Using the Internet, entrepreneurs can run sophisticated businesses from anywhere. That is why places like Boulder, Colorado, now have some of the densest concentrations of technology-related businesses in the country, most of them small independent firms. The desire for and availability of more lifestyle choices will continue to drive economic decentralization. Splintering consumer tastes are also moving the industry away from its centralized past. Cable, satellite broadcasting, and the Internet all feed Americans' appetites for customization. This trend has helped create three new broadcast networks and more specialized media, while the market share of mass network programming has declined sharply. Larger media companies now depend on small-scale producers to meet the new consumer demands. (1)
More successful Internet businesses have been spawned by Caltech graduate Bill Gross than by any other person on the planet. Through idealab!, his Southern California-based incubator, he has launched dozens of enterprises that are now worth many hundreds of millions of dollars, including e-commerce pioneers like CitySearch and eToys. (2) At last count, there were more than 100 million Web pages. Not long ago, pundits, experts, and Internet aficionados could be heard urging CEOs - that notoriously technophobic group - to sit down at their computers and enter the strange new world of the Web. Today, many chief executives have done just that, and witnessed the online revolution first hand by visiting not only their own companies' Web sites, but also such high-profile spots as Amazon.com, the Drudge Report, and Yahoo! you can do more than buy books or advertise your company online. (3)
Internet advertising's comeback is progressing quite nicely. Industry revenue for the second quarter of 2003 was $1.66 billion, up 14% from the same period a year ago, and nearly 2% higher than in the first quarter. That's according to the Interactive Advertising Bureau's (IAB) regular Internet Ad Revenue report, which it conducts with PricewaterhouseCoopers. Numbers for the first half of the year show U.S. Internet advertising bringing in $3.3 billion, which is 10.5% higher than the same period in 2002. (4) Internet advertising develops visual and written content for client web pages, and/or online advertisements and strategy for online promotions and web page development monitors web site and online traffic. (5)
In the midst of all the hype, speculation, and self-interested predictions about the Internet and advertising, there are three lonely facts that seem apparent and obvious: (6)
Internet advertising is big, and will get much bigger. The majority of business-to-business marketing will be via the Internet within a few years. On the consumer side, there is a much greater level of social, psychological, and cultural density.
Direct marketing principles and architecture are made-to-order for the Internet. The Web is interactive. Direct marketers have been doing interactive since the beginning of time. The interactive nature of the Internet is obvious to all but the most clueless, a category that unfortunately includes most large ad agencies and many large traditional corporations.
The Internet radically facilitates connecting with customers. It also radically facilitates invading their privacy, which will be quite an issue during the next few years. But whether you call it relationship marketing, 1-to-1, CRM, or anything else, it's a lot easier on the Web.
However, the Internet has paradoxes, ambiguities, and complexities: (7)
Most new technologies begin with brittle interfaces, and mature only when the interface becomes transparent. Once a brittle interface disappears, the technology itself vanishes from vocabulary. The Internet, in fact, has a doubly brittle interface, the personal computer itself, and, in many cases, Windows, which is nothing if not brittle. When the technology becomes subsumed by the benefit, it is a signal that things are maturing. Broadbanding, which makes access much quicker and much more robust, will also feed into its coming universality.
We do not control technology; technology controls us. This painfully obvious fact is so much a part of everyday life, and so implicated in the whole story of the 20th Century, that no one really pays enough attention to it. Ignore this principle, though, at your peril.
Important new technologies change the world, making predictions difficult.
Every strong technology has enormous unintended consequences. One shivers a bit to think of the unintended consequences of the Internet, but it is best to be prepared for them: Privacy invasions, ego fragmentation, and addiction have already made their appearances on the radar screen.
The Internet really began to gain critical mass in 1998. Some events stand out. (8)
The Procter & Gamble summit conference in the summer of 1998, "Why Isn't Advertising on the Internet Working?" P&G invited competitors, consultants, and Internet agencies to discuss the failure of Internet advertising. Experts pointed out that no one had coined a memorable slogan on the Internet. Even worse news: As people get more Internet-literate, they begin ignoring banner ads. The Internet is a direct marketing medium, not an advertising medium. Advertising is a right-brain-hemisphere communications discipline. The Internet-like direct mail -- is an interactive medium, by definition left hemisphere. The advertising industry wants the Internet to be like television, but it can't be -- the wrong part of the brain is involved. It takes time to sort all of this out.
Amazon. com's instantly rescinded decision to sell book "recommendations" to publishers. Amazon.com customers had been happily allowing the company to guide their book choices via reviews. The New York Times revealed, though, that Amazon was quietly selling "reviews" to publishers. Amazon.com at first defended the practice as analogous to the publisher-funded displays you see in bookstores, but quickly backed down. What this showed was how the Internet is changing advertising. The personalized, interactive, somewhat tribal relation customers have with Amazon.com made the promotions seem like betrayals. Interactivity creates involvement, which can easily become emotional involvement. The passive experience of browsing through a large bookstore lacks the interactivity, and therefore the emotional charge that made Amazon customers think they had been suckered. Also adding to the emotional charge: a compensation reaction to the disembodiment and abstraction of the Internet. Amazon.com may be a business, but it acts like a club. Internet advertising, at least in its early stages, seems to want to be clublike. Apropos which, Amazon.com reminds us in an ad that word-of-mouth on the Internet becomes a mass medium.
The explosion of Internet advertising in the U.S. during the 1998 holiday season. Everyone, most notably the merchants themselves, was taken aback at the unexpected growth of Internet buying during the 1998 holiday season. It was not precisely a success. Inventory and shipping problems created massive consumer disappointment, a reminder of the rude way physical reality intrudes into cyberspace. But it is par for the course for new media and new channels to suffer logistical growing pains. Internet advertising is exploding because of a classic intersection between technological adaptation and consumer needs. Catalogs in the U.S. exploded for the same reasons: technological adaptation to 800-numbers and credit cards, and impatience with the time-consuming, service-deficient nature of conventional retail buying.
Will the Internet change the style, substance, and soul of business...or will business change the Internet? Everyone's assuming that radical things will happen, but you can make the argument that there already may be a trend towards conventionalizing E-Commerce. Amazon.com are now spending $360 million in warehouses, an awfully big investment in the physical world. Is this progress, or regress? Whatever it is, the implication is that conventional logistics count. Amazon.com is also trying to be all things to all people. This could be visionary brilliance, but it can also be a panic reaction to the company's persistent lack of profits. Panic eliminates strategy, and being all things to all people is an emphatically non-strategic path. Sacrifice, after all, is the essence of strategy.
On the other hand, look at Priceline.com, which is starting to seem indeed like a sheep in sheep's clothing -- inventing a new kind of Internet advertising for a new kind of medium.
However, there are some Don'ts in the Internet advertising business:
Do not underestimate post-industrial capitalism's enormous powers of co-optation, absorption, and repressive tolerance.
Look at historical precedent 1990s' techno/commercial radicalism may go the same way as 1960s' social/political radicalism. But the point is, no one knows. And certain paradoxes built into the Internet make analysis all the more tricky.
Here is how you re-intermediate in the brave world of Internet advertising:
Stop tormenting people! Relationship has to do with friendship, You can't build relationships if you regard customers as hostile provinces to be conquered.
Forget the pseudo-science. If marketing research worked, new products wouldn't fail. If data mining, fractal analysis, neural networks, etc. worked, no one would get irrelevant mailings.
Build your brand -- but in a 21st Century mode. With the exception of luxury products, brand loyalty has to do with stress reduction, not with status or self-disclosure. Customers will be loyal to your brand because they know you'll fix things when they break. But they'll lose their loyalty if you stress them out through your…