Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH 45040 Phone: (800) 423-0563

Part One: Chapter Three Networks “The science of networks has taught us that distance is deceiving. That two individuals can be connected through a short chain of network ties – through only six degrees – is a claim about the social world that has fascinated generation after generation.” Duncan Watts, Six Degrees: The Science of a Connected Age

The Evolving Internet A decade of rapid growth ends with the transition to a more mature market

The Evolving Internet A decade of rapid growth ends with the transition to a more mature market Experienced users more likely to engage in online commerce and upgrade to faster connection services

The Evolving Internet A decade of rapid growth ends with the transition to a more mature market Experienced users more likely to engage in online commerce and upgrade to faster connection services The seasoned user also moves away from exploratory “surfing the Net”

The Evolving Internet A decade of rapid growth ends with the transition to a more mature market Experienced users more likely to engage in online commerce and upgrade to faster connection services The seasoned user also moves away from exploratory “surfing the Net” A shift to deeper connections

Changing Patterns in Global Net Use The declining share of U. S Changing Patterns in Global Net Use The declining share of U.S. Internet users Source: World Bank, U.S. Census

An Information Explosion, On the Go Music, books, x-rays and home videos all contribute to a sea of information

An Information Explosion, On the Go Music, books, x-rays and home videos all contribute to a sea of information Internet users increasingly obtain information from mobile devices

An Information Explosion, On the Go Music, books, x-rays and home videos all contribute to a sea of information Internet users increasingly obtain information from mobile devices Instant messaging and text messaging create new frontier for marketers

An Information Explosion, On the Go Music, books, x-rays and home videos all contribute to a sea of information Internet users increasingly obtain information from mobile devices Instant messaging and text messaging create new frontier for marketers Blogs, podcasts and beyond create new challenges for reaching audience

Age Gap: Email vs. Instant Messaging Internet users who use IM Users who use IM more than email Users who email more than IM Gen Y 62% 57% 19% Gen X 37 16 24 Trailing Boomers 33 18 Leading Boomers 29 7 Matures 25 <1 Source: Pew Internet & American Life Project Training Survey, February 2004

Second Generation Internet The early Internet served basic documents to anonymous users, helping drive widespread use but limiting its performance and security

Second Generation Internet The early Internet served basic documents to anonymous users, helping drive widespread use but limiting its performance and security Second Generation Internet focuses on more descriptive content – the semantic web – and ways to reliably authenticate users

Understanding Social Networks Network connections grow faster than the number of participants

Understanding Social Networks Network connections grow faster than the number of participants Extensive local clustering: friends tend to have the same group of friends

Understanding Social Networks Network connections grow faster than the number of participants Extensive local clustering: friends tend to have the same group of friends Small worlds: connecting any two people on a network with limited steps

Understanding Social Networks Network connections grow faster than the number of participants Extensive local clustering: friends tend to have the same group of friends Small worlds: connecting any two people on a network with limited steps Hubs and Connectors spread information more quickly than other members

Understanding Social Networks Network connections grow faster than the number of participants Extensive local clustering: friends tend to have the same group of friends Small worlds: connecting any two people on a network with limited steps Hubs and Connectors spread information more quickly than other members OK to lose members randomly, but networks vulnerable to deliberate attack

Metcalfe’s Law Growth of a communications network strongly enhances its value Assuming equal value among network members, if v = 1, full value of a conversation is $2 In networks with changing communication value, value rises at a slower rate

The value of a complete network rises rapidly, but not every link shares the same value

Clusters and Connections Within clusters, connections made even more rapidly Any two members can usually be connected with only a few links Kevin Bacon and Six (or fewer) Degrees of Separation

Marketing Value in Networks Networks are most valuable when they are ubiquitious: the power of the ever present

Marketing Value in Networks Networks are most valuable when they are ubiquitious: the power of the ever present Increased speed can transform business

Marketing Value in Networks Networks are most valuable when they are ubiquitious: the power of the ever present Increased speed can transform business Participants expectations are important and can be shaped by publicity and hype

Marketing Value in Networks Networks are most valuable when they are ubiquitious: the power of the ever present Increased speed can transform business Participants expectations are important and can be shaped by publicity and hype Resource sharing benefits knowledge

Marketing Value in Networks Networks are most valuable when they are ubiquitious: the power of the ever present Increased speed can transform business Participants expectations are important and can be shaped by publicity and hype Resource sharing benefits knowledge Greater opportunity for specialization and challenges in branding

Virtual Value Activities Creating value from reams of available information is a key skill in online marketing First step: Gathering Second step: Selecting and Organizing Third step: Synthesizing Fourth step: Distributing