# ADVERTISING AND ONLINE PUBLISHING - E-Commerce Concepts

Reasons expected for the increase in Advertising spending

Shorter Access Times

As more bandwidth becomes available, users will spend a larger proportion of their time on Web sites and a smaller proportion waiting to access them. With more time available to draw users’ attention, advertisers should be willing to pay more per user to place their icons in online periodicals. Shorter access times also enable increasingly complex graphics to be placed on Web sites, without requiring additional access time. This should draw to the Web advertisers who may have been concerned that the current graphical quality was insufficient for displaying their products. With more advertisers, advertising rates should rise.

Reduced Access Fees

New Internet users will be attracted by reduced ac-cess fees, with part of the reduction covered by advertisers. The cost of the access fee itself can be shared by an advertiser if, for example, the advertiser pays for the access time used when accessing online yellow pages.

As the amount of information online increases, it should be increasingly important for advertisers to get users to their sites quickly, leading them to pay more for placement in online periodicals.

Increasingly Valuable Information

Product descriptions can be enhanced through online advertising. With more information available, the decision to purchase should be easier and more purchases should occur (assuming the product is desirable). This should boost the appeal of the Web and increase the rates that advertisers could be charged for placing their icons in an online periodical.

Product advertising is far more effective if it leads to a purchase. If online advertising encourages users to shift a portion of their purchases to the Web, then companies may pay far more to advertise. However, a measurement system will not be useful until:

1. an online publisher can use it to determine advertising rates and the appeal of its articles, and
2. an advertiser can use it to justify the cost of promoting a Web site, maintaining a Web site, and placing a site -linked icon in an online page.

Despite the popularity of advertising on Web sites, few publishers have attempted to measure how many advertising dollars are being spent. There are three reasons for this:

• The market is too small to justify the cost of measuring its size.
• There is not a clear definition of what advertising expenses should be counted.
• Spending can be the amount that advertisers pay other Web sites such as

periodicals and games to display their icons or product offerings. The market is changing too rapidly to develop an effective means of measurement. Effective measurement of online advertising is taking centre stage. It was reported in MediaWeek [MW96] that Procter & Gamble was ready to spend some of its $3.3 billion ad budget to advertise on various Web sites. However, the packaged goods giant told the online publishing community that it will compensate the ad banners it buys only on a “click-through” ba-sis. In other words, standard impressions-delivered when an Internet surfer sees an ad banner but does not click on it to connect to a Web site -are considered to have no value by P&G. The anticipated P&G strategy, a sharp departure from the industry standard which measures hits ,has sent a shiver down the spine of many ad sales executives. The concern was that other advertisers will follow P&G’s lead. Digital Copyrights and Electronic Publishing Intellectual property rights (copyrights, trademarks, and licenses) are an important asset possessed by the publishers in their respective markets. Protecting intellectual property rights and collecting dues from online users is proving to be quite challenging. The scope and magnitude of the problem is clear. The potential of online copyright infringement vastly surpasses the damage that can be inflicted with a photocopy machine. Anyone with a computer can make and distribute countless copies of anything digital, be it a book, a TV or computer program, or a piece of music. Even worse, the digital version can be sent to friends or even a bulletin board system (BBS) for downloading by anyone with a modern. Advances in technology have raised the stakes considerably. Today, virtually any work can be “digitized,” archived, and used in the digital format. This increases the ease and speed with which a work can be reproduced, the quality of the copies, the ability to manipulate and change the work, and the speed with which copies (authorized and unauthorized) can be “delivered” to the public. Works also can be combined with other works into a single medium, such as a CD-ROM, causing a blurring of the traditional content lines. The establishment of high-speed networking makes it possible for one individual, with a few key strokes, to deliver perfect copies of digitized works to scores of other individuals. In short, the emergence of the Internet is dramatically changing how consumers and businesses deal in information and entertainment products and services; as well as how works are created, owned, distributed, reproduced, displayed, performed, licensed, managed, presented, organized, sold, accessed, used, and stored. All of this has led to a clarion call for changes in the copyright law. The stakes are high. Owners of copyrights are not willing to put their interests at risk if appropriate protections are not in place to permit them to set and enforce the terms and conditions under which their works are made available online. Likewise, the public will not use the services avail-able and create the market necessary for online publishing’s success un-less access to a wide variety of works is provided under equitable and reasonable terms and conditions, and unless the integrity of those works is assured. Online Copyright Protection Methods Unauthorized access to published content can be restricted by two methods: 1. Restricting access to the source of the work. This includes controlling Web server access or controlling individual document access. 2. Restricting manipulation of the electronic file containing the work. Electronic Commerce and Online Ppublishing The Web may have blossomed because of peer-to-peer publishing, but judging from recent product offerings, there is an enormous groundswell of interest among both commercial and corporate publishers in the Web. For instance, it was reported that, in less than three months, the Wall Street Journal Interactive Edition attracted 500,000 registered readers on the Web, and that number is growing by some 3,000 readers per day. Also, the electronic edition has attracted more than thirty advertisers paying to reach this audience. Initially, growth in the online publishing marketplace was driven by the potential of new interactive technologies and applications. The promise of new interactive publishing captured the imagination of both content providers and the public. However, from 1993 to 1995 much of online publishing was inhibited by a lack of business purpose. At that time, the con-tent creation side of online publishing was dominated by techno-savvy individuals who were not experienced at selling and who did not under-stand the business of publishing. In addition, there were publishing companies who took a “Just Get Me on the Web!” approach, failing to define the business purposes driving their online presence. As the initial euphoria wore off, publishers realized that simply having a presence on the Web did not guarantee profits. They discovered that offering exciting technology without compelling content is insufficient to capture market share. These firms are learning that the best way to capture consumers’ attention is to develop a business model that allows the company to offer unique and valuable information, programming, and services. This content, no matter how it is delivered, must be packaged so that it provides more value than alternative sources of information. The key is to identify what the customer wants and finds interesting and to avoid being distracted by new technologies. Publishers need to pay more attention to their core competency of packaging and delivering content and making money online. These are tricky but necessary conditions to successful online publishing. Many online publishing pioneers have gone up the technology curve and are confronting tough management questions such as how to gain market share and how to be profitable sooner than later. Some of these firms have invested tens of millions of dollars in people, equipment, and marketing, and they have not yet turned a profit. Some of the sites employ hundreds of people, with millions of dollars in payroll alone. Many early pioneers invested a huge amount of money into brand building, marketing, and content, but they have not been able to figure out which business model works best for making money. Online publishers are developing new business models to charge customers directly and convince them that such charges are justified. As more and more firms begin to offeronline content, they are being forced to adjust to new customer attitudes regarding pricing. Publishers currently finance their businesses by offering advertisers mass markets for delivering their message in return for large advertising fees. The public has been trained to think that the news, information, and entertainment they receive should be subsidized or nearly free and that advertisers will pay the bill. This approach may not be viable in the online medium when mass markets are re-placed by customers selecting their information and delivery methods. The early online publishing pioneers are trying to accomplish a difficult feat. Newspaper and magazine publishers, some of the first to stake their claims on the Internet, are tinkering with new advertising models for their fledgling Web sites. In general, mainstream advertisers have been skittish about pumping money into a medium with an audience whose size and habits are nearly impossible to figure out. As a result of relatively low ad revenues, none of the Web publishers have turned a profit. While ad revenues are not coming close to covering expenses now, they could grow substantially in coming years as the traffic increases and brand names become established. Brand development is important because every time a user sits in front of a Web browser, she needs to make a decision about where to go. The better the brand, the more likely it is to pop up in the consumer’s mind another key issue in online publishing relates to digital copyrights. Effective technological protection mechanisms are vital to ensuring the availability of quality content online. Today, publishers such as Addison—Wesley only offer catalogs or sample selections of works available online. They do not and cannot offer more because in an environment where the culture and technology provide so little protection for the rights of content producers, there is too great a risk to their intellectual property. The Internet makes it extremely easy to copy, retransmit, and alter works without the permission or the copyright holder. Moreover, the digital world has no international boundaries, and policing is impossible since the levels of protections and sanctions against infringement vary widely in countries across the globe, which makes the risk even greater. Online Publishing Strategies As with any new development, there are generally three strategies for publishing companies to consider: Early Movers These are highly skilled independent publishers with existing access to such key capabilities as direct marketing and order fulfilment. These publishers have the capacity to derive the highest benefits from new media as their learning curves are much shorter than others, and they already have many of the necessary resources at hand. Watchers These are large publishing companies that employ scale-sensitive economics. They are unlikely to view online publishing as a sufficiently attractive channel until costs fall and distribution widens. This category includes publishers of unbranded or less distinctive content who cannot attract a sufficiently large initial consumer franchise, as well as fo-cused publishers in categories not easily suited for the online medium. Testers These are the majority of publishers that face either attractiveness and/ or skill challenges. Gathered here are many multi category and specialty publishers who are competing successfully in traditional markets, who are uncertain who will win in the online marketplace, and who neither need nor want to make a choice now. Testers also include branded general publishers with robust consumer franchises and attractive distribution channels already in place. For this group, the online medium appears to be an alternative. In general, publishers are educating themselves about the potential opportunities without committing themselves to anyone position. Those with strong brand images and existing consumer franchises may choose to post-pone entry until they find viable service providers and distributors. Publishers such as the Wall Street Journal and New York Times are taking part in targeted tests and pilot projects aimed at learning what online publishing has to offer, building required skills, and exploring the attractiveness of potential channels. These tests often include a skill-building program as well as an early warning system so that a company can quickly identify and re-act to changes within the industry or economy. Content, incentives, service, quality, and price will not be enough to compete in this new environment. Speed of delivery, bundling of products, and diversity of choice also become critical success factors. Publishers will have to innovate constantly and challenge present concepts if this form of commerce is to become widely accepted and popular. Winning in online publishing will entail developing new skills in areas such as tailored advertising,order processing and fulfilment, and customer service as well as re-learning the fundamental principles concerning why people subscribe. Online Publishing Approaches There are four contrasting content publishing approaches. • The online archive approach. This is new to the Web, but is a logical extension of the trends in electronic delivery over the past several years. • The new medium approach. This is more controversial and more difficult toimplement, but also more exciting. • The publishing intermediation approach. This is an online extension of the thirdparty publisher role off-line. • The dynamic and just-in-time approach. In this approach, content is assembled in real-time and transmitted in the format best suited to the user’s tastes and preferences. The Online Archive Approach The online archive approach (including bibliographic databases and full-text search/ retrieval services) is one that appeals to corporate publishers and, to some extent, commercial publishers (such as academic or journal publishers) who have an existing digital archive that they want to deliver over the Web as well as on paper, CD- ROM, or other media. The most prevalent example of online archive approach is library catalogs and bibliographic databases. Most libraries have replaced traditional card catalogs with sophisticated electronic online bibliographic databases offering an incredible range of functions. At revenues of over$1 billion a year, bibliographic databases represent a sizable chunk of the online data-base market.

An example of a bibliographic database is MEDLINE, developed by the National Library of Medicine (NLM), which caters to an increasing number of physicians who rely on online medical databases to keep up to date with the latest developments and literature. The spread of PCs has enabled physicians to directly search databases used only by librarians in the past. MEDLINE and other medical databases are available free of charge on the Internet.

The online archive approach is also being used by niche publishers such as Ziff- Davis, which began its venture into electronic publishing in .1985 with a bulletin board system for readers of PC Magazine. That bulletin board evolved in 1988 to become PC Mag-Net on CompuServe, which quickly grew in popularity. In 1991, Ziff-Davis created the ZD Net subscription service on CompuServe to provide a service supporting online versions of all its publications.

Members of the ZD Net/CompuServe edition have access to several features, including the ZD Net University series of comprehensive online “continuing education courses, sophisticated on-line forums with top industry personalities, and a comprehensive database of past articles. In addition to its successful CompuServe subscription ser-vice, the ZD Net Web Edition logs access by more than 700,000 Internet hosts each month and is reportedly showing a profit.

The New Medium Approach

The new medium approach (including real -time news delivery, personalized news delivery, and edutainment) aims to create new material for the Web-to treat the Web as its own medium, one deserving its own material. This approach will have the most appeal to commercial print publishers, such as magazines, that view the Web as an alternative, not a replacement, for print publications. For example, Wired magazine sees very little crossover in content between its magazine and its HotWired venture. Some writers may write for both media, but separate content streams will be developed for each medium.

This approach currently has some teething problems because of technological limitations. For instance, the formatting limitations of the Web are frustrating at the moment, but with technological advancements they will soon be forgotten. The frustrations are more than offset by the excitement of the interactivity the Web offers; its model is both broadcasting and conversation at the same time. With online publishing there may be a well-known starting point, but with no controlling gatekeeper, the subsequent value-added improvisation from readers makes each online magazine a unique experience.

Even if the technology constraints were overcome, the expectations of the Web are so different from print media that new content, written for a Web audience, must be created. It quickly becomes apparent that under this model, the old paradigms do not work. The publisher gives up not only its brand name, but its intellectual content, too-once the information is out there, it is no longer, owned. Faced with that model, all a publisher can do is “be the first with the most interesting stuff,” an approach that HotWired is taking in its attempt to create a place where readers can see what the world has to say on a minute-by minute basis.

The Publishing Intermediation Approach

The publishing intermediation approach (including online directories) exploits new service opportunities for intermediaries. For example, in the growing market for educational material such as course packs and other customized books, companies offering material owned by more than one publisher face the daunting task of obtaining permissions. New organizations that specialize in the management of copyright clearance are emerging as key players.

Online directories are important for several reasons. Companies and consumers interested in conducting electronic commerce often struggle to navigate the Internet to create an electronic marketplace. Once on that sprawling network, they are having trouble finding other companies, products, and services. The success of Yahoo’s initial public offering (IPO) underscores the importance of online directories. Yahoo (which stands for Yet Another Hierarchical Officious Oracle) was created in 1994 by David Filo and Jerry Yang, two Stanford, University electrical engineering PhD students who began DY simply compiling lists of their favorite Web sites. It went on to become one of the most popular means of navigating around the Internet.

Yahoo is the first place millions of Internet users go when they try to find their way around the rapidly growing Internet. At one time, Yahoo was getting about 6 million visitors per day, which made it the second most active Web sitenext to Netscape’s home page.

Clearly, there will be a demand for intermediation because there will al-ways be a need for a good directory to help people locate goods, services, and products. The future is bright for the publishing intermediaries who offer ease of operation, speed, and detailed information.

The Dynamic and Just-in-Time Publishing Approach

Online content is no longer static information. Content can now be created in realtime and transmitted on the fly in the format best suited to the user’s location, tastes, and preferences. More importantly, the content engine recognizes repeat visitors to a site and configures the Web pages to match the individual’s known preferences. For example, a publisher planning to deploy a large product catalog will no longer have to author and update each individual Web page. Instead, the elements of each page-text, graphics, video, and sound-are stored separately in a database and used to create individualized pages on the fly as each user browses the site.

The page content can be further customized to reflect which Web browser is being used, the user’s geographic location, and modem speed. Another way of looking at dynamic publishing is that it is just-in-time publishing. That is, the stories, applets, and content flow into the computer just as consumers need them, and then self-destruct after usage.

A number of micro payment schemes are emerging. The world of online entertainment-specifically “pay-for-play” outlets being developed by Sony, Sierra On- Line, and others-could serve as the best model for every-one else [PCW96]. Clearly publishers and developers should be thinking about low-value payments, but it is still too early for most companies to de-ploy. For micro payments to work, transaction costs must be very small (around 10 cents), and they are nowhere near that yet. What is more, the proposed schemes vary widely and many kinks in the micro payment puzzle have to be worked out.