Online Advertising

Nowadays, the internet has become the ongoing emerging source, which is constantly tending to development and expanding. That is why the following growth and the rapid development are mainly considered as the attractive issues for the advertisers in the light of its productivity, demand, and easiness to contact and communicate with the potential customers worldwide.

For the clients, the competitive advantage of the online form of advertising is the option of having a constant control over the products they choose, being aware of all advantages and disadvantages of a particular product and its innovative features, while comparing the group of similar products online (Wakolbinger 2009, p. 380).

In the scopes of this dissertation research, it is important to outline the background of the online advertising notions and its key advantages in order to support the core purpose of the following work, stated in the research proposal – the evaluation of the impact of the innovative approach on the online advertising development and the way the effective online advertising may assist the company’s development and its reaching the leadership positions in the particular market, which is changeable and highly competitive.

Currently, there is a set of the definitions of the online advertising, which would be further discussed in the literature review chapter, but in accordance with the most general one, the online advertising is the form of the product or service promotion, which mainly applies the Internet resources for the marketing messages addressing to the potential customers and clients’ attracting. As an example, it is possible to outline the set of the following contextual ads: rich media ads, search engine results pages, blogs, banner ads, interstitial ads, social network advertising, advertising networks, online classified advertising, e-mail marketing, and the e-mail spam in particular. The majority of the above listed advertisements are delivered by the Ad server.

It is also possible to consider the online advertising in the light of the following three components: websites, marketing plan and budgeting, as well as marketing campaigns.

Chapter Two: LITERATURE REVIEW

1.1 Advantages of Online Advertising in the Light of its Historical Development

According to the information presented by Google Inc. (2007) in the Marketing and Advertising Using Google report, the online form of advertising currently joins the marketing mix. It is important to rely on the historical development of the advertising as the tool of marketing in the timeframe of the 20th century. Initially, the advertisers diversified their activity across the set of mediums: print, radio, TV, or billboards in order to promote their services and products. It is possible to consider this diversification as the marketing mix.

After people have started spending significant time on-line, the Internet has become the additional channel of the information sharing and popularization, which, in turn, has been widely applied as the tool for the marketing goods by the advertisers. Such a feature of the World Wide Web (WWW) as its versatility has provided the advertisers with the possibilities of communication, engagement, and interaction with potential clients and customers. The campaigns are produced by the advertisers specifically for the target audiences in the more effective way in comparison to the traditional advertising efforts.

The following new abilities have been provided for the advertisers (Picture 2):

• Possibility of reaching the new niche markets, which have the specific interests;
• Reaching the broad audiences with the single advertising message;
• Reaching the speakers of the specific languages;
• Reaching the large geographic segments.

While taking into account the fact that both the advertiser’s needs and the consumer’s habits have been changed, the lion share of the world leading and successful companies allocate the part of their advertisements and, consequently, the marketing budget in the web. It is possible to state a fact that, at the moment, the online advertising form is the fastest growing advertising category. It is possible to support this statement with Graph 1. (Google Inc. 2007).

Inherent advantages of the online model:

The continued migration from offline classified advertising to the online form of advertising is expected due to the following reasons mentioned below.

• The easiness of use in comparison to the other types of offline advertising. Online ads are constantly updated, user-friendly, broad and deep, targetable, available 24×7 and, finally, they are not geographically constrained. The additional advantage of the online form of the advertising is the fact that the users are provided with an option of easy and fast finding of the product, which would meet the all requirements of the customer (Dreze 2003, p. 15).

It is possible to state a fact that the broad search base/experience is the competitive advantage of Yahoo, and the extensive trading platform, which allows to initiate and to conduct the transactions in one place, is the core advantage of eBay.  Finally, the core competitive advantage of Amazon.com is that it provides information regarding its products and the fact that the customers are provided with the confidence that the products would be definitely delivered to them by a particular company.

To us, the key point is that customer or user pull — rather than seller push — is driving the online classified opportunity, and as broadband and “always on” become more prevalent, we expect this trend to be accelerated.

It is possible to prove the dynamics of the web advertising success in the timeframes of last five (2007-2011) years on the example of e-Bay (one web site) in comparison with all other US newspapers (Graph 2). That is why it is possible to make a conclusion about the rapid development of the online form of advertising and its efficiency for business of the 21-st century.

The listings – Classifieds, Yahoo!, and e-Bay may offer the larger amount of listings in comparison with the offline classified media. It is estimated that, in 2011, the eBay’s US online listings’ size was 7 times larger in comparison with all US newspaper classified ad listings (Graph 2). That is why it is possible to make the following concussions: the majority of the items, included into the e-Bay lists, are considered as more relevant in the light of the Penny-saver markets or weekly shopper. That is why the rate structures of big city newspapers have been significantly lowered. Secondly, it is not possible to carry out the comparison analysis of all the listings. Finally, the last issue is the fact that the rates of ad are not only the function of audience reach, but also this function includes the general demographic characteristics and average income of this intended audience.

• The pricing and value proposition are compelling for sellers. It is possible to state a fact that the prices for classified ads on e-Bay and Yahoo! are lower in comparison with the newspaper ones (Graph 3).

It is not feasible to sell the lower ticket items in the larger newspapers in accordance with the economics of classified advertising. For the items with the high price (autos in particular), it is possible to use the less expensive sales channels than large newspapers like The New York Times. It is more appropriate to price it in line with smaller regional papers like The New Orleans Times-Picayune. Google offers the key word search, and that is why, the very appealing pricing for advertisers may appear.

• There are large and ready audiences classified offerings in Yahoo! and e-Bay (the leading Ecommerce Destinations) due to the fact that they are already the leading ecommerce destinations in the light of the users and usage, per Media Metrix.

According to the statistical data, almost $800 million has been enabled to buy Yahoo! transactions in C3Q via Yahoo! Travel, Yahoo! Shopping, and other related commerce channels, and more than 18,000 stores have been hosted on Yahoo! Network. On the other hand, e-Bay has generated $3.8 billion in the online gross merchandise sales in C3Q, with 60% Y/Y growth (Morgan Steanley 2011, p. 6) (Table 1).

Table 1. e-Bay and Yahoo! — Key User/Usage Momentum Metrics

Source: Morgan Stanley (2011).

It is possible to consider that the distinctive transaction platform for e-Bay and its loyal and increasingly strong customer base imply the compelling opportunity, and in addition, e-Bay has already applied this potential into practice with its rapid inroads in the auto transaction marketplace. In the auto market, e-Bay has become a significant competitive threat for “old media” auto advertising.

Finally, it is possible to make analysis of the selected companies — ranked by estimated revenue exposure to consumer spending and by estimated user exposure to consumer spending (Table 2 and Table 3).

Table 2. Selected Companies — ranked by estimated revenue exposure to consumer spending

Source: Morgan Stanley (2011).

Table 3. Selected Companies — ranked by estimated user exposure to consumer spending

Source: Morgan Stanley (2011).

2.2 3 R’s of Online Advertising: Return on Investment (ROI), Relevance, and Reach

It is important to put an emphasis on the fact that the successful online marketing campaigns are based on the practical implementation of the three R’s of advertising, which are the following: return on investment (ROI), relevance, and reach. The online form of advertising and the AdWords in particular have provided the advertisers with the set of new options in the three above listed areas of the advertising (Wakolbinger 2009, p. 58).

While taking into account reach, it is possible to state a fact that more than 80 percent of people, who use the Internet worldwide, are reached by the Google network. Relevance – the potential is shown to the customers of AdWords, who are looking for the issues, which should be offered by the business. Finally, the return (ROI) applies the analytical tools for the evaluation the effectiveness of the ads and the core issues, which should be corrected (Rodgers 2000, p.88).

2.3. Core Success Factors of Online Advertising

Currently, people are living in the informational society, and the globalization of business via internet takes its place. That is why it is obvious that the online advertising has got the set of advantages in comparison with the traditional forms of advertising, such as TV, radio, press, printed materials, etc.

It is possible to state a fact that the one of the core success factors of the online form of advertising is the immediate publishing of information, which is not restricted or limited by the geographical location (as in the case of the traditional form of advertising). In addition, the advertisers are provided with an option of the interactive advertising emerging area. Finally, it is possible to outline the last competitive advantage of the online form of advertising- customization of advertisements – which, in turn, implies the content and the posted websites. As an evident example, it is possible to consider the Yahoo!, Search Marketing, GoogleAdSense, and AdWords. These programs enable the advertiser to show the ads on the relevant web pages along with the information searched by the user (Danaher 2003, p. 52)

It is important to pay additional attention to the fact that the online form of advertising that may be represented by the set of animation forms. In majority of cases, the online advertising is mainly associated with the e-mail, keyword advertising, several types of banner, in-game, etc. It is located on the popular platforms – such as MySpace, Twitter, or Facebook.

There are different approaches applied in the online advertising process for reaching the niche audience of a particular product or service and to focus the attention of this group on the advertised product. According to the research conducted by Lea Wakolbinger, there is a strong interrelation between the application of the online form of advertising and business revenue growing. It is forecast that, in 2012, the total expenditures for the online advertising in the US would reach $34.5 billion (Wakolbinger 2009, p. 45).

In addition, in the scopes of this dissertation research, it is important to rely on the fact that the internet commerce industry is a rapidly developing one in the current business world. It has been starting from five million Internet users in 1995, and currently, almost everyone uses computers and the internet for getting and sharing the information. That is why it is possible to consider the internet, internet commerce, and online advertising, in particular, as the new, dramatic and wide-reaching technology (Burns 2006, p. 36).

2.4. Core Issues Needed for the Effective Online Advertisement Creation

Joe Plummer considers the online advertising as the one of the most effective advertising methods to be applied in the process of the advertising campaign development and its practical implementation due to the fact that such a method implies the ability of targeting the specific markets in the process of their Internet surfing (Plummer 2007, p. 48).

At the same time, Anja Janoschka (2004) puts an emphasis on the fact that the effectiveness of the online form of advertising mainly and directly depends on the quality of ads. The researcher considers that the powerful advertisement is such an advertisement that has got the correct and attractive headline because only several seconds may be split to grab the attention of the target audience. It is obvious that, in the current competitive markets, the attention of the potential client would be attracted only in the case when it is caught by one of the set of advertisements. That is why the core success factors of being successful in the advertising campaign development, outlined by Anja Janoschka, imply writing the ads with excitement, passion, and benefits (Janoschka 2004, p. 89).

Lambert M. Surhone, Miriam T. Timpledon, and Susan F. Marseken outline the approach concerning the effective online advertising development while applying the following formula (Surhone et al 2010, p. 56).

Anja Janoschka (2004) puts an emphasis on the fact that the powerful headline is the complicated task for the advertiser. The effective and powerful headline forces the sellers’ potential to the clients for learning more about the particular product or service. Such a headline would ignite a certain type of emotions, and the reader would be intrigued for further reading about the particular product or service.

Wai Man Lam considers that, in order to create an effective headline and, consequently, the effective advertising, the set of specific words should be mastered and included into the headline to achieve the specific reaction of a potential client (Lam 2005, p. 73).

Marcella Vurro puts an emphasis on the psychological aspects of advertising and on the core human motivators. The scholar supports such an approach with the Abraham Maslow’s theory known as the hierarchy of needs, which, in turn, implies the fact that the human behavior is an outcome of one or more of five basic needs. Abraham Maslow has listed the needs in a sequence. In literature, it is usually referred as the hierarchy of human needs.  Abraham Maslow believes that until the less important need is satisfied, there won’t be the strong intension for pursuing more important need.

In the scopes of this dissertation research, it is important to rely on the five core human motivators, outlined by Abraham Maslow:

1. Physiological needs. These are the basic human needs, such as thirst, hunger, clothing, shelter, and sex.
2. Safety (Security) needs. These needs imply the human need for emotional, physical and financial security.
3. Social (Affiliation) needs: need for affection, love, acceptance and companionship.
4. Esteem (Self Esteem) needs: need for recognition, achievement, respect, and attention.
5. Self-actualization needs: needs for reaching the full potential.

Consequently, when the advertiser is aware of the core basic human needs and when this knowledge is effectively incorporated into the advertising creation, there is a possibility of appearing of the great headline to the potential customers’ emotions. The core success factor in advertising is to feel the needs of the customers and to understand their desires and wants (Vurro 2006, p. 115).

After outlining the Maslow’ hierarchy of needs in the light of the online advertisement creation, it is possible to rely on the online advertising hierarchy of tactics (Picture 3). Generally, the online advertising tactics should be based on the IYP saturation. The second stage of development is the automated relationship management, and the last stage is the social media involving into the advertising process. Also, there are such intermediary stages as lead generation website search engine optimization, pay per click, and referral based growth.