Advertising on the Web - Academic Research


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On this page we present the introduction, problem formulation andconclusion of our thesis "Advertising on the World Wide Web". If you would like to share any information withus about this subject, do not hesitate to contact us.

List of contents


1 - Introduction

1.1 Problem formulation
1.2 Methodology
1.3 Towards a new advertising paradigm
1.4 Introduction to the World Wide Web


2 - Between Interpersonal and Mass Communication

2.1 Interpersonal communication
2.2 Mass communication
2.3 World Wide Web - neither interpersonal nor mass communication
2.4 Conclusion

3 - Characteristics of the Web users

3.1 Development in hosts, networks and domains
3.2 Population surveys
3.3 User segments
3.4 Future growth of the Web
3.5 Demographics of the Web users
3.6 Usage patterns
3.7 The death of Netiquette
3.8 Conclusion

4 - Strengths and weaknesses of the Web as an advertising carrier

4.1 Advertising spending in major media
4.2 Fee-based vs. sponsorbased content
4.3 Exposure on demand
4.4 Media characteristics - strengths and weaknesses of the main advertisingmedia
4.5 Conclusion


5 - Which companies should use the World Wide Web for advertising?

5.1 The three dimensions to consider
5.2 Audience fit
5.3 Product fit
5.4 Combining product fit and audience fit
5,5 General benefits to the company
5.6 How should the Web be incorporated into the company's media mix?
5.7 Conclusion

6 - Guidelines for designing Web advertisements

6.1 The key to customer attention: Introducing value-based advertising
6.2 Three approaches to creating value for the customer
6.3 Informercials
6.4 Advertainments
6.5 Purchase facilitation
6.6 Comparing the three models
6.7 Attracting visitors to the site
6.8 Generating repeat visits to the Web site
6.9 Operational considerations when designing advertising Web sites
6.10 Conclusion



Throughout history, technological breakthroughs have created fundamentalchanges in the way we communicate and relate to each other. The new formsof communication that have surfaced with the passage of time have, eachin their own way, influenced society dramatically. Gutenbergs inventionof the printing press in the 15th century made it possible to mass producetext and triggered a wave of knowledge dissemination which eventually providedthe foundations for the Lutheran reformation and other radical changes inthe society of that time.

In the 20th century, radio and television have brought sound and picturesdirectly to the individual household. This first generation of electronicmass media expanded the individual's access to information and exercizeda homogenizing influence on large parts of the population. This developmenthas played an important part in shaping the mass society which is a definingcharacteristic of our century.

In these years, a new communication technology is beginning to break through:interactive networks, which make it possible for the individual to retrieveand deliver large amounts of information to one or more recipients. As theinformation processed in these networks is digital, it can be replicated,manipulated and distributed with an unprecedented ease. And unlike the unidirectionalcommunications of traditional mass media, the interactive networks are basedon a two-way communication flow which gives a more active role to the user.Many observers argue that interactive networks hold the potential to revolutionizethe way we communicate, work, shop and entertain ourselves. Revolution ornot, there is little doubt that their long-term impact on our lives willbe significant.

The largest and fastest growing interactive network is the Internet, "thenetwork of networks", which is emerging as today's de facto informationsuperhighway. Until a few years ago, the use of the Internet was limitedto scientists and techno freaks, but now it is gaining popularity with agrowth rate unparalleled by earlier media, the number of current users beingestimated at 40-50 million. The growth of the Internet is driven by increasingease-of-use, lower access and telecommunication costs, cheaper and fastercomputers, and, perhaps most important, by an increasing amount of entertainmentand information. As our society continues the transition from an industrialto an information society, the Internet may also emerge as an importantdistribution channel.

With a growing number of users spending an increasing amount of time onthe Internet, advertisers, who annually spend billions of dollars courtingpotential customers, are beginning to show great interest in this new medium.The fastest growing part of the Internet, the World Wide Web, is increasinglybeing used for commercial purposes by companies who are attracted by thelow costs of making information available, the possibilities of reachinga global audience, and the opportunity to use the medium's interactivityto create a dialogue with the audience. From Madison Avenue to Silicon Valley,companies are establishing Web sites and struggling to understand what interactiveadvertising is all about.

Although there are several success stories of commercial use of the WorldWide Web, anecdotal evidence indicates that many companies have not yetreaped the expected economic benefits of using this new medium. One of themain reasons for this seems to be that the form and content of the advertisementshave not yet been adapted fully to the medium. This situation is characteristicof new forms of communication: in a medium's early fase, experiences fromother media are transferred before users start adapting content to the newmedium. When the film camera was invented, it was used to record theaterplays in their entire length, which were subsequently shown in uneditedversions for an audience. Later, the invention of the film editing techniquefacilitated the design of content especially suited for the new medium.Similarly, the first radio news programs consisted of newspaper articleswhich were read aloud.

The lessons from history are clear: content needs to be adapted to new mediain order to ensure effective communication. The World Wide Web is inherentlydifferent from the mass media traditionally used as advertising channels,and an understanding of the differences is essential to optimizing advertisingefforts in this new medium. Advertisers who do not understand and acknowledgethese differences and who attempt to apply traditional advertising conceptsand approaches indiscriminately to this new medium are likely to fail miserably.Therefore, new advertising approaches and models which exploit the uniqueproperties of this medium must be established.

Because of the explosive development in this area, research has lagged behindpractice. Despite the great attention given to the development of the Internet,very little research has been undertaken about how the World Wide Web isactually used for advertising purposes today, and even less about how itshould be used. While most observers agree that the Web has an enormouspotential as a commercial medium, there is widespread disagreement abouthow the medium is developing and what advertisers should do to exploit thisdevelopment. In this report, we will attempt to shed light on these questions.

1.1 Problem formulation

The aim of this report is to analyze the World Wide Web as an advertisingcarrier. The World Wide Web is a new medium which has not yet been adequatelyresearched and described in the literature, and it embodies a number ofcommunication characteristics which differ fundamentally from those of traditionalmass media.

Moreover, there are large uncertainties about who the Web users are, howthey use the medium, and what the general strengths and weaknesses of theWeb as an advertising carrier are. Thus, the first objective of this reportis to gain an in-depth understanding of the medium.

The second objective is to discuss how the World Wide Web can best be usedfor advertising purposes. Taking our findings about the medium as the pointof departure, we discuss the considerations a company should make beforeintegrating the Web in its media mix, and which models can be developedfor successful advertising.

In short, this report aims to answer the following questions:

1. What are the main differences between the World Wide Web and traditionalmass media from an advertising perspective?

2. How should the World Wide Web be used for advertising purposes?

In order to answer these main questions, the report will address the followingsubquestions, which include analyses about the medium and its users, aswell as prospective advertisers:

  • From a theoretical perspective, what are the differences between the communication processes on the World Wide Web and traditional mass media?

  • What are the characteristics of the Web users?

  • What are the strengths and weaknesses of the Web compared to other advertising media?

  • Which companies should use the World Wide Web for advertising?

  • What guidelines can be established for designing Web advertisements?


What are the main differences between the Web and traditional mass mediafrom an advertising perspective?

The World Wide Web is a hybrid medium which shares characteristics withmass communication as well as interpersonal communication. The Web combinesthe ability of the mass media to disperse a message to a wider audiencewith some of the interpersonal communication possibilities of providingindividualized information using feedback and interaction. The low entrybarriers to the medium and the absence of gatekeepers between content providersand the audience means that validation of the quality and authenticity ofthe content becomes a key issue on the Web.

Since the medium is interactive, users of the Web play a much more activerole in the communication process than users of traditional mass media.Whereas traditional mass media are characterized by an information push,the communication processes on the World Wide Web are driven by a basicinformation pull, meaning that the control balance of the communicationprocess has shifted in favor of the user. Where TV viewers have to do somethingactively to avoid the advertisements, Web users have to do something activeto access the advertising Web sites, which means that the World Wide Webis not as effective as TV for advertising that depends on a high degreeof intrusiveness.

Since Web users actively get information, rather than have it distributedto them, the costs of distribution on the Web are very low from the pointof view of the advertiser. Therefore, the marginal cost of delivering extrainformation depth or letting more users access the information are verylow. While the scarce factor in traditional mass media is access to distributionas well as access to attention, the scarce factor on the World Wide Webis only access to attention.

The reach of the Web is still very limited. As of late 1995, approximately11.5 million people used the Web in the United States, corresponding to5.8% of the American population aged 16 and over. With a "percentagereached yesterday" of around 2% of the population compared to 89% onTV, the Web is not suited as a primary advertising medium for advertisersthat rely on frequent exposures to mass target audiences.

While the audience that can be reached through the Web is still very limited,its demographic characteristics makes it an attractive target group formany advertisers. Users of the Web are generally affluent and well-educated.However, the low representation of women is problematic for advertiserssince women tend to make the majority of key buying decisions in Americanhouseholds.

With a three-digit 1995 growth rate, the Web is attracting new users ata great pace. The medium has now reached the critical mass to set a powerfulpositive feedback cycle in motion, where the increasing quantity and qualityof content attracts new users and the increasing number of users attractsnew content providers. Further, the rapid technological advances improvingsupply will continue to make it cheaper, easier, and faster to use the Web,and expand the possibilities of delivering video, music and three dimensionalvirtual reality. Nevertheless, the relatively low ease-of-access and ease-of-usewill limit the profileration of the World Wide Web to the less educatedand less affluent parts of the population. However, ease-of-access and ease-of-useis likely to increase significantly as cheap "net computers" thatare simple to install and operate and can be connected to a TV set becomewidely available.

The combination of strong drivers and falling barriers means that the mediumis likely to continue its explosive growth, at least in the short run. Itis impossible to forecast accurately how fast the Web is going to grow,but some of the best qualified estimates are as high as 100-150 millionusers by year 2000. Thus, all evidence indicates that the reach of the WorldWide Web will improve dramatically in the coming years, gradually turningthe Web into a mainstream medium.
Comparisons between advertising spending on the World Wide Web and traditionalmedia show that the Web is in its infancy as an advertising medium. Thus,total advertising placement revenue of the Web constituted only 0.1% ofnewspaper advertising revenue in 1995. Although there are large uncertaintiesassociated with the figures for Web advertising spending, the figures doindicate it will take several years for the Web to become a major threatto the advertising revenues of traditional mass media.

On the Web, advertising revenues today are mainly derived from selling "bannerads". Due to their limited size and the ease with which the user can"escape" from them, the sensory impact and intrusiveness of bannerads is very limited compared to advertisements in TV or in newspapers. However,banner ads can be used to generate traffic to the advertiser's Web site.Users exposing themselves voluntarily to the advertising Web sites are activelyinterested and have an involvement in the advertisement which is high comparedto traditional mass media. Thus, while the Web has limited efficiency foradvertisements that depend on a high degree of intrusiveness, it is an idealadvertising channel for advertisements capable of attracting "exposureon demand".

In sum, the Web is a medium that may become a tough competitor for traditionalmass media because of its ability to provide large amounts of individualizedinformation on demand to a self-segmenting audience, to process feedback,customer service, transactions and in some cases distribution with an easehitherto unknown in mass media. However, it is likely to remain a secondaryadvertising medium for the majority of advertisers in the short and mediumterm because of its low reach, limited intrusiveness, and low bandwidth.

How should the World Wide Web be used for advertising purposes?

The three basic issues which should be considered by companies contemplatingto advertise on the Web are audience fit, product fit, and general benefitsto the company.
Audience fit refers to the congruence between the campaign target groupand Web users. Companies targeting young, well-educated, affluent, technosavvy users and students are likely to find a high audience fit. Productfit refers to how the product or service is suited to the medium, in termsof buyer involvement, information intensity, and possibilities of providingincreased purchase facilitation. Since the customer has a high control theextent to which he wants to be exposed to advertising on the Web, the perceivedrelevance of the advertisement becomes a very important factor. Therefore,high involvement products are more likely to gain significant exposure.The medium's capacity for supplying large amounts of updated informationin the form of text and pictures and its ability to let the customer searchthis information with great precision from anywhere in the world means thatthe Web offer possibilities unparalleled in other media for advertisinginformation-intensive products.

Products that have a high product fit and audience fit, such as softwareand magazines, have a high potential for being advertised on the Web, andthe medium is likely to draw ever larger portions of advertising spendingfrom this category of products. On the other hand, the Web holds a limitedpotential for products with low audience fit and low product fit, such assanitary towels and detergents.

However, the decision whether to advertise on the Web should not be basedexclusively on current product and audience fit. Companies should also considerthe general benefits of advertising on the Web, such as image and learningeffects. The positive image effects associated with establishing a Web presenceare important to consider, since companies using the Web are perceived asbeing innovative and future-oriented. Further, since interactive marketcommunications are likely to prevail in the future, learning curve advantagesalso constitute an important argument for advertising on the Web.

For most companies, the Web will be only a secondary, supplementary componentof their media mix in the short and medium term. Because of the Web's mediacharacteristics, it is best suited for operating in the lower stages ofthe AIDA-model, i.e. the stages of desire and action, and mainly as a supplementarymedium. Local companies will find it difficult to advertise profitably onthe Web due to the limited reach in local areas. However, the Web has thepotential to become a main component in the media mix for companies producinggoods with a high product and audience fit to global niche markets.

While the traditional approach to advertising in mass media usually entailscommunicating simple, standardized messages to a passive, captive audience,the implications of communicating with active media users on the Web shouldnot be underestimated. If a site is to get valuable, lasting exposures thatleave a positive impression with the customer in the interactive contextof the Web, it needs to provide some kind of value in return for the timeand money the customer spends to visit the site.

To briefly capture the attention of Web users is not enough. It must retainand reward their attention in order to get the right kind of exposures.Therefore, advertisers have to rethink the traditional approach to advertisingin order to succeed on the Web, adopting a value-based concept of advertisingwhich focuses on providing value for the receiver. The basic idea underlyingthis approach is that if the advertiser does not provide value for the customer,he will find it highly difficult to attract and retain an audience. As differentcustomer segments respond to different incentives and value proposals, theconcept of value-based advertising also entails that the individual advertisermust focus on more specific segments and acquire greater knowledge aboutthe needs and wants of these segments.

There are three basic approaches to creating value for the customer: infomercials,advertainments and purchase facilitation. The three approaches should notbe seen as mutually exclusive but rather as theoretical archetypes thatcan be combined in various ways. Thus a Web advertising campaign can incorporateelements from all three basic approaches. Infomercials, advertainments andpurchase facilitation strategies are all based on providing value for thecustomer in ways superior to what can be achieved in traditional media.

Although creating a value-based advertising site is the most important preconditionfor advertising successfully on the Web, the advertiser must also investin creating traffic to his site. This can be a difficult challenge, consideringthe number of sites competing for attention on the Web. Visitors can beattracted to a Web site through banner ads, campaigns in traditional media,search engine registration, and electronic word-of-mouth effects.

Providing truly value-based advertisements is not an easy feat. The highuser control of the medium and the limited intrusiveness of the advertisementsmeans that the latter have to fulfill real needs of the audience. And asthe quantity and quality of the content available on the Web continues torise, Web users will become increasingly demanding. In many ways, therefore,the World Wide Web is a very difficult medium to advertise in. Those advertiserswho fail to understand the nature of the medium and attempt to apply traditionaladvertising approaches indiscriminately are likely to fail badly. On theother hand, companies that understand how to exploit the medium's possibilitiesof creating value-based advertisements in innovative ways will be able toachieve results that surpass what can be achieved in traditional media.Further, the technical possibilities open to advertisers on the Web todaywill pale in comparison to what will be possible within a few years.

The future of the media landscape is likely to be interactive. And the WorldWide Web offers valuable insights and learning possibilities for advertiserswho wish to understand and influence the development of advertising beyondthe principles and practices shaped by traditional mass media.

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