The Foundation of Webonomics New sites on the World Wide Web have been cropping up at the rate of one per minute. As it expands at this astounding pace, it's clear that the Web's colorful entanglement of words, pictures, sound, and motion is briskly becoming more than just the most important new communication medium since television. The Web is more like a parallel universe that mirrors the physical world in some ways but exhibits entirely unique properties in others. And if you hang out there long enough, you will slowly discover that there's nothing less than an entirely new economy taking shape on this digital terrain--and a new way of looking at the way this marketplace of information and ideas works. Call it Webonomics. Many of the businesses now piling onto the Web may totally misunderstand what this new medium is all about. They may end up losing millions of dollars and eventually decide that the Web isn't living up to its hype. Other businesses may totally ignore the Web and get left behind. Their competitors, meanwhile, will use the Web as a tool to literally steal their best customers away. Averting such scenarios will only come with a keen understanding of Webonomics. Traditional economics is based on the notion of scarcity--that human desires will always exceed available resources such as food, clothing, and shelter. It was Thomas Malthus, the English economist, who first postulated that populations will always increase faster than the food supply. This pessimistic focus on the allocation of scarce resources is what earned economics the reputation as "the dismal science." Webonomics is anything but dismal. On the Web, precisely the reverse is true. Since the Web is a fast-growing world of intellectual property that can be copied and downloaded ad infinitum, its supply of resources will continue to soar past human demand for these resources. Instead of a scarcity of supply, the Web economy exhibits a scarcity of demand. Indeed, one of the main complaints about the Web is that it's "mind-boggling" and "too overloaded" with information. On the Web, the main commodity in limited supply is the attention of the busy people using it. The underlying battle in the Web economy is the ability to command and sustain that attention. As such, growth of the Web economy has everything to do with the quality of the information there--how interesting and engaging it is, how it is presented, and how it takes advantage of the unique attributes of the medium. As more and more people continue to enjoy the Web, as they find it worthy of their attention, the Web will continue to grow at its frenetic pace. Unlike a national economy with limited resources, there are no physical limits on this growth. Unlike real estate, steel, or even paper, computing power and computer storage is cheap and getting cheaper. There's an infinite number of bits in the universe and a virtually bottomless hunger for valuable information and knowledge. The Web is also a world without borders in which the physical location of a company doing business there is of little importance. Despite efforts to do so, the Web economy will resist efforts by national governments to control or regulate it. It will be up to each citizen of the world to choose what they see and do. In this sense, a totally free-market economy had been considered to be only theoretically possible in the past; the Web makes it practically possible for the first time. The nature of this beast is both good and bad. Because of the abundant choices available, the combat among companies is, in the words of Sun Microsystems CEO Scott McNealy, one of "fierce Darwinism." To succeed, businesses on the Web must invent new ways to market themselves, new ways to learn what customers want, new ways to forge lasting relationships with them. Marketers Shouldn't Be on the Web for Exposure, but for Results Brochure-Ware Mass marketing won't work on the World Wide Web. The idea that marketers can burnish a brand image in the minds of millions is fine for a TV advertisement or a print campaign. But it's an unrealistic fantasy in this new medium. What the Web can accomplish for marketers is potentially even more powerful. Still, countless marketers have ignored what the Web can do well and mistakenly tried to use their Web site to do what they have always been doing--simultaneously shipping the same message to the masses. Consider the case of Volvo. In the fall of 1994, Volvo Cars of North America became the first automaker to establish a Web presence and one of the first advertisers on popular content sites. In those early days of the Web, the most popular content creators, such as Hotwired, Time Warner's Pathfinder, ESPN SportsZone, and Playboy 's site, all began charging between $30,000 and $100,000 for a three-month placement of a logo or banner on their digital pages. These ads are also known as "links." Click on one of these buttons and your eyes are transported, or linked, to a promotional Web site running on some other computer somewhere else. After interacting with that advertisement, you will presumably link right back to where you were. In buying banner advertisements on the Web, Volvo was hoping to enhance its brand image. And by attracting Web surfers to its site, the Swedish automaker also wanted to give people in the market for a luxury car a new information tool that would make them consider a Volvo more seriously, says Bob Austin, Volvo's director of U.S. marketing. He notes that only about 6 percent of the adult population has the money and inclination to buy an automobile costing at least $30,000. He saw those people as having a high overlap with the early Web surfers. "We know that our potential buyers are well-off and tend to be early adopters--people who enjoy technology," Austin says. So the company spent about $100,000 developing and advertising what started out as essentially just an electronic brochure. Not only did the Volvo site fail to lead to many, if any, sales, but it actually caused unintended problems. The only truly interactive part of the site was the ability to send E-mail to Volvo's U.S. headquarters in New Jersey. "People would occasionally write things like: 'Nice Web site, but the sun roof on my 850 leaks,'" Austin says. Many state lemon laws require responses to such complaints within a few weeks, otherwise the manufacturer has to take the car back. Since Volvo failed to staff the site with people who were qualified to respond to such complaints, the Web site became a tool not to increase sales but a potential way to damage them. So the E-mail feature had to be shut down within a few weeks. With that bitter experience in hand, Volvo decided to pull back all its Web advertising and simply promote the site in its own TV and print ads. Austin says he just wasn't getting value for the money spent, especially since the content sites weren't able to provide hard numbers about who exactly they were linking to his site. "I'm not comfortable throwing more money at advertising the site," he says. "We're not here to sell Web sites. Web sites should be here to sell cars." Volvo made two crucial mistakes. The first foible was in treating consumers on the Web as a distinct demographic group in and of itself. Back then, that was understandable. It's true that the early Web surfers tended to be upscale, well-educated, techno-savvy males. Although it may always tilt to that core audience, the Web is more and more coming to resemble a cross section of the population at large. As bigger crowds of people stream into cyberspace every day, the trick for marketers will be to pluck their best and most likely customers from that pool--not indiscriminately trying in vain to reach all of them. The second, much bigger mistake was failing to take advantage of the unique attributes of the Web. Providing potential customers with an electronic rendition of a brochure--brochure-ware--is of little value when it's faster and easier to flip through one made of paper. As a result, Volvo was not able to forge relationships with individual consumers. The only method Volvo had for trading information with consumers was the nonfunctional E-mail feature. The worst thing you can do is suggest that you're willing to communicate with customers and then not have the capacity to respond. A New Psychology Advertising, it has been said, is all about unleashing desire. An effective advertisement will make you yearn for something that you previously didn't know you needed. Ad men, John Kenneth Galbraith wrote in his 1958 book, The Affluent Society , "are effective only with those who...do not already know what they want. In this state alone, men are open to persuasion." Consider cigarette ads. The FCC banned them from the airwaves in the early 1970s precisely because these commercials were able to convince people that cigarettes, although dangerous, are glamorous. Print ads for cigarettes have a similar effect, even though they may not be as potent. The Marlboro Man is still one of the world's most recognizable characters. The vision of a cowboy riding his horse through a shallow lake as the setting sun bounces off the pale mountains is alluring. The "Come to Marlboro Country" campaign works through enticement, identification, and association. The "information" in the ad--the Surgeon General's warning--can't match the power of the image. This might be an extreme example. But almost all ads in intrusive, one-way media employ a similar psychology. The Web calls for a new psychology, a new way of enticing people to buy things. It has to be a psychology based less on manipulation and more on peer-to-peer negotiation. Yet it is a psychology nonetheless. All marketers must keep generating new demand for their product, not just rely on the few customers who might already be predisposed to buying it. On the Web, powerful imagery that tunnels into the subconscious of consumers doesn't work all that well. The goal shouldn't be to shout your message repeatedly in their faces but to identify and respond to their needs. Mass-media advertisements usually go too far over the line, trying to get you to want something before knowing whether you are open to such a pitch. An effective marketing site on the Web will play to the other side of the line. It all begins with the needs. So instead of extending the old psychology based on unleashing desire, marketers on the Web must get down to the more mundane chore of assessing needs and responding to them. This is how it may work. You may need a car. But how does a marketer get you to want a Ford Taurus? Every car company has a Web site, but which car company has the best Web site to convert your need for a car into a desire for a certain car? One site might do it by asking you about your lifestyle. If you are a young single man, and you prefer a sporty vehicle, a Honda site might suggest a Prelude rather than an Accord. By responding to your particular need, this site might have an edge over the others. A good car site should also tell you how much you can afford in monthly payments and compare leasing deals to buying. The Ford site, for instance, has a financial planner feature that does just that. If you enter your income and monthly expenses, it will come back at you with a number. If it turns out that you can afford a $255 monthly payment, that becomes the all-important number when shopping around. You may feel good about a company that helped you determine that figure. An auto company's Web site should also allow you to choose from the menus of options that you might like. When this process is done, the site should be able to custom-configure a car for you and give you an invoice that you can print out and take to the dealer nearest you. This process is known as "needs gratification." Advertising generally has done very little in this realm. This is not to say that the traditional role of unleashing desire goes away. It just ceases to be the all-dominant form of marketing. The most successful marketers in the future will do both: use mass media to unleash desire and use the Web and other interactive media to finish the job by responding to those needs and desires. Consumers Must Be Compensated for Disclosing Data About Themselves Surfing the World Wide Web can pretty much be an anonymous activity. The famed New Yorker cartoon about how on the Internet nobody knows you're a dog still holds true. That is, unless you happen to tell others that you're a dog, along with what backyard your doghouse is in, plus what kind of leash you wear and what flavor Milk-Bone you prefer and why. When you disclose this data, others on the Net will consider you a very valuable dog indeed. But there has to be a damn good reason you are going to strip off your anonymity and reveal your innermost information. Yes, information privacy is a huge concern. But many consumers are beyond worrying about whether Big Brother and the data spies are invading their personal infosphere. They're willing to make a trade-off-- if the deal is a good one. To a marketer, of course, information about who you are and your usage of a product can make all the difference in the world. "If you tell me that your mini-van is five years old," says Rich Everett, manager of interactive communications for Chrysler Corporation, "I want to get an attractive lease rate to you immediately." To obtain information about customer satisfaction and purchasing plans, Chrysler at one point sent an E-mail message to 200,000 Chrysler owners, many of whom gave their Internet address to Chrysler over the Web. The message offered free wiper blades to those who opted in and agreed to disclose what was on their minds. The response rate was only in the 6 to 8 percent range. But that's much better than a typical direct-mail campaign. And because it doesn't use paper and postage, it's a much cheaper and faster way to engage customers in direct response. Of course, getting people to feed this kind of data into a corporate computer on some far-off network is a tricky challenge to say the least. "It's a big problem," says Mary Lou Floyd, business manager of AT&T's promotional Web site. "You need to require people to register their name and other information at your site to know who they are. But once you require registration, you might lose them altogether." Mandatory registration is what Saatchi & Saatchi researchers call a "flow breaker." It interrupts the path of least resistance that Web surfers often find themselves taking. By requiring consumers to disclose their data as the price of entry into a site, you put up a barrier that causes some consumers to take a detour around it. Better to give them a no-hassle taste first, then entice them to tell all about themselves later. The key at that point is to provide enough value in return for information so that consumers gladly enter into the bargain. Disclosing Data to Content Creators One of the first Web sites to grapple with the principle of compensating consumers for disclosing da Excerpted from Webonomics: The 9 Essential Principles for Growing Your Business on the World Wide Web by Evan I. Schwartz All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.
