have a personal computer at home. The number of US adults who use a home computer everyday is only 13%. Recent research on consumer's purchasing plans indicates that it is unlikely that home computer market penetration will break 30% by early 1995 (The Richards Group 1994). This could be bad news for online services who are betting on explosive growth of the home PC market over the next ten years. Advertisers who are investing heavily in broad-appeal interactive communications might be equally disappointed.
Despite all of the online and Internet hype over the past year, The Times Mirror Center for The People The Press reports that only 6% of all American households go online, and less than 1% of all households currently have access to the Internet (The Richards Group 1994).
In terms of acceptability, nearly half of the respondents of the Advertising Age Market Facts survey said advertising on interactive services is not at all acceptable versus a paltry 5.1% who said it's very acceptable. The Market Facts study also revealed that 59.5% of all respondents who said advertising was "not at all acceptable" or "somewhat acceptable" would be more accepting if advertising lowered monthly connection fees. Over 57% of the "not at all" or "somewhat acceptable" respondents said that they would be more accepting if the medium allowed them to choose which advertisements they wanted to see and when. Over 58% were more accepting if advertising allowed them to get more in-depth information from marketers (Ward 1994).
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A study was conducted between October 31, and November 16, 1994, to examine agencies' use of Internet and online applications for marketing. In addition, the perceived effectiveness of these media were examined in relation to the agencies who have clients who are using them.
The contribution of this study is a comprehensive analysis of interactively aware agencies' practices and perceived effectiveness of online and Internet applications of advertising.
Research Question
Therefore, the research question for this study is given: What are the current agency practices and opinions of online and Internet applications as an advertising or marketing vehicle? More specifically, what is the perceived effectiveness of these interactive media?
Methodology
A questionnaire was chosen to measure the agency practices and perceived effectiveness of online and Internet applications as a marketing vehicle. A survey was chosen for the following reasons:
Sampling Method
Respondents were selected nonrandomly from current trade publication interviews. The publications included Advertising Age, The Wall Street Journal, The New York Times, and AdWeek. There are few agencies developing verified and active interests in the interactive forum. It was therefore necessary to find contacts within these publications to reduce the amount of agencies unable to respond to the questionnaire due to a lack of knowledge. Not all of these agencies are participating in online or Internet media, but they are more likely to have investigated and experimented in this area.
Thirty-two respondents were selected. Two respondents were unable to be reached, resulting in a sampling size of thirty, and a response rate of 93.8%. The agencies interviewed are listed below, not for identification, but as a resource for the reader of interactively prominent agencies at the time of study.
Ketchum DDB Needham Fallon McElligot
Communications
The Richards Group Bates USA West FCB Communications
Young and Rubicam BBDO Lintas: Worldwide
Lowe & Partners/SMS Messner, Vetere, Bozell, Jacobs,
(Scali, McCabe, Berger, McNamee, Kenyon and Eckhardt
Sloves) Scmetterer/ Euro
RSCG
McCann-Erickson Goodby, Silverstein Suissa Miller
Worldwide and Partners Advertising, Inc.
Hal Riney and Earle, Palmer, Brown Chiat/Day East
Partners Cos
Ross Roy Wells, Rich, Greene, Modem Media
Communications BDDP Inc.
Leo Burnett Co. The Martin Agency Grey Advertising
J. Walter Thompson SicolaMartin Rives Carlberg
Campbell Mithun Esty GSD & M NW Ayer
Table 6: Agencies determined to be interactively prominent
Research Instrument
A telephone script was developed for use as the research instrument. After a brief introduction of the interviewer and the purpose of the study, a qualifying question based on the respondent's knowledge of their agency's decisions concerning online and Internet applications was asked. Once an appropriate respondent was found, three dichotomous questions about current online practices followed (See Appendix A). If the respondent indicated that any of their clients had advertised online, they were asked an open-ended question to discover which of their clients had used online advertising. Subsequently, they were asked to rate the perceived effectiveness for each brand advertised on a five-item Likert scale ranging from "very effective" to "very ineffective." Lastly these respondents were asked to indicate which online services their agency had used.
Next the respondents were asked if any of their clients had used the Internet for advertising. If they answered yes, they continued by answering which of their clients had use the Internet for advertising. Next they were asked to rate the perceived effectiveness of these brands' use of the Internet, again on a five-item Likert scale ranging from "very effective" to "very ineffective." Then they were asked how clients had used the Internet. This was an open-ended question, as a hidden purpose was to determine agencies familiarity with the Internet's uses for marketing purposes.
Finally questions of a demographic nature were asked. Question 13 was developed to determine the size of the agencies involved in interactive advertising. The next question determines the level at which the respondent is managing and in which department. Next, a level of education was determined. Lastly, the sex of the respondent, which was not asked, was established.
All respondents were offered a copy of the results of this survey, and invited to comment in any manner concerning their opinions and attitudes towards the Internet and online advertising and its research.
Research Procedure
After the determination and development of the research instrument, the survey was tested on ten respondents. The test respondents were agency representatives (3), masters (3) and doctoral (2) candidate graduate students at the University of Texas at Austin, one professor, and one very supportive mother of the researcher.
Actual interviews were conducted by the author as the researcher, between the hours of 7 AM and 7 PM Central Standard Time on the working days of October 31 to November 16, 1994. The time of day varied naturally, as well as the day of week. Respondents' answers were carefully recorded and open-ended questions were recorded verbatim.
Results
Each questionnaire was coded accordingly, with dichotomous variables being assigned numerical values and categorical variable being assigned numerical groupings.
Client listings for usage of online or Internet applications were categorized according to SMRB category listings. (1 - Entertainment, 2 - Food and Service, 3 - Media, 4 - Retail, 5 - Technical/Communications, 6 - Transportation, 7 - Banking services, and 8 - Other) Likert scale items were assigned numerical values one to five with five being the most positive item ("very effective").
Question 11, which dealt with how advertisers have used the Internet (open-ended) was categorized into four groups. Home pages (1), Information/FTP sites (2), Database for clients/customers/salespeople (3), and Newsgroups or Bulletin Board Systems (4).
Billings were later categorized into four categories. Under $5,000,000 (1), $5,000,001 - $1,000,000,000 (2), $1,000,000,001 - $5,000,000,000 (3), and over $5,000,000,001 (4).
Professional titles were divided into the following categories: upper management - Interactive division (1), upper management - media (2), upper management - account services (3), upper management - research (4), middle management - Interactive division (5), middle management - media (6), middle management - account services (7), and middle management - research (8).
Coded results were entered into Microsoft Excel 4.0, and analyzed accordingly. Because the sample is a nonprobability sample, only descriptive statistics may be used to characterize this sample. These results may not be projected onto the population of agencies from which this sample was drawn.
Findings
This section will discuss the specific findings of the research discussed above. Please note that a frequency and means table is listed in Appendix B at the end of this paper for reference.
As mentioned before, there were a total of thirty respondents who agreed to participate, which allowed a respondent rate of 93.8%.
Ninety percent of the participants interviewed responded that their agencies were indeed currently researching online and Internet applications of advertising.
Sixty percent of the agencies interviewed had not developed a separate division to handle the new technologies, and only forty percent had developed a new division. This would lead us to believe that the current roles of account management, research, media planning, and creative are burdened with the extra task and weight of discovering and managing the new technology, or that clients are handling the new technology in-house.
Online Advertising
Sixty-seven percent of the agencies were aware of at least one of their clients who was using or had used an online application for advertising. Of those clients, the categories where their products/services fell were: transportation (31%), retail (24%), food and service (21%), technological/communication (10%), financial services (8%), entertainment (3%) and media (3%).
An overwhelming number of participants indicated that the online advertising media of choice was Prodigy Services. However, many (16%) agencies indicated America Online. Traditionally America Online has not allowed for advertising, but they have allowed for corporate sponsorships of chat room events as well as strategic research. It seems from these results that these agencies are considering sponsorships an advertising communications effort.
Below is a chart of the perceived effectiveness of commercial online advertising for specific product categories.
Average Score (N) Entertainment 5 1 Food & Service 3.63 8 Media 3 1 Retail 4.33 9 Technological/Comm. 4.5 4 Transportation 4.58 12 Financial Services 4.33 3 Other N/A 0
Table 7: Perceived effectiveness for online applications
The entertainment category seemed to score the best for perceived effectiveness. However, with only one client categorized in this manner, this score is not particularly reliable. Transportation scored highest, with twelve clients and a perceived effectiveness that would translate to "very effective." The overall perceived effectiveness of online applications for all categories and all clients was 4.26, which translates to a positively defined: "effective."
Internet Advertising
Surprisingly, an overwhelming seventy-three percent of agency participants were not aware of any of their clients who are using or have used the Internet for advertising. Twenty-seven percent of respondents were aware of clients who have used the Internet for advertising, and these clients fall into three categories. Forty-four percent of clients on the Internet are classified as technological/communication industries. Transportation (33%) and retail (22%) were the other two predominant product and service categories.
The majority of agency respondents were not aware of how their client had used the Internet for advertising (30%). Home pages (20%), databases (20%), and information/FTP sites (20%), were popular methods for marketing activities on the Internet. Newsgroups and bulletin board systems received ten percent of the responses.
In terms of perceived effectiveness, technical products and communications vehicles scored higher (3.75) than transportation (3.33) and retail (3). The score for technological/communications products and services translates to "effective," while transportation and retail translate to a "neutral/don't know" category.
Average Score (N)
Entertainment N/A 0
Food & Service N/A 0
Media N/A 0
Retail 3 2
Technological/Comm. 3.75 4
Transportation 3.33 3
Financial services 4 1
Other N/A 0
Table 8: Perceived effectiveness of Internet applications
In terms of annual billings, the responding agencies were relatively evenly distributed between all four categories. Twenty percent of respondents were from agencies of over $5 billion, twenty-seven percent billed annual expenditures of $1 to $5 billion, seventeen percent billed $5 million to $1 billion, and thirty-six percent were smaller agencies, billing less than $5 million.
The agency representatives spoken with came from several divisions of agency responsibility. Twenty percent of respondents were upper management from the interactive division of their agency. Forty-three percent were upper management from the media division, seventeen percent were middle management from media, and twenty percent were upper management professionals from account service.
Fifty percent of the agency respondents had completed college, thirty percent had attended some graduate school, and twenty percent had completed graduate school.
Summary
Online applications for advertising are perceived to be "very effective," while Internet advertising is dragging behind. Perceived effectiveness for Internet advertising was a "neutral/don't know," indicating that the Internet is still an uncertain medium for advertising. Limitations
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Clients are indeed demanding that their agencies be innovative and find new ways to disseminate messages. This challenge was first publicly articulated by Edwin L. Artzt, chairman of Proctor & Gamble, when he told a convention of ad-agency executives that traditional mass-market ads could be endangered (Artzt 1994).
Likewise, Gerald Levin, CEO of Time Warner, told the same conference of the American Association of Advertising Agencies in White Sulphur Springs, West Virginia that agencies should become more active in the interactive business (McCormack 1994). Levin noticed that while clients who are involved with interactive media are often enthusiastic, "agencies don't always share that enthusiasm" (McCormack 1994).
In a survey of senior executives conducted by Northern Illinois University for Advertising Age (Ward 1994), twenty-eight percent of CEOs said that their agencies were not prepared for the information superhighway and twenty-seven percent said that the were not sure if their agencies were prepared. Marketing managers echoed this sentiment, with twenty-eight percent saying that their agency is ill-prepared, and thirty-one percent unsure (Ward 1994).
Furthermore, an overwhelming forty-seven percent of CEOs do not think that they will need an advertising agency if the superhighway will permit them to talk directly to their consumers. Thirty percent of marketing managers agreed with their CEOs (Ward 1994). Clearly, we need to examine the needs of our clients more closely, as well as the actions and preparedness of our agencies.
Research Question
What are the current client opinions of agency involvement levels for Internet marketing and business activities? Specifically, what issues may be relevant for further study? Three areas were discussed:
Research Methodology
A questionnaire was chosen to measure clients' opinions of agencies' participation in Internet business activities. A questionnaire was chosen for the following reasons:
Sampling Method
Respondents were selected nonrandomly from current Internet World Wide Web marketing sites. Participants in the study ranged from research and development staffers to executives within the marketing department. All of the participants had some sort of responsibility for their corporation's Web site, whether maintenance, design, or strategy. Participants' products and services varied.
Twenty corporations were originally contacted via e-mail. Sixteen corporations responded, resulting in a response rate of 80%. Ten responding corporations qualified and were chosen for participation in the study. A corporation could not qualify unless someone from each of three departments responded to the questionnaire. The three departments requested were: system administrator of the Internet site, marketing and/or sales, and an executive-level decision maker from any department. Who responded to the survey was up to the discretion of the system administrator, but they were encouraged to solicit varying opinions.
The corporations represented are listed below, not for identification, but as a resource to the reader of interactively prominent clients.
QMS, Inc.* Hewlett-Packard* MCI AT&T*
Communications*
Sega* Time Warner Alamo* CWC Consulting
Associates
Viacom Disney* Advanced IBM*
Wireless
Communications
CBS NBC Digital Microsoft*
Equipment
Corporation*
Sony Volvo Dow Jones The New York
Times
Table 9: Interactively prominent clients
* indicates corporation participated in study
Research Instrument
An electronic survey was developed for use as the research instrument. After a brief introduction of the interviewer and the purpose of the study, a qualifying question was asked based on the respondent's knowledge of their corporation's Internet marketing activity. Once an appropriate respondent was found, a dichotomous question was asked concerning whether their advertising agency was involved in their Internet activities, and if so, in what capacity (open-ended). Next the respondents were asked to give their opinions concerning the quality of their agency's involvement, on a scale of one to five, with five representing the best quality involvement. The third question was an inquiry into where the strongest opposition to Internet marketing activities came from (open-ended).
Lastly, questions of a demographic nature were asked. Question four was designed as an open-ended inquiry into the position the respondent holds professionally. Question five is to determine the highest level of education attained by the respondent.
All respondents were offered a copy of the results of this research, and invited to comment in any manner concerning their opinions and attitudes towards Internet business activity as well as their experience in Internet marketing.
Research Procedure
After the determination and development of the research instrument, the survey was tested on nine respondents via electronic mail. The test respondents were all members of a graduate class of Internet Resources and Services at the University of Texas at Austin. The survey was posted to a closed newsgroup, and willing members of the class responded for the test. Actual surveys were sent via e-mail on the evening of February 27, 1995. The e-mail survey to the system administrators of each corporation was copied by the system administrator, and rerouted to an appropriate member of their corporation. Responses were accepted from February 28 to March 20, 1995.
Results
Each questionnaire was qualified and coded accordingly, with dichotomous variables being assigned numerical values (one and two) and open-ended variables being assigned numerical groupings. The first question was coded ones and twos, yes and no respectively. The second question was coded likewise, as a dichotomous response was all that was allowed.
The third question was a bit more complicated. It was open-ended, which allowed for a variety of responses, but all of the responses fell into one of three categories: 1 - agency is aware and supportive, but not specifically active, 2 - strategy development, 3- implementation and execution. The next question was similarly coded, with one representing poor quality involvement, and five representing highest quality involvement. Answers came in precoded, by the respondent. The fourth question concerning the strongest opposition was classified into these four areas: 1 - internal, marketing and/or sales, 2 - internal, upper executive management, 3 - internal, financial departments, 4- external, other.
Titles were coded conveniently according to which member of the corporation the respondent represented: 1 - system administrators or research and development, 2 - marketing or sales, 3 - other executive-level decision-makers.
Lastly, the level of education was categorized and coded accordingly: 1 - some high school or less, 2 - completed high school, 3 - vocational/technical school, 4 - some college or associates degree, 5 - completed college, 6 - some graduate school, 7 - completed graduate school.
Coded results were entered into Microsoft Excel 5.0 and analyzed accordingly. Because the sample is a nonprobability sample, only descriptive statistics may be used to characterize this sample. These results may not be projected onto the population from which the sample was drawn.
Findings
All of the respondents were aware of their corporation's Internet marketing activity. Seven percent of respondents were unsure whether or not their advertising agency was involved in their Internet marketing and business activity. Fifty-seven percent were sure that their agency was involved, and thirty-seven percent responded that their advertising agency was not involved.
Fifty-three percent of respondents said that their advertising agency had some sort of involvement on an executional level. Thirty-five percent responded that their advertising agency was involved in some part of the strategy planning for their marketing efforts on the Internet. Twelve percent of respondents knew that their advertising agency was aware of their Internet activity, yet not active in its implementation. The average score for involvement ratings was 4.06. This translates to a "quality" rating for advertising agencies.
Furthermore, upon examination of cross tabulations, we find that of the agencies that are not actively involved, but supportive of Internet marketing activities, fifty percent scored a rating of "average" quality, and fifty percent scored "high quality" ratings. Of those agencies involved in strategy development, an overwhelming eighty-three percent scored a rating which translates to "quality." The other seventeen percent of strategy developing agencies scored "high quality" ratings. Agencies involved in the actual execution were more evenly distributed through the ratings. Twenty-two percent scored an "average" rating, while thirty-three percent of agencies involved in the execution of Interent activities scored a "quality" rating. Forty-four percent of execution-involved agencies scored a "high quality" rating. Clearly, higher involvement levels increase the relative quality perception of an agency.
Within the specific departments, system administrators seem to have the strongest opinions of the advertising agency's involvement. Upon examining the cross-tabulations, sixty percent of system administrators felt that their advertising agency's involvement deserved a "quality" rating, while forty percent felt their agency deserved a "high quality" rating. Among marketing and other departments, the ratings were evenly distributed, with no preference below an "average" rating.
Twenty percent of respondents indicated that they did not feel any opposition to Internet marketing concepts. Ten percent indicated that the strongest opposition came from marketing and/or sales people, twenty-three percent indicated that the opposition came from higher-level executives, and seventeen said it came from external or other sources. But the strongest opposition was felt by the financial divisions of these corporations. This indicates the need for strong and persuasive numbers that exemplify the benefits of an Internet corporate presence.
When examining the cross-tabulations once again, it is interesting to note that among system administrators and research and developement staffers, thirty percent felt oppostition from the marketing and/or sales department, ten percent felt the opposition form upper-management, and thirty prcent felt the opposition from the finance department. Another thirty percent of system administrators did not feel any opposition to their Internet business activity.
Among marketing professionals, thirty percent of the respondents felt the opposition from the executive level, thirty percent felt it from the finance department, and twenty percent indicated that the opposition came from an external source. Ten percent of respondents did not feel any opposition to their Internet business activity, while ten percent actually felt the opposition from their own department.
The respondents were evenly distributed among the three disciplines, system administration/research and development, marketing and/or sales, and executive decision-making levels. The average education level was "completed college."
Summary
Limitations
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This chapter is divided into three sections. The first section examines the secondary sources reviewed in this thesis, and concludes the status of marketing on the Internet as of April, 1995. The second section summarizes two studies conducted for this project. The third section commissions areas for future research on the rapidly changing topic of marketing on the Internet.
Every facet of conventional marketing strategy is challenged by the evolving communication potential of the Internet. This mandates that companies develop new, or at least revised methods of marketing.
But not only is there no one who understands all of the Internet, there is no one who even understands most of the Internet. The growth of the Internet is overwhelming. Now that most four-year colleges are connected, people are trying to get primary and secondary schools connected, along with local libraries. People who have graduated from college and know what the Internet is good for are talking to their employers about getting corporations connected.
Several sources have reported conflicting findings about the size of the Internet. Two of the most commonly cited surveys are John Quarterman's TIC/MIDS Internet Demographic Survey, and Mark Lottor's Internet Domain Survey. Depending on which numbers you choose to use, the estimated number of users of the Internet varies between 2.5 and 32 million.
The Internet is growing at a staggering rate of about 10 percent per month as more colleges, universities, and businesses come online. In the early 1990's, the network was opened up to a few large commercial sites, and international Internet access is also expanding rapidly. The growth of the Internet can be attributed to several factors, not the least of which is the open availability and affordability of the medium. All of this activity points towards continued growth, networking problems to solve, evolving technologies, and job security for networkers. There are several reasons businesses would be interested in the Internet as a communication vehicle. The Internet: eases communication, corporate logistical concerns, globalizes local businesses; helps to gain and maintain a competitive advantage; aids in cost containment; enhances and assists collaboration and development; promotes information availability; encourages marketing efforts; assists in the transmission of data; and, establishes a corporate presence in the progressive interactive world (Ellsworth and Ellsworth 1994).
The development of the World Wide Web Mosaic browsers has furthered the expansion of Internet technology and use. The presentation of information on the Web is much more friendly than the older, more traditional methods, and the uniform interface provided by Web-browsers have facilitated a user-friendly environment. This friendly atmosphere, combined with the ability to use any of the Internet's tools within the hypertext culture, has been the catalyst for businesses to rush to the Internet in record numbers. Although there is little evidence that anyone is getting rich yet from this method of marketing, companies are flocking to the Web in anticipation of future payoffs. Some companies build and maintain their own home pages, while others spend thousands of dollars a month to let experts like CompuServe or O'Reily and Associates create the cyberspace-equivalent of fancy front doors and reception areas. While the Internet is doubling in size every year, the Web is doubling every few months, making this medium even more attractive to marketers.
The citizens of the Internet have strong opinions about how the Internet should be used. To develop and maintain a positive image and customer acceptance, businesses need to be aware of the acceptable uses and customs of the Internet. Since the broadcasting of advertising is restricted on virtually all networks, the only way marketing on the Net will work is if the Internet community has a good impression of, and wants to patronize your service.
"Giving back to the Internet" is an important concept for prospective Internet marketers. The Internet custom is that you can market your goods or services if you return something of genuine value. A similar concept, and closer to marketers' MBA backgrounds, is that of "value added" services, again pointing to the idea of an obligation to provide something to the network community.
Creating a business presence on the Internet is a multi-faceted endeavor. There is obviously much time and effort involved in developing a marketing presence on the Internet. Although it can involve almost every Internet tool, it is often more successful when it is based on a more modest approach. There are numerous ways to create a business presence on the Internet. How a business chooses to use the Internet is simply a function of many factors including planned business goals, the marketing plan, and the level of market penetration desired.
Using the Internet as an entrepreneurial tool is an audience participation sport--two way communication is the valued and expected norm. The Internet encourages interaction, and encourages customers to be providers of information as well as users. One of the major challenges posed to Internet marketers is the method by which they communicate. In traditional media, the firm(s) provide a message to the medium, which disseminates it to a mass market of consumers. In the new medium, the consumers and firm(s) can interact with the medium, as in "Net surfing," as well as provide the medium, to the point of setting up their own Internet servers. The most radical departure from traditional marketing environments is that consumers can provide product-related content to the medium. Marketers must reconstruct the function of advertising to reflect this "many-to-many" communication method (Hoffman and Novak 1995).
Responsible communication on the Net is characterized by two marketing strategies: (1) the marketing activity should further the development of the medium itself, and (2) the activity should work with consumers to develop a shared understanding of the consumer benefits of the Internet. Netizens will be slow to accept guerrilla marketing strategies, and so knowledgeable marketers are inclined to do things according to the culture, needs and wants of the consumer. As viewed on the Internet, advertising is intrusive, whereas marketing can be active and can provide valuable information and services as part of an effort to provide products and services. Businesses must make the paradigm shift from something highly intrusive and image-oriented to something highly content-oriented in order to be successful on the Internet.
Research concerning online and Internet application concentrates largely on the consumer's perspective, awareness and attitudes towards interactive media. The consumer studies that relate directly to attitudes and behaviors on the Internet are of particular interest to both advertising practitioners and consumer researchers. Unfortunately, there are no formal research studies concerning advertising agencies and their use of online or Internet applications. Most American adults do not know what interactive media are or how they could improve their lifestyles.
The current research does show that the interactive media concept is more familiar among men than women. Not surprisingly, more young adults are aware of the concept than older adults. Quarterman (1994) found that people with higher incomes are more likely to be familiar with interactive media.
The agency study performed as a part of the present research revealed that the majority of agencies are currently researching online and Internet applications of advertising. A minority of the agencies interviewed had developed a separate division to handle the new technologies. This would lead us to believe that the current roles of account management, research, media planning, and creative are burdened with the extra task and weight of discovering and managing the new technology, or that clients are handling the new technology in-house.
Surprisingly, the majority of agency participants were not aware of any of their clients who are using or have used the Internet for advertising. Twenty-seven percent of respondents were aware of clients who have used the Internet for advertising, and these clients fall into three categories. Forty-four percent of clients on the Internet are classified as technological/communication industries. Transportation (33%) and retail (22%) were the other two predominant product and service categories.
Many agency respondents were not aware of how their client had used the Internet for advertising, indicating that a higher level of Internet involvement might be necessary on the part of agency personnel. How advertisers are using the Internet as an advertising vehicle is fragmented. Perhaps this is because advertisers are not as familiar with this "free" medium and all of its possibilities.
In terms of perceived effectiveness, technical products and communications vehicles marketers scored higher than transportation and retail marketers. The score for technological/communications products and services translates to "effective," while transportation and retail translate to a "neutral/don't know" category. Product and service categories are highly fragmented among online advertisers, while highly concentrated in technological and communications fields among Internet advertisers.
Advertising agencies are slowly becoming aware of the Internet as a marketing vehicle. Yet the $138 billion advertising industry seems unprepared for what lies ahead. The ad business is still recovering from the severe recession of the late eighties, and layoffs and cutbacks have left advertising agencies without the resources to invest in interactive technologies. A few of the bigger agencies, including Foote, Cone & Belding Communications Inc., Omnicom Group's DDB Needham, and WPP Group's Ogilvy & Mather, and McCann-Erickson are formally and actively looking into interactive media. Three agencies are to be commended for their commercial presence on the World Wide Web. Chiat/Day, Fallon McElligott, and Poppe Tyson, a division of Bozell, Jacobs, Kenyon & Eckhardt, all have Web sites. The agencies are starting to realize that more consumers are getting their information from the Internet.
Yet becoming interactive requires several changes for large advertising agencies. Agencies that specialize in promotional marketing and direct marketing are more likely to be prepared to tackle interactive marketing because of the skills they have built in their specializations. The sluggish "business as usual" attitude for larger agencies will make it significantly more difficult for them to make the paradigm shift suggested by Strangelove (1994). The smaller agencies will also have to make this paradigm shift, which will inevitably require certain thinking skills, some of which are currently used by direct marketing and promotions agencies.
Although there has been much controversy surrounding the use of the Internet as an advertising medium (Canter & Seigel, and Mecklermedia), advertising agencies have not stopped talking about it since 1992, when the Web became user-friendly. Paid advertising may make the Internet sustainably inexpensive, like television, newspapers, and other traditional media. Advertising on the Internet may also provide practical incentives for attracting the attention of Internet citizens to the information they need. Interestingly enough, coming late into the information superhighway could be especially dangerous for advertising agencies, which have traditionally held strong stances among the media.
Secondary research tells us that clients are indeed demanding that their agencies be innovative and find new and more effective ways to disseminate messages. In a survey of senior executives conducted by Northern Illinois University for Advertising Age (Ward 1994), twenty-eight percent of CEOs said that their agencies were not prepared for the information superhighway and twenty-seven percent said that the were not sure if their agencies were prepared. Furthermore, an overwhelming forty-seven percent of CEOs do not think that they will need an advertising agency if the superhighway will permit them to talk directly to their consumers. Thirty percent of marketing managers agreed with their CEOs (Ward 1994). These shocking findings demand that agencies investigate their clients' needs.
The primary study conducted among clients indicated that all of the respondents were aware of their corporation's Internet marketing activity. The majority of clients were sure that their agency was involved, and thirty-seven percent responded that their advertising agency was not at all involved.
When clients rated the quality of their agencies' Internet involvement on a five point Likert scale, the overall average score translated to a "quality" rating for advertising agencies. A small majority (53%) of respondents said that their advertising agency had some sort or involvement on an executional level. The majority of agencies involved in the actual execution received "average" and "quality" ratings. Evidently, agency execution of Internet marketing efforts is not living up to client expectations. Thirty-five percent of clients indicated that their advertising agency was involved in some part of the strategy planning for their marketing efforts on the Internet. Of those agencies involved in strategy development, the overwhelming majority scored a rating that translates to "quality." The other seventeen percent of strategy developing agencies scored "high quality" ratings, indicating that strategy development is key to clients' contentedness. Twelve percent of respondents knew that their advertising agency was aware of their Internet activity, yet not active in its implementation.
Furthermore, of the agencies that are not actively involved, but supportive of Internet marketing activities, fifty percent scored a rating of "average" quality, and fifty percent scored "high quality" ratings, indicating that clients are not completely of the belief that agencies must be involved in Internet marketing activities. Involvement at the strategy level increases the relative quality perception of an agency.
Within the specific departments, system administrators seem to have the strongest opinions of the advertising agency's involvement. The majority of system administrators felt that their advertising agency's involvement deserved a "quality" rating, while forty percent felt their agency deserved a "high quality" rating. Among marketing and other departments, the ratings were evenly distributed, with no preference below an "average" rating.
Twenty percent of client respondents indicated that they did not feel any opposition to Internet marketing concepts. Ten percent indicated that the strongest opposition came from marketing and/or sales people, twenty-three percent indicated that the opposition came from higher-level executives, and seventeen said it came from external or other sources. But the strongest opposition was felt by the financial divisions of these corporations. This indicates the need for strong and persuasive numbers that exemplify the benefits of a corporate presence on the Internet.
It is noteworthy that among system administrators and research and development staffers, thirty percent felt opposition from the marketing and/or sales department, ten percent felt the opposition form upper-management, and thirty percent felt the opposition from the finance department. Another thirty percent of system administrators did not feel any opposition to their Internet business activity.
Among marketing professionals, thirty percent of the respondents felt the opposition from the executive level, thirty percent felt it from the finance department, and twenty percent indicated that the opposition came from an external source. Ten percent of respondents did not feel any opposition to their Internet business activity, while ten percent of marketing professionals actually felt the opposition from their own department.
Clearly clients expect more from agencies, and agencies are generally unprepared for the challenge. Below are some suggestions for future research which might help to advocate the growth of agency involvement in their clients' marketing activities on the Internet.
There is still a great deal of uncertainty surrounding online and Internet advertising applications. It would be interesting to examine the adoption process of the Internet in parallel with the adoption process of television, as it seems that there are some similar factors. Both media are/were potentially driven by the advertiser's dollar.
Perhaps further examination of the Internet as an advertising vehicle could explore whether advertising's presence would reduce online costs, and if so, would this actually change consumers' attitudes towards online advertisements?
Research concerning agency practices may be an inappropriate avenue to examine in this field. Agencies are highly sensitive to consumer behaviors and attitudes, and now, more than ever, agencies are again re-active to the consumer rather than pro-active. A more useful study will either examine consumer attitudes and practices online, or expand the study of client needs and wants for interactive Internet applications. If possible, this study should be a random sample, therefore representative of the population at certain levels of significance.
In addition, it would be extremely appropriate and timely to examine agencies' organizational structures and their ability to handle the new technology and client needs. Are agencies prepared to handle the strategy development that clients seem to want? Do agencies know enough about the intracacies involved with Internet marketing? This paper should serve as a primer for only a short period of time. Certainly, by the time this thesis is published, it is outdated in terms of the fast-changing Internet world.
Regardless of the future research conducted, it is clear that the Internet will provide a viable and cost-effective method of conducting business. Although there are currently several issues concerning the effective and appropriate use of this medium, it will no doubt become a powerful and intelligent communications vehicle for the future marketing efforts of corporations. Clearly, advertising agencies are expected to perform. They must either catch the marketing information wave or be left to drown. This paper makes a strong argument for "surfing" on the Internet with caution, yet an adventurous spirit. The agency with most information and the skill by which to use it will catch the strongest crest and enjoy the longest ride.
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