Online marketing Dr Tim King 15 th May

Online marketing Dr Tim King 15 th May 2008

Business models l 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) l Free funded by adverts – Land grab - lots of users means lots of adverts displayed l Shareware – Guiltware l Try before you buy – Poor quality short clips – Licence key cracks (Macromedia) l Pay per use – Software as a service – UK 1901 Census – Betting l Licence / subscription / price per item – Digital Rights Management (everlasting vs annual) – Physical fulfilment 2

Market fit l l Different versions for different market subsections Many examples Price p – Travel • First class vs coach – Cars • Audi vs Skoda – Software • “lite” versions with hardware l Psychology – Brand awareness Quantity 3

Lock-in l 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 4

Lock-out l l l Incumbent tries to maximise switching cost Loyalty programs Technology control – Nintendo game cartridges – Sony Playstation DVD formats l l Crypto and tamper resistance Community – its where your friends are • My. Space, You. Tube l Hassle – eg email address change 5

Personalisation (1) l 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 6

Personalisation (2) l 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 7

Customer support l Identify meaning of email – Auto-respond with the answer l Classify once human response given – So next time it will auto-respond l Expose database as FAQ – So they don’t send the email at all l Always give the option of human interaction 8

Brand awareness l l 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 l 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 i. Pods 9

Community l You. Tube – 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

Advertising l 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 (Killer. Coke) 11

Successful business models l Google – – l Acquiring Double. Click gives it over 80% of web advertising Acquiring You. Tube gives it millions more viewers Providing a simple way to advertise gets it plenty of customers Has Microsoft Office firmly in its sights Plenty. Of. Fish – – – Run by a single guy from his apartment Free dating site In the global top 40 web sites Runs Google Ad. Sense adverts Gets paid over $5 m per year by Google 12

Successful exits l My. Space – Bought by News Corp for $580 m July 2005 l You. Tube – Bought by Google for $1. 65 bn in October 2006 l Friends Reunited – Bought by ITN for £ 175 m in December 2005 l Bebo – Bought by AOL for $850 m in March 2008 l 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) 13

Conclusion l Continuous evolution – – – l 28 K/s -> 8 M/s Still pictures -> movies 2 D -> 3 D Newsgroups -> online communities Games -> Second Life Evolving economics – Many people make a living online • Buying and selling on ebay • Property developer in Second Life l What’s next? 14