The growth of electronic marketing.

• Author: Mack, Tim
• Position: Science & Technology

THE FUTURE of marketing and advertising is there for anyone to see --just log onto the Internet. Few entities have been as dynamic as the World Wide Web, which, in less than a decade, has been transformed from a research enclave to the Main Street of the world. The Internet is a subject of intense discussion around the globe, and the rate of change on it is amazing--nothing seems to stand still. Accordingly, we have the luxury of watching a process unfold in what seems like time-lapse photography.

While much has been written about the social impact of the Internet, its powers of isolation and connection, and even its role in political life in places like China, less has been said about the impact on the economy, except for the stock market. The transformation of the Internet from a medium of personal expression to one of economic opportunity has been steadily unfolding.

Although the Internet is not yet equal with other forms of marketing media in terms of returns, it has the enviable position of being the most positively dynamic. The last half-decade saw declines of around five percent in the amount of hours per week Americans watched network television, listened to the radio, and read newspapers. A few media--magazines and books, for example--grew at about the same rate of five percent. Only cable TV showed serious growth over this period, with an increase of approximately 50%.

In contrast to these other media, the research firm of FIND/SVP determined that the Internet rose from eighth to about fourth place among consumer media over the past five years, representing a fivefold increase. Part of that increase was fueled by the growing use of credit cards on the Internet. According to MasterCard International, the most-often purchased products were software (41%), followed by books (29%) and computer hardware (18%). Smaller, but growing, categories include cards, food, airline tickets, CDs, flowers, and clothes. One Internet advertising agency, the Double Click Company, believes that, worldwide, Web users now total 150,000,000, and this may be conservative.

The World Wide Web, in spite of some resistance from those who treasured its earlier more-academic and free-spirited nature (back when "everything on the Internet was free"), has become a booming marketplace. Web advertising is expected to reach $9,000,000,000 annually by 2002. PCMeter says that business users spend almost two-thirds more time on the Web than home users, and 71% of online consumers utilize the Internet to get information about products they buy.

One of the goals of marketing is contacting potential customers directly, without investing in a big ad or research budget. With the Internet, this is almost magically possible. While banner ads on websites sometimes get no more than one percent response (compared to five-seven percent for direct mail), the cost is dramatically less. A website may cost $5 for each 1,000 individuals who view a marketing message, while direct mail could average $50 to reach the same 1,000 sets of "eyeballs."

In mail and phone media, marketers must decide how detailed their targets need to be since, the more specific they are, the more expensive the process becomes. On the Internet, though, it is possible to test advertising banners on a variety of sites at relatively little cost, then continue with those that produce the best. While it is possible for marketers to manage this feedback process themselves, a number of entrepreneurial firms have sprung up to provide this and related services.

One longer-term practice--if "long-term" can be used in relation to the Internet--is the use of banners, which advertise a website on other sites and provide a quick link. This widespread use was due in part to the practice of the...