Online marketing
Dr Tim King
7th May 2009
Business models
Free
– Web sites for the fun of it or to gain early users – Part of a wider service (BBC, cars) – Free software, pay for maintenance (Linux, AVG)
Free funded by adverts
– Land grab - lots of users means lots of adverts displayed
Shareware
– Guiltware
Try before you buy
– Poor quality short clips – Licence key cracks (Macromedia)
Pay per use
– Software as a service – Genealogy sites – Betting
Licence / subscription / price per item
– Digital Rights Management (everlasting vs annual) – Physical fulfilment
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Market fit
Different versions for different market subsections Many examples
– Travel • First class vs coach – Cars • Audi vs Skoda – Software • “lite” versions with hardware
Price p
Psychology
– Brand awareness Quantity
3/14
Lock-in
Buying something commits you to buying more
– Services • Car services • Mobile phone subsidy • Frequent flyer – Consumables • Ink-jet printers • Yoghurt makers – Complimentary products • Camera lenses • Operating systems
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Lock-out
Incumbent tries to maximise switching cost Loyalty programs Technology control
– Nintendo game cartridges – Sony Playstation DVD formats
Crypto and tamper resistance Community – its where your friends are
• MySpace, YouTube
Hassle
– eg email address change
5/14
Personalisation (1)
Know your customer
– Profile typical users when they visit a web site • Purchase history • Time to make purchase decision • Amount of research done – Profile users through loyalty cards • Nectar
– They know everything you have ever bought
– Keep in touch with customers • Collect email addresses • Email newsletters
– Lastminute, Maplin
• Cookies
– Welcome back Tim
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Personalisation (2)
Know your customer type
– User database • Address/postcode -> socio economic indicator • Gender • Age -> Register with Data Protection Registrar • 60 “bins” 5 classes x 2 genders x 6 age groups
– (kids, teens, dinky, married with kids, empty nesters, retired) – Disposable income – Disposable leisure time
– Recommendation • People who bought this also bought that
– Data from your own site – Amazon really can recommend music or books you might like
• Data mining
– People who buy this on cold winter Fridays in Slough also buy that
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Customer support
Identify meaning of email
– Auto-respond with the answer
Classify once human response given
– So next time it will auto-respond
Expose database as FAQ
– So they don’t send the email at all
Always give the option of human interaction
8/14
Brand awareness
Single most important piece of data People buy from a known name
– Sense of trust
• Marks and Spencer
– Perceived value
• Cheap reliable airline => Cheap reliable mobile
– Peer pressure
• Nike, Rolex, Dolce and Gabanna, Ferrari
Brands can expand
– Virgin
• Active, Atlantic, Books, Brides, Broadband, Cosmetics, Credit card, Drinks, Galactic(!), Games, Holidays, Limobike, Megastore, Mobile, Trains, Wines
– Apple • From computers to iPods to iPhones
9/14
Community
YouTube
– TV adverts • Recycle TV adverts • People send copies of your advert to each other • Risqué adverts not acceptable on TV – TV shows • Trail shows • Repeat the best bits – Music • Shareable • Do-it-yourself MTV
10/14
Advertising
Google
– Buy your brand name • Coke
– – – – Careers Corporate Responsibility The Coca-Cola company Press Centre
– Buy your supplier’s brand name • Nike
– JDSports
– Buy your competitors’ brand name • Ford
– Adverts for Seat dealer
– Buy your target • Nike (Boycott Nike), Coke (KillerCoke)
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Successful business models
Google
– – – – Acquiring DoubleClick gives it over 80% of web advertising Acquiring YouTube gives it millions more viewers Providing a simple way to advertise gets it plenty of customers Has Microsoft Office firmly in its sights
Run by a single guy from his apartment Free dating site In the global top 40 web sites Runs Google AdSense adverts Gets paid over $5m per year by Google
PlentyOfFish
– – – – –
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Successful exits
MySpace
– Bought by News Corp for $580m July 2005
YouTube
– Bought by Google for $1.65bn in October 2006
Friends Reunited
– Bought by ITN for £175m in December 2005
Bebo
– Bought by AOL for $850m in March 2008
Valued by
– Number of users • Potential income, possibly over several years • Cost (or impossibility) of getting there yourself – Value of brand (what market will bear) – Asset base (users who can’t leave) – Capital already invested (but the money may well have been squandered)
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Conclusion
Continuous evolution
– – – – – 28K/s -> 8M/s Still pictures -> movies 2D -> 3D Newsgroups -> online communities Games -> Second Life
Evolving economics
– Many people make a living online • Buying and selling on ebay • Property developer in Second Life
What’s next?
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