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
Market fit • Different versions for different market subsections • Many examples • Travel • First class vs coach • Cars • Audi vs Skoda • Software • “lite” versions with hardware • Psychology • Brand awareness Price p Quantity
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
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
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
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
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
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
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
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)
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 • PlentyOfFish • 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
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)
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?
