Introduction to the Internet Unit Outline The Yahoo

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Introduction to the Internet

Introduction to the Internet

Unit Outline The Yahoo Story n A Variety of Perspectives n The Internet n

Unit Outline The Yahoo Story n A Variety of Perspectives n The Internet n The Web n Hierarchy of Effects Explanation n Internet Business Models n The Web and the Economy n

The Yahoo Story “Jerry’s Guide to the World Wide Web” n Human compiled index

The Yahoo Story “Jerry’s Guide to the World Wide Web” n Human compiled index n Yahoo! Index n Advertising revenues nearly $100 million n Stock rose from $13 to $172 per share between April 1996 to July 1998 n

The Yahoo Story n Way to go Jerry (Yang) and Dave (Filo)! n Current

The Yahoo Story n Way to go Jerry (Yang) and Dave (Filo)! n Current Yahoo! Stock price? n Yahoo!

A Variety of Perspectives n A technology n Social space n Marketing tool n

A Variety of Perspectives n A technology n Social space n Marketing tool n Information publishing n Economic, social and business contexts

The Internet n A network of computers (similar to a telephone system) n WWWeb

The Internet n A network of computers (similar to a telephone system) n WWWeb was a “child” of the internet and the part of the internet that can be “surfed” n The child is now larger than the parent n When people say “internet” usually they mean WWW

The Internet as Technology n Bits are the essential building blocks of digital information

The Internet as Technology n Bits are the essential building blocks of digital information n Takes on a zero or one value n Grouping bits forms more complex information n The Internet is all about moving bits from place to place

The Internet as Technology (Cont. ) n Speed is important n Internet is currently

The Internet as Technology (Cont. ) n Speed is important n Internet is currently too slow n Video on demand is the holy grail

The Internet as Technology (Cont. ) n WWW was developed to make it easier

The Internet as Technology (Cont. ) n WWW was developed to make it easier for users to exchange bits n A point and click graphical interface n Sound, picture and video elements

The Internet as Social Space n A place where users communicate – e-mail –

The Internet as Social Space n A place where users communicate – e-mail – Usenet – Web • • • Chat rooms Conferencing Video conferencing Internet phone Interactive games Geocities

The Internet as a Marketing Tool n The Marketing Concept – An organization exists

The Internet as a Marketing Tool n The Marketing Concept – An organization exists to satisfy customer wants and needs while meeting organization objectives n Mass customization of communications and products is now possible n Increasingly smaller target markets – A target market of one!

The Internet as a Marketing Tool (Cont. ) n Used in Marketing for –

The Internet as a Marketing Tool (Cont. ) n Used in Marketing for – Information gathering for planning – New products – Digital distribution channel and electronic storefront – Promotion that allows for two-way communication n 50 million users in four years (television took 13)

The Web In 1991 the National Science Foundation decided to allow commercial use of

The Web In 1991 the National Science Foundation decided to allow commercial use of the Net n Three stages n – Information publishing – Transaction-based systems – Mass customization

The Web - Information Publishing n Business began with informational home pages (brochureware) n

The Web - Information Publishing n Business began with informational home pages (brochureware) n Evolved to new product for some businesses (magazines, newspapers) n People do research on the WWW n Selling ads and sponsorships supports the content

The Web - Information Publishing (Cont. ) n Portals – Entry points to the

The Web - Information Publishing (Cont. ) n Portals – Entry points to the web – Index and retrieve information from other content providers – Largest is Yahoo!

The Web - Transaction-Based Systems n Allows firms to communicate and sell online n

The Web - Transaction-Based Systems n Allows firms to communicate and sell online n More difficult (and expensive) – Online storefronts – Business to business commerce

The Web - Transaction-Based Systems (Cont. ) n Web page must link to backend

The Web - Transaction-Based Systems (Cont. ) n Web page must link to backend computer systems to validate and manage transactions and inventories n Backend because the user never interacts with them directly

The Web - Mass Customization n Mass Customization – Creating systems that can personalize

The Web - Mass Customization n Mass Customization – Creating systems that can personalize messages to a target audience of one. n Two kinds - automatic and manual

The Web - Mass Customization (Cont. ) n Automatic customization – Software tailors content

The Web - Mass Customization (Cont. ) n 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. ) n Manual customization – Relies on explicit

The Web - Mass Customization (Cont. ) n 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 Awareness (think) n Knowledge (think) n Liking

Lavidge & Steiner’s Hierarchy of Effects Model Awareness (think) n Knowledge (think) n Liking (feel) n Preference (feel) n Conviction (do) n Purchase (do) n

What is Involvement? The extent to which something is somehow important to the consumer

What is Involvement? The extent to which something is somehow important to the consumer n Driven by risk n – Financial – Social – Performance – Psychological

Impact of Involvement n The greater the level of involvement, the greater the –

Impact of Involvement n 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

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

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

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 n Stakeholder Communications – information about the company and its brands

Internet Business Models n 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 n Branding – Selecting a brand name and/or mark and supporting

Internet Business Models n 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 n Sales promotions – Build short-term sales • Coupons (J. Crew)

Internet Business Models n Sales promotions – Build short-term sales • Coupons (J. Crew) • Sampling (Hallmark)

Internet Business Models n Lead generation – Company uses e-mail or its web site

Internet Business Models n Lead generation – Company uses e-mail or its web site to gather names of potential customers (Herman. Miller)

Internet Business Models n Customer Service – Information for customers (Rollerblade) – Feedback mechanisms

Internet Business Models n Customer Service – Information for customers (Rollerblade) – Feedback mechanisms for communication with customers • e-mail - and databases, avoid spam • Customer satisfaction surveys

Internet Business Models n Sell Product – Online transactions – Largest segment business to

Internet Business Models n Sell Product – Online transactions – Largest segment business to business markets (about 2/3 s of all dollars) but – Consumer transactions growing

Internet Business Models n Electronic Publishing – A subset of selling products – Media

Internet Business Models n 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 n Agent Services n Firm acts as middleman but never takes

Internet Business Models n Agent Services n 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 n Agent Services – Be aware that the internet is a

Internet Business Models n Agent Services – Be aware that the internet is a global medium!

The Web and the Economy n Real cost of a product is the nominal

The Web and the Economy n Real cost of a product is the nominal cost + search costs (Stigler) n The cost of information is decreasing radically as a result of information on the web n How does cheaper information lead to greater wealth?

The Web and the Economy Internet Stocks are Up! n Internet stocks are up

The Web and the Economy Internet Stocks are Up! n Internet stocks are up (with some recent - late spring 1999 - fluctuations) n This, despite the fact that most inernet companies are NOT making money n Stock trading online is big

The Web and the Economy New Media Revenues n New media industry n “combines

The Web and the Economy New Media Revenues n New media industry n “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 n Commerce Department believes digital technology has

The Web and the Economy Reduced Inflation n Commerce Department believes digital technology has helped keep inflation in check (from 3. 1% down to 2%) n Conflict between lower cost of information and bidding up of goods and services?

The Web and the Economy Efficiency and Effectiveness n Efficiency: minimized input to output

The Web and the Economy Efficiency and Effectiveness n Efficiency: minimized input to output ratio n Effectiveness: making the right choices in order to maximize the company’s competitive advantage

The Web and the Economy Gains to Efficiency n Purchasing – automation, lower costs,

The Web and the Economy Gains to Efficiency n Purchasing – automation, lower costs, downward price pressures through online bidding n Inventory management – JIT and electronic ordering, reduced inventory holding costs n Cycle times (new product development) n Customer service (cost shifting? ) n Sales and marketing

The Web and the Economy Gains to Effectiveness n Purchasing – locating hard-to-find components

The Web and the Economy Gains to Effectiveness n Purchasing – locating hard-to-find components n Inventory management – Incorporate latest technology n Cycle times (new product development) – Respond quickly to changes in the marketplace n Customer service – Greater satisfaction, likelihood of repeat purchase n Sales and marketing – Superior service, greater customer satisfaction

The Web and the Economy Jobs – New media payrolls increased to $2. 73

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 mid 1997 – 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