Transcript Introduction to the Internet

Introduction to the Internet
Unit Outline
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The Yahoo Story
A Variety of Perspectives
The Internet
The Web
Hierarchy of Effects Explanation
Internet Business Models
The Web and the Economy
The Yahoo Story
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“Jerry’s Guide to the World Wide Web”
Human compiled index
Yahoo! Index
Advertising revenues nearly $100
million
Stock rose from $13 to $172 per share
between April 1996 to July 1998
The Yahoo Story
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Way to go Jerry (Yang) and Dave (Filo)!
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Current Yahoo! Stock price?
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Yahoo!
A Variety of Perspectives
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A technology
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Social space
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Marketing tool
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Information publishing
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Economic, social and business contexts
The Internet
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A network of computers (similar to a
telephone system)
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WWWeb was a “child” of the internet
and the part of the internet that can be
“surfed”
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The child is now larger than the parent
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When people say “internet” usually they
mean WWW
The Internet as Technology
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Bits are the essential building blocks of
digital information
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Takes on a zero or one value
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Grouping bits forms more complex
information
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The Internet is all about moving bits
from place to place
The Internet as Technology (Cont.)
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Speed is important
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Internet is currently too slow
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Video on demand is the holy grail
The Internet as Technology (Cont.)
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WWW was developed to make it easier
for users to exchange bits
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A point and click graphical interface
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Sound, picture and video elements
The Internet as Social Space
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A place where users communicate
– e-mail
– Usenet
– Web
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Chat rooms
Conferencing
Video conferencing
Internet phone
Interactive games
Geocities
The Internet as a Marketing Tool
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The Marketing Concept
– An organization exists to satisfy customer
wants and needs while meeting
organization objectives
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Mass customization of communications
and products is now possible
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Increasingly smaller target markets
– A target market of one!
The Internet as a Marketing Tool (Cont.)
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Used in Marketing for
– Information gathering for planning
– New products
– Digital distribution channel and electronic
storefront
– Promotion that allows for two-way
communication
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50 million users in four years (television
took 13)
The Web
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In 1991 the National Science
Foundation decided to allow commercial
use of the Net
Three stages
– Information publishing
– Transaction-based systems
– Mass customization
The Web - Information Publishing
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Business began with informational
home pages (brochureware)
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Evolved to new product for some
businesses (magazines, newspapers)
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People do research on the WWW
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Selling ads and sponsorships supports
the content
The Web - Information Publishing (Cont.)
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Portals
– Entry points to the web
– Index and retrieve information from other
content providers
– Largest is Yahoo!
The Web - Transaction-Based Systems
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Allows firms to communicate and sell
online
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More difficult (and expensive)
– Online storefronts
– Business to business commerce
The Web - Transaction-Based Systems (Cont.)
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Web page must link to backend
computer systems to validate and
manage transactions and inventories
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Backend because the user never
interacts with them directly
The Web - Mass Customization
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Mass Customization
– Creating systems that can personalize
messages to a target audience of one.
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Two kinds - automatic and manual
The Web - Mass Customization (Cont.)
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Automatic customization
– Software tailors content to user based on
info about user’s historical surfing behavior
– Example is Amazon.com
– Ethically controversial
– What is the benefit delivered?
The Web - Mass Customization (Cont.)
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Manual customization
– Relies on explicit instructions from user
– Common in the news delivery service
– Example is CNN Interactive
Lavidge & Steiner’s
Hierarchy of Effects Model
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Awareness (think)
Knowledge (think)
Liking (feel)
Preference (feel)
Conviction (do)
Purchase (do)
What is Involvement?
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The extent to which something is
somehow important to the consumer
Driven by risk
– Financial
– Social
– Performance
– Psychological
Impact of Involvement
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The greater the level of involvement, the
greater the
– time spent in search
– effort expended in search
Hierarchy of Effects Explanation
High Involvement
Awareness
Cognitive (think)
Knowledge
Liking
Affective (feel)
Preference
Conviction
Purchase
Conotive (do)
Hierarchy of Effects Explanation
Low Involvement
Awareness
Cognitive (think)
Knowledge
(low levels)
Purchase
Conative (do)
Conviction
Liking
Preference
Affective (feel)
Internet Business Models
Hierarchy of Effects
Cognitive and Attitude
Transactive Behavior
(Revenue Generating)
Business Model
Stakeholder communication
Branding
lead generation
Customer service
E-mail databases
Sell product
Electronic publishing
Sell Content
Sell ads
Agent services
Internet Business Models
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Stakeholder Communications
– information about the company and its
brands (www.mcdonalds.com)
– stockholders, consumers, employees,
suppliers, media, government are all
stakeholders
– When the web site is stricly informational,
this is brochureware
Internet Business Models
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Branding
– Selecting a brand name and/or mark and
supporting with marketing communication
– Object is to build brand equity - brand
advertising
– Internet has not been strong, but predicted
growth - what do you think?
Internet Business Models
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Sales promotions
– Build short-term sales
• Coupons (J. Crew)
• Sampling (Hallmark)
Internet Business Models
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Lead generation
– Company uses e-mail or its web site to
gather names of potential customers
(HermanMiller)
Internet Business Models
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Customer Service
– Information for customers (Rollerblade)
– Feedback mechanisms for communication
with customers
• e-mail - and databases, avoid spam
• Customer satisfaction surveys
Internet Business Models
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Sell Product
– Online transactions
– Largest segment business to business
markets (about 2/3s of all dollars) but
– Consumer transactions growing
Internet Business Models
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Electronic Publishing
– A subset of selling products
– Media create online versions of product
and either
• 1) charge a subscription rate and/or
• 2) sell advertising space
• New York Times
Internet Business Models
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Agent Services
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Firm acts as middleman but never takes
posession
– Aggregators (advertising, travel, commodities)
(Travelocity)
– Intermediaries (searching for lowest prices)
– Syndicated selling (commisions to other web sites
for customer referrals) (Amazon)
Internet Business Models
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Agent Services
– Be aware that the internet is a global
medium!
The Web and the Economy
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Real cost of a product is the nominal
cost + search costs (Stigler)
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The cost of information is decreasing
radically as a result of information on
the web
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How does cheaper information lead to
greater wealth?
The Web and the Economy
Internet Stocks are Up!
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Internet stocks are up (with some recent
- late spring 1999 - fluctuations)
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This, despite the fact that most inernet
companies are NOT making money
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Stock trading online is big
The Web and the Economy
New Media Revenues
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New media industry
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“combines elements of computing technology,
telecommunications, and content to creaate products
and services which can be used interactively by
consumers and business users” (Coopers & Lybrand
1977, p.16)
The Web and the Economy
Reduced Inflation
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Commerce Department believes digital
technology has helped keep inflation in
check (from 3.1% down to 2%)
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Conflict between lower cost of
information and bidding up of goods and
services?
The Web and the Economy
Efficiency and Effectiveness
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Efficiency: minimized input to output
ratio
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Effectiveness: making the right choices
in order to maximize the company’s
competitive advantage
The Web and the Economy
Gains to Efficiency
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Purchasing
– automation, lower costs, downward price
pressures through online bidding
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Inventory management
– JIT and electronic ordering, reduced inventory
holding costs
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Cycle times (new product development)
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Customer service (cost shifting?)
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Sales and marketing
The Web and the Economy
Gains to Effectiveness
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Purchasing
– locating hard-to-find components
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Inventory management
– Incorporate latest technology
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Cycle times (new product development)
– Respond quickly to changes in the marketplace
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Customer service
– Greater satisfaction, likelihood of repeat purchase
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Sales and marketing
– Superior service, greater customer satisfaction
The Web and the Economy
Jobs
– New media payrolls increased to $2.73 BILLION
by mid 1997
– Number of new media companies grew by 16%
and the number of employees grew by 31%
– Marketing and sales positions in new media have
quintupled during the 18 months ending in mid1997
– 31% of new media managers own equity in the
business
– New media companies represent the largest and
fastest growing U.S. Industry sector in 20 years