MARKETING, INTERNET

Internet marketing is the practice of using the Internet as a medium for a marketing campaign. An Internet marketing campaign can involve several different types of advertisements, including the banner bars that formed of core of online advertising efforts in the late 1990s, a newsletter distributed via e-mail, an interactive pop-up window, links to one World Wide Web site from another, and a Web site itself. Internet marketing efforts can be designed to push direct sales, build or solidify a brand, encourage repeat business, and garner customer information. Quite often, the Internet is just one of several mediums—including television, radio, and print—that companies use in their marketing campaigns.

HISTORY OF INTERNET MARKETING

Spending on Internet advertising in 1996 totaled $301 million in the U.S. While significant compared to the zero dollars spent in 1994, the figure paled in comparison to the $175 billion spent on traditional advertising as a whole that year. As the number of Internet surfers continued to rise, however, interest in the Internet as a mass-media vehicle increased. Online advertising grew to an industry worth nearly $1 billion in 1997. The Internet became increasingly popular in the late 1990s, and the viability of the Internet as a marketing medium emerged as more than mere speculation. Millions of surfers logged on to the Web each day, and many businesses were determined to reach this new audience. Web sites emerged for companies in nearly every industry, ranging from household cleaning products and cosmetics to electronics and automobiles. At the same time, many firms realized that simply creating a Web site wasn't enough to create a solid Internet presence; they also needed to drive traffic either to their sites or to their specific advertisements.

For example, drug company Bristol-Myers Squibb Co. launched an Internet marketing campaign designed to build brand awareness for Excedrin. For 30 days during the 1997 tax season, the firm proclaimed Excedrin to be the "tax headache medicine" on a variety of financial Web sites. To entice surfers to click on the advertisement, Bristol-Myers offered a free sample of Excedrin to anyone who entered their name and address. According to Business Week writer Linda Himelstein, "The response was as good as any elixir. In just one month, Bristol-Myers added 30,000 new names to its customer list—some 1,000 per day and triple the company's best-case scenario. What's more, the cost of obtaining those names was only half that of traditional marketing methods."

Hoping for similar results, many traditional firms began incorporating the Internet into their existing marketing plans. Even technology industry giants like IBM Corp. and Microsoft Corp. began dumping millions of dollars into Internet marketing efforts. Many smaller firms, including Internet upstarts, turned to highly trafficked sites like Internet portal Yahoo!, paying for advertisements such as banner bars. In fact, Yahoo! was one of the few Internet-based firms actually able to earn a profit from online advertising. By developing technology that allowed it to track a visitor's online activity and control what banner bars and button ads that visitor saw, Yahoo! was able to target its messages in a manner never before seen by the marketing industry. Yahoo! could also monitor the number of hits each advertisement received as a means of evaluating an ad's effectiveness. This innovative technology, coupled with the site's intense traffic levels, attracted dot.com upstarts hoping to reach as many Internet users as possible.

However, like most other ventures reliant on dotcom businesses, Yahoo! saw its customer base dwindle when the U.S. economy began to cool in 2000 and many dot.com firms were forced to tighten advertising budgets as they fought to stay afloat. Making matters worse, many industry analysts began to argue that online advertisements like banner bars were simply ineffective more often than not. Despite the dot.com fallout, though, the $8.2 billion online advertising industry did not disappear. The fact remained that millions of people were surfing the Internet on a regular basis, and businesses were not willing to turn a blind eye to this mass market.

INTERNET MARKETING IN THE TWENTY-FIRST CENTURY

Although banner bars had fallen out of favor by the 21st century, many other forms of online advertising were playing an increased role in the marketing plans of various companies. For example, many businesses began to use online newsletters, transmitted via e-mail, to communicate new product developments to existing customers, solidify brand awareness, and announce special promotions. Some even began to sell advertising in their newsletters. According to a 2001 study conducted by Opt-in News, one out of three online newsletter publishers use the newsletter to generate advertising revenue. In many cases, according to Forrester Research, advertising in online newsletters is more effective than placing a banner ad on a Web site; a Forrester study revealed that advertisements in e-mail newsletters had an average response rate of 18 percent in 2000, versus a banner ad click through rate—the number of times someone clicks on an ad—of less than one percent. Michele Slack, an advertising executive for Jupiter Research, stated in a March 2000 CNET News article, "online players either have e-mail newsletters or are going to have them, and it's partially driven by competition. Newsletters are a way to lock in your consumers and remind them on a periodic basis of the value you provide."

Some firms began taking advantage of high-speed Internet connections to create things like short films to advertise their goods. For example, BMW spent millions of dollars to create a series of five-minute films available exclusively at BMW-films.com. The marketing campaign targeted men with incomes of more than $75,000, the same demographic that makes up the majority of individuals with high-speed access to the Internet. BMW advertised the films in magazines, movie theaters, and television. In June of 2001, roughly 1.1 million browsers paid a visit to BMWfilms.com.

Despite successes like those realized by BMW, the six largest advertising firms in the U.S. spent less than one percent of their budgets on Internet marketing in 2000. The reason for this, according to a July 2001 article in BusinessWeek Online, is that "the Web is still a developing medium, with no firmly established standards for either presenting advertising or measuring its effectiveness." The traditional firms who did begin to focus on the Internet, like BMW, focused "on ways to reinvent Web advertising in the image of its offline cousins—complete with more sophisticated presentation and broader standards for measuring success." In mid-2001, many traditional marketing firms began purchasing online advertising ventures, which they could acquire for rock bottom prices thanks to the dot.com meltdown. For example, European giant Havas Advertising acquired Circle.com, an interactive advertising agency based in Baltimore, Maryland.

Many established brick-and-mortar firms like General Motors Corp. came to see the Internet as one medium among many. For example, rather than simply deciding to use the Internet as a marketing tool, marketing executives at General Motors first identify the objectives of the marketing campaign in question. If the audience they are trying to reach is present on the Internet, they then decide which medium is going to play a major role, and which mediums will play supporting roles. In some cases, print and television ads might be used to market a campaign that is primarily online. In other cases, the Web might be used to supplement a television or print campaign, or an event of some sort. Typically, the automaker uses print and television when the marketing goal is building a brand; however, the firm believes the Internet is particularly valuable for the generation of leads. For example, General Motors can use the Web to send new vehicle launch information to anyone who is interested in a new car, essentially including those individuals in the launch campaign.

Despite the negative press regarding banner advertisements in recent years, General Motors opted for a banner advertisement to generate general interest in the Vibe, a new vehicle under production in 2001. Targeting the young individuals it hopes will be interested in the Vibe, General Motors is allowing Web surfers who click on its banner ad to suggest color names for the various hues in which the car will be available. According to GM's director of interactive marketing, as quoted in a September 2001 issue of E-Commerce Times, "We thought, why should we come up with funky names for colors that we think people will like? Why not just ask them and build a contest around it? Then, we had our objective, and the Web was the obvious channel to accomplish this."

Enterprise resource planning software vendor PeopleSoft Inc. also views the Internet as one of many tools at the disposal of marketing professionals. The firm's marketing staff selects its target audience before deciding which medium to use. While it doesn't believe the Internet is well suited to creating initial brand awareness, it does use the medium to support existing brands, as well as to generate sales leads and determine interest levels. The firm enjoyed success with e-mail newsletters, believing that the key to success with this type of advertisement is ensuring the newsletters are mailed to the appropriate customers or potential customers. Also important is the inclusion of a specific offer in each newsletter, as well as a link allowing newsletter readers to instantly connect to the site.

Software giant Oracle Corp. believes Internet marketing has reduced its overall marketing expenditures. According to chief marketing officer Mark Jarvis, as quoted in a November 2001 article in E-Commerce Times, "You can do a great deal of marketing on the Internet without spending a dime. You put up a Web site with good content on it and customers will come, they'll register, and you can generate leads for your sales force without ever having to do outbound marketing." While some analysts might also attribute this success to Oracle's established product base and technologically savvy clients, the fact remains that the Internet has allowed Oracle to reduce its annual marketing expenses from $500 million in 1997 to $300 million in 2001. One way the firm has done this is by replacing direct mailing advertisements—which involve paper, printing, and postage costs—with e-mails. The firm sends roughly 100,000 marketing e-mails each day. While it continues to use print and television advertisements to create brand awareness, many of its lead generation activities revolve around the Internet. For example, Oracle uses banner ads that offer free software or a free information package in response to information like a visitor's name and email address. Referring to Internet marketing as "completely unchartered territory," Jarvis believes most companies are better off using their own experience to determine how the Internet can best serve them as a marketing medium.

The success of future Internet marketing efforts may well depend on the industry's ability to develop credible methods for measuring the success of online marketing campaigns. As the number of Internet users continues to rise, though, efforts to target those users are likely to grow with or without tools for measuring impact. Forrester Research predicts that by 2005, Internet marketing will be worth $42 billion, or 9.5 percent of total marketing expenditures.