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AM: Is online commerce where its at?

To:     <ad-market@netpreneur.org>
Subject:     AM: Is online commerce where its at?
From:     "Mitch Arnowitz" <marnowitz@morino.org>
Date:     Fri, 10 Oct 1997 15:16:11 -0400

Folks:

There has been much written in this column lately about the convergence of advertising 
into sales, real dollars being made (or not..) and overall online commerce opportunities. 
In light of recent global deals and regardless of what sector you travel in (consumer, 
business, etc.), I thought it made sense to share the following short piece on emerging 
Internet marketing & commerce by Michael Tchong. 

Michael is the founder of CyberAtlas ( http://www.cyberatlas.com/ ) and 
MacWEEK. Michael also pushes out an excellent weekly broadcast; ICONOCAST. 
Subscription information follows.

** I am curious about YOUR recent experiences. For those of you that sell, are you seeing 
an upswing in online activity? Do you agree with the experts here that selling online is quiclky 
where we're heading? Are you using advertising to brand or make direct sales? Do you think 
the opportunity is supported by the technology (or visa versa)? Will tthe WDC Internet 
advertising community benefit from recent local online activity (big players, yellow 
pages, newspapers, etc. quickly coming to market)? 

If the pundits are right here, it might make sense to compile a regional FAQs, based on your 
experience. Or maybe we get one of the "experts" to offer up advice to our ad/markemting
community...Enjoy this positive piece, have a warm weekend (Janet has already told me that 
Sunday's going to be beautiful and that I will be unplugged...), and please address your
responses here to the group.

BTW, this piece sorta refutes the recent, much publized IAB report on banner ad 
effectiveness, doesn't it?
================================================================================================

The following comes courtesy of  1997 ICONOCAST.
SUBSCRIPTIONS: send a message to majordomo@iconocast.com with the following 
command in the BODY of your message: subscribe iconocast
  
HONG KONG IN CYBERSPACE
~~~~~~~~~~~~~~~~~~~~~~~
A few months back, Yoyodyne CEO Seth Godin sent ICONOCAST
this graphic scenario: "Advertising is not the driver,
because it's inherently a soft, mushy, me-too expenditure.
Slow to scale, slow to drop off, filled with lemmings.
Commerce, on the other hand, is gasoline and a match.

Once someone can make a buck, 10 people try to make a buck.
I fearlessly predict that once we flip the inflection point
on e-commerce, it explodes. Massive price wars. Massive
promotional expenditures. Huge new businesses starting
overnight, reaping profits and then being absorbed.

Hong Kong in cyberspace."

We may have already passed the executive inflection point
judging by all the recent activity. The long hot summer
started with Auto-by-Tel agreeing to pay $6 million per
year to be America Online's exclusive car-buying agent.

On July 2, Gary Arlen predicted that this Christmas season,
retail sales would exceed $500 million dollars, equivalent
to the whole industry last year. The search engines jumped
into action when Excite announced a "multi-million dollar"
deal with Amazon.com on July 7.

On July 22, IDC stunned marketers with a revised forecast
that had e-commerce soaring almost a hundredfold from $2.6
billion in 1996 to $220 billion in 2001. To better grasp the
intent and spirit behind this prophecy, one need only glance
at ICONOCAST's consensus forecast:

------------------------------------------------------------
Consensus forecast*     1996    1997    1998    1999    2000
------------------------------------------------------------
Consumer transactions  $570M   $1.1B   $2.5B   $6.0B  $13.8B

* Source: 1997 ICONOCAST. Based on Cowles/Simba, Forrester,
  Jupiter Comm., Paul Kagan Assoc. and The Yankee Group.

IDC claims these projections are based on 40,000 interviews
in 17 countries. The company believes that the market will
expand dramatically due to "Net-friendly non-PC gadgets and
tools and devices such as hand-held electronics products and
televisions." [On July 29, Paul Kagan Associates seconded
that last notion.]

On July 25, Microsoft announced that Expedia sales exceeded
$2 million per week. That same day, thousands of miles away,
a poll of Spotlight 97 attendees revealed that 58 percent
voted transaction capability the primary Net money-maker.

On August 20, Lycos matched Excite with a cross-promotional
tie-in with BarnesandNoble.com. J. D. Power and Associates
reported on August 27 that, thanks to the Web, the number
of people who use shopping services to buy a car almost
doubled, to 20 percent.

Capitol Records became the first major studio on Sept. 8 to
begin selling a Liquid Audio version of Duran Duran's new
single, Electric Barbarella, for $1.99. More deals followed,
including Preview Travel and Excite for $15 million, The Hub
and Tower Records, CUC and Match.com. Finally, on Sept. 15,
Excite produced a double whammy by signing up
BarnesandNoble.com for WebCrawler.

Bottom line: The pace has picked up dramatically, as it
should. E-commerce is the end-goal of most advertising,
which is to sell something. The intense interest in cost-
per-sale ad pricing points to the confluence of advertising
and e-commerce. Given that sales are much more tangible,
and less subject to argument, than impressions, this will
greatly benefit the nascent Internet ad industry.

Lifetime customer value -- Once you have a customer,
never let him/her go. A study of seven sites by Binary
Compass Enterprises shows that "new shoppers" on a site
spent an average of $127, while repeat visitors spent
almost twice as much, $251. Companies that are adept at
this today include PC Flowers, Preview Travel and
Seattle Filmworks.

E-commerce merchants are developing creative marketing
techniques to boost sales. Preview Travel, for example,
e-mails travelers a "welcome home" message. In the future,
these messages will sell services to returning travelers.

But challenges remain. Neither Excite's or Lycos' contextual
book searches appear to be working. CUC's netMarket prevents
customers from specifying a shipping method. And all servers
are groaning under the weight of excessive data transfers.

Traditional catalogs have yet to make a complete transition.
Crutchfield has a nice catalog but its site offers virtually
nihil. Hello Direct is also not what it could be. Not
surprisingly, IDC says the need to get sites functional is
creating a huge demand for professional Web consultants.

_____________________________________________________________________
Mitch Arnowitz marnowitz@morino.org      Advertising/Marketing Discussion Group
Business Development 	               	  http://netpreneur.org/connect/am
PKW Netpreneur Program 	               v 703.620.8971
http://netpreneur.org                                  f 703.620.4102
_____________________________________________________________________
                                                             



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