E-commerce

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"Internet" first became a household word in the mid-1990s. The vast access to information on the Internet spawned myriad marketing strategies. As new Web sites proliferated, so-called "dot-com marketers" faced the formidable challenge of cutting through the clutter. Beginning in the 1990s, the term "dot-com" came to be used to refer to any kind of commercial Web site. (The term derives from the ".com" suffix that forms the last part of the Web address for most U.S. Internet-based commercial entities.)

The rapid rise of the Web as a commercial medium since 1991 can be attributed to three factors. First, content and commerce are more closely integrated on the Web than in other forms of advertising; users can view almost any product and be a "click" away from buying it. Second, the advent of portable computers in the 1990s made the reading of online content more convenient than it had been previously. Finally, most Web content is free, and global Internet advertising companies support this via a variety of strategies, ranging from direct e-mail marketing to personalized promotions.

Strategies

Advertising and marketing strategies for e-commerce can be divided into eight areas:

  • Designing and writing ads for "virtual storefronts," such as Sears, Roebuck & Co.'s Lands' End Web site (www.landsend.com), that have online catalogs and are sometimes gathered into a "virtual mall," such as those at Yahoo! (www.yahoo.com), a portal, and Amazon.com, an online store that also serves as a storefront for many online and traditional retailers.

  • Gathering and using demographic data obtained from Web contacts or from such services as comScore Media Metrix (www.comscore.com) and VNU-controlled Nielsen/NetRatings (www.netratings.com).

  • Using online information services such as the electronic data interchange for the business-to-business exchange of data, as documented by Washington Publishing Co. (www.wpc-edi.com).

  • Attracting public attention to a product or business with e-mail, faxes and online media to reach prospects and communicate with established customers, as documented in Jupitermedia Corp.’s ecommerce-guide.com (ecommerce.internet.com).

  • Promoting business-to-business buying and selling, as outlined by the Interactive Advertising Bureau (www.iab.net).

  • Ensuring the security of business transactions, as documented by the U.S. Commerce Department's Computer Security Resource Center (csrc.ncsl.nist.gov).

  • Building relationships with valued customers, providing quality customer service and support, building brand loyalty and offering free information and services to attract and keep new customers.

  • Customizing ad content according to the audience. Since Web sites cross national boundaries, global consumer companies such as Levi Strauss & Co. (www.us.levi.com) and Yahoo! (www.yahoo.com) feature Internet ad content attuned to verbal nuances and cultural differences or that may be offered in different languages.

Super Bowl advertising

The 2000 Super Bowl was nicknamed the "dot-com bowl" because of the high number of Web-based companies—17—each of which paid an average of $2.2 million for a 30-second spot to reach the estimated 160 million-plus viewers. Fourteen of those had not advertised on the previous year's telecast and, with so many debuting e-companies seeking to advertise in 2000, the cost of advertising increased 38% and was predicted to continue to increase. Predicting the future, however, can be risky; following the crash of e-commerce in 2000 and 2001, the 2002 Super Bowl saw average prices for a 30-second spot drop to $1.9 million.

Driven by the desire to go public, dot-com advertisers were more interested in getting noticed immediately and bringing traffic to their sites than in building a brand. In addition, some may have been less concerned with generating consumer interest than attracting investors.

Between 1998 and 2000, it became nearly impossible to watch prime-time TV or thumb through a major magazine and not see a dot-com ad. Internet ad expenditures for TV (including network, spot, syndication and cable) in the first half of 1999 exceeded $398 million, compared to $323 million in 1998 and $173 million in 1997.

By the end of 1999, total revenue for the U.S. TV industry from online and Internet services was estimated at $1 billion, according to the Television Bureau of Advertising, the local TV stations' association for ad issues.

Building brands

Gaining credibility and establishing trust are central to online business strategies. To this end, in the late 1990s many dot-com companies were investing roughly 70% of their ad budgets in traditional media, recognizing that those media were more effective than online advertising for the purposes of branding and name recognition.

A 1998 Forrester study of consumer confidence in advertising found that consumers considered online ads to be the least trustworthy of all forms of advertising (with direct mail the next most suspect). From the outset, therefore, any new company using the Internet as an ad medium faced the serious challenge of establishing its credibility—a task made all the more difficult after the collapse of the Internet economy.

For all the new money the dot-com companies brought to the ad market in the late 1990s, a number of ad agencies did not find this new kind of client easy to work with. As many of the young dot-com entrepreneurs came to traditional ad agencies seeking help in building their brands, it became clear that there was a considerable contrast in cultures between the new world of the start-up Internet companies and the old world of the agencies.

Over decades in business, ad agencies had evolved practices that placed a high value on long-term agency-client relationships, a sense of partnership and structured methods of evaluating and reviewing ad strategies. Those practices grew out of doing business for many years with established marketers that were risk averse and preferred methodical decision-making.

The typical dot-com company, on the other hand, was often driven by a spirit of pioneering innovation, and its management was more likely to be averse to precedents and restrictions than to risk.

As a consequence, the number of top agencies resigning the business of dot-com clients was unusually high. Goodby, Silverstein & Partners, agency for online drug retailer PlanetRx.com, resigned the account after a few months in 1999. The marketer had demanded an immediate campaign but could not make basic decisions on goals. When it brought in another agency to undertake a separate project, Goodby resigned.

On the other hand, many agency people were excited by the prospects of being in the vanguard of a dot-com start-up company and left agency positions to do so. By the end of 2000, however, significant numbers were finding the instability of the e-business atmosphere chaotic and trying to return to the relatively stable atmosphere of their old agencies, many unsuccessfully as the "dot-bomb" fallout left many agencies retrenching rather than hiring.

"Clicks and mortar"

Powerful technology-based marketing, aggressive advertising and a wide consumer base created e-commerce successes such as eBay (www.ebay.com) and Amazon.com. In their efforts to harness the full power of the Internet for promotional, advertising and selling endeavors, marketers adopted technological innovations that replaced mundane tasks once routinely handled by a labor-intensive sales staff, thereby streamlining business operations.

Taking a cue from e-commerce "purebreds" such as Amazon.com, most bricks-and-mortar companies adopted the strategy of "clicks and mortar"—the common-sense melding of everything that is fast, seamless and slick in e-commerce with traditional services and distribution. However, dot-coms and traditional retail stores did not always mix well.

There were some exceptions. Financial services firm Charles Schwab & Co., for example, merged its independent e.Schwab division into the parent company because its subscribers also wanted access to Schwab's high level of conventional advice and services.

E-commerce shopping revenues soared with the Christmas 2003 season, reaching $18.5 billion, up 35% over the 2002 holidays, according to a report from Goldman, Sachs & Co., Harris Interactive and VNU-controlled Nielsen/NetRatings.

But more was in store, for e-commerce by 2004 had grown into a routine for many Web users. "E-commerce," an early Internet term, seemed too limited to fully describe the activity. Consumers, in spare minutes at the office or on a fast broadband connection at home, might click to do their banking, research a car purchase, browse at Amazon, download music from Apple Computer’s iTunes (www.apple.com/itunes), price a Dell made-to-order PC (www.dell.com), plan a trip at Expedia (www.expedia.com) or print out an airline boarding pass at JetBlue (www.jetblue.com). It no longer was e-commerce; it was business as usual.

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