Chapter Seventeen


To explore the important factors advertisers weigh when considering digital interactive media and direct mail. Each medium has its own characteristics, and each offers unique advantages and drawbacks. Advertisers must be able to compare the merits of these media and understand the most cost-effective ways to buy advertising on them. (p. 546)

After studying this chapter, your students will be able to:

1. Discuss the various opportunities and challenges presented by digital interactive media.

2. Explain the evolution of interactive media.

3. Debate the pros and cons of the Internet as an advertising medium.

4. Define the various kinds of Internet advertising.

5. Discuss the Net's audience and the challenges involved in measuring it.

6. Explain how Internet advertising is sold and how much it costs.

7. Enumerate the various types of direct-mail advertising.

8. Categorize the costs associated with direct-mail advertising.

9. Assess which kinds of mailing lists are best.

Teaching Tips and Strategies

This chapter introduces students to the world they grew up in. The Internet (also how Direct Marketing ties into the Internet). As Arens points out in this chapter, the Internet was one of the fastest growing and accepted mediums in recent memory. Advertisers can use the Internet to their advantage or can they?

One of the biggest advantages of the Internet, as illustrated throughout this chapter, is the fact that online users tend to have a higher household income then nonusers of the Internet (p. 564). The Internet is still in its infancy and it will take some more time before advertisers figure out how to use it effectively.

With the advent of the Internet, many companies jumped on the free Internet bandwagon. The thought process was if we give users’ free Internet access the users will view the banner ads and we will make lots of money. That has not really happened. Many of these free Internet services are a “dot gone”. May we have a moment of silence for,, and others? I think it is a good idea to emphasize to students that business models that are not created for a profit are in deep trouble. Internet surfers got used to surfing and not having to see or click on the banner ad to use the service.

At last years Superbowl, the newspapers and television reports announced that millions of people watched the Superbowl. How do they know that? In my opinion, they are guessing to a point. As you know they do telephone polls etc, and then extrapolate for the whole population who is watching and who isn’t’. With the Internet, it is a completely different story.

If I had a banner ad on, I would know how many people clicked on it, how long they were on my website, and what portal they came from. This presents a problem for a website that gets millions of hits but only a few thousand clicks on the banner ad. Going back to our Superbowl example, if there was a way to track how many people were really watching, or partying etc, wouldn’t the advertiser rightly demand that the cost of the ad be reduced (as you know ad prices are based on the number of people watching).

The problem facing Internet sites is that most people use the web as a point and click experience (they want to go somewhere and they get there). Most people did not get accustomed to ads as they have with television and radio. This does not mean that the Internet is dead to advertisers and unprofitable.

With more and more broadband (faster Internet connections), being offered it is important to note that Internet advertising will be changing. I see in the not to distant future consumers seeing more video type pop-up ads etc. Have fun with this discussion with the class. They have a chance to be influencers of this relatively new medium for everyone involved.

On page 564 is the Checklist for the Advantages/Disadvantages of Advertising on the Internet.

Lecture Outline

I. Introduction (pp. 545-546) —Virtual pets are a creation of NeoPets. NeoPets is an interactive community of virtual pet owners on the Internet. Members create pets from 45 different species and play with them, feed them etc. Members can enter their pets into virtual battles with other owners and their pets. There are numerous games and activities on the website. NeoPets went live in early 2000 with about 500 new registrations a day. The only advertising that the website utilizes is word-of-mouth. Today 60,000 new registrants adopt a NeoPet each day and there are over 50 million worldwide. NeoPets is the largest global youth community on the Internet. Users range in age between 8-80. Majority of the users are between the ages of 13-17. NeoPet is essentially a new kind of advertising medium in itself. The two major contributors to the success of NeoPets are content and quality. The content is updated daily and monitored around the clock. Parents who feel the company is monitoring the safety of their children endorse the company. Teachers have endorsed the Website in their lectures and classroom activities. Sponsors’ products are included in the activities on the website as a means to advertising.

A17-1 NeoPets (p. 545)

II. Digital Interactive Media (p. 546)

A. Today, we are participating in a new media revolution, brought on by incredible achievements in communication technology — these have engendered the digital interactive media and the information superhighway.

B. Understanding the arrival of digital interactive media

1. Before radio and TV there was the door-to-door salesperson, an individual who had to appeal to the consumer directly — a consumer who could shut the door at any time.

2. Then along came radio and, 30 years later, TV. Mass marketers now had a captive audience. However, the advent of the remote control, the first step towards interactivity, initiated the return to consumer control. Viewers cut off ads and "channel surfed."

3. The widespread distribution of cable TV caused network TV audience viewership to plunge from 90 percent to 60 percent in less than a decade.

4. With the VCR, people could now record shows for later viewing, zipping through the commercials. Alternatively, rent a movie and skip the commercials all together. The power shift from the marketer to the consumer has been recognized by advertising professionals who recommend adapting to the new media because other marketers will.

5. The personal computer, cellular phone, Internet, World Wide Web, fiber optics, satellite communications, CD-ROM, and interactive TV, are widely accepted and growing more affordable daily. These are not just advertising media, they represent, in many cases, new ways of living and doing business.

6. These technologies are revolutionizing the way we live, expecting to reach $100 billion in consumer online purchases by 2005. Both consumers and businesses have increased access to one another. Most important, the new digital interactive media improve the way businesses can develop relationships with customers and other stakeholders.

Exhibit 17-1 Growth in online ad spending in the US (p. 549) A17-2 NeoPets (p. 549)

III. The Internet as a Medium (p. 549)

A. The Evolution of the Internet (p. 549)

The Internet was initiated by the U. S. Department of Defense in the 1960s as a way to maintain communication during time of confrontation by having multiple lines of communication always up and running through a variety of geographical areas. It remained obscure until the 90s, used mostly by academics, military researchers, and scientists around the world for sending and receiving electronic mail, transfer files, and find and retrieve information from databases.

1. Commercial Online Services (p. 549)

a. In the 80s, a number of online services began operations by capitalizing on the local electronic bulletin board services (BBSs) being used by computer wonks, linking them to form national networks that delivered e-mail between subscribers, online shopping services, chat room for discussion, interactive game playing, software download capabilities, along with a host of other features. Marketers could advertise on CompuServe or America Online (AOL) with classifieds. Prodigy was another service that anyone with modem-equipped personal computer could join for a basic fee of around $10 a month.

b. The Internet was still not easy to use. People had to find an Internet service provider (ISP) and sign on directly using their SLIP/PPP account or shell account. Once online, there was no easy way to navigate the WWW unless the user had a lot of technical expertise. The Web's first form was entirely text-based; it had no graphics so ads resembled print classifieds.

c. In 1994, the first Web browser, Netscape Navigator, featured a graphical interface, accommodated graphic files, and allowed users to point and click on icons and pictures to find their way around cyberspace.

2. The World Wide Web (p. 550)

a. The World Wide Web, which has evolved as a commercial subset of the Internet, offers an enormous amount of information accessible via home pages (similar to book covers, gateways, brochure covers, or storefronts) that act as starting points to additional information-filled pages. Web pages follow the home page carry information about the company and its products.

b. Once business and the media sensed the lucrative nature of the Internet, they bombarded the public about the technology, which caught on to start the gold rush of the Information Age. The Web exploded from about 50 sites in 1993 to over 70,000 sites in 1995, to 15 million sites worldwide in 2000.

3. Internet Search Engines (p. 551)

a. The need to find an individual site among the tens of thousands available only became possible with the creation of search engines, software programs able to scour the Internet for a word, a phrase, or site address (similar to using a card catalog in a library). With names like Yahoo!, Excite, and InfoSeek, search engines are assisting visitors to navigate their way around the world with ease locating relevant information and website addresses.

b. Actual Internet advertising began in earnest in October, 1994, when the first banner ads — little billboards that pop up on a page when visited — were sold by Hotwired.

Exhibit 17-2 Top 25 most visited websites (p. 551)

c. Internet growth has been exponential. Some 50 million U.S. adults accessed the Internet in 1997, with 10 million children being the fastest-growing segment of new Internet users. By the year 2001, more than half the U.S. population had access to the Internet from home. Meanwhile the worldwide Internet audience was estimated at 407 million.

Portfolio: “Advertising on the Internet,” (p. 552-555)

Exhibit 17-3 Number of people online around the world (p. 556) A17-3 (p. 556)

d. A wide range of businesses and manufacturers use the Internet.

e. Marketers must provide accurate, up-to-date information when creating and maintaining Internet sites, and some entertainment and freebies also help keep visitors coming back.

B. The Internet Audience (p. 556).

A 2000 Juniper Research Study revealed that over half of PC users surveyed said they were giving up television to spend more time on their computers. Other studies indicate the online audience double in 12 months and 1 million less people were watching TV.

1. Who Uses the Net (p. 557)

Exhibit 17-4 Household income composition of the World Wide Web in the U.S (2000), Exhibit 17-5 Household income composition of the US (p. 558)

a. Recent surveys find that women now represent 46 percent of the online population.

b. The average age of online users has been steadily increasing in the past few years. Today, people 55-64 years old make up 22 percent of online households but will reach 40% by 2003.

c. Also, 27.3 percent of online users have household incomes between $40,000 and $60,000 compared with 18.9 percent of the population as a whole. Those in the lower income brackets account for only 9.7 percent of online users, whereas they represent nearly one-third of the U.S. population. However, this is the fastest growing group on the Web.

d. A majority, 75 percent, of Internet users has attended college compared to 45 percent of the U.S. population.

e. In planning media for Sega, FCB developed a list of Web sites that were known to have a higher than average composition of video gamers. These sites ultimately delivered over 100 million impressions during Sega’s four-month campaign.

2. How People Access the Net (p. 558)

a. To get on the Internet, people must choose from two types of communication systems: narrowband and broadband. Narrowband is a type of digital data transmission in which wires each carry only one signal, or channel at a time Normal telephone communication is narrowband, as well as, most communications involving computers. Broadband transmission enables a single wire to carry multiple signals simultaneously. Cable TV, for instance, uses broadband technology. Broadband is faster and can carry a larger volume of data, but it costs more.

b. The most common way to access, the Internet is by using a dial-up modem via an Internet service provider (ISP) from a modem-equipped desktop computer (PC or Mac). The ISP charges a fee (typically about $20 per month) and provides e-mail service, Internet access, and other online services. The computer modem is used to dial up the ISP's local telephone number, become connected to the ISP, and then have the ISP open up access to the Internet.

c. To use broadband, the most common ways are cable modem and DSL. Cable-modem is a service available only from cable TV companies that offer high-speed data transfer direct to computer (no modem needed), such as "Roadrunner" or "@Home."