Nothing excites advertisers more than television. It is the primary
medium of communication in our society and an important tool in the
marketer's arsenal. That's why, unlike personal computing, a form that
few advertisers understand today, the mere suggestion that television
may undergo profound change over the next decade strikes interest, if
not fear, in the hearts of those who work in marketing.
Experiments in interactive television today--Time Warner's Full Service
Network trial in Orlando, AT&T's trials with Viacom Paramount, Pacific
Bell, and GTE; Bell Atlantic's Stargazer trial in Manassas, Virginia;
and U S West's trial in Omaha--are all designed to learn more about how
broadband interactivity will affect marketers' ability to use television
to sell goods and services.
Will these trials portend a back-to-the-future scenario in which the
technology is far ahead of consumers' understanding and, more important,
their willingness to pay for innovative new services? Can the network
and service providers construct business models that support the costs
of infrastructure upgrade and equipment in the home? Will content
providers find compelling new ways to communicate? All of these
questions must be answered as advertisers answer the most compelling
question of all: Is this an efficient new selling platform? For if it
is, it will forever change the way goods and services are sold in our
society, the very basis of our capitalist economy.
Mastering the Art of Interactive Marketing
Over time, the integration of digital technology into our lives will
likely force changes in the way companies market and communicate to
customers. Whereas the past fifteen years have yielded only marginal
success in this arena, one could reasonably hypothesize that they were
the start-up years; that, indeed, every new technology experiences
growing pains; and, finally, that we are now on the cusp of much greater
impact.
If so, that impact is likely to be profound, as the media viewers of the
past transform into media users, in full control over their programming
environment. Based on our decade of experimenting with interactive media
in virtually every product category, we see a number of changes on the
horizon.
Advanced networks will create highly fragmented media markets. The
consumer will have vastly increased choice and control over media
options. The notion of consumers having access to 1,500 channels is a
misnomer; over time, the consumer will have access to and control over
only one channel: his or her channel. And one will tailor that channel
to suit one's needs and desires.
Consistent with this, we are moving toward a marketing universe-of-one,
in which the individual consumer self-selects those messages from the
companies with whom one wishes to do business. This, in turn, shifts the
balance of power from the marketer side to the consumer, for consumers
will control a large share of the messages they view.
The universe-of-one focus will change the way media are measured. While
cost-per-thousand models for measuring media value will not disappear,
new measurement techniques gradually will evolve to supplant them around
the idea of relationship marketing.
The move toward interactive systems, where the consumer is in control,
will force advertisers to confront the real consumer impact--both
rational and emotional--of brand advertising. Ultimately, creative
issues--in particular, the need to embellish the brand with greater and
greater levels of information, entertainment, and customer service
value--will become paramount.
The relationship between media and marketers will shift as the new
advertising creativity becomes unbundled from the traditional analog
forms of distribution. In a digital choice-based domain, content
providers will have to build new opportunities for marketers to
participate in program development and sponsorship.
Finally, new, interactive systems could substantially affect the retail
channels of distribution in virtually all categories, from packaged
goods to consumer electronics, so that manufacturers of all kinds,
retailers, and the service companies that support them will
fundamentally alter their relationships.
A (Brief) History of Selling in the Digital Age
To understand the effect that interactivity will have on the marketing
of goods and services in our society, it is important to review both the
small impact it has already had and the historical context in which it
originated.
Consumer interactive services have existed in one form or another in the
United States for more than fifteen years. In all that time, two very
different models have competed for public attention. The first model, an
outgrowth of the telephone and software industries, is based on the
premises that consumers are willing to pay for what they use, that
consumers can ascribe an exact dollar value to it; that advertising
subsidization is unnecessary; and, indeed, that such subsidization is an
impediment to industry growth. CompuServe, the granddaddy of on-line
services, most aptly embodies that model. For many years, until
competitive pressures forced change, CompuServe's pricing structure was
identical to the telephone industry model of pay per use. Thus, users
paid an hourly charge for the service.
The second historical stream is an outgrowth of the media and marketing
industries. This business model makes the assumption that the broad base
of consumers will be unwilling or unable to pay the entire cost of using
an interactive service. Proponents of this school seek to integrate
advertising into the creative product in order to offset, either
entirely or in part, the subscription fees. Of course, free TV in the
United States carries this idea to its logical extreme, and, in fact,
television grew very quickly after World War II as a result. But
magazines and newspapers, to a lesser degree, are also based on the
scheme that advertisers are willing to subsidize consumers' access to
content in return for share of mind. Prodigy, the joint venture between
IBM and Sears, works from that premise.
Throughout the history of consumer interactive services, these two
models have existed side by side, with advertisers and their agencies
participating in the middle.
Early Experiments
The late 1970s saw the birth of interactive services on a worldwide
basis. The British invented videotex and launched Prestel, a new service
of British Telecom. The French initiated the Teletel project, later to
become known as Minitel, after the small terminal device that was to
find its way into millions of French homes and businesses. Canada
started the Telidon project, introducing a graphic standard that is
still being used by Prodigy today. Japan initiated the CAPTAIN project.
Here in the United States, Warner Cable introduced Qube, a nascent form
of interactive television. CompuServe had already been around for years,
as an outgrowth of a commercial time-sharing business, and was offering
text-based information services, communication chats, and adventure
games to customers with terminal devices who were willing to pay a steep
hourly access fee.
It was in this environment that advertising was first envisioned as a
way to subsidize the mass introduction of interactive services. In fact,
the Canadians argued that their Telidon standard, with its advanced
graphics, was the only reasonable one to adopt given the need for
advertisers to display their logos. Meanwhile, the British and French
were arguing that their standard, while less graphical, was far more
efficient--that, in fact, advertising was marginal and that empirical
evidence existed that consumers would pay for information so long as an
inexpensive set-top box could be manufactured. Thus, the premium exacted
by Telidon's advanced graphic capability would inhibit marketplace
growth, logos or not.
By 1980, major media companies in the United States were beginning to
develop their field tests of videotex. Knight-Ridder, Times Mirror, CBS,
Time Inc., and the Tribune Company all saw in interactivity a threat to
their core publishing businesses, and so all began experiments to test
consumer demand, not unlike today's experiments in advanced interactive
television services. Given their heritage in advertiser-supported media,
all of these companies constructed business models in which advertising
played a role. To varying degrees, advertisers and their agencies
participated in those trials. They had little to lose.
The Rise and Fall of Videotex
Based on successful market trials, several videotex ventures were
launched in the mid 1980s. Knight-Ridder offered Viewtron; Times Mirror
began marketing Gateway. A consortium that included the Tribune Company
offered Keycom. During that time, IBM and Sears would begin to join
forces with CBS to plan Trintex, later the Prodigy Service.
This was the heyday of videotex. The major advertising agencies each
formed a new-technology unit to help their clients evaluate the many
proposals coming at them from the videotex providers. Each of these
providers hired media sales staffs and attendant production services to
work with the agencies, anticipating that the huge new interactive
medium would spread from coast to coast.
But the best intentions of everyone fell flat as consumers
overwhelmingly rejected the offers that the early videotex providers
were making. For the most part, videotex was met with a big yawn--a
technology looking for a problem to solve--and as quickly and boldly as
the big players materialized, so now they would fade away, leaving
advertisers stung by false promises.
Kiosks and Discs
As videotex failed, the pay-as-you-go model of interactivity continued
to march forward. CompuServe, while growing slowly, was now beginning to
reach hundreds of thousands of personal computer users. Quantum
Computing Services, which would later evolve into America Online, began
Q-Link for the fast-growing, Commodore 64 marketplace. Delphi, another
early entrant, would also appeal to computer hobbyists. And GE
Information Services would create GEnie, essentially a clone of
CompuServe. None of these efforts would be advertiser supported.
As a reaction to the videotex debacle, advertisers and their agencies
generally exited the interactive industry. There were exceptions, and
basically these could be found in two areas: public kiosks and computer
software.
Public kiosks could incorporate videodisc players, printers, and even
touch screens to enhance ease of use. IBM, Sony, and NCR all introduced
integrated kiosk hardware. Campbell Soup and Kraft General Foods both
placed kiosks in supermarkets to offer consumers recipes, coupons, and
cooking videos at the point of sale. Ryder Trucks placed kiosks in
shopping malls to provide rental information and take orders. Sears
created the Gift Sender kiosk so that consumers could order and send
gifts from convenient locations. Florsheim and Buick placed kiosks in
their showrooms to help salespeople guide customers through the product
selection process.
Other kiosks were placed in airports, and advertisers were asked to
participate in exchange for the opportunity to offer free information to
travelers. For the most part, these kiosk ventures came to very little,
because the costs of installing and maintaining the units outweighed the
business benefits.
Meanwhile, more and more companies were using PC diskettes to deliver
interactive advertising or marketing messages. Technology companies had
been putting out demo discs since the invention of personal computing,
but it wasn't until the mid-1980s that The Equitable, a large financial
services company, working with Ogilvy & Mather and a small start-up firm
called Interactive Picture Systems, produced A Friend in the Business,
the first fully interactive PC-based software diskette.
Of course, technology companies like Microsoft and AT&T had long used
discs to sell their products. But others, notably such automotive
manufacturers as Ford, Buick, and BMW, were now using discs to sell
cars. While still minuscule in media terms, some advertisers were at
last beginning to view interactive media as a legitimate selling medium.
Finding the Right Medium for the Message
During the past four years, the personal computer has moved into the
mainstream of American life, but it has done so based on the pay-per-use
model and not as an advertiser-supported medium. With the exception of
Prodigy, none of the on-line services has yet broadly adopted
advertising as a legitimate content area. CompuServe and GEnie both have
small direct selling areas, called malls, but these can hardly be viewed
within the mainstream of their respective businesses. Software, whether
on floppy disc or CD-ROM, is sold like books. The user pays for the
product and does not expect to see advertising either on the package or
embedded in the software itself.
The past four years--particularly the past two--have witnessed the
reentry of major newspaper and publishing companies into the on-line
world. After the decade-long hiatus that followed the videotex debacle,
these companies are once again dipping their toes into the on-line
waters. So far, advertising remains on the sidelines of these
activities, as companies attempt to learn how to appeal to an on-line
user. But everywhere there is talk of incorporating some form of
marketing into the mix.
With the incredible boom in CD-ROM sales during the past two years,
companies have also begun to test direct sales via CD. EnPassant,
created by an Apple consortium, tested a catalog on CD last year. Three
other CD-ROM-based catalogs are currently planned. And CD-ROM magazines
also are being introduced. The first one of these, created by Newsweek,
incorporated advertising as well.
So the stage is now set in the personal computing arena for many forms
of interactive marketing to emerge in the marketplace through on-line
services, fixed media such as CD-ROM, and new hybrid forms that will
combine both. Still, at best, this remains a marginal activity on the
marketing landscape.
All of the foregoing points to a chaotic state in the marketing and
media businesses for the next decade. Above all, consumers will be
barraged by changing technologies and service options. Clearly, for
those who can work within such uncertainty, there will be unprecedented
opportunity.
Sidebar 1
What Is Advertising, Anyway?
"Advertising is nonpersonal communication of information usually paid
for and usually persuasive in nature, about products, services, or ideas
by identified sponsors through various media."1
By the above definition, what a lot of people are objecting to isn't
advertising at all, but publicity, public relations, or just plain
flackery. As a professor of advertising and a former practitioner of the
art, I point out to people that advertisers usually pay for their media.
The word "usually" is inserted into the definition to give recognition
to the millions of dollars' worth of public service advertising that is
donated by advertisers and the media each year.
Another key element in this definition is the phrase "identified
sponsors." This, too, is in the definition to help differentiate
advertising from other forms of persuasive communication, such as public
relations, publicity, and propaganda.
One might think that I am splitting hairs, but saying that advertising
and public relations are all the same thing is like saying that biology
and botany are the same thing.
This is why it's important to remember that true advertisers aren't
going to be flooding the Internet with ads. Advertisers cherish the
control they have of being able to carefully place messages in the paid
media in specific times and places. They also cherish that that kind of
placement is measurable in terms of audience size and response.
Advertisers would give up such control by placing messages on the
Internet--as it is now.
To be sure, there are unscrupulous individuals and rank amateurs who may
see the Internet as a cheap way to place uninspired messages before a
lot of people, but until it evolves into a more systematic structure,
it's doubtful that the Internet will soon be a major advertising medium.
Endnote
1. William F. Arens and Courtland Bovee, Contemporary Advertising, 5th
ed. (Burr Wood, Ill.: Irwin, 1994).
By Charles Pearce, Associate Professor, A. Q. Miller School of
Journalism and Mass Communications, Kansas State University
Sidebar 2
Building Relationships on the Net
With commercial businesses waking up to the fact that electronic
networks reach millions of people educated and wealthy enough at least
to have E-mail addresses, the dilemma is how to sell to that audience
without running the risk of flaming, as happened recently to a law firm
that angered many people who honor the netiquette of Internet protocol.
In that instance, a husband-and-wife law firm that had sent promotional
messages to 6,000 bulletin boards found itself scorched by thousands of
flame-mail messages. Undaunted, the firm started a business called
Cybersell, in order to do for others what it managed to do for itself--
at $500 a pop.
On the other end of the spectrum, three new enterprises offer the
opportunity for commercial entities to provide information on their
products and services in clearly designated market stalls on the
Internet. This approach allows electronic browsers to make the decision
to interact with an advertiser, rather than subject browsers to the
networked equivalent of the 6 p.m. junk phone call.
MecklerWeb, a new venture of Mecklermedia, provides a location on the
Internet for conducting commerce. Recognizing that traditional
advertising rests on assumptions about mass markets that do not
translate to the networking medium, MecklerWeb is promoting the notion
of corporate presence on the Internet, with the goal of building real
relationships with self-selecting micromarkets. Domain areas, such as
arts, business to business, education, finance, law, manufacturing, and
medicine, provide opportunities for companies to engage those audiences
in substantive communications on relevant issues and opportunities.
Educom is a charter member of the MecklerWeb enterprise.
CommerceNet is operated by a consortium of major Silicon Valley users,
providers, and developers. The core companies involved are BARRNet,
Enterprise Integration Technologies, and Stanford University's Center
for Information Technology. By providing affordable, high-quality
Internet connections for companies and individuals throughout northern
California, CommerceNet aims to revolutionize the way most Bay Area
companies transact business, regardless of their size or business focus.
In addition to connectivity, CommerceNet provides its commercial
customers with on-line directories, value-added information services,
security and remittance services, and an intuitive multimedia user
interface that guides customers through the arcane process of doing
business on the Internet.
Meanwhile, in a third venture to provide politically correct commercial
access to the net, the Internet Company has created a new collection of
newsgroups called "market.*" within the Usenet News Service. Advertisers
can distribute purely commercial marketing information--advertisements,
price lists, and promotional offers--to the appropriate news group, each
of which will be moderated by members of the Internet community to
control the quality of the service. The initial collection of news
groups will focus on Internet-related products, services, publications,
access providers, and events. Future additions will include forums to
discuss and advertise consumer, business, and computer-related products,
services, and publications.
The knowledge and experience gained from these three projects, and
others like them, will provide a solid foundation to build on in using
the vast resources of the Internet for the mutual benefit of commercial
entities and their potential customers.
As senior vice president of advertising firm Ogilvy & Mather, Martin
Nisenholtz manages one of the largest multimedia development groups in
the country.