||About the author
|Miguel Angel Todaro is originally from Buenos Aires, Argentina. He has been advisor of important corporations in marketing, multimedia and e-commerce projects.
He is an expert in software development, with strong background in graphic design, multimedia programming and marketing. In 1997 he developed one of the first automotive e-commerce projects on the net, for the Italian company Fiat Auto International Corporation.
As a consultant he helped major organizations such as UNICEF, AIGA, Oracle and IBM.
He also developed experimental multimedia e-learning ventures for different companies in North America, including BP and Methanex Corp.
Miguel Todaro is an active collaborator and supporter of the Open Source Initiative (www.opensource.org)
Chapter 1: Introduction to Internet Marketing
Opening the door
In 1997 I was in the office of the Vice President of Latin American division of FIAT Auto, Roberto San Pedro, one of the most innovative business people that I have ever met.
- What is what you want to talk about? - he asked sitting behind his impressive oak desk after we had a relaxed conversation about life.
- I want to sell cars online - I said.
He looked at me puzzled, trying to decide if I was kidding. This reaction was quite expected to be honest, actually it could have been even worse, the Internet was still an uncertain soil for business. At that time companies and organizations had a fair presence on the net, but the idea of doing business online was far beyond anyone's comprehension, even for the most respectful experts.
Two months after that conversation I was in charge of that project, with the ambitious objective of selling 150 cars on the Internet by the end of that year.
At the present time this objective would be not a big deal of course (the automotive industry made more than 85 millions in car sales online worldwide in 2005), but considering that e-Commerce was invented in 1995 and the technical tools for financial transactions and security online were very poor at that time, the objective was quite a challenge.
I led a team of five developers and we engaged in the execution of the project in a forgotten and small office in the basement of the IT building. After three months the website was online and fully operating. The company supported the launch with newspaper advertisements in order to promote the idea and attract customers, I remember that at that time the only search engines were Yahoo! and Altavista (with very limited traffic), and the concept of Internet Marketing was a dream.
Four months later we reached the goal with no difficulty.
Ironically, this website did not actually allow the user to go through the whole process of e-Commerce as it is known today; we didn't have a reliable technological platform at that time, but at least the website provided real time information about the stock of cars of each of the dealerships (420 in total) and gave the option to select the color of the car as well as diverse accessories. Finally, the user was invited to go to the closest dealership in order to finalize the purchasing.
The experiment was a real marketing exercise into e-Commerce; moreover, it was the first strong step into a long process that would finally evolve as a real e-Commerce corporate move that has not stopped since, and generates more than 13% of the sales worldwide for FIAT Auto at the present time.
When we accomplished our goal I had the feeling that we were in an extraordinary moment, observing the sunrise of a new (and uncertain) business era. Today, several years later, I still have that feeling, in fact stronger and certainly with more clear indications. My personal analysis and knowledge about those first indications motivated me in writing this book that I consider a helpful implementation tool for everyone with desires of learning how to really get involved in Internet Marketing and make it very profitable.
Any user with basic knowledge about marketing and how the Internet works will be able to understand it and find it extremely practical; this is my personal promise to you.
Before explaining in detail what Internet Marketing is, and what the most effective way to implement it is, I would like to make clear some points that will help you to better understand the relevancy of the topics of this book.
The Internet network was invented in the late ‘70's, as most people know, designed originally as a government communication tool; nobody at that time expected it was going to become such a colossal business and commerce instrument as it is currently.
When the Interlink and Hyperlink system known as the WWW was implemented on the Internet in 1989, the network became accessible to everybody. Companies and organizations began to publish their web portals as a type of virtual brochure with corporate and, at some extent, promotional information.
Slowly, midsize companies and businesses made their appearance on the network, promoting their services and products in a very direct approach. Most of these companies published their websites just to “be there” but with no real business expectations.
At that point everybody started talking about the Internet, and everybody wanted to be involved somehow, however nobody had any clear understanding of the operational characteristics and dynamic of this network.
In order to better understand the evolution of Internet and its associated sub-products (like Internet marketing for instance) I would like to guide you through the following argument:
In business the typical S curve model shows, better than anything, the analytical representation for establishing the market penetration of any product, as shown in Figure 0.5.
We know that any product reaches market penetration once it hits 10% of the market, also known as hitting the Critical Mass.
If we understand that Internet Marketing is a “product” and all its associated activities as derivatives of that main “product”; we could agree that the evolution's laws of any product in the last century are also applicable to it.
The Figure 1.0 represents a set of diagrams with the evolution of very significant products according to the S curve analysis and the moment they hit critical mass:
You can appreciate that there is an extensive period of time until the product reaches market penetration; this is the emplacement period, in which the market slowly assimilates new technology offers. Once the product penetrates 10% of the market, the product sets a new time range until reaching 90% of the market; this is also known as the “aha” factor. After this period, the product reaches maturity, and the continuation of the curve depends on several subsequent factors.
As the user may see on the diagrams, the range of time to hit the critical mass of 90% of the market has been decreasing in high-tech products. The market capacity for assimilating new products has evolved in a very significant rate, for different market behavior's reasons. If we analyze the evolution of Electricity, for instance, we may observe that it took 37 years since it was introduced to the public to hit critical mass, and then it took another 47 years to reach 90% of the market. Another example is the Telephone and the Automobile which show a similar evolution. On the other hand, products like the Internet, the Microwave, and the Television represent a different scenario, in which the time for reaching the critical mass is equal or actually longer than the timeframe to reach 90% of the market.
It is not difficult to understand that Internet Marketing has not yet reached critical mass; believe it or not this is one of the most important reasons for reading this book. At the present time, approximately 100 million people engage in e-Commerce activities per year. In the next ten or fifteen years, that number will reach more than 800 million of users per year, crushing into the 10% of the market and then, as predicted, climbing to the 90% in a frantic way. That is what authors like Don Tapscott define as the upcoming digital economy. The Figure 2.0 represents the S curve analysis specifically calculated for Internet Marketing, in order to facilitate the comprehension of its market immersion in the next 20 years.
At this point you may think: Why do I need to know this? The answer is very simple. Figure 2.5 represents the current picture of Internet Marketing in numbers and values that provide a strong reference to anyone with a minimal understanding of business. Once Internet Marketing has an impact on the market's critical mass, it will become one of the most astounding emerging multibillionaire industries ever.
Taditional Marketing vs. Digital Marketing
In the late 1990's, traditional marketing began to experiment and introduce new services. Internet Marketing is the natural evolution of one of those services- Digital Marketing.
Many professionals and developers started to realize the value of interactive marketing, capitalizing on the propagation of home computers with CD-ROM and, naturally, the consolidation of the entire Internet.
As a result, several companies began offering interactive kiosks, multimedia catalogues, interactive games, promotional slideshows, virtual magazines and brochures, etc.
Companies like Ambrosia Software, Medialab International, Blast Radius, Insigna Systems, Electric Rain, Xyvision Enterprise, among many others, initiated a new line of marketing that slowly incorporated the Internet as the most relevant channel for promotion and interaction. These types of companies were the pioneers of Internet Marketing, introducing new interactive concepts like banner ads, online catalogues, directories, virtual magazines, etc. This was also the time that developing companies like Macromedia, Adobe, Xerox, Quark, Ventura, etc. started to deploy advanced animation and multimedia applications for the Internet, in order to conquer (dominate?) the market. For instance, Macromedia introduced Director, an innovative multimedia programming application which became the father of the current and popular Flash MX.
At the beginning of 2000, big corporations began to very seriously consider incorporating digital marketing in their promotional plan, allocating a portion of their marketing budget to this new type of advertisement and promotion.
As a result, comparing traditional activities to digital marketing, companies identified several new, tangible unique value propositions:
1- Customer interaction . Interactivity as a part of the new business interaction, in which the user manage his desire to select, click, open, close, drag and see the different options presented by the application
2- Multimedia . The integration of multi-channels of communication, combining sound, images, motion, etc.
3- Tracking of user behavior and reaction . The ability to identify action paths, patterns, common behaviors and audience interest with the application
4 - Electronic Commerce . Engagement of some form of electronic commerce in order to provide the user with the capacity of initiate a financial transaction or purchasing of any type
5- Unmatchable ROI . With the implementation of online advertisements, low cost, and tracking functionality, unique advantages were created for ROI. For example, sensitive info about how many users saw the ad, how long, and if somebody clicked on the link could be tracked and assessed financially.
What is Internet Marketing?
Advertising and its associate activities have been one of the most important actions in the marketing industry in the last 50 years.
In the early 1990's, the Internet made a warm entrance into the advertising world, appearing to be, as many people believed, the little sister of traditional and significant advertisement channels (newspapers, billboards and television). Nobody believed at that time that online advertising would produce such a direct impact into the market and affect the business performance of the traditional multibillion, advertising channels.
At that time, online advertising was inexpensive and web traffic was not significant. Yahoo! was one of the first players trying to establish banners and skyscrapers controlled by a very simple programming cycle. Advertising Companies did not see any value added in the advertisement options on the net, and many times, during that period, Yahoo!, for instance, offered banner ads to big corporations for free.
As the technology evolved, the amount of options increased, and more formal techniques started to appear- this was the initiation of Internet Marketing.
The Figure 3.0 represents a very interesting snapshot of the time evolution of Internet and all its collaterals; I believe it is important to spend a few minutes to understand the major components of the diagram, since we will be referring to this timeline several times in the present chapter.
Due to the impressive volume of Internet users, and the characteristics of the different online advertisement options, the impact on the traditional advertisement channels was significant.
At this point it is important to identify the following concepts: online advertising is not only the typical banners ads displayed in the top section of any popular website, those just represent a small segment of a diverse set of options.
Internet Marketing is the evolution of on-line advertising and e-Commerce. The reason: A market of 1 billion users daily.
Figure 3.1 represents the main components, or sub-activities, of Internet Marketing; we will refer about all of them in the upcoming chapters.
One of the most relevant components of Internet Marketing is (and nobody saw that coming) Search Engine Optimization (SEO). This component currently represents more than 70 % of Internet activity. (also known as the Search Engine factor)
This “Search Engine Optimization” represents the big initial step to the Internet Marketing revolution; let me explain this in detail. In 1999 Google traffic was about 40 million people per day, the very next year it reached over 100 million. Internet World Stats reported that Google and Yahoo! together, at the end of 2002, managed traffic up to 190 million people per day.
The Internet literally exploded-People were actively looking for something on the net, using the search engines: writers, historical events, furniture, books, articles, music, data, hardware, etc, etc, etc.
Antonio Mercado, Director of Marketing for Oracle-Latin America, an expert in advance e-commerce, told me in 2001: “the new understanding in business is the traffic, no matter the type of website of service you have, if you have the traffic and you are able to keep it, you will make money”.
This was, and is, an Interesting concept. At that time, not too many people understood this “traffic value concept”. Many marketing academic experts actually questioned both the Google and Yahoo business models, without trying to figure out their long term strategy. I remember some colleagues saying that Google was going to collapse before reaching 2005.
The true investment for online companies in the late 1990's and the new century was “traffic”. This new understanding, as described by Antonio Mercado in the first paragraph, required a high comprehension of the trend that was coming since the late 80's and which was identified by just a few professionals and business people.
There is not an official start date for Internet Marketing, but we can agree on two major episodes that define when it did start:
- The launching of Overture Services
- The SEO implementation
On October 8, 2001 , Bill Gross decided to re-launch GoTo.com as Overture Services. The company managed, through different alliances with search engines like MSN and Yahoo! for instance, a new business model on top of the traditional user's search online, capitalizing on the significant traffic at that time. Overture implemented the PPC (pay per click) system, offering “Sponsored results” added to the existing (and typical) relevancy lists. Usually for every search the search engine will display the relevancy list and in the right side, a highlighted column with the sponsored result.
As a result, Yahoo! became Overture's best customer, with a profit of 60 million at the end of 2003. In 2004 Yahoo! announced the purchasing of Overture Services for 1.7 billion, re-branding the service as Yahoo! Search Marketing.
In 2003 Google joined the PPC war with the launching of AdWords, its own product for PPC campaigns.
Essentially, what the The PPC service does is secure the appearance of the sponsor in the Sponsored list or links section. Don't worry-The details of this activity will be explained opportunely in Chapter 7.
Every time a user submits a search, the application (search engine) obtains a result page with a list; that list is named the Relevancy list.
All search engines use different systems (Robots, Spiders, Submission, etc) to cover the global network looking for and classifying websites. The Relevancy list is the output of complex mathematical algorithms that the search engines apply in order to rank the links, based on data storage criteria.
There is no human intervention in the process of listing results of the Relevancy list; the entire process is automated according to the algorithms mentioned before.
Since 1996 several web developers, programmers and mathematicians experimented with Search Engine Optimization (SEO), an activity that combined web programming and statistical calculations with the objective of defining the rules that make websites friendly for the search engines as well as easy to rank. In the next chapter, you will find a full coverage of SEO and some of its secrets.
SEO became very popular in 2003 when Google introduced a new formula that basically set the standards of SEO. That formula was a combination of keywords analysis, link popularity, contextual content and parametrical regulations.
Today, big and midsize corporations in North America reallocate more than $30 billion of advertising budgets from traditional promotional activities to Internet Marketing options. Why?
The reason is simple. Take a look of the following list:
Captive market - The people that are using search engines are definitively looking for something
Attracted buyers - This market has a high chance to purchase and is receptive to engaging in a transaction
Interested market - The user's curiosity about the product/service has been established. This is also considered the “engaged market”
Traceable market - The audience and its activity on each website can be detailed and identified in order to be analyzed from a marketing perspective
Interactivity factor - Cross selling and promotional outcomes as result of users' interactivity with your interface
It has been predicted that by 2010 the volume of investment allocated by companies in North America will be over $100 billion, at the same strength as the TV industry.
The principles of SEO
The main principle is very simple (Figure 3.5) and is called the basic market connection law: there are millions of people surfing Internet every day, a segment of which represents the manufacturer market. Internet Marketing is the activity that builds the bridge between that potential number of customers and the...