Commercial Scenarios for the Web: Opportunities and Challenges: Hoffman, Novak and Chatterjee

The potential of the World Wide Web on the Internet as a commercial medium and market has been widely documented in a variety of media. However, a critical examination of its commercial development has received little attention. Therefore, in this paper we propose a structural framework for http://jcmc.indiana.edu/vol1/issue3/hoffman.html (1 of 26)7/22/2006 7:04:48 PM Commercial Scenarios for the Web: Opportunities and Challenges: Hoffman, Novak and Chatterjee examining the explosion in commercial activity on the Web. First, we explore the role of the Web as a distribution channel and a medium for marketing communications. Second, we examine the factors that have led to the development of the Web as a commercial medium, evaluating the benefits it provides to both consumers and firms and its attractive size and demographic characteristics. Third, we discuss the barriers to commercial growth of the Web from both the supply and demand side perspectives. This analysis leads to a new classification of commercialization efforts that categorizes commercial Web sites into six distinct types including 1) Online Storefront, 2) Internet Presence, 3) Content, 4) Mall, 5) Incentive Site, and, 6) Search Agent. The first three comprise the "Integrated Destination Site," and the latter three represent forms of "Web Traffic Control." Our framework, argued in the context of integrated marketing, facilitates greater understanding of the Web as a commercial medium, and allows examination of commercial Web sites in terms of the opportunities and challenges firms face in the rush towards commercialization. Introduction The tremendous growth of the Internet, and particularly the World Wide Web, has led to a critical mass of consumers and firms participating in a global online marketplace. The rapid adoption of the Internet as a commercial medium has caused firms to experiment with innovative ways of marketing to consumers in computer-mediated environments. These developments on the Internet are expanding beyond the utilization of the Internet as a communication medium to an important view of the Internet as a new market (Ricciuti, 1995). The Internet is a massive global network of interconnected packet-switched computer networks. Krol and Hoffman (1993) offer three (mutually consistent) definitions of the Internet : "1) a network of networks based on the TCP/IP protocols; 2) a community of people who use and develop those networks; [and a] 3) collection of resources that can be reached from those networks". Note that there is no agreed-upon definition because the Internet is at once a set of common protocols, a physical collection of routers and circuits, distributed resources, and even a culture of connectivity and communications. The most exciting commercial developments are occurring on that portion of the Internet known as the World Wide Web (WWW). The WWW is a distributed hypermedia environment within the Internet which was originally developed by the European Particle Physics Laboratory (CERN). Global hypermedia allows multimedia information to be located on a network of servers around the world which are interconnected, allowing one to travel through the information by clicking on hyperlinks. Any hyperlink (text, icon or image in a document) can point to any document anywhere on the Internet. The user-friendly consumer-oriented homepages of the WWW utilize the system of hyperlinks to simplify the task of navigating among the offerings on the Internet. The present popularity of the WWW as a commercial medium (in contrast to other networks on the Internet) is due to its ability to facilitate global sharing of information and resources, and its potential to provide an efficient channel for advertising, http://jcmc.indiana.edu/vol1/issue3/hoffman.html (2 of 26)7/22/2006 7:04:48 PM Commercial Scenarios for the Web: Opportunities and Challenges: Hoffman, Novak and Chatterjee marketing, and even direct distribution of certain goods and information services. The World Wide Web as an Efficient Channel Anecdotal evidence suggests that Web-based commercial efforts are more efficient and possibly even more effective than efforts mounted in traditional channels. Initial conjectures on efficiencies generated by online commercial efforts suggests that marketing on the Web results in "10 times as many units [sold] with 1/10 the advertising budget" (Potter, 1994). It is about one-fourth less costly to perform direct marketing through the Net than through conventional channels (Verity & Hof, 1994). This fact becomes especially critical in the face of shrinking technology and product life cycles and increasing technological complexity (IITA, 1994). Consider the example of SunSolve Online , which has saved Sun Microsystems over $4 million in FAQs alone since they "reengineered information processes around the WWW" (Neece, 1995). The Web as an Active Model of Marketing Communications Firms use various media to communicate with their current and potential customers. Marketing communications perform three functions: to inform, to remind, and to persuade (Anderson and Rubin, 1986). The traditional one-to-many marketing communications model for mass media is shown below in Figure 1. In this passive model, firms (denoted by F) provide content through a medium to a mass market of consumers (denoted by C). The first two functions of marketing communications may be performed by a traditional communication model. However, the persuasion function necessary for differentiating a product or brand is limited by the unidirectionality of traditional mass media. http://jcmc.indiana.edu/vol1/issue3/hoffman.html (3 of 26)7/22/2006 7:04:48 PM Commercial Scenarios for the Web: Opportunities and Challenges: Hoffman, Novak and Chatterjee Figure 1. Traditional Mass Media Model of One-toMany Marketing Communications The Internet, a revolution in distributed computing and interactive multimedia many-to-many communication, is dramatically altering this traditional view of communication media. As Figure 2 indicates, the new many-to-many marketing communications model defining the Web offers a radical departure from traditional marketing environments (Hoffman & Novak, 1995). http://jcmc.indiana.edu/vol1/issue3/hoffman.html (4 of 26)7/22/2006 7:04:48 PM Commercial Scenarios for the Web: Opportunities and Challenges: Hoffman, Novak and Chatterjee Figure 2. New Model of Marketing Communications for the Web Figure 2 suggests that the Internet offers an alternative to mass media communication. Some applications on the Internet (e.g., personal homepages) represent "narrowcasting" to the extreme, with content created by consumers and for consumers. As a marketing and advertising medium, the Web has the potential to change radically the way firms do business with their customers by blending together publishing, real-time communication broadcast and narrowcast. As an operational model of distributed computing, the "Net" supports: ● Discussion groups (e.g., USENET news, moderated and unmoderated mailing lists), ● Multi-player games and communications systems (e.g., MUDs, irc, chat, MUSEs), ● File transfer (ftp) and remote login (telnet), ● Electronic mail ("email"), and ● Global information access and retrieval systems (e.g., archie, veronica, gopher, and the World Wide Web). From a business and marketing perspective, the most exciting developments are occurring on that portion of the Internet known as the World Wide Web. In this paper, we present an initial attempt to http://jcmc.indiana.edu/vol1/issue3/hoffman.html (5 of 26)7/22/2006 7:04:48 PM Commercial Scenarios for the Web: Opportunities and Challenges: Hoffman, Novak and Chatterjee organize the commercial activity on the Web thus far according to its business function. We identify two major categories of sites: "Destination Sites," and "Web Traffic Control Sites." Under destination sites, we identify Online Storefronts, Internet Presence Sites, and Content Sites. These comprise the ultimate "destinations" housing a firm's virtual counterpart. The purpose of the Web Traffic Control Sites is to direct consumers to these various Destination Sites. There are three major categories of Web Traffic Control: Malls, Incentive Sites, and Search Agents. We argue for considering our framework in the context of "integrated marketing," in which various communications vehicles are coordinated to create a single, strategically appropriate marketing effort to maximize customer response (Schultz, Tannenbaum, & Lauterborn, 1992; Tynan, 1994). The Web as a Commercial Medium As a commercial medium, the Web offers a number of important benefits which can be examined at both the customer and firm levels. In this way, we can address both demand and supply issues. We discuss the buyer benefits first, followed by the firm benefits. Buyer benefits arise primarily from the structural characteristics of the medium and include availability of information, provision of search mechanisms, and online product trial, all of which can lead to reduced uncertainty in the purchase decision. Firm benefits arise from the potential of the Web as a distribution channel, a medium for marketing communications, and a market in and of itself. These efficiencies are associated with Web technology and the interactive nature of the medium.