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Untangling the Web: First of a Three Part Series

Untangling the Web: First of a Three Part Series

Murray Raphel

SUMMARY BOX

* According to Price Waterhouse Coopers, less than $2 billion was spent on Internet advertising in 1998. But current predictions state that spending will increase to $22 billion by 2004.

* If predictions prove to be correct, more money will be spent on Internet advertising than on magazines, newspapers, TV, radio and direct mail.

* In 1998, the number of Internet users was 60 million. By 1999, the number of Internet users had jumped to $100 million and sales jumped to $12 billion, or a 100 percent increase in one year.

Part One of Three

AUTHOR’S NOTE: How do you explain, understand and make sense of the Internet? And what does it mean to art galleries and frame shops? Books and specialty magazines spring up overnight and statistics change daily, if not hourly.

In order to make sense of all this information, I researched where the Internet began, where it is and where it is going. I edited a tremendous amount of information down to three columns. It’s difficult to be comprehensive in a field that changes so quickly. But, for now, here’s what I found out.

The time was the summer of 1994. The place was the Digital World Trade Show in Los Angeles. The speaker was Jim Clark, co-founder of Mosaic Communications, and the theme was “The Future of Marketing.” He said the Internet (what was that?) would be the “next big thing in communication.”

The audience gave a collective yawn as they left to attend another session on something they felt far more important: Interactive T.V.

They should have paid closer attention. With revenues projected by Forrester Research to be as much as $33 billion within the next two years, the Web has achieved the fastest critical mass of any advertising medium of all time, according to a U.S. Commerce Department study.

Traffic on the Internet doubles every 100 days. To acquire an audience of 50 million it took radio 30 years, computers 16 years and TV 13 years. It took the Internet four years.

And so my first question is …

What Is the Internet and Where Did it Come From?

The story of the Internet began more than 30 years ago with the Defense Department Advance Research Projects Agency Network who created the first computer network (ARPANET). They sent text messages between government and university scientists in California and Utah. And then, on Sept. 2, 1969, about 15 people were in the room on the UCLA campus when Scientific Data Systems Sigma 7 became the first computer to plug into ARPANET, which later morphed into the Internet.

UCLA’s Professor Leonard Kleinrock made a prophetic statement in a news release: “Computer networks are still in their infancy. But as they grow and become more sophisticated, we will probably see the spread of computer utilities which, like present electric and telephone utilities, will service individual homes and offices across the country.”

In the 1970s, Gordon Tucker was a brand manager at Procter & Gamble with three young marketers promoting brands, including Pringles and Duncan Hines. The three young employees went on to found some of the most successful Web sites. Steve Case founded America OnLine, Meg Whitman is c.e.o. of eBay and Andrew Parkinson founded Peapod. “Brand building mentality has come to the Internet” said Tucker, now c.e.o. of Egreetings.com.

The World Wide Web was introduced in 1989 by Tim Berners-Lee, a computer scientist trained at Oxford and working at CERN, the European Particle Physics Laboratory in Switzerland. His goal was to aid communities between physicists working in different parts of the world for the European Laboratory for Particle Physics (CERN). Networked e-mail was introduced in 1972.

About the same time, Marc Anderson, a student at the University of Illinois, developed the “browser.” Now you could look at Web material online. The advertising folks looked at this new idea and thought, “Hmmm, is this the future of advertising?” Or, at the very least, a newly discovered media?

One of the first giants to step into the arena was Time Warner with a test in Orlando. But all the pieces were not there. The cost of wiring individual homes was prohibitive. The modem speed was too slow. The ad agencies said, “Hmmm, maybe we were too optimistic.”

And then, in 1994 a national consumer product–Coors’ new beer brand–was the first to make it to the computer screen as www.zima.com

At last! Success!

But nothing happened.

McDonald’s tried a different approach–to “talk” to people rather than “advertise” to them. Working with AOL, it ran ads in USA Today asking people to log on. More than 500 did. (Today McDonald’s.com, and its complimentary site, happytoys.com, receive four million hits a week.)

Now the ad agencies said, “Hmmm, let’s take another look.”

1994: The Year It Came Together

Jerry Yang and David Filo, students at Stanford University, developed the first search engine and then started a company called Yahoo. A few months later came Wired, the first online magazine with 12 advertisers including MCI, AT&T and Volvo.

In October, AT&T ran one of the Web’s first banner ads with the headline, “Have you ever clicked your mouse right here?”

An entrepreneur named Jeff Bezos thought the Internet looked like a good way to sell merchandise. He came up with a list of 20 products and settled on books, calling his company Amazon after the big river because of its tremendous size (read: inventory). Today, Amazon.com, “Earth’s Biggest Bookstore” has expanded into music, videos, furniture, groceries, cars–you name it. It has registered “Amazoneverywhere.net” as its newest site.

One year later, in 1995, America Online decided to include advertising on its Web site. The number of Internet users in the U.S. during this period was about 29 million. By 1997, the number of Internet users jumped to 47 million. Procter & Gamble hosted the first big conference on the future of online advertising. Revenues jumped to $906 million–a 240 percent increase in one year. In 1998, the number of U.S. Internet users totaled more than 60 million. Online advertising topped $1.92 billion or more than is spent on outdoor advertising. By 1999, the number of Internet users was close to 100 million. And sales jumped to $12 billion, or a 100 percent increase in one year.

How Many Advertising Dollars Are Spent on the Web?

According to Price Waterhouse Coopers, the total number was less than $2 billion in 1998. Jupiter Communications predicts total spending of $11.3 billion by the year 2003 (against current expenditures of about $4 billion). Forrester Research predicts $22 billion by 2004.

If these predictions are correct, more money will be spent on Internet advertising than on magazines, newspapers, TV, radio and direct mail. Adweek reported that ad spending on the Web reached $917 million in 1997, jumped to $1.9 billion in 1998 when, for the first time, there was more dollars spent advertising on the Web than on billboards.

“All the estimates about Internet advertising are going to be thrown out the window because every estimate made so far has been lower than what actually happened. The whole thing is explosive. We’re standing at Sutter Creek in 1840,” said Robert Lijenwall, who teaches a course on the internet at UCLA.

The most visible Web advertising is the “banners”–those rectangular messages at the top of a Web site. They use motion, sound or sweepstake information to grab your attention. But G.M. O’Connell, chairman and c.e.o. of True North Communication, offers a warning. “No matter how much bandwidth is available, the Web will never be `watched'” he said. O’Connell believes that people don’t watch the Internet–they use it.

Murray Raphel is one of the nation’s leading marketing experts and author of several business books.

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