Internet marketing
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Internet marketing is the use of the Internet to advertise and sell goods and services. Internet Marketing includes pay per click advertising, banner ads, e-mail marketing, affiliate marketing, interactive advertising, search engine marketing (including search engine optimization), blog marketing, article marketing, and blogging.
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[edit] Definition and scope
Internet marketing is a component of electronic commerce. Internet marketing can sometimes include information management, public relations, customer service, and sales. Electronic commerce and Internet marketing have become popular as Internet access is becoming more widely available and used. Well over one third of consumers who have Internet access in their homes report using the Internet to make purchases.(Devang, 2007)
[edit] History
Internet marketing first began in the early 1990s as simple, text-based websites that offered product information. Over time Internet marketing evolved into more than just selling information products, there are people now selling advertising space, software programs, business models, and many other products and services. Companies like Google, Yahoo, and MSN have leveled the playing field of internet advertising. By offering local advertising to small to medium sized businesses, ROI has grown while the bottom line has been lowered. This type of marketing is the backbone of modern capitalism, allowing anyone with an idea,product or service to reach the widest audience possible. The next evolutionary step would be to refine the consumer search to those consumers specifically searching for your product or service, and entice them with catchy tag lines and promotions. Once the consumer has chosen your company, and entered your e-store, the design of your website will determine the online to offline or e-commerce conversion rates. These are what business owners covet, the lowest cost per lead.
To clarify, while internet marketing can cover any facet of online marketing as described above, current use of the term internet marketing commonly refers to the use of direct response marketing strategies, that were traditionally used in direct mail, radio, and TV infomericals, applied to the internet business space.
These methods have been found to be particularly useful on the internet due to its tracking capabilities coupled with the ability to instantly reach the prospect, whether it be B2B or Business to consumer. This ability for careful anaylsis has become quite common now, which is why you will commonly see terms such as ROI, conversion rate, and sales letter commonly come up when discussing internet marketing.
[edit] Business models
Internet marketing is associated with several business models. The main models include business-to-business (B2B) and business-to-consumer (B2C). B2B consists of companies doing business with each other, whereas B2C involves selling directly to the end consumer (see Malala, 2003)[1] When Internet marketing first began, the B2C model was first to emerge. B2B transactions were more complex and came about later. A third, less common business model is peer-to-peer (P2P), where individuals exchange goods between themselves. An example of P2P is Kazaa, which is built upon individuals sharing files.
Internet marketing can also be seen in various formats. One version is name-your-price (e.g. Priceline.com). With this format, customers are able to state what price range they wish to spend and then select from items at that price range. With find-the-best-price websites (e.g. Hotwire.com), Internet users can search for the lowest prices on items. A final format is online auctions (e.g. Ebay.com) where buyers bid on listed items.
It should be noted, however; as described above, under history, that current use of the term internet marketing commonly refers to the use of direct response marketing strategies, that were traditionally used in direct mail, radio, and TV infomercials, applied to the internet business space. When professionals and entrepreneurs commonly refer to "internet marketing" it is this model that they are often referring to. ....The theory was that broadcaster would begin transmitting digital signal in this new band and then the analog signal would be discontinued when consumer penetration of the new technology was deemed sufficient...
[edit] Benefits
Some of the benefits associated with Internet marketing include the availability of information. Consumers can log onto the Internet and learn about products, as well as purchase them, at any hour. Companies that use Internet marketing can also save money because of a reduced need for a sales force. Overall, Internet marketing can help expand from a local market to both national and international marketplaces. And, in a way, it levels the playing field for big and small players. Unlike traditional marketing media (like print, radio and TV), entry into the realm of Internet marketing can be a lot less expensive.
Furthermore, since exposure, response and overall efficiency of digital media is much easier to track than that of traditional "offline" media, Internet marketing offers a greater sense of accountability for advertisers.
Compared to the other media marketing(like print, radio and TV), Internet marketing is growing very fast. It's also gaining popularity among small businesses and even consumers when trying to monetize their blog or website. The measurability of the internet as a media makes it easier to experience innovative e-marketing tactics that will prove a better Cost of Acquisition than other media. However, in most developed countries, internet marketing and advertising spending is around 5% only, while TV, radio, and the print are more.
[edit] Limitations
Limitations of Internet marketing create problems for both companies and consumers. Slow Internet connections can cause difficulties. If companies build overly large or complicated web pages, Internet users may struggle to download the information. Internet marketing does not allow shoppers to touch, smell, taste or try-on tangible goods before making an online purchase. Some e-commerce vendors have implemented liberal return policies to reassure customers. Germany for example introduced a law in 2000 (Fernabsatzgesetz - later incorporated into the BGB), that allows any buyer of a new product over the internet to return the product on a no-questions-asked basis and get a full return. This is one of the main reasons why in Germany internet shopping became so popular. Another limiting factor, particularly with respect to actual buying and selling, is the adequate development (or lack thereof) of electronic payment methods like e-checks, credit cards, etc.
[edit] Security concerns
For both companies and consumers that participate in online business, security concerns are very important. Many consumers are hesitant to buy items over the Internet because they do not trust that their personal information will remain private. Recently, some companies that do business online have been caught giving away or selling information about their customers. Several of these companies have guarantees on their websites, claiming customer information will be private. By selling customer information, these companies are breaking their own, publicized policy. Some companies that buy customer information offer the option for individuals to have their information removed from the database (known as opting out). However, many customers are unaware that their information is being shared and are unable to stop the transfer of their information between companies.
Security concerns are of great importance and online companies have been working hard to create solutions. Encryption is one of the main methods for dealing with privacy and security concerns on the Internet. Encryption is defined as the conversion of data into a form called a cipher. This cipher cannot be easily intercepted unless an individual is authorized by the program or company that completed the encryption. In general, the stronger the cipher, the better protected the data is. However, the stronger the cipher, the more expensive encryption becomes.
[edit] Effects on industries
Internet marketing has had a large impact on several industries including music, banking, and flea markets - not to mention the advertising industry itself.
In the music industry, many consumers have begun buying and downloading MP3s over the Internet instead of simply buying CDs. The debate over the legality of duplicating MP3s has become a major concern for those in the music industry.
Internet marketing has also affected the banking industry. More and more banks are offering the ability to perform banking tasks online. Online banking is believed to appeal to customers because it is more convenient than visiting bank branches. Currently, over 50 million U.S. adults now bank online. Online banking is now the fastest-growing Internet activity. The increasing speed of Internet connections is the main reason for the fast-growth. Of those individuals who use the Internet, 44% now perform banking activities over the Internet.
As Internet auctions have gained popularity, flea markets are struggling. Unique items that could previously be found at flea markets are being sold on Ebay.com instead. Ebay.com has also affected the prices in the industry. Buyers and sellers often look at prices on the website before going to flea markets and the Ebay.com price often becomes what the item is sold for. More and more flea market sellers are putting their items up for sale online and running their business out of their homes.
The effect on the Ad industry itself has been profound. In just a few years, online advertising has grown to be worth tens of billions of dollars annually. [2][3][4] As Advertisers increase and shift more of their budgets online, it is now overtaking radio in terms of market share.[5]
[edit] Recent issues
In November 2004, a lawsuit was filed against Bonzi Buddy software. The lawsuit alleged that Bonzi's banner ads were deceptive. These ads often looked like Microsoft Windows message boxes. Internet users would run across the ads and when they attempted to close the boxes, they found themselves redirected to a website determined by Bonzi.
On May 27, 2005, Bonzi Buddy agreed to change the format of its ads so they did not resemble Windows message boxes. The boxes will now contain the word "Advertisement" so computer users know what they are looking at. The boxes will also no longer carry buttons that do not perform the correct actions.
Sales tax issues have also recently become debated. In the USA, the current laws require that buyers of online products pay their state all due taxes on these goods at the end of the year, along with their other state taxes. However, most consumers do not appear to be making these payments. Thirteen states have now begun encouraging Internet businesses to collect sales tax on every sale. These states are currently not forcing the companies to collect the tax. However, it appears that if companies do not begin collecting the sales tax on their own, states will begin forcing the companies to do so. The states are claiming that each year they lose $15 billion in unpaid sales taxes associated with online purchases.
[edit] References
- ^ Malala, J. N. (2003). The Relationship Between Computer Literacy, Online Marketing, and B2B Electronic Commerce. Business Research Yearbook
- ^ eMarketer - Online Ad Spending to Total $19.5 Billion in 2007 (2007-2-28)
- ^ The Register - Internet advertising shoots past estimates (2006-09-29)
- ^ Internet Advertising Bureau - Online Adspend
- ^ Businessweek - Advertising Goes Off the Radio (2006-12-07)
