Chapter 1

Introducing digital marketing

Chapter at a glance
Main topics
●● Introduction – how have digital technologies transformed marketing? 6
●● Definitions – what are digital marketing and multichannel marketing? 11
●● Introduction to digital marketing strategy 16
●● Introduction to digital marketing communications 29

Case studies
Digital marketing in practice
The Smart Insights interview: Nick Dutch, Head of Digital at Domino’s Pizza Group Limited shares the
approach used to help plan digital strategy development 9
Case study 1: eBay thrives in the global marketplace 46

Learning objectives
After reading this chapter, you should be able to:
●● Explain the relevance of different types of digital platforms and digital media to
marketing
●● Evaluate the advantages and challenges of digital media
●● Identify the key differences between customer communications digital
marketing and traditional marketing.
Questions for marketers
Key questions for marketing managers related to this chapter are:
●● What are the options for digital marketing to grow our business?
●● What are the key benefits of digital marketing?
●● What differences do digital media introduce compared to existing marketing
communications models?

Scan code
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Links to other chapters

This chapter provides an introduction to digital marketing, and the concepts
­introduced are covered in more detail later in the book, as follows:
●● Chapters 2 and 3 explain marketplace analysis for digital marketing planning
●● Chapters 4, 5 and 6 in Part 2 describe how digital marketing strategy can be
developed
●● Chapters 7, 8, 10 and 11 in Part 3 describe strategy implementation
●● Chapters 11 and 12 in Part 3 describe B2C and B2B applications.
6 Part 1 Digital marketing fundamentals

Introduction – how have digital technologies transformed marketing?

The Internet, the web and digital media have transformed marketing and business since
the first website (http://info.cern.ch) went live in 1991. With over 3 billion people around
the world regularly using the web to find products, entertainment and friends, consumer
behaviour and the way companies market to both consumers and businesses have changed
dramatically.
To succeed in the future, organisations will need marketers, strategists and agencies
with up-to-date knowledge of how to apply digital media such as the web, email, mobile
and interactive TV. The aim of Digital Marketing: Strategy, Implementation and Practice
is to support students and professionals in gaining and developing this knowledge. In the
text, we will show how traditional marketing models and concepts can be applied to help
develop digital marketing strategies and plans and where new models are appropriate. We
will also give many practical examples and best practices for applying online communica-
tions tools to effectively market an organisation’s products and services using the Internet
and other digital media.
For the authors of this book, digital marketing is an exciting area to be involved with,
since it poses many new opportunities and challenges yearly, monthly and even daily.
Innovation is a given, with the continuous introduction of new technologies, new business
models and new communications approaches. For example, Google innovates relentlessly.
Its service has developed a long way since 1998 (Figure 1.1) with billions of pages now
indexed and other services such as web mail, pay-per-click (PPC) adverts, analytics and
social networking all part of its offering. Complete Activity 1.1 or view Table 1.1 to see
other examples of online startups showing the rate at which new innovations occur.

Figure 1.1 Google timeline

Source: Google Corporate Timeline: www.google.com/about/company/timeline/
 Chapter 1 Introducing digital marketing 7

Activity 1.1 Innovation in digital marketing platforms

Purpose
To introduce some of the most important platforms used for digital marketing today and
to illustrate innovation in online business models and communications approaches.

Questions
1 Think about the innovation you have witnessed during the time you have used the
Internet, World Wide Web and mobile platforms. What would you say are the main
sites used in your country which have changed the way you spend your time o­ nline?
Table 1.1 shows the sites that we believe have had the biggest influence on online
business models in the US and Europe, with more emphasis on the most recent
ones.
2 What do these sites have in common with the ones that you have selected and what
do you think has made them successful?

Table 1.1 Timeline of online services indicating innovation in business model or

marketing communications approach

Year founded Company/service Category of innovation

1994 Amazon Retailer
1995 (March) Yahoo! Directory and portal
1995 (September) eBay Online auction
1995 (December) Altavista Search engine
1996 Hotmail Web-based email
Viral marketing (using email signatures to
promote service)
Purchased by Microsoft in 1997
1998 GoTo.com First pay-per-click search marketing
Overture Purchased by Yahoo! in 2003
1998 Google Search engine
1999 Blogger Blog publishing platform
Purchased by Google in 2003
1999 Alibaba B2B marketplace with $1.7 billion IPO
on Hong Kong stock exchange in 2007
(see case in Chapter 2, p. 94)
1999 MySpace Social network
Formerly eUniverse Purchased by News Corp in 2005
2001 Wikipedia Open encyclopedia
2002 Last.fm A UK-based Internet radio and music
community website, founded in 2002.
On 30 May 2007, CBS Interactive
acquired Last.fm for £140m (US$280m)
2003 Skype Peer-to-peer Internet telephony VOIP –
Voice Over Internet Protocol
Purchased by eBay in 2005
2003 Second Life Immersive virtual world
8 Part 1 Digital marketing fundamentals

Year founded Company/service Category of innovation

2004 Facebook Social network applications and groups

2005 YouTube Video sharing and rating
2006 Paypal Paypal offers first mobile payment service
2007 iPhone Apple launches the iPhone
2008 Groupon A group-buying service based on use of
discounted gift certificates
2009 Foursquare and Foursquare was a location-based
Kickstarter social media website designed for
mobile access through ‘check-ins’
Kickstarter launches to give momentum
crowdsourcing
2011 Snapchat A mobile photo messaging service where
images are deleted after a set number of
seconds
2012 SmartThings Internet of Things service, connects
everyday objects — from ovens to
thermostats to the Internet
2013 Apple iBeacon and iBeacon uses low-energy Bluetooth
CloudTags to notify shoppers of items of interest.
Cloudtags gives shoppers in-depth
information about products via tablets
The Future Digital innovations and Innovation drives the digital
business propositions economy and is set to continue
into the future. Digital has become
mainstream and although there are
opportunities, displacing existing global
incumbent platforms will be rare. For the
latest developments see:
www.thenextweb.com

The challenge for marketers is to assess which innovations are

most relevant to their organisation and to seek to gain advantage
through introducing them to a company such that the digital mar-
keting techniques integrate effectively with traditional marketing
communications.
This text will take you through the questions to ask and potential
solutions step by step to enable you to develop appropriate strate-
gies. In this introductory chapter, after an initial scoping of digital
marketing, we review two main aspects of managing digital mar-
keting. In the first part of this chapter, we review the main strate-
gic challenges and opportunities of digital marketing that must be
managed by organisations. We then go on to introduce the com-
munications techniques for promoting companies online through
digital technology platforms such as desktop, tablet and smart-
phone devices (for example, search engine marketing (SEM), and
social media and display advertising) using the unique characteris-
tics of digital media. The following practitioner interview with Nick
Dutch, Head of Digital at Domino’s Pizza Group, highlights some
of the challenges and opportunities of marketing an online business.
 Chapter 1 Introducing digital marketing 9

Digital marketing in practice The Smart Insights interview

Nick Dutch is Head of Digital at Domino’s Pizza Group Limited in the UK and
Republic of Ireland. In this interview he shares the approach used to help plan
digital strategy development.

Digital strategy development at Domino’s Pizza

Q. Please outline your role and how your team is structured

My role combines all aspects of the online customer experience from media to
­conversion, both on the desktop site and in mobile. So, I’m responsible for all ­online
marketing activity that drives people to the site and interactions on the customer
journey whether on our desktop site, mobile sites and apps and our communities on
­social media sites which are also part of how the Domino’s brand is presented in the
­digital space. From a strategic point of view, I’m responsible for developing the long-
term strategic roadmap for digital and ensuring it contributes to and complements the
­overall business strategy.
We have six in our digital team in total, with three other manager roles for the three
key activities: an e-Commerce Marketing Manager, Digital Campaigns Manager and
CRM Manager. The e-Commerce Marketing Manager’s remit is performance-based
with a focus on generating value through search, affiliate and display marketing and
also maximising conversion on-site. They work closely with the Digital Campaigns
Manager – imagine the intersecting Yin and Yang of Digital Marketing. The Digital
Campaigns Manager ensures integration with broader brand marketing initiatives and
is tasked with bringing the brand to life online, so they’re responsible for branded digi-
tal content on- and off-site. The CRM Manager works with an E-CRM exec and they
manage automated triggered email predominantly and in future increased SMS and
personalisation anywhere 1:1 communications, including Push notifications on mobile,
digital display and of course the website itself. They’re also supported by a database
marketing analyst.
Our team is relatively small since we’re supported on the technical side by the com-
mercial systems team responsible for the development and maintenance of all our
e-commerce platforms (in IT services), we’re their client. We work with them closely on
new features and applications, conversion rate optimisation and they manage ­on-site
product content updates. There are also business analysts in this team who provide
­reports and insights to support CRO.

Q. How do you set the vision for the long-term contribution of desktop+mobile
channels for Dominos?

Our vision for digital is centred on how we can provide convenience to the customer
across different channels – convenience has to be platform agnostic.
The rate of consumer adoption of digital technologies informs this vision, so we
went into mobile first, because we were already seeing that mobile platforms were
popular for customers. We will be tracking take-up of newer technologies like NFC
payment options and will add them to a longer-term three-year roadmap based on
when we see them entering the mainstream. Then there is a hard roadmap for the next
12 months. What we identify two years out may fall by the wayside if there isn’t a clear
customer imperative.
We prioritise new developments based on a combination of how it will impact
­customer convenience and commercial returns through increased conversion rate or
average order value. It doesn’t have to always be a scientific prioritisation; decisions
can be more brand-related: for example, connected TV – opportunity to partner with
10 Part 1 Digital marketing fundamentals

TV manufacturer – may be more brand related – innovation is a key element of our

brand DNA so we’ll always consider those things that may not be 100 per cent com-
mercially viable also.

Q. What is your process for making investment decisions in media?

The starting point is based on integrating with business priorities, which are based on
a classic campaign marketing planning process – based on new product introductions
for example – so online campaign activities are aligned with these.
At a top level, we make an investment-split decision for search marketing, affiliates
and display based on previous performance trends comparing the previous year to dif-
ferent quarters and of course our current business targets and forecasts. We need to
use the best mix of media to attract customers who are exhibiting different behaviours
in their buying decision. So some customers will be in the process of getting pizza in
tonight and are looking for the best deals right now. Affiliates are significant in driv-
ing that decision. But others may be considering eating in a few days; display can
be important here and we do see a halo-effect of display ads prompting searches for
Domino’s, so it’s important to balance performance and brand investments.
At a practical level, like all e-commerce sites, we look at our year-on-year perfor-
mance carefully – all decisions are based on beating year-on-year performance men-
tality. Detailed decisions are involved here – for example around search, we may have
a search budget where we have to balance investment in paid and natural search to
get the best efficiency. Likewise, depending on the market factors, we will change the
balance of targeting different terms in Adwords; some terms are demand creation such
as generics, whereas others mop up demand such as brand or local search terms.
Adjusting the media mix month by month is always an ongoing activity because
of four factors. First, competitor action such as a promotion or competing on a brand
term or other media activity. Second, new marketing options we may want to test
to gain advantages – for example, the current targeting options in Gmail or custom
audiences in Facebook. Then there are changes to business needs such as weather
­affecting demand – we have to generate more demand which can be mean upweight-
ing generic or local search targeting for new customers.
Finally, our analysis techniques or tools of which media are effective will improve –
for example, we have been looking more recently at purchase attribution and this has
given emphasis on display budget against more ‘mopping up channels’.
I haven’t mentioned social media yet since it’s not so important from a direct-sales
point of view. That said, we do use content marketing where bespoke content is
­developed around our audience’s passion, for example to associate us with football. But
it’s critical for other aspects such as community management on the social networks
where we create and share content continuously around this. We do offer social sign-in
through Facebook Connect, for example, but that isn’t used to a significant degree. Of
course, social media is also important for customer service where we have to manage
this proactively. We use some outsourced services for different social media activities.

Q. How do you manage conversion rate improvements and the implementation of

new features on your sites?

We now continually optimise, there has been a change in mindset as sales from the
online channels have increased. It was more of a static site originally, but we are now
able to review more regularly, for example on a fortnightly or monthly review process.
We use Google Analytics as a performance tool for reviewing customer journeys and
we use multi-device attribution, but can use journey analysis, e.g. through ad serving
to give us something similar.
 Chapter 1 Introducing digital marketing 11

Definitions – what are digital marketing and multichannel marketing?

Digital media The use of the Internet and other digital media and technology to support ‘modern
Communications are
facilitated through
marketing’ has given rise to a bewildering range of labels and jargon created by both
content and interactive academics and professionals. It has been called digital marketing, Internet marketing,
services delivered by e-marketing and web marketing. For the fifth edition we changed the title of this text from
different digital technology
platforms including the Internet Marketing to Digital Marketing since it shows the use of a range of digital plat-
Internet, web, mobile forms to interact with audiences and for other reasons explained in the preface. Of course,
phone, interactive TV,
IPTV and digital signage.
what is important within a company is not the term, but the activities that comprise digital
marketing, which must be prioritised according to their relevance. So in this chapter we
Digital marketing
The application of the focus on introducing these different digital marketing activities.
Internet and related Digital marketing can be simply defined as:
digital technologies
in conjunction Achieving marketing objectives through applying digital technologies and media.
with traditional
communications to
achieve marketing
This succinct definition helps remind us that it is the results delivered by technology
objectives. that should determine investment in Internet marketing, not the adoption of the technol-
Online company ogy! These digital technologies include the desktop, mobile, tablet and other digital plat-
presence forms introduced later in the chapter.
Different forms of online
media controlled by a In practice, digital marketing includes managing different forms of online company
company including their presence, such as company websites and social media company pages in conjunction with
website, blogs, email
list and social media
online communications techniques introduced later in this chapter, including search engine
presences. Also known as marketing, social media marketing, online advertising, email marketing and partnership
‘owned media’. arrangements with other websites. These techniques are used to support the objectives of
Electronic customer acquiring new customers and providing services to existing customers that help develop
relationship
management (E-CRM)
the customer relationship through E-CRM. However, for digital marketing to be successful
Using digital there is still a necessity for integration of these techniques with traditional media such as
communications print, TV and direct mail as part of multichannel marketing communications.
technologies to maximise
sales to existing The role of digital platforms in supporting integrated multichannel marketing is another
customers and encourage recurring theme in this text and in Chapter 2 we explore its role in supporting different
continued usage of
online services through customer journeys through alternative communications and distribution channels. Online
techniques including channels can also be managed to support the whole buying process from pre-sale to sale to
database, personalised
web messages, customer
post-sale and further development of customer relationships.
services, email and social
media marketing.
Multichannel marketing
Customer communi-
cations and product
Paid, owned and earned media
distribution are supported
by a combination of digital To develop a sound digital strategy today involves understanding a more complex, more
and traditional channels
at different points in the competitive buying environment than ever before, with customer journeys involving many
buying cycle. different forms of online presence. To help develop a strategy to reach and influence
Customer journeys potential customers online, it’s commonplace to refer to three main types of media chan-
The sequence of online nels marketers need to consider today (Figure 1.2):
and offline touchpoints a
customer takes during a
1 Paid media. These are bought media where there is investment to pay for visitors, reach
buying process or broader
customer experience. or conversions through search, display ad networks or affiliate marketing. Offline,
Online this may include a traditional media like print and TV advertising and direct mail remain important,
range of digital platforms,
communications media, accounting for the majority of paid media spend.
websites, pages and 2 Owned media. This is media owned by the brand. Online this includes a company’s own
engagement devices.
websites, blogs, email list, mobile apps or their social presence on Facebook, LinkedIn
or Twitter. Offline owned media may include brochures or retail stores. It’s useful to
think of a company’s own presence as media in the sense that they are an alternative
investment to other media and they offer opportunities to promote products using simi-
lar ad or editorial formats to other media. It emphasises the need for all organisations
to become multichannel publishers.
12 Part 1 Digital marketing fundamentals

Advertising
Paid search
Display ads
Affiliate marketing
Digital signage

Paid
Atomisation Paid
media
of content placements
into ads

Digital properties Partner networks

Website(s) Publisher editorial
Blogs Owned Earned Influencer outreach
Mobile apps media media Word-of-mouth
Social presence Social networks

Atomisation of conversations
through shared APIs
and social widgets

Figure 1.2 The intersection of the three key online media types

Paid media 3 Earned media. Traditionally, earned media has been the name given to publicity generated
Also known as bought through PR invested in targeting influencers to increase awareness about a brand. Now
media, a direct payment
occurs to a site owner earned media also includes word-of-mouth that can be stimulated through viral and social
or an ad network when media marketing, and conversations in social networks, blogs and other communities. It’s
they serve an ad, a
sponsorship or pay useful to think of earned media as the sharing of engaging content developed through
for a click, lead or sale different types of partners such as publishers, bloggers and other influencers including cus-
generated.
tomer advocates. Another way of thinking about earned media is as different forms of
Owned media conversations between consumers and businesses occurring both online and offline.
Different forms of online
media controlled by a
company including their
We will see at the end of this chapter that content marketing has become a core inte-
website, blogs, email grated modern marketing approach which involves communications across paid, owned
list and social media and earned media.
presence.
You can see in Figure 1.2 that there is overlap between the three different types of media.
Earned media
The audience is reached It is important to note this since achieving this overlap requires integration of campaigns,
through editorial, resources and infrastructure. Content on a content hub or site can be broken down (some-
comments and sharing
online.
times described as microcontent) and shared between other media types through widgets
powered by program and data exchange APIs (Application Programming Interfaces) such
Application
Programming as the Facebook API.
Interfaces
Method of exchanging
data between systems
such as website services.
The growing range of digital marketing platforms

If you think of the options to reach and interact with audiences when they are online, we have
traditionally used digital media channels like search, social media or display ads on media
sites accessed via desktop or laptop-based hardware platforms. The desktop access platform
has been dominant for years and remains so for now, but the number of mobile smartphone
and tablet visitor sessions now exceed desktop Internet sessions for many ­consumer busi-
nesses. Combining with these hardware platforms, there are also different software platforms
which marketers can use to reach and interact with their audience through content ­marketing
or advertising, so let’s look at the range of options that are available:
 Chapter 1 Introducing digital marketing 13

Desktop, laptop and notebook platforms

1 Desktop browser-based platform. This is traditional web access through the c­ onsumer’s
browser of choice, whether Internet Explorer, Google Chrome or Safari.
2 Desktop apps. We don’t hear this platform talked about much; increasingly users
are accessing paid and free apps from their desktop via the Apple App Store or the
­Microsoft equivalent, like Gadgets. This gives opportunities for brands to engage via
these platforms.
3 Email platforms. While email isn’t traditionally considered a platform, it does offer an
opportunity separate from browser and app-based options to communicate with pros-
pects or clients, whether through editorial or advertising, and email is still widely used
for marketing.
4 Feed-based and API data exchange platforms. Many users still consume data through
RSS feeds, and Twitter and Facebook status updates can be considered a form of feed
or stream where ads can be inserted.
5 Video-marketing platforms. Streamed video is often delivered through the other plat-
forms mentioned above, particularly through browsers and plug-ins, but it represents
a separate platform. Television channels delivered through streaming over the Internet
(known as IPTV) are related to this platform.
It could be argued that the major social networks Facebook, LinkedIn and Twitter also
provide a form of platform, but these really exist across all of these technology platforms
so they haven’t been identified separately.
Mobile marketing
Marketing to encourage Mobile phone and tablet platforms
consumer engagement
when using mobile The options on mobile hardware platforms are similar in many ways to the desktop. Since
phones (particularly
smartphones) or tablet
they can be used in different locations there are many new opportunities to engage con-
devices. sumers through mobile marketing and location-based marketing. The main platforms are:
Location-based
marketing
1 Mobile operating system and browser. There are mobile browsers which are closely
Location or proximity- ­integrated with the operating system.
based marketing is mobile 2 Mobile-based apps. Apps are proprietary to the mobile operating system, whether
marketing based on the
GPS built into phones or Apple iOS, Google Android, RIM or Windows. A big decision is whether to deliver
based on interaction with content and experience through a browser and/or a specific app which provides an im-
other local digital devices.
proved experience. If you check the latest research you will see that the majority of
Mobile-based apps
Designed to run on
mobile media time is app-based.
smartphones and tablet
computers, apps provide
users with rich mobile
Other hardware platforms
content by deploying the
handset’s multiple native Apart from desktop and mobile access, there are a host of other and growing platforms
capabilities. Apps are through which to communicate with customers. For example:
available for download
from app stores hosted 1 Gaming platforms. Whether it’s a PlayStation, Nintendo or Xbox, there are increasing
by the mobile operating
systems (e.g. iTunes for ­options to reach gamers through ads or placements within games, for example in-game ads.
iOS, Google Play for 2 Indoor and outdoor kiosk-type apps. For example, interactive kiosks and augmented
Android, Microsoft App
Store, BlackBerry App
reality options to communicate with consumers.
World). 3 Interactive signage. The modern version of signage is closely related to kiosk apps and
Software as a may incorporate different methods such as touchscreen, Bluetooth or QR codes to
Service (SaaS) ­encourage interactive. Mini Case Study 1.1 gives a futuristic example.
Business applications
and software services are
4 Wearables. Smart watches such as the Apple Watch and smart glasses such as Google Glass.
provided through Internet
and web protocols with
the application managed Software platforms for managing modern marketing
on a separate server
from where it is accessed There is a bewildering range of software, services and systems available today for manag-
through a web browser on ing marketing. Many are now available as SaaS platforms which have made services to
an end user’s computer
with data stored within
manage marketing more affordable for smaller businesses and easier to manage for all
‘The Cloud’. since no installation is required.
14 Part 1 Digital marketing fundamentals

The range of options have been ably summarised by Scott Brinker, who publishes a
summary of the marketing technology landscape each year. The six main categories of
system he recommends marketers review for the range of technologies available are:
1 Marketing experiences. More specialised technologies that directly affect prospects and
customers across their lifecycle, such as advertising, email, social media, search e­ ngine
optimisation, content marketing, A/B testing, marketing apps – the ‘front-­office’ of
modern marketing.
2 Marketing operations. The tools and data for managing the ‘back-office’ of marketing,
such as analytics, Marketing Resource Management (MRM), Digital Asset M ­ anagement
(DAM) and agile marketing management.

Activity 1.2 The latest marketing technology landscape

Purpose
To illustrate the range of systems available to support marketers and to explain the
main categories of service available.

Activity
1 Search for Scott Brinker’s latest technology roadmap for the current year on his
ChiefMartec.com site. For each of the six categories of service summarised in
­Figure 1.3, write a layman’s description of how they can support digital marketing
activities by reviewing the proposition as described on the websites of the most
popular services in the category (the most popular are listed first).
2 Make a note to understand the different types of service defined in each category.
3 Choose one or two vendor systems and visit their website to see how they explain
the proposition and explain it to others in your group(s). Alternatively identify the
most popular service(s) in each category.

Marketing
Marketing experiences operations
(Customer experience, digital media channel, voice of
(Digital analytics,
customer, personalisation, chat, sales enable, testing and attribution and dashboards
optimisation) asset management,
audience and market data)

Marketing middleware
(APIs, data management, tag management, identity)

Marketing backbone platforms

(CRM, marketing automation, content management, Ecommerce)

Infrastructure Internet
(Databases, big data, cloud, mobile and web development) (Digital platforms)

Figure 1.3 Scott Brinker’s categorisation of modern marketing technology

options. Digital Platforms include Facebook, Google, LinkedIn
and Twitter
Source: With permission – Chiefmartec.com
 Chapter 1 Introducing digital marketing 15

3 Marketing middleware such as Data Management Platforms (DMPs), tag management,

cloud connectors, user management and API services.
4 Marketing backbone platforms such as customer relationship management, marketing
automation, content management and e-commerce engines. (These are quite different
in their application, so need to be reviewed separately.)
5 Infrastructure services such as databases, big data management, cloud computing and
software development tools.
6 Internet services such as Facebook, Google and Twitter that underlie today’s marketing
environment. (How you integrate with these key platforms.) Complete Activity 1.2 to
review the latest technologies.

Mini case study 1.1 Tesco Homeplus opens subway virtual store in South Korea

In South Korea, Tesco Homeplus operates around 600 stores (including franchise store operations) but
has significantly fewer stores than the market leader E-mart. Based on research which showed that many
­Koreans tend to shop in stores near their homes for convenience, Tesco trialled a virtual store to reach
these shoppers.
And Tesco now operates 22 virtual stores, where virtual displays were implemented in a similar way to
actual stores, from the display to merchandise but with smartphone QR code readers used to shop and the
goods delivered home after checkout (Figure 1.4). This approach enables South Koreans to shop – on-the-go.
Source: Homeplus (2014), www.tescoplc.com/index.asp?pageid=314

Figure 1.4 YouTube video explaining the Tesco Homeplus Virtual Subway Store presence in South
Korea
Source: www.youtube.com/watch?v=fGaVFRzTTP4
16 Part 1 Digital marketing fundamentals

Introduction to digital marketing strategy

The key strategic decisions for digital marketing are in common with traditional business
and marketing strategy decisions. As we will see in Chapter 4, which defines a process for
developing a digital marketing strategy, customer segmentation, targeting and positioning
Positioning are all key to effective digital marketing. These familiar target marketing strategy
Customers’ perception
of the product and brand
approaches involve selecting target customer groups and specifying how to deliver value
offering relative to those of to these groups as a proposition of services and products. As well as positioning of the
competitors. core product or brand proposition, online development of a compelling extended product
Target marketing or online value proposition (OVP) is also important (see Chapter 7). This defines how the
strategy
Evaluation and
online experience of a brand is delivered through content, visual design, interactivity, shar-
selection of appropriate ing, rich media and how the online presence integrates with the offline presence. All of the
customer segments companies referenced in Table 1.1 have a clear, compelling OVP. Strategic decisions about
and the development of
appropriate offers. the future OVP a company offers is a key part of Internet marketing strategy.
Online value proposi-
tion (OVP)
A statement of the
benefits of online
Key features of digital marketing strategy
services that reinforces
the core proposition The interaction and integration between Internet channels and traditional channels is a key
and differentiates from
an organisation’s offline part of digital marketing strategy development. Digital marketing strategy is essentially a
offering and those of channel marketing strategy and it needs to be integrated with other channels as part of multi-
competitors.
channel marketing. It follows that an effective digital marketing strategy should:
● Be aligned with business and marketing strategy (for example, many companies use a
rolling three-year plan and vision), with more specific annual business priorities and
initiatives.
● Use clear objectives for business and brand development and the online contribution
of leads and sales for the Internet or other digital channels. These should be based on
models of the number using the channels.
● Be consistent with the types of customers who use and can be effectively reached
through the channel.
Value proposition ● Define a compelling, differential value proposition for the channel which must be effec-
The benefits or value a
brand offers to customers
tively communicated to customers.
in its products and ● Specify the mix of online and offline communication tools used to attract visitors to the
services. company website or interact with the brand through other digital media such as email
or mobile.
● Support the customer journey through the buying process as they select and purchase
products using the digital channel in combination with other channels.
● Manage the online customer lifecycle through the stages of attracting visitors to the
website, converting them into customers and retention and growth.

Applications of digital marketing

For established multichannel organisations, digital media offer a range of opportunities

for marketing products and services across the purchase cycle that companies need to
review as part of their digital strategy. Consider the example of a low-cost airline. Digital
media and technologies can be used as follows:
● Advertising medium. Display ads on publisher sites or social networks can be used to
create awareness of brands and demands for products or services.
● Direct-response medium. Targeted search advertising enables companies to drive visits to a
site when consumers shows intent to purchase, such as searching for a flight to a destination.
 Chapter 1 Introducing digital marketing 17

●● Platform for sales transactions. Online flight booking is now the most common method
for booking flights both for consumers and business travellers.
●● Lead-generation method. For booking business flights, tools can be provided which help
identify and follow up corporate flight purchases.
●● Distribution channel, such as for distributing digital products. Today, airlines sell more
insurance services than previously, for example.
●● Customer service mechanism. For example, customers may ‘self-serve’ more cost-­
effectively by reviewing frequently asked questions.
●● Relationship-building medium. Here a company can interact with its customers to
­better understand their needs and publicise relevant products and offers. For example,
easyJet uses its email newsletter and tailored alerts about special deals to encourage
repeat flight bookings.

Benefits of digital marketing

The benefits of digital marketing in supporting marketing is suggested by applying the

definition of marketing by the Chartered Institute of Marketing (www.cim.co.uk):
Marketing is the management process responsible for identifying, anticipating and satis-
fying customer requirements profitably.

This definition emphasises the focus of marketing on the customer, while at the same
time implying a need to link to other business operations to achieve this profitability. Chaf-
fey and Smith (2012) note that digital marketing can be used to support these aims as
follows:
●● Identifying – the Internet can be used for marketing research to find out customers’
needs and wants (Chapters 7 and 10).
●● Anticipating – the Internet provides an additional channel by which customers can
­access information and make purchases – evaluating this demand is key to governing
resource allocation to e-marketing (as explained in Chapters 2, 3 and 4).
●● Satisfying – a key success factor in e-marketing is achieving customer satisfaction
through the electronic channel, which raises issues such as: is the site easy to use, does
it perform adequately, what is the standard of associated customer service and how are
physical products dispatched? (These issues of customer relationship management are
discussed further in Chapters 6 and 7.)
In Chapter 4, we show how to quantify different goals as part of developing digi-
tal ­marketing strategy. To introduce the typical types of goals for digital marketing, see
Table 1.2 which gives a basic framework for setting and reviewing different types of goals
for digital strategy development based on the 5Ss of Chaffey and Smith (2012).
A powerful method of evaluating the strategic marketing opportunities of using the
­Internet is to apply the strategic marketing grid of Ansoff (1957), as discussed in the strat-
egy formulation section of Chapter 4. This shows how the Internet can potentially be used
to achieve four strategic directions:
1 Market penetration. The Internet can be used to sell more existing products into exist-
ing markets.
2 Market development. Here the Internet is used to sell into new geographical markets,
taking advantage of the low cost of advertising internationally without the necessity for
a supporting sales infrastructure in the customers’ countries.
3 Product development. New products or services are developed which can be delivered
by the Internet. These are typically digital products.
4 Diversification. In this sector, the Internet supports selling new products which are
­developed and sold into new markets.
18 Part 1 Digital marketing fundamentals

Table 1.2 The 5Ss of Internet marketing

Benefit of e-marketing How benefit is delivered Examples of typical objectives

Sell – Grow sales Includes direct online sales • Achieve 10 per cent of sales
and sales from offline online in market
channels influenced online. • Increase online sales for
Achieved through wider ­product by 20 per cent in year
distribution to customers
you cannot readily service
offline or perhaps through
a wider product range than
in-store, or lower prices
compared to other channels
Serve – Add value Achieved through giving • Increase interaction with
customers extra benefits different content on site
online or inform product • Increase dwell-time duration
development through online on site by 10 per cent
dialogue and feedback (sometimes known as
‘stickiness’)
• Increasing number of
­customers actively using
­online services (at least once
per month) to 30 per cent
Speak – Get closer to Creating a two-way dialogue • Grow email coverage to
customers through web interactions 50 per cent of current
like forums and surveys and customer database
conducting online market • Survey 1000 customers online
research through formal each month
surveys and informally • Increase visitors to community
monitoring conversations to site section by 5 per cent
learn about them
Save – Save costs Achieved through online • Generate 10 per cent
email communications, more sales for same
sales and service transac- communications budget
tions to reduce staff, print • Reduce cost of direct
and postage costs. Savings marketing by 15 per cent
also accrue through ‘web through email
self-service’ where custom- • Increase web self-service
ers answer queries through to 40 per cent of all service
online content ­enquiries and reduce overall
cost-to-serve by 10 per cent
Sizzle – Extend the Achieved through providing • Improve branding metrics
brand online new propositions, new such as brand awareness,
offers and new experiences reach, brand favourability and
online including building purchase intent
communities
Source: Chaffey and Smith (2012)

Geyskens et al. (2002) suggested an alternative perspective, that there are three main
forms of demand expansion for an existing company when they adopt direct Internet
channels. These are:
1 Market expansion, which occurs when new segments of customers are reached who
did not previously buy in a category – they give the example of Estée Lauder, which
hopes that the Clinique.com site will attract customers who avoid buying at a cosmetics
­counter because they find the experience intimidating.
 Chapter 1 Introducing digital marketing 19

2 Brand switching, which is by winning customers from competitors.

3 Relationship deepening, which is selling more to existing customers.

For well-established brands with a loyal customer base, price reduction relative to other
channels is not necessarily essential or some web-channel price reductions can be used, but
they note that often competitive pressures may require lower online prices. These a­ uthors
also note the potential benefits of reduction in transactional and distribution costs through
introducing a direct Internet channel once initial startup costs are incurred. However, for
manufacturer brands it important that consideration is given to the advertising expendi-
ture required to move goods through the supply chain once a brand is established online
(Pei et al., 2014). It is essential for brands to plan how they will manage potential channel
conflict when establishing their brands online.
As well as assisting large corporate organisations develop their markets, perhaps the
most exciting potential of the Internet is to help existing small and medium enterprises
(SMEs) expand. Read Mini Case Study 1.2, which illustrates how one manufacturer has
used digital media and technology to build its brand. There is further discussion of the
­opportunities of digital communication at the end of the chapter.

Mini case study 1.2 Tatu Couture expands the reach of its brand online

Tatu Couture designs and manufactures luxury British lingerie which is sold through stockists in the UK, Paris
and New York. Tatu Couture has a unique vision to push the boundaries of design and innovation with its trend-
setting luxury lingerie and designer body wear. All the goods are manufactured and hand finished in the UK.

Overview and digital strategy

Agency Tonica supported Tatu Couture by creating a four-stage strategy to increase digital presence
(­Figure 1.5). In addition to the stockist route, Tatu Couture was keen to increase its own direct sales, so we

Figure 1.5 Tatu Couture (www.tatucouture.com)

20 Part 1 Digital marketing fundamentals

had two simple objectives for the work – to increase visits to tatucouture.com and increase sales from the
site. The steps to develop the reach of the company are explained by the agency as:

Step 1 – Take control

Like many small to medium sized enterprises (SMEs), Tatu Couture had employed a Web Designer to cre-
ate their site, but were unfamiliar with some of the standard tools that could help them track success. In this
phase of work, we focussed on empowering Tatu Couture to take control so that they could cost-effectively
develop their site without spending budget on external resource:
●● Suggesting Tatu Couture gain full account control of their Shopify website
●● Assisting Tatu Couture in having Google Webmaster Tools access in order to access information about the
health of their site
●● Setting up Google Analytics in order to track website performance.

Step 2 – Make the most of your contacts

In this phase, we were keen to ensure that Tatu Couture could conduct their own email campaigns using free
provider, Mailchimp. During this process we also consolidated their contact data into a new Tatu Couture
Mailchimp account, and set up a website ‘sign up’ so that new prospects could be captured.

Step 3 – Promote (for free when possible!)

In addition to the email campaigns, we identified several low-cost or no-cost promotion options:
●● Google Merchant (aka Google Shopping/Google Product Search). In order to increase online presence, we
were keen to feed Tatu Couture products into Google Shopping, particularly as this was still a free service
in the UK (prior to March 2013). Luckily Shopify had a fairly easy integration option for this, so we were able
to activate the integration and add a few settings (such as shipping) for products to be regularly submitted.
●● Google Places – a free local service which helps Tatu Couture stand out regionally.
●● Google Adwords (pay-per-click advertising). Since the launch campaign, low-cost Google Adwords
­campaigns have been used at key events in the calendar, continuing to lower the cost per click, increase
click-through rates and utilise the best performing keywords.
●● We have also used micro-geographic targeting in Google Adword campaigns as a proxy for income – for
example, targeting South Kensington and Chelsea postcodes.
●● Facebook. Tatu Couture is using this investment to reach the most likely recipients to purchase. The chal-
lenge in promoting a luxury product online is reaching an audience likely to purchase and this is where the
beauty of Facebook could help.

By targeting Facebook profiles who already liked other luxury or designer products, our Facebook cam-
paign could reach a more tailored market than using Google alone. During the campaign we were able to
double Facebook likes for Tatu Couture. In the last three months, Facebook has driven 16 per cent of the
traffic to the site.

Step 4 – Search engine optimisation

As well as suggesting search engine optimisation changes along the way, we suggested a more formal search
engine optimisation (SEO) review as Step 4. Tatu Couture have begun to implement these SEO changes in
an effort to drive more organic traffic to the site. The changes included incorporating more keywords into the
product descriptions in addition to the unique Tatu Couture copy.
Source: Smart Insights (2013)

Alternative digital business models

As part of strategy development, organisations require clarity on the type of business

model they will develop.
 Chapter 1 Introducing digital marketing 21

Business and consumer business models

A basic aspect of the types of online business model explored in Chapter 2 is whether the
proposition offered appeals to consumers or business. So digital marketing opportunities
are often described in terms of the extent to which an organisation is transacting with con-
Business-to-consumer sumers (business-to-consumer – B2C) or other businesses (business-to-business – B2B).
(B2C) Reference to the well-known online companies in Table 1.1 initially suggests these
Commercial transactions
between an organisation companies are mainly focussed on B2C markets. However, B2B communications are still
and consumers. important for many of these companies since business transactions may occur, as for
Business-to-business ­example with eBay Business (http://business.ebay.com/), or the B2C service may need to
(B2B)
Commercial transactions
be sustained through advertising provided through B2B transactions, for example Google’s
between an organisation revenue is largely based on its B2B AdWords (http://adwords.google.com/). Advertising ser-
and other organisations vice and advertising-based revenue is also vital to social network sites such as YouTube,
(inter-organisational
marketing). Facebook and Twitter.
Digital media and technologies offer new opportunities for direct-to-customer strate-
gies where brands can communicate directly to their consumers. For example, a publisher
and authors can interact with their readers, or food brands can interact directly with their
purchasers via their websites or social media.
Figure 1.6 gives examples of different companies operating in the business-to-consumer
(B2C) and business-to-business (B2B) spheres. Often companies such as easyJet and BP will
have products that appeal to both consumers and businesses, so will have different parts
of their site to appeal to these audiences. Figure 1.6 also presents two additional types of

From: Supplier of content/service

Consumer or citizen Business (organisation) Government
Consumer or citizen

Consumer-to-consumer (C2C) Business-to-consumer (B2C) Government-to-consumer (G2C)

• eBay • Transactional: Amazon • National government
• Peer-to-peer (Skype) • Relationship-building: BP transactional: Tax – HM
• Blogs and communities • Brand-building: Unilever Revenue & Customs
• Product recommendations • Media owner – News Corp • National government
• Social network (Bebo, • Comparison intermediary: information
Facebook Google+) Kelkoo, Pricerunner • Local government information
• Local government services
To: Consumer of content/service
Business (organisation)

Consumer-to-business (C2B) Business-to-business (B2B) Government-to-business (B2B)

• Priceline • Transactional: Euroffice • Government services and
• Consumer-feedback, • Relationship-building: BP transactions: tax
communities or campaigns • Media owned: Emap • Legal regulations
business productions
• B2B marketplaces: EC21
• Social network (Linked-In,
Plaxo)

Consumer-to-government (C2G) Business-to-government (B2G) Government-to-government (G2G)

• Feedback to government • Feedback to government • Inter-government services
Government

through pressure group or businesses and non- • Exchange of information

individual sites governmental organisations

Figure 1.6 Summary and examples of transaction alternatives between businesses, consumers and
governmental organisations
22 Part 1 Digital marketing fundamentals

Consumer-to-­ transaction – those where consumers transact directly with other consumers (­consumer-to
consumer (C2C)
Informational or financial consumer – C2C ) and where they initiate trading with companies ( consumer-to-
transactions between business – C2B). Common C2C interactions include transactional exchange (e.g. eBay,
consumers, but usually
mediated through a
www.ebay.com), financial services (e.g. Zopa, www.zopa.com) and betting (e.g. Betfair,
business site. www.betfair.com). In the early stages of the evolution of the web, Hoffman and Novak
Consumer-to-business (1996) highlighted the potential importance of C2C interactions; the significance of their
(C2B) findings have been supported by growth of social networks. More recently, Adjei et al.
Consumers approach the
business with an offer. (2010) found how brand communities can be effective tools for influencing sales and retain-
E-government
ing customers and building confidence in new customers.
The use of Internet The significance of C2C interactions is shown by Activity 1.3.
technologies to provide Figure 1.6 also includes government and public services organisations which deliver
government services to
citizens. ­online or e-government services. As well as the models shown in the figure, it has also been
suggested that employees should be considered as a separate type of consumer through the
use of intranets, which is referred to as employee-to-employee or E2E.

Activity 1.3 Why are C2C interactions important?

Purpose
To highlight the relevance of C2C transactions to B2C companies.

Activity
Consult with fellow students and share experience of C2C interactions online. Think of
Direct-to-customer C2C on both independent sites and organisational sites. How can C2C communica-
model tions assist these organisations?
A brand which has
previously communicated
to its customers via
intermediaries such as
media sites or wholesalers
communicates directly
via digital media such as
social networks, email
What is the difference between e-commerce and e-business?
and websites.
Electronic commerce Electronic commerce (e-commerce) refers to both financial and informational
All financial and e­ lectronically mediated transactions between an organisation and any third party it deals
informational electronically
mediated exchanges with (Chaffey, 2014). So e-commerce involves management not only of online sales trans-
between an organisation actions, but also of non-financial transactions such as inbound customer service enquiries
and its external
stakeholders.
and outbound email broadcasts, so you can argue that e-commerce is open to all online
Sell-side e-commerce
organisations.
E-commerce transactions E-commerce is often further subdivided into a sell-side e-commerce perspective, which
between a supplier refers to transactions involved with selling products to an organisation’s customers, and a
organisation and its
customers. buy-side e-commerce perspective, which refers to business-to-business transactions to pro-
Buy-side e-commerce
cure resources needed by an organisation from its suppliers. This is shown in Figure 1.7.
E-commerce transactions Social commerce is an increasingly important part of e-commerce for site owners, since
between a purchasing incorporating reviews and ratings into a site and linking to social networking sites can
organisation and its
suppliers. help understand customers’ needs and increase conversion to sale. It can also involve group
Social commerce buying using a coupon service like Groupon. There is much discussion on the extent to
Social commerce is a which social media interactions between consumers directly influence sales. Digital mar-
subset of e-commerce
which encourages
keting insight 1.1 outlines research hinting at the complexity of understanding this rela-
participation and tionship. We introduce social media marketing later in this chapter.
interaction of customers E-business or digital business is similar to e-commerce but broader in scope and refers
in rating, selecting and
buying products through to using digital technology to manage a range of business processes incorporating the sell-
group buying. This side and buy-side e-commerce shown in Figure 1.7, and also other key supporting business
participation can occur on
an e-commerce site or on processes including research and development, marketing, manufacturing and inbound
third-party sites. and outbound logistics.
 Chapter 1 Introducing digital marketing 23

Social commerce – how much do social networks influence

Digital marketing insight 1.1 purchase?

Research published by the Harvard Business School, quoting Iyengar et al. (2009),
found that in Korea, where social networking and commerce is more established,
­social networks do influence purchase, but the degree of influence depends on the
­usage level and connectedness of a user. In summary, the research shows:
●● For light users of social networks with few connections (48% of users), purchases
are unaffected by social network activity.
●● For moderate users of social networks with average connections (40%), purchases are
influenced by social network interaction, boosting vendor sales for this group by 5%.
●● For heavy users of social networks with a high number of connections (12%),
­purchases are also influenced by social network interaction, but negatively; these
users avoid buying what their friends have bought and are talking about, leading to
a 14 per cent drop in sales from this group for vendors.

We return to this question in Chapter 9, where we explore the effectiveness of differ-

ent types of digital media in the Smart Insights (2015b) article ‘Is this the social media
backlash?’

E-business

Buy-side Sell-side
e-commerce e-commerce

Intranet

Internet and Internet and

extranet extranet

Key
Organisational processes
Suppliers Customers
and functional units

Suppliers’ suppliers Intermediaries Customers’ customers

Figure 1.7 The distinction between buy-side and sell-side e-commerce

24 Part 1 Digital marketing fundamentals

Electronic business
(e-business) or digital
Different forms of online presence
business
Electronically mediated The form of digital strategy developed by a company will depend on the nature of a
information exchanges,
both within an ­business. Chaffey (2014) identifies different types of online presence which each have
organisation and with different objectives and are appropriate for different markets. Note that these are not
external stakeholders
supporting the range of
clear-cut categories of websites since any company may combine these types as part of
business processes. their business model, but with a change in emphasis according to the market they serve.
­Increasingly companies are using their company pages on social networks such as Face-
book, Google+ and LinkedIn to similar purposes. As you review websites and company
social presences, note how organisations have different parts of the site focussing on
these functions of sales transactions, services, relationship-building, brand-building and
providing news and ­entertainment. The five main types of site or site or mobile app
functions are as follows.

1 Transactional e-commerce site

Enables purchase of products online. The main business contribution of the site is through
sale of these products. The sites also support the business by providing information for
consumers who prefer to purchase products offline.
●● Visit these examples: an end-product manufacturer such as Vauxhall (www.vauxhall
.co.uk) or an online retailer such as Amazon (www.amazon.com).

2 Services-orientated relationship-building website

Provides information to stimulate purchase and build relationships. Products are not
­typically available for purchase online. Information is provided through the website and
e-newsletters to inform purchase decisions. The main business contribution is through
­encouraging offline sales and generating enquiries or leads from potential customers. Such
sites also add value to existing customers by providing them with detailed information to
help support them in their lives at work or at home.
●● Visit these examples: B2B management consultants such as PricewaterhouseCoopers
(www.pwcglobal.com) and Accenture (www.accenture.com).

3 Brand-building site
Provides an experience to support the brand. Products are not typically available for online
purchase. Their main focus is to support the brand by developing an online experience
of the brand. They are typical for low-value, high-volume fast-moving consumer goods
(FMCG) brands for consumers.
●● Visit these examples: Tango (www.tango.com) and Guinness (www.guinness.com).

4 Portal or media site

Stage models Provides information or news about a range of topics. ‘Portal’ refers to a gateway to infor-
Models for the mation; it is not in common usage today. This is information both on the site and through
development of different
levels of Internet links to other sites. Portals have a diversity of options for generating revenue including
marketing services. advertising, commission-based sales, sale of customer data (lists).
Brochureware site
A simple site with limited
●● Visit these examples: Yahoo! (www.yahoo.com) (B2C) and Smart Insights (www.smartin-
interaction with the user sights.com) (B2B).
that replicates offline
marketing literature. These different types of sites tend to increase in sophistication as organisations develop
Transactional their Internet marketing. In Chapters 2 and 4 we look at stage models of the development
e-commerce sites
Sites that support online
of digital marketing services and capabilities, from static brochureware sites to dynamic
sales. transactional e-commerce sites that support interactions with customers.
 Chapter 1 Introducing digital marketing 25

5 Social network or community site

These sites or parts of sites focus on enabling community interactions between different
consumers (C2C model). Typical interactions include posting comments and replies to
comments, sending messages, rating content and tagging content in particular categories.
Well-known examples include Facebook, LinkedIn and Twitter. In addition to distinct
­social network sites such as these, social networks can also be integrated into other site types.

Challenges in developing and managing digital

marketing strategy

Some of the challenges in managing Internet marketing strategy which are commonly seen
in many organisations (and should be managed) include:
●● Unclear responsibilities for the many different Internet marketing activities (shown in
Figure P.1 in the Preface).
●● No specific objectives are set for Internet marketing.
●● Insufficient budget is allocated for Internet marketing because customer demand for
­online services is underestimated and competitors potentially gain market share through
superior online activities.
●● Budget is wasted as different parts of an organisation experiment with using different
tools or suppliers without achieving economies of scale.
●● New online value propositions for customers are not developed since the Internet is
treated as ‘just another channel to market’ without review of opportunities to offer im-
proved, differentiated online services.
●● Results from digital marketing are not measured or reviewed adequately, so actions can-
not be taken to improve effectiveness.
●● An experimental rather than planned approach is taken to using e-communications
with poor integration between online and offline marketing communications.
Research by Smart Insights (2014) investigated the challenges of managing digital mar-
keting. It was found that many businesses do face challenges in these areas:
●● Planning. Half (50 per cent) of businesses surveyed do not have a defined digital plan
or strategy although they are active in digital marketing, while nearly half (44 per cent)
also don’t have a defined marketing plan in the business against which to align strategy.
●● Organisational capabilities. Nearly half (43 per cent) of businesses have a well-defined per-
formance improvement process, with 46 per cent having adapted their structure. Many busi-
nesses either already have or are planning to introduce a digital transformation programme,
although a substantial number (37 per cent) of businesses don’t think it’s relevant for them.
●● Integration of digital channels into marketing. Only a quarter of companies (26 per
cent) were happy with their level of integration of digital marketing and traditional
communications. The main barriers to integration are: 1. Lack of integrated strategy
and plans (28 per cent); 2. Teams structured in silos (21 per cent); 3. Lack of skills in
integrated communications (17 per cent).
●● ROI evaluation. A significant proportion (39 per cent) see opportunities from digital
marketing, but find ROI measurement challenging – a key area for managers to address.
Given the future importance of digital marketing, larger organisations have introduced
Digital transformation
A staged programme of
Digital transformation programmes to help manage these challenges. The approach has
business improvements been discussed by many management consulting groups, for example MIT Center for
to People, Process ­Digital Business and Capgemini Consulting (2011) and Altimeter (2014).
and Tools tools used
for integrated digital Altimeter produced a visual proposing enablers and barriers to digital transformation
marketing to maximise (Figure 1.8). It shows how disruptive digital technologies such as social media, mobile plat-
the potential contribution
of digital technology and
forms and real-time marketing should be harnessed to create an effective digital customer
media to business growth. experience.
26 Part 1 Digital marketing fundamentals

Leaders lead
Empowerment is top-down r ∞)
me Xxx
inspiration cascades to
cus (DC
Internal collaboration al ce
git en
Di peri
Behavioral economics ex
Digital opens new
touch-points
Expand market opportunities e
tim
al
Re
Digital darwinism Data paralysis
Adapt to new Actionable insight need
technology or die new support paradigm
e
Culture of innovation bil No common vision
Mo
Digital ethnography Cause-effect
Focus on the new No dedicated
customer journey resources

Hero’s journey ial Competitive disadvantage

c
customers inspire change agents So
Tunnel vision
Silos prevent CX
collaboration

ta Lack of sense of urgency

ive Da
pt y
sru log Education
Di hno
Te
c er Execs need to know
um r
ns vio what they dont know
Co Beha
Broken experience

Digital darwinism Evolution

Figure 1.8 The drivers and barriers to digital transformation

Source: Altimeter (2014)

Applying the 7Ss

The 7Ss are a useful framework for reviewing an organisation’s existing and future
­capabilities to meet the challenges posed by the new digital channels, and some of the
­aspects of this are shown in Table 1.3.
You may have encountered the 7S framework, summarised by Waterman et al. (1980)
and developed by McKinsey consultants in the 1980s. It is often referenced when refer-
ring to the management of a business. EConsultancy (2005) has summarised some of the
­strategic resource management issues that require consideration, as shown in Table 1.3.

Table 1.3 Summary of some of the organisational challenges of digital marketing

that need to be managed in the context of the 7S framework

Element of 7S Application to digital Key issues from practice and

model ­marketing strategy literature
Strategy The significance of digital Gaining appropriate budgets and
marketing in influencing and demonstrating/delivering value and
supporting the organisation’s ROI from budgets. Annual planning
strategy approach
Techniques for using digital marketing
to impact organisation strategy
Techniques for aligning digital strategy
with organisational and marketing
strategy
 Chapter 1 Introducing digital marketing 27

Element of 7S Application to digital Key issues from practice and

model ­marketing strategy literature

Structure The modification of Integration of digital marketing

organisational structure to and e-commerce teams with other
support digital marketing management, marketing (corporate
communications, brand marketing,
direct marketing) and IT staff
Use of cross-functional teams and
steering groups
Insourcing vs outsourcing
Systems The development of specific Campaign planning
processes, procedures or approach–integration
information systems to support Managing/sharing customer
digital marketing information
Managing content quality
Unified reporting of digital marketing
effectiveness
In-house vs external best-of-breed
vs external integrated technology
solutions
Staff The breakdown of staff in Insourcing vs outsourcing
terms of their background and Achieving senior management buy-in/
characteristics such as IT vs involvement with digital marketing
marketing, use of contractors/ Staff recruitment and retention. Virtual
consultants, age and sex working
Staff development and training
Style Includes both the way in Relates to role of digital marketing
which key managers behave team in influencing strategy – is it
in achieving the organisation’s dynamic and influential or conservative
goals and the cultural style of and looking for a voice
the organisation as a whole
Skills Distinctive capabilities of key Staff skills in specific areas: supplier
staff, but can be interpreted selection, project management,
as specific skill sets of team content management, specific
members e-marketing approaches (SEO, PPC,
affiliate marketing, email marketing,
online advertising)
Superordinate The guiding concepts of the Improving the perception of the
goals digital marketing organisation importance and effectiveness of the
which are also part of shared digital marketing team among senior
values and culture. The inter- managers and staff it works with
nal and external perception of (marketing generalists and IT)
these goals may vary
Source: EConsultancy (2005)

A strategic framework for developing a digital marketing

strategy

To realise the benefits of digital marketing and avoid the pitfalls that we have described,
an organisation needs to develop a planned, structured approach. Consequently, this text
defines a strategic approach to Internet marketing which is intended to manage these risks
and deliver the opportunities available from online channels. In Figure 1.9 we suggest a
process for developing and implementing a digital marketing plan which is based on our
28 Part 1 Digital marketing fundamentals

Business
objectives

A. Defining
the online
opportunity
a. Evaluate 1. Set b. Assess
e-marketing e-marketing online
performance objectives marketplace

B. Selecting a. Define 2. Define b. Define

the strategic customer value e-marketing e-communications
approach proposition strategy mix

a. Implement 3. Implement
b. Execute
customer e-marketing
e-communications
experience plan
C. Delivering
results
online
4. Profile
measure and
improve

Figure 1.9 A generic digital marketing strategy development process

experience of strategy definition in a wide range of companies. This diagram highlights

the key activities and their dependencies which are involved for the creation of a typical
digital marketing strategy and relates them to coverage in different chapters in this text:

A: Defining the online opportunity

Setting objectives to define the potential is the core of this phase of strategy development.
Key activities are:
●● 1 Set Digital marketing objectives (Chapters 4 and 8). Companies need to set specific
numerical objectives for their online channels and then resource to deliver these objec-
tives. These objectives should be informed by and influence the business objectives and
also the following two activities.
●● 1a Evaluate digital marketing performance (Chapters 4 and 10). Apply web analytics
tools to measure the contribution of leads, sales and brand involvement currently deliv-
ered by online communications such as search engine marketing, online advertising and
email marketing in conjunction with the website.
●● 1b Assess online marketplace (Chapters 2, 3 and 4). Situation analysis review of the
micro-environment (customers, competitors, intermediaries, suppliers and inter-
nal ­capabilities and resources) and the broader macro-environment which influences
­strategy, such as legal requirements and technology innovation.
 Chapter 1 Introducing digital marketing 29

B: Selecting the strategic approach

● 2 Define digital marketing strategy (Chapter 4). Select appropriate strategies to achieve
the objectives set at stage A1.
● 2a Define customer value proposition (Chapters 4 to 7). Define the value proposition
available through the online channel and how it relates to the core proposition delivered
by the company. Review segmentation and targeting options. Review the marketing mix
and brand values to evaluate how they can be improved online.
● 2b Define digital communications mix (Chapters 4, 8 and 9). Select the offline and online
communications tools to encourage usage of an organisation’s online services and to
generate leads and sales. Develop new outbound communications and event-triggered
touch strategies to support customers through their relationship with the company.

C: Delivering results online

● 3 Implement digital marketing plan (Part 3). This details the implementation of the
strategy.
● 3a Implement customer experience (Chapter 7). Build the website and create the email
marketing communications which form the online interactions customers make with a
company. Create online customer relationship management capabilities to understand
customers’ characteristics, needs and behaviours and to deliver targeted, personalised
value (Chapter 6).
● 3b Execute digital communications ( Chapter 8 ) . Manage the continuous online
marketing communications such as search engine marketing, partnership social media
marketing, sponsorships and affiliate arrangements, and campaign-based e-marketing
communications such as online advertising, email marketing and microsites to
encourage usage of the online service and to support customer acquisition and retention
campaigns. Integrate the digital media channels with traditional marketing.
● 4 Customer profiling (Chapter 6), monitoring and improving online activities and
maintaining the online activities (Chapter 9). Capture profile and behavioural data
on customer interactions with the company and summarise and disseminate reports
and alerts about performance compared with objectives in order to drive performance
improvement.
You will see that in the process diagram, Figure 1.9, many double-headed arrows
are used, since the activities are often not sequential, but rather inform each other, so
activity 1, set digital marketing objectives, is informed by the activities around it but may
also influence them. Similarly, activity 4, profile, measure and improve, is informed by the
execution of online activities but there should be a feedback loop to update the tactics and
strategies used.

Introduction to digital marketing communications

Digital media channels For many years, marketing campaigns were based on traditional media including TV, print
Online communications
techniques used to
and radio ads, and direct mail supported by public relations. But, in a few short years,
achieve goals of brand since the web concept was first proposed in the late 1980s by Sir Tim Berners-Lee, there
awareness, familiarity, have been huge changes in marketing communications. The digital equivalents of these
favourability and to
influence purchase intent traditional media, which are known as digital media channels, are vital components of
by encouraging users most marketing campaigns today. For example, in an online campaign, marketers can use
of digital media to visit a
website to engage with ads and content on social media to engage audiences; display ads, the familiar banner and
the brand or product, and skyscraper ads seen on many online publisher sites; pay-per-click (PPC) ads such as the
30 Part 1 Digital marketing fundamentals

ultimately to purchase Sponsored Links in Google; search engine optimisation (SEO) to gain higher positions in
online or offline through
traditional media channels the natural listings of Google; affiliate marketing where sites which generate a sale for a
such as by phone or merchant gain commission; and email marketing, which is most effective when messages
in-store.
are sent to an existing customer base – i.e. customers who have given their permission
Display ads
Use of graphical or rich
to receive them. Many of these digital communications techniques are analogous to their
media ad units within traditional equivalents – for example, display ads are broadly equivalent to print or display
a web page to achieve ads and email marketing is equivalent to direct mail.
goals of delivering brand
awareness, familiarity, But the approaches used to target the online audience are potentially very different,
favourability and purchase with personalisation based on the customer profile and previous interactions with com-
intent. Many ads
encourage interaction
munications giving many options to deliver more timely, relevant messages. (Personalised
through prompting the communications are also effective on the website, where landing pages are commonly used
viewer to rollover to play to make the page more relevant to what the customer is seeking.) Leading websites also
videos, complete an
online form or to view provide great opportunities to engage the visitor through in-depth text content, rich media
more details before such as video and audio and participation in customer communities.
clicking through to a site.
Pay-per-click
PPC refers to when a The relationship between digital and traditional communications
company pays for text
ads to be displayed on
the search engine results It is helpful to understand the relationship between the new digital communications
pages as a sponsored ­techniques and traditional communications, in order that new opportunities are not
link (typically above, to
the right of or below the missed and campaigns can be planned in an integrated fashion. According to Jenkinson
natural listings) when (2007), there are important learning opportunities to be derived from understanding the
a specific keyphrase is
entered by the search
scope of personalisation both on- and offline. To illustrate the relationship between differ-
users. It is so-called ent levels of marketing communications consider Table 1.4, which is based on terminology
because the marketer introduced by Jenkinson and Sain (2001) and increasingly adopted by practitioners and
pays each time the
hypertext link in the ad academics.
is clicked on. If a link is
clicked repeatedly, then
this will be detected by
the search engine as click
fraud and the marketer
Table 1.4 Key marketing communications concepts
will not be charged.
Search engine
optimisation Marketing Definition Examples from traditional
A structured approach communications term and digital media
used to increase the
position of a company Medium (media) ‘Anything that conveys a Broadcast (television, radio),
or its products in search message’ press, direct mail, cinema,
engine natural or organic
results listings (the main
The carrier of the message poster, digital (web, email,
body of the search or method of transmission. mobile)
results page) for selected Can be conceived as
keywords or phrases. the touchpoint with the
Affiliate marketing customer
A commission-based
Discipline ‘A body of craft technique Advertising, direct marketing,
arrangement where
referring sites (publishers) biased towards a facet of public relations, market
receive a commission marketing communication’ research, personal selling,
on sales or leads by These are traditionally known sales promotion, sponsorship,
merchants (retailers). as ‘promotion tools’ or the packaging, exhibitions and
Commission is usually different elements of the trade shows. All are also used
based on a percentage
communications mix online
of product sale price or a
fixed amount for each sale, Channel (tools) The combination of a Direct mail, direct response
but may also be on a per- discipline with a medium TV, television brand
click basis, for example
when an aggregator refers
advertising. Digital channels:
visits to merchants. different forms of search
marketing, affiliate marketing,
Email marketing
Typically applied
display advertising, email
to outbound marketing, social media, blogs
communications from a and feeds
company to prospects or
customers to encourage
 Chapter 1 Introducing digital marketing 31

purchase or branding
goals. Email marketing
is most commonly used Marketing Definition Examples from traditional
for mailing to existing communications term and digital media
customers on a houselist,
but can also be used for Vehicle A specific channel used to TV (ITV, Channel 4),
mailing prospects on a
rented or co-branded
reach a target audience newspaper (The Sun, Metro,
list. Emails may be sent The Times), magazine
as part of a one-off (The Economist, Radio Times),
campaign or can be radio (Virgin Radio, BBC
automated event-based, Radio 5) and their website
triggered emails such
equivalents. Different search
as a welcome strategy
which can be broadcast engines such as Google fit,
based on rules about or aggregators of product
intervals and customer from other suppliers such
characteristics. as Money supermarket, also
fit here

Activity 1.4 Digital media differences?

Purpose
To illustrate similarities and differences between digital and traditional media.

Activity
Make two columns. On the left, write down different digital media channels and on
the right, the corresponding communications disciplines such as advertising, direct
Landing page ­marketing or PR which are most appropriate.
A destination page when
a user clicks on an ad or
other form of link from a
referring site. It can be
a home page but more
typically and desirably,
a landing page is a page Using digital media channels to support business objectives
with the messaging
focussed on the offer in
the ad. This will maximise Before we explain the different digital media channels, it is important to consider how
conversion rates and they can support business goals. RACE (Figure 1.10 and Preface Figure P.1) is a practical
brand favourability.
framework developed by Smart Insights (2010) to help marketers manage and improve the
Rich media
Advertisements or site
commercial value that their organisations gain from digital marketing. RACE is an evolu-
content that are not static, tion of the REAN (Reach–Engage–Activate–Nurture) framework originally developed by
but provide animation, Xavier Blanc and popularised by Steve Jackson in his book Cult of Analytics (Jackson,
sound or interactivity. An
example of this would be 2009). It is intended to help create a simplified approach to reviewing the performance of
a display advertisement online marketing and taking actions to improve its effectiveness. The measures introduced
for a loan in which a
customer can type in the in Figure 1.10 are covered in more depth in Chapters 4 and 10, where we explore the power
amount of loan required, of using web analytics for improving marketing performance.
and the cost of the loan is
calculated immediately.
RACE consists of four steps designed to help engage prospects, customers and fans
with brands throughout the customer lifecycle.
Web or digital analytics
Techniques used to
assess and improve the
●● Step 1: Reach – Build awareness of a brand, its products and services on other sites and
contribution of digital in offline media and build traffic by driving visits to web and social media presences.
marketing to a business, ●● Step 2: Interact – Engage audience with brand on its website or other online presence to
including reviewing
traffic volume, referrals, encourage them to act or interact with a company or other customers.
clickstreams, online ●● Step 3: Convert – Achieve conversion to generate leads or sales on web presences and
reach data, customer
satisfaction surveys, leads
offline.
and sales. ●● Step 4: Engage – Build customer relationships through time to achieve retention goals.
32 Part 1 Digital marketing fundamentals

REACH
Build awareness on other
sites and in offline media
and drive to web presences
KPIs:
• Unique visitors and fans
• Audience share
• Revenue or goal value
per visit

ENGAGE ACT
Build customer and fan Engage audience with
relationships through time brand on its website or
to achieve retention goals other online presence
KPIs: KPIs:
• % active hurdle rates • Bounce rate
• Fan engagement • Pages per visit
• Repeat conversion • Lead conversion

CONVERT
Achieve conversion to
marketing goals such as
fans, leads or sales on web
presences and offline
KPIs:
• Conversion rates
• Sales
• Revenue and margin

Figure 1.10 RACE: Reach–Act (Interact)–Convert–Engage

Source: Smart Insights (2010)

Digital channels always work best when they are integrated with other channels, so
where appropriate digital channels should be combined with the traditional offline media
and channels. The most important aspects of integration are, first, using traditional media
to raise awareness of the value of the online presences at the Reach and Interact stages
and, second, at the ‘Convert’ and ‘Engage’ steps where customers may prefer to interact
with customer representatives.

The key types of digital media channels

There are many online communications tools which marketers must review as part of their
communications strategy or as part of planning an online marketing campaign. To assist
with planning, Chaffey and Smith (2012) recommend that these online marketing tools are
divided into the six main groups, shown in Figure 1.11.
In Chapters 8 and 9, we review these tools in detail, but this is the essence of each digital
media channel:
1 Search engine marketing. Placing messages on a search engine to encourage click-
through to a website when the user types a specific keyword phrase. Two key search
marketing techniques are paid placements or sponsored links using pay-per-click, and
 Chapter 1 Introducing digital marketing 33

Social network placements in the natural or organic listings using search engine optimisation where no
A site that facilitates ­peer-
to-peer communication charge is made for clicks from the search engine.
within a group or between 2 Online PR. Maximising favourable mentions of your company, brands, products or
individuals through
providing facilities to
websites on third-party websites such as social networks, blogs, podcasts or feeds that
develop user-generated are likely to be visited by your target audience. Also includes responding to negative
content (UGC) and to mentions and conducting public relations via a site through a social media news centre
exchange messages
and comments between or blog, for example.
different users. 3 Online partnerships. Creating and managing long-term arrangements to promote your
Blog online services on third-party websites or through email communications. Different
Personal online diary,
journal or news source
forms of partnership include link building, affiliate marketing, aggregators such as
compiled by one person, price comparison sites like Moneysupermarket (www.moneysupermarket.com), online
an internal team or sponsorship and co-branding.
external guest authors.
Postings are usually 4 Display advertising. Use of online ads such as banners and rich media ads to achieve
in different categories. brand awareness and encourage click-through to a target site.
Typically comments can
be added to each blog
5 Opt-in email marketing. Renting email lists or placing ads in third-party e-newsletters
posting to help create or the use of an in-house list for customer activation and retention.
interactivity and feedback. 6 Social media marketing. Companies participate and advertise within social networks
Podcast and communities to reach and engage their audience. Viral marketing or online word-
Individuals and
organisations post online of-mouth messages are closely related to this. Here content is shared or messages are
media (audio and video) forwarded to help achieve awareness and, in some cases, drive response.
which can be viewed in
the appropriate players Social media marketing is an important category of digital marketing which involves
(including the iPod which
first sparked the growth in e­ ncouraging customer communications on a company’s own site, or social presences such
this technique). The latest as Facebook or Twitter or in specialist publisher sites, blogs and forums. It can be applied
podcast updates can be
automatically delivered
by RSS.
Feed (or RSS feed)
Blog, news or other
content is published by
an XML standard and
2 Online PR
syndicated for other
sites or read by users • Publisher outreach
1 Search marketing 3 Online partnership
in RSS reader services • Community participation
• Search engine • Affiliate marketing
such as Google Reader, • Media alerting
optimisation (SEO) • Sponsorship
personalised home pages • Brand protection
or email systems. RSS • Paid search • Co-branding
stands for Really Simple Pay-per-click (PPC) • Link-building
Syndication. • Paid for inclusion feeds
Viral marketing
A marketing message Offline communications Offline communication
is communicated from 1 Advertising 6 Direct mail
one person to another, Website
2 Personal selling 7 Exhibitions
facilitated by different and social
3 Sales promotion 8 Merchandising
media, such as word-of- presences
mouth, email or websites,
4 PR 9 Packaging
in particular social 5 Sponsorship 10 Word-of-mouth
network or blogsites. Viral
marketing implies rapid
4 Interactive ads 6 Social media marketing
transmission of messages
• Site-specific media buys • Audience participation
is intended. 5 Opt-in e-mail
• Ad networks • Managing social presence
Social media marketing • House list e-mails
• Contra-deals • Viral campaigns
Monitoring and • Cold (rented list)
• Sponsorship • Customer feedback
facilitating customer-to- • Co-branded
customer interaction and • Behavioural targeting
• Ads in third party
participation throughout e-newsletters
the web to encourage
positive engagement
with a company and its Online communications Offline communications
brands. Interactions may
occur on a company site,
social networks and other
third-party sites. Figure 1.11 Six categories of e-communications tools or media channels
Source: Chaffey and Smith (2012)
34 Part 1 Digital marketing fundamentals

as a traditional broadcast medium – for example companies can use Facebook or Twitter
to send messages to customers or partners who have opted in. However, to take advan-
tage of the benefits of social media it is important to start and participate in customer
conversations. These can be related to products, promotions or customer service and are
aimed at learning more about customers and providing support, thus improving the way a
­company is perceived.
The growth of social networks has been documented by Boyd and Ellison (2007), who
describe social networking sites (SNS) as:
Web-based services that allow individuals to (1) construct a public or semi-public profile
within a bounded system, (2) articulate a list of other users with whom they share a con-
nection, and (3) view and traverse their list of connections and those made by others
within the system.

The interactive capabilities to post comments or other content and rate content are
­surprisingly missing from this definition.

Different types of social media marketing tools

There are many, many sites and tools which comprise what we call ‘social media’. To gain
an idea of just how many, complete Activity 1.5, which lists many tools in 25 categories.
A social media site is much more than simply a website. From a technology viewpoint,
most of these sites can be considered as software applications or web services which give
access to users at different levels of permission and then enable management and storage
of different forms of user-generated content. Messaging is also an important feature of

Digital marketing insight 1.2 Social media matters – the Cluetrain Manifesto sparks the
social media marketing revolution

When Levine et al. (2000) coined the phrase ‘markets are conversations’, they perhaps
did not realise how fundamental this idea would be to the success of marketing in the
digital age. Creating a social media or customer engagement strategy is challenging
because it requires a change in mindset for the company wishing to exploit it. The
challenge is that the company may have to give up some control of their messaging
to enable them to communicate with customers effectively. The change in approach
required is clear from a movement that originated in the USA in 1999, known as the
Cluetrain manifesto (www.cluetrain.com). The authors, Levine et al. (2000), say:

The cluetrain used email, newsgroups, mailing lists, chat and web pages to facilitate
internet based conversations and human interaction in a digital space. Conversations
among human beings sound human. They are conducted in a human voice. Most
corporations, on the other hand, only know how to talk in the soothing, ­humorless
monotone of the mission statement, marketing brochure, and your-call-is-important-
to-us busy signal. Same old tone, same old lies. No wonder networked markets have
no respect for companies unable or unwilling to speak as they do. Corporate firewalls
have kept smart employees in and smart markets out. It’s going to cause real pain to
tear those walls down. But the result will be a new kind of conversation, which gives
everyone permission to take part in the discussion. And if this is the case it will be the
most exciting conversation business has ever engaged in.
 Chapter 1 Introducing digital marketing 35

many of these sites, particularly the main social networks which will alert users when new
content related to their content or connections is published. APIs for exchanging data with
other web services interfaces are also a key feature of social networks which enable them to
be more useful and allow them and their members to extend their reach and influence by
incorporating social comments into other sites.

Activity 1.5 Assessing social media marketing platforms

Purpose
To explore the range of social media sites and tools, to categorise them and assess
their business applications.

Activity
Visit the Conversation Prism (www.conversationprism.com), which is a visual map of
the social media landscape. Identify the types of social media sites you and your col-
leagues use. How do you think the popularity of tools would differ for different types of
B2B and B2C sites? Discuss how businesses should decide on the most important to
invest in to achieve their goals.

According to Weinberg and Ekin (2011), social media is neither a perfect substitute
for traditional marketing, nor is it a one-size-fits-all. Marketers can effectively use social
­media by taking their message directly to consumers and focussing on traditional objec-
tives. Since there are so many types of social presence, it’s helpful to simplify the options to
manage. You can see there’s more to social media than social network…
1 Social networks. The core social platforms in most countries where people interact
through social networks are Facebook for consumer audiences, LinkedIn for business
audiences, Google+ and Twitter for both.
2 Social publishing and news. Nearly all newspapers and magazines, whether broad or
niche, now have an online presence with the option to participate through comments
on articles, blogs or communities.
3 Social commenting in blogs. A company blog can form the hub of your social media
strategy and you can look at tapping into others’ blogs, whether company or personal
or through blog outreach.
4 Social niche communities. These are communities and forums independent of the main
networks, although these do support sub-groups. You can create your own community
this way.
5 Social customer service. Sites like GetSatisfaction, as well as companies’ own customer
support forums, are increasingly important for responding to customer complaints.
6 Social knowledge. These are reference social networks like Yahoo! Answers, Quora
and similar, plus Wikipedia. They show how any businesses can engage their audiences
by solving their problems and subtly showing how their products have helped others.
7 Social bookmarking. The bookmarking sites like Delicious (www.delicious.com), which
are relatively unimportant in the UK except if you are engaging technical audiences.
8 Social streaming. Rich and streaming media social sites – photos, video and podcasting.
9 Social search. Search engines are becoming more social with the ability to tag, com-
ment on results and, most recently, vote for them through Google+1.
10 Social commerce. We’ve left this one until last, because it’s mainly relevant for the
­retail sector. It involves reviews and ratings on products and sharing of coupons about
details.
36 Part 1 Digital marketing fundamentals

Web 2.0 concept Web 2.0

A collection of web
services involving data The Web 2.0 concept emerged in 2004. was summarised in an influential article by Tim
exchange between sites
that facilitate participation O’Reilly (2005). A brief reference to the concept has been retained in this edition, although
and interaction of web the term is not used in practice today. The main types of services that developed as part of
users with sites to
create user-generated Web 2.0 which still underpin website–social media interaction are: free to use, ad-support
content and encourage web-hosted services or interactive applications for different media formats such as Flickr
behaviours such as
community or social
for images; YouTube for video; Bing or Google Maps; blogging services such as Wordpress.
network participation, com; and rating of content and services through rating systems. Data exchange between
mashups, content rating, sites through XML-based data standards, for example RSS, is still used for direct shar-
use of widgets and
tagging. ing of content from business blogs to social network updates. The ‘Ajax’ (Asynchronous
Video marketing
JavaScript and XML) implementation is still used for developing many interactive features.
The use of video to Video marketing was also part of ‘Web 2.0’ and has grown in importance since.
gain visibility in search Since the Web 2.0 concept has been widely applied, it is natural that commentators
marketing, video hosting
sites and to engage site would try to develop it to the Web 3.0 concept, although the term has not been widely used
visitors. to date. Figure 1.12 summarises the evolution of digital and web-related technologies.
Web 3.0 concept
Next-generation web ●● Web applications. Usage of web-based applications and services (like Google word pro-
incorporating high-speed cessor and spreadsheets). Using the web in this way is sometimes termed cloud comput-
connectivity, complex
cross-community ing where all that is really needed for many activities is a computer with a web browser
interactions and an with local software applications used less widely.
intelligent or semantic
web where automated
●● Syndication. Increased incorporation of syndicated content and services from other
applications can access sites or a network into a site (using tools such as Yahoo! Pipes and XML exchange
data from different ­between widgets). We refer to this concept as ‘atomisation’ in Chapter 9.
online services to assist
searchers perform
●● Streamed video or IPTV. Increased use of streamed video from existing TV providers and
complex tasks of supplier user-generated content (as suggested by use of YouTube and IPTV services such as Joost).
selection.

Web 4.0
Semantics of Information Connections

The WebOS
2020 – 2030
Intelligent personal agents
Semantic Web
SWRL
Web 3.0 Distributed Search
OWL 2010 – 2020
SPARQL Semantic Databases
OpenID AJAX Semantic Search
ATOM Widgets
RSS
P2P RDF Mashups
Javascript Flash
SOAP XML
Web 2.0 Office 2.0
Social Media Sharing
2000 – 2010 Weblogs
World Wide HTML Java Social Networking
Web HTTP Directory Portals Wikis SaaS
VR
Keyword Search Lightweight Collaboration
BBS Gopher Web 1.0 Websites
1990 – 2000
MMO’s MacOS SQL
Groupware
Desktop SGML Databases
Windows
BBS File Servers
Email
PC Era
FTP IRC 1980 – 1990
USENET
PC’s File Systems

Semantics of Social Connections

Figure 1.12 Evolution of web technologies

Source: Adapted from Spivack (2007)
 Chapter 1 Introducing digital marketing 37

●● Virtual worlds. Increased use of immersive virtual environments such as Second Life.
●● Personal data integration. Increased exchange of data between social networks fulfilling
different needs
●● The semantic web. Increased use of semantic mark-up leading to the semantic web envi-
sioned by Tim Berners-Lee over ten years ago. It seems semantic mark-up will be needed
to develop artificial intelligence applications which recommend content and services to
web users without them actively having to seek them and apply their own judgement as
to the best products and brands (i.e. an automated shopping comparison service) (as
suggested by the use of standardised data feeds between shopping comparison sites and
Google Base).

Benefits of digital media

In the section on digital marketing strategy, we described some of the applications of

­Internet marketing to support communications with customers across the purchase ­cycle
from generating awareness, achieving direct response for lead generation or sale and
­supporting customer service and relationship marketing. In this section we explore key dif-
ferences between digital media and traditional media which savvy marketers exploit.
Digital marketing communications differ significantly from conventional marketing
communications because digital media enabled new forms of interaction and new models
for information exchange. A useful summary of the differences between new media and
traditional media originally developed by McDonald and Wilson (1999) and still valid –
they describe the ‘6 Is of the e-marketing mix’ which are practical benefits of digital mar-
keting that the marketer should exploit.

1 Interactivity
John Deighton was one of the first authors to identify these characteristics of a digital
medium (Deighton, 1996):
●● the customer initiates contact
●● the customer is seeking information or an experience (pull)
●● it is a high-intensity medium – the marketer will have 100% of the individual’s atten-
tion when he or she is viewing a website
●● a company can gather and store the response of the individual
●● individual needs of the customer can be addressed and taken into account in future
dialogues.
Figure 1.13(a) shows how traditional media are predominantly push media where the
marketing message is broadcast from company to customer, although interaction can be
encouraged through direct response to phone, website or social media page. Online it is
often the customer who initiates contact and is seeking information through researching
information on a website. In other words, it is a ‘pull’ mechanism where it is particularly
important to have good visibility in search engines when customers are entering search
terms relevant to a company’s products or services. Amongst marketing professionals this
powerful new approach to marketing is now commonly known as inbound marketing (Shah
Inbound marketing and Halligan, 2009). Inbound marketing is powerful since advertising wastage is r­ educed.
The consumer is proactive Content and search marketing can be used to target prospects with a defined need –
in seeking out information
for their needs, and they are proactive and self-selecting. But this is a weakness since marketers may have less
interactions with brands control than in traditional communications where the message is pushed out to a defined
are attracted through
content, search and social audience and can help generate awareness and demand.
media marketing. Figure 1.13(b) shows how digital media should be used to encourage two-way commu-
nications, which may be extensions of the direct-response approach. For example, FMCG
suppliers use their website or Facebook presence as a method of generating interaction by
providing incentives such as competitions and sales promotions to encourage the customer
to respond with their names, addresses and profile information such as age and sex.
38 Part 1 Digital marketing fundamentals

Push
Company Customer

Direct response

Traditional TV, print, radio media

(a) Direct mail communications

Interactivity
Dialogue not monologue

Pull/Push

Company Customer

Intelligence

(b) Two-way feedback

Figure 1.13 Summary of communication models for (a) traditional media, (b) new
media

2 Intelligence
Digital media and technology can be used as a relatively low-cost method of collecting
marketing research, particularly about customer perceptions of products and services, as
described in Chapter 10 which reviews digital analytics and market research.

3 Individualisation
Another important feature of interactive marketing communications is that they can
be tailored to the individual (Figure 1.14(b)) at relatively low costs, unlike in traditional
­media where the same message tends to be broadcast to everyone (Figure 1.14(a)). This
individualisation is based on the intelligence collected about site visitors and then stored
in a d
­ atabase and subsequently used to target and personalise communications to cus-
Personalisation tomers to achieve relevance in all media. The process of tailoring is also referred to as
Delivering individualised ­ ersonalisation – Amazon is the most widely known example where the customer is
p
content through web
pages or email. greeted by name on the website and receives recommendations on site and in their emails
Sense and respond based on previous purchases. This ability to deliver ‘sense and respond communications’
communications is another key ­feature of digital marketing and is explored further in Chapter 6.
Customer behaviour
is monitored at an
individual level and the 4 Integration
marketer responds with
communications tailored The Internet provides further scope for integrated marketing communications. Figure 1.15
to the individual’s need.
shows the role of the Internet in multichannel marketing. When assessing the market-
Outbound Internet- ing effectiveness of a website, the role of the Internet in communicating with customers
based communications
The website and email and other partners can best be considered from two perspectives. First, there is outbound
marketing are used ­Internet-based communications from organisation to customer. We need to ask how does the
to send personalised
communications to Internet complement other channels in communicating the proposition for the company’s
customers. products and services to new and existing customers with a view to generating new leads
 Chapter 1 Introducing digital marketing 39

Customer

Company Customer

Same message
to all customers
Customer
(or customers in
(a) each segment)

Customer

Company Customer

Different messages
to each customer
Customer
(or customers in
(b) micro-segment)

Figure 1.14 Summary of degree of individualisation for: (a) traditional media

(same message); (b) new media (unique messages and more
information exchange between customers)

Inbound Internet-based and retaining existing customers? Second, inbound Internet-based communications from
communications customer to organisation: how can the Internet complement other channels to deliver cus-
Customers enquire
through web-based forms tomer service to these customers? Many companies have now integrated email response
and email. and website callback into their existing call centre or customer service operation.
Some practical examples of how the Internet can be used as an integrated communica-
tions tool as part of supporting a multichannel customer journey (Figure 1.16) are the
following:
●● The Internet can be used as a direct-response tool, enabling customers to respond to
­offers and promotions publicised in other media.
●● The website can have a direct response or callback facility built into it. The Automo-
bile Association has a feature where a customer service representative will contact a
customer by phone when the customer fills in their name, phone number and a suitable
time to ring.
●● The Internet can be used to support the buying decision even if the purchase does not
occur via the website through assisted selling via live chat or phone. For example, Dell
has a prominent web-specific phone number on its website that encourages customers
to ring a representative in the call centre for support.
40 Part 1 Digital marketing fundamentals

Intermediary

Web

E-mail
Company Customer

Phone

Mail

Person

Figure 1.15 Channels requiring integration as part of integrated e-marketing

strategy

Offline Online

Product Product
evaluation evaluation

Decision to Decision to
purchase purchase
1

Specify Specify
Mail, purchase purchase
fax,
3
phone,
person Payment Payment
4
5

Fulfilment
Fulfilment
(digital)

Figure 1.16 The role of mixed-mode buying in Internet marketing

 Chapter 1 Introducing digital marketing 41

Activity 1.6 Integrating online and offline communications

Purpose
To highlight differences in marketing communications introduced through the use of
the Internet as a channel and the need to integrate these communications with existing
channels.

Activity
List communications between a PC vendor and a home customer over the lifetime of a
product such as a PC. Include communications using both the Internet and traditional
media. Refer to channel-swapping alternatives in the buying decision in Figure 1.16 to
develop your answer.

5 Industry restructuring
Disintermediation Disintermediation and reintermediation are key concepts of industry restructuring that
The removal of
intermediaries such as should be considered by any company developing an e-marketing strategy and are ­explored
distributors or brokers that in more detail in Chapters 2, 4 and 5.
formerly linked a company
to its customers.
For marketers defining their company’s communications strategy it becomes very
­important to consider the company’s representation on these intermediary sites by answer-
Reintermediation
The creation of new ing questions such as ‘Which intermediaries should we be represented on?’ and ‘How do
intermediaries between our offerings compare to those of competitors in terms of features, benefits and price?’
customers and suppliers
providing services such
as supplier search and 6 Independence of location
product evaluation.
Electronic media also introduce the possibility of increasing the reach of company
­communications to the global market. This gives opportunities to sell into international
markets which may not previously have been possible. The Internet makes it possible to
sell to a country without a local sales or customer service force (although this may still be
­necessary for some products).

Mini case study 1.3 Online pureplay startup Travel Republic achieves growth through
taking advantage of benefits of digital marketing

Travel Republic is the highest ranking independent online travel agent in the UK, with over 1 million travellers
booking every year. It’s an example of a pureplay that has deployed digital marketing techniques like search,
social media and email marketing to grow both in the UK and internationally.
Online travel agent Travel Republic topped The Sunday Times Virgin Fast Track 100 list four years after the
company was launched. The Kingston-upon-Thames based business was set up in 2003 and is the brainchild
of three university friends – Paul Furner, managing director, Chris Waite, IT director, and Kane Pirie, finance
and operations director.
Today the company can no longer be termed a startup, with revenues increasing 14.5 per cent in 2014 to
£67.5 million, giving it an operating profit margin of 20 per cent and with separate sites for local audiences in
Spain, Italy and Ireland.
The company employs more than 150 staff. TravelRepublic.co.uk appears in the IMRG-Hitwise Hot Shops
List, which ranks the UK’s top 50 most popular Internet retailers, across all sectors (ranked by number of web
visitors). In the online travel agency sector TravelRepublic.co.uk is more popular than Opodo and ebookers.
com, although Expedia.co.uk and lastminute.com rank higher.
42 Part 1 Digital marketing fundamentals

A major reason for the growth of Travel Republic is that it has taken advantage of the ‘pull’ effect of web
communications. Through using sponsored links in search networks such as Google AdWords, it has been
able to target its offering precisely to an online audience looking for a competitive price on a holiday or a flight
to a particular destination. Of course, this has to be backed up by a strong proposition, an easy to use, high-
performance website and trust in the brand indicated by user reviews and holiday guarantees (Figure 1.17).
TravelRepublic.co.uk caters for a broad range of customers including families, couples and groups. The web-
site offers charter, low-cost and scheduled airlines, powerful rate shopping technology for hotel rooms and
apartments, plus hotel reviews and resort guides written by its customers.
Customers can save up to 50 per cent on the price of a comparable package holiday purchased online
or on the high street. TravelRepublic.co.uk works with over 100 different flight operators and offers flights to
more than 200 destinations. The website also offers over 30,000 discounted hotels, apartments and villas
plus a wide range of other services such as taxi transfers, airport parking and car hire. The website gives cus-
tomers complete flexibility with flights, hotels and durations.
Paul Furner, managing director of TravelRepublic.co.uk explained how the company developed:

Chris, Kane and I met at university but then followed very different careers – Chris in software d
­ evelopment,
Kane in corporate finance/private equity and me in software quality assurance. These differing back-
grounds, all outside of the travel industry, have allowed us to take a fresh new look at the sector and
­become one of its leading innovators.
However, equally important has been our commitment, from the outset, to deliver gold standard cus-
tomer service to our customers. At a time when it is often said that there is no loyalty on the web we would
beg to differ. Our levels of repeat and recommended business suggest that we have a real affinity with our
customers which we plan to build upon in the coming months.

Source: Travel Republic press release, 2 December 2007, Travel Republic is the UK’s Fastest Growing Private Company, www.travelrepublic.
co.uk/help/pressReplace_003.aspx

Figure 1.17 Travel Republic (www.travelrepublic.co.uk)

 Chapter 1 Introducing digital marketing 43

In terms of deploying campaigns, these are further benefits of digital communications:

●● Accountability. Digital media are potentially more accountable through the use of
measurement systems known collectively as web analytics. Google provides a free tool
known as Google Analytics (www.google.com/analytics) to enable its advertisers to test
the value generated from its ads.
●● Testing. Potentially, testing becomes more straightforward at a lower cost with the
­o ption to trial alternative creative executions, messaging or offers. Google offers
­another free tool – the Website Optimiser – to test alternative landing pages.
●● Flexibility. Campaigns can be more flexible, with the capability to change copy or o
­ ffers
during a campaign. Alternative ads can be served within Google to evaluate which
works best. Google AdWords also offers dayparting, where ads can be displayed at
­different times of the day.
●● Micro-targeting. Alternative messages can be delivered for different audiences accord-
ing to what they are searching for. Potentially a company can show a different advert in
Google AdWords for each term searched on.
●● Cost-control. Costs can be controlled for each group of search terms entered by cus-
tomers through the search engine, managed collectively, and bids made can be increased
or decreased with the aid of software.

Key challenges of digital communications

It is sometimes suggested by some suppliers of digital media that they are ‘quick, cheap
and easy’ to deploy. This is a great misconception since there are many challenges which
need to be overcome when managing digital campaigns. Again referring to a Google
­AdWords campaign as an example, these include:
●● Complexity. To enable the benefits we have mentioned above – such as personalisation,
testing and dynamic variation in ads through time – time has to go into configuring
the campaign although the search engines provide defaults to enable easy setup. This
requires specialist expertise either in-house or at an agency to manage the campaign.
●● Responding to competitors. Since competitors can also change their approach readily,
more resource has to be used to monitor competitor activity. Automated tools known
as bid management tools can assist with this – they will automatically check amounts
competitors are paying and then adjust them according to pre-defined rules.
●● Responding to changes in technology and marketing platforms. Google and the other
­ad-serving companies innovate to offer better capabilities for their customers. This means
that staff managing campaigns need training to keep up-to-date. Google offers ‘Adwords
Qualified Professionals’ so that companies can be certain of a minimum skills level.
●● Cost. Although costs can be readily controlled, in competitive categories the costs can
be high, exceeding €10 per click.
●● Attention. While online paid search ads are highly targeted and there is arguably little
wastage, not everyone will view paid adverts, indeed there is a phenomenon known as
‘banner blindness’ where web users ignore online ads (see Chapter 9 for more details).
Engaging with the audience with advertising is also a problem in social networks and
other publisher sites, which can lead to a very low rate of people clicking on ads.

Key communications concepts for digital marketing

In this section, we introduce three key concepts which underpin digital communications
across the digital media we have introduced in this chapter.
1 Customer engagement.
2 Permission marketing.
3 Content marketing.
44 Part 1 Digital marketing fundamentals

1 Customer engagement
This difficulty in gaining attention online on all types of sites has led to the emergence of
Customer engagement the concept of customer engagement as a key challenge with which digital marketers are
Repeated interactions that
strengthen the emotional,
increasingly concerned. cScape (2008) describe customer engagement as:
psychological or physical
investment a customer repeated interactions that strengthen the emotional, psychological or physical investment
has in a brand. a customer has in a brand.

While for Haven (2007), customer engagement is:

the level of involvement, interaction, intimacy, and influence an individual has with a
brand over time.

Arguably, the biggest difference in communications introduced by the growth of digital

media and the web is the capability, or many would say necessity, to include customer’s’
conversations as an integral part of communications. Today, proactively managing con-
sumer participation which occurs through social networks such as Facebook, Google+
and LinkedIn, video postings and comments on YouTube and myriad blogs and forums is
essential since, when a positive sentiment is expressed by a real person independent from a
company this confers credibility on the company.
Equally, there are negative sentiments or comments made by consumers on the web that
need to be managed. For example, on one site (www.haveyoursay.com) a purchaser of a car
was highly critical about a make of car and the comments appeared near the top of the
Google search results page when someone searched for the brand, yet for several years the
manufacturer did nothing to manage this.

2 Permission marketing
Permission marketing Permission marketing is an established approach to online marketing which is still highly rele-
Customers agree (opt vant today as a practical foundation for CRM and online customer engagement. ‘‘­Permission
in) to be involved in an
organisation’s marketing marketing’ was a term coined by Seth Godin. Godin (1999) noted that while research used
activities, usually as a to show we were bombarded by 500 marketing messages a day, with the advent of the web
result of an incentive.
and digital TV this has now increased to over 3000 a day! From an organisation’s viewpoint,
this leads to a dilution in the effectiveness of the messages – how can the communications
of any one company stand out? From the customer’s viewpoint, time is seemingly in ever
shorter supply; customers are losing patience and expect reward for their attention, time and
Interruption marketing information. Godin refers to the traditional approach as interruption marketing. Permission
Marketing marketing is about seeking the customer’s permission before engaging them in a relation-
communications that
disrupt customers’ ship and providing something in exchange. The classic exchange is based on information or
activities. entertainment – a B2B site can offer a free report in exchange for a customer sharing their
email address or ‘Liking’ a brand, while a B2C site can offer a newsletter or access to their
wall with valuable content and offers. We cover the principles of permission marketing in
more detail and with examples related to CRM in Chapter 6.

3 Content marketing
Content marketing
The management of Success in permission marketing requires exceptional, compelling content. To emphasise
text, rich media, audio the importance of content marketing to gaining permission, encouraging sharing and
and video content aimed
at engaging customers ongoing engagement through websites and social media, the concepts of content market-
and prospects to meet ing and content strategy have developed to describe best practice approaches. Today, by
business goals published
through print and digital
content we refer to the combination of static content forming web pages, but also dynamic
media including web rich media content which encourages interaction. Videos, podcasts, user-generated content
and mobile platforms and interactive product selectors should also be considered as content which should be
which is repurposed and
syndicated to different refined to engage issues.
forms of web presence You can see the challenge content strategy presents since today there are so many
such as publisher sites,
blogs, social media and
­different types of content delivered in different forms to different places on different access
comparison sites. platforms, yet it is increasingly important to engage customers in social media.
 Chapter 1 Introducing digital marketing 45

The definition suggests these elements of content management that need to be planned
and managed:
1 Content engagement value. Which types of content will engage the audience – is it sim-
ple product or services information, a guide to buying product, or a game to engage
your audience?
2 Content media. Plain text, rich media such as Flash or Rich Internet applications or
mobile apps (see Chapter 3), audio (podcasts) and hosted and streamed video. Even
plain text offers different format options from HTML text to ebook formats and PDFs.
3 Content syndication. Content can be syndicated to different types of sites through
feeds, APIs, microformats or direct submission by email. Content can be embedded in
sites through widgets displaying information delivered by a feed.
4 Content participation. Effective content today is not simply delivered for static con-
sumption, it should enable commenting, ratings and reviews. These also need to be
monitored and managed both in the original location and where they are discussed
elsewhere.
5 Content access platform. The different digital access platforms such as desktops and
laptops of different screen resolution and mobile devices. Paper is also a content access
platform for print media.
Smart Insights (2015a) explain the key elements of a content hub using the diagram
shown in Figure 1.18, or, as they put it, a ‘content marketing machine’ as:
1 Create the right types of sharable content formats to meet customer interests and
company commercial goals. The quality and range of content must be sufficient and
sustained to compete. (In Chapter 9, the Smart Insights Content Marketing Matrix is
presented as a method of reviewing the most appropriate content formats to use.)

Figure 1.18 The Content Marketing Hub

Source: Smart Insights (2015a)
46 Part 1 Digital marketing fundamentals

Content marketing hub 2 A defined branded content marketing hub or repository for accessing all relevant
A central branded location ­content marketing assets.
where your audience
can access and interact 3 Invest in seeding content and working with partner sites and influencers to increase
with all your key content awareness and sharing of content.
marketing assets. In
a practical sense, the 4 Content marketing should be linked into search marketing and particular search
content hub can be a blog ­ arketing, since if there is a regular stream of quality content Google will favour the
m
or new section, an online
customer magazine or a
site when searchers are looking for information or products.
resource centre. 5 The right people, process and tools need to be in place to monitor content and sharing
effectiveness in social media. This should include following up on any comments from
social media.
To conclude this chapter, read Case Study 1 for the background on the success factors
which have helped build one of the biggest online brands.

Case Study 1 eBay thrives in the global marketplace

Context We believe that this trend has expanded our address-

It’s hard to believe that one of the most well-known able market.
­dot-coms has now been established 15 years. Pierre At the time of writing eBay comprises two major
Omidyar, a 28-year-old French-born software engineer businesses:
living in California, coded the site while working for
another company, eventually launching the site for 1 The eBay Marketplaces. The mission for the core
business on Monday, 4 September 1995 with the more eBay business is to ‘create the world’s online mar-
direct name ‘Auction Web’. Legend reports that the ketplace’. In 2008, eBay’s SEC filing notes some of
site attracted no visitors in its first 24 hours. The site the success factors for this business, for which eBay
became eBay in 1997. In 2014 eBay had 155 million seeks to manage the functionality, safety, ease-of-
active buyers, an increase from 90 million active in 2009. use and reliability of the trading platform. By 2011
This shows how established pureplays have continued the strategic priorities had changed to trust, value,
to grow with global adoption of the web. selection and convenience.
This summary and many others in the text are based 2 PayPal. The mission is to ‘create the new global
on the SEC filing of the business. The Security and standard for online payments’. This company was
­Exchange Commission (SEC) required by company law acquired in 2003 but was repurchased at a later
in the US gives deep, relatively hype-free insights on the date.
main online platforms based in the US and is recom-
This case focuses on the best known eBay business,
mended for students studying these types of business.
the eBay Marketplace.
Mission
Revenue model
eBay describes its purpose as to ‘pioneer new commu-
The vast majority of eBay’s revenue is for the listing
nities around the world built on commerce, sustained
and commission on completed sales. For PayPal pur-
by trust, and inspired by opportunity’. eBay’s 2014
chases an additional commission fee is charged. The
­report describes the company’s view on current use of
margin on each transaction is phenomenal since once
e-commerce:
the infrastructure is built, incremental costs on each
Driven by the ubiquity of the Internet and the prolifer- transaction are tiny – all eBay is doing is transmitting
ation of mobile devices, we believe that the way con- bits and bytes between buyers and sellers. To grow rev-
sumers engage with each other, brands and services enue eBay has acquired and developed other sites such
is fundamentally changing, blurring the lines between as comparison site Shopping.com and StubHub (event
offline retail and online e-commerce, and effectively tickets). eBay has also created vertical formats, such
creating one market for commerce and reinforcing as ­Classifieds, Daily Deals, Fashion, Motors (vehicles,
the connections between commerce and payments. parts and a­ ccessories) and Electronics.
 Chapter 1 Introducing digital marketing 47

eBay also expanded into providing infrastructure For sellers:

for other retailers in 2011 with its purchase of GSI, a ●● access to broad markets
provider of e-commerce and interactive marketing ●● cost effective marketing and distribution
services encompassing websites and fulfilment centres ●● access to large buyer base
to enterprise clients that include some of the world’s ●● good conversion rates.
leading brands and retailers covering merchandise
categories, including apparel, sporting goods, toys and In 2007, eBay introduced Neighbourhoods ( http://
baby, health and beauty and home. neighbourhoods.ebay.com) where groups can discuss
Advertising and other non-transaction net revenues brands and products they have high involvement with.
represent a relatively small proportion of total net rev- This social commerce experiment has now ended.
enues and the strategy is that this should remain the In January 2008, eBay announced significant
case. changes to its Marketplaces business in three major
areas: fee structure, seller incentives and standards,
Proposition and feedback. These changes have been controversial
The eBay Marketplace is well known for its core service, with some sellers, but are aimed at improving the
which enables sellers to list items for sale on an auction quality of experience. Detailed Seller Ratings (DSRs)
or fixed-price basis giving buyers the opportunity to bid enable sellers to be reviewed in four areas: (1) item as
for and purchase items of interest. described; (2) communication; (3) delivery time; and
Software tools are provided, particularly for frequent (4) postage and packaging charges. This is part of a
traders, including Turbo Lister, Seller’s Assistant, Selling move to help increase conversion rate by increasing
Manager and Selling Manager Pro, which help automate positive shopping experiences, for example by including
the selling process, the Shipping Calculator, Report- more accurate descriptions with better pictures and
ing tools, etc. Today over 60 per cent of listings are avoiding excessive shipping charges. Powersellers with
­facilitated by software, showing the value of automating positive DSRs will be featured more favourably in the
posting for frequent trading. search results pages and will gain additional discounts.
Fraud is a significant risk factor for eBay. BBC (2005)
reported that around 1 in 10,000 transactions within the
Competition
UK were fraudulent; 0.0001 per cent is a small propor- Although there are now few direct competitors of o ­ nline
tion, but scaling this up across the number of transac- auction services in many countries, there are many
tions makes a significant volume. ­indirect competitors. The SEC filings describe compet-
eBay has developed ‘Trust and Safety Programs’ ing channels as including online and offline retailers,
which are particularly important to reassure customers distributors, liquidators, import and export companies,
since online services are prone to fraud. For example, auctioneers, catalogue and mail-order companies, clas-
the eBay feedback forum can help establish credentials sifieds, directories, search engines, products of search
of sellers and buyers. Every registered user has a feed- engines, virtually all online and offline commerce par-
back profile that may contain compliments, criticisms ticipants and online and offline shopping channels and
and/or other comments by users who have conducted networks.
business with that user. The Feedback Forum requires
feedback to be related to specific transactions and Top
Objectives and strategy
Seller status was introduced in 2010 to increase trust in The overall eBay aims are to increase the gross mer-
the service. There is also a Safe Harbour data protection chandise volume and net revenues from the eBay
method and a standard purchase protection system. Marketplace. More detailed objectives are defined to
eBay has increased use of mobile commerce since achieve these aims, with strategies focussing on:
2009, yet it still only accounts for 20 per cent of pur-
1 Acquisition – increasing the number of newly regis-
chases in 2014, including sales from 240 million app
tered users on the eBay Marketplace.
downloads since inception.
2 Activation – increasing the number of registered
According to the SEC filing, eBay summarises the
­users that become active bidders, buyers or sellers
core messages to define its proposition as follows:
on the eBay Marketplace.
For buyers: 3 Activity – increasing the volume and value of transac-
tions that are conducted by each active user on the
●● trust
eBay Marketplace.
●● value
●● selection The focus on each of these three areas will vary
●● convenience. ­according to strategic priorities in particular local markets.
48 Part 1 Digital marketing fundamentals

eBay Marketplace growth is also driven by defining ●● legal uncertainty regarding liability for the listings and
approaches to improve performance in these areas. other content provided by users, including uncer-
First, category growth is achieved by increasing the tainty as a result of less Internet-friendly legal sys-
number and size of categories within the marketplace, tems, unique local laws and lack of clear precedent
for example: Antiques, Art, Books and Business & or applicable law;
­Industrial. Second, formats for interaction: the traditional ●● difficulties in integrating with local payment providers,
format is auction listings, but it has been refined now including banks, credit and debit card associations,
to include the ‘Buy-It-Now’ fixed-price format. This and electronic fund transfer systems;
fixed-price listing now accounts for well over half of all ●● differing levels of retail distribution, shipping and
transactions. communications infrastructures;
●● different employee/employer relationships and the
eBay’s growth strategy existence of workers’ councils and labour unions;
In its SEC filings, success factors eBay believes are ●● difficulties in staffing and managing foreign
important to enable it to compete in its market include: operations;
●● ability to attract buyers and sellers;
●● longer payment cycles, different accounting prac-
●● volume of transactions and price and selection of tices and greater problems in collecting accounts
goods; receivable;
●● customer service;
●● potentially adverse tax consequences, including
●● brand recognition. local taxation of fees or of transactions on websites;
●● higher telecommunications and Internet service pro-
According to its 2010 SEC filing: vider costs;
Our growth strategy is focussed on reinvesting in
●● strong local competitors;
our customers by improving the buyer experience
●● different and more stringent consumer protection,
and seller economics by enhancing our products data protection and other laws;
and services, improving trust and safety and cus-
●● cultural ambivalence towards, or non-acceptance of,
tomer support, extending our product offerings into online trading;
new formats, categories and geographies, and im-
●● seasonal reductions in business activity;
plementing innovative pricing and buyer retention
●● expenses associated with localising products,
strategies. including offering customers the ability to transact
business in the local currency;
It also notes that in the context of its competitors, other ●● laws and business practices that favour local com-
factors it believes are important are: petitors or prohibit foreign ownership of certain
●● community cohesion, interaction and size; businesses;
●● system reliability; ●● profit repatriation restrictions, foreign currency
●● reliability of delivery and payment; exchange restrictions and exchange rate fluctuations;
●● website convenience and accessibility; ●● volatility in a specific country’s or region’s political or
●● level of service fees; economic conditions;
●● quality of search tools. ●● differing intellectual property laws and taxation laws.

This implies that eBay believes it has optimised these

factors, but its competitors still have opportunities for Question
improving performance in these areas which will make Discuss how eBay uses different parts of their site
the market more competitive. to focus on certain activities and how this has con-
tributed to continued growth.
Risk management
The SEC filing lists the risks and challenges of
conducting business internationally as follows:
●● regulatory requirements, including regulation of
auctioneering, professional selling, distance selling,
banking and money transmitting;
E-Marketing (Electronic Marketing) are also known as Internet Marketing, Web
Marketing, Digital Marketing, or Online Marketing. E-marketing is the process of
marketing a product or service using the Internet. Emarkerting not only includes
marketing on the Internet, but also includes marketing done via e-mail and wireless
media. It uses a range of technologies to help connect businesses to their customers.

What is E-Marketing?
E-Marketing (Electronic Marketing) are also known as Internet Marketing, Web
Marketing, Digital Marketing, or Online Marketing. E-marketing is the process of
marketing a product or service using the Internet. Emarkerting not only includes
marketing on the Internet, but also includes marketing done via e-mail and wireless
media. It uses a range of technologies to help connect businesses to their customers.

Like many other media channels, e-marketing is also a part of integrated marketing
communications (IMC), which helps a brand grow across different channels. E-
marketing has become a pivotal tactic in the marketing strategy adopted by companies
using several digital media channels.

Advantages of E-marketing
Certain advantages of emarketing are discussed as below:
1. Much better return on investment from than that of traditional marketing as it helps
increasing sales revenue.
2. E-marketing means reduced marketing campaign cost as the marketing is done
through the internet
3. Fast result of the campaign as it helps to target the right customers.
4. Easy monitoring through the web tracking capabilities help make emarketing highly
efficient
5. Using e-marketing, viral content can be made, which helps in viral marketing.

Types of e-marketing
There are several ways in which companies can use internet for marketing. Some
ways of e-marketing are:
1. Article marketing
2. Affiliate marketing
3. Video marketing
4. Email marketing
5. Blogging
6. Content marketing
All these and other methods help a company or brand in e-marketing and reaching
customer through the internet.
6 Main Objectives of Internet Marketing
Almost all business owners today know that Internet marketing is essential, but not all of
them understand the end results that can or should be obtained through online strategies.
As a result, it can be tough for them to calculate the ROI of their campaigns.
Here are some common Internet marketing objectives that may fit your company’s goals:

Objective #1: Increase revenue

The primary goal of any marketing strategy is ultimately to increase revenue, and Internet
marketing is no exception. Thankfully, the Internet provides plenty of opportunities for
every business to improve their bottom line.
By combining search engine optimization, or SEO, with pay-per-click ads, or PPC, your
company can improve the chances that potential customers find you online. And with
strategies like content marketing and social media marketing, you can position yourself as
an expert in your field who also cares about your clients.

Objective #2: Build a brand

Internet marketing objectives often include building a brand. This means not only
establishing your logo and company name in the minds of consumers, but also what your
company stands for.
Well-known brands are typically trusted more by customers, especially when paired with
positive associations. The Internet is a great tool for building that trust, because it has a wide
reach and allows you to directly connect with individuals.

Social media is particularly useful when building a brand, because it allows companies to
create and post with a more personal feel. Organizations have discovered that this kind of
brand-building can be fostered by the use of social media channels such as Facebook,
Twitter, Instagram and Pinterest. In addition to organic posts on these sites, companies can
build brand recognition by paying for advertisements and placements. This takes patience
on the part of the organizational leaders, because trust and loyalty are developed over many
months, and sometimes years. The key is to stay focused on the results.

Objective #3: Improve local SEO

Many small businesses, as well as companies focused on increasing sales in specific
geographic region, focus much of their marketing efforts on improving their local SEO. This
means optimizing various elements on their sites in order to attract local customers who are
looking for the services they provide.
Although the number of searches that include both your industry and your town or city is
undoubtedly lower than those that just specify a product or business type, those searches
tend to generate much more qualified traffic. If a user is already looking for businesses
where you are, chances are high that they’ll be willing to come to your physical location.

Objective #4: Increase qualified traffic

Every business owner wants to see numbers rise in terms of visitors to their site and landing
pages. However, those numbers are meaningless if they aren’t the right kinds of traffic.
Not every visitor to your site is going to make a purchase. That’s just the way of the Internet,
and should be accepted. However, if none of your site visitors make purchases (or contact
you), you are likely attracting “unqualified” traffic, or visitors who have no intent of
becoming a customer.
By targeting your marketing to specific personas and aiming to attract specific, qualified
people, you can increase the ROI of your marketing efforts—as well as your bottom line.

Objective #5: Manage online reputation

In an age when anyone with a computer or smartphone can post their opinions about
companies, products, and services for the whole world to see, it’s important for businesses
to maintain a solid online reputation. This means monitoring your company’s name,
maintaining social profiles, and responding to bad reviews accordingly.
One bad review doesn’t mean that your company’s reputation is shot, but one bad reaction
to a bad review might. The way you publicly respond to customer complaints will show them
(and all other current and potential customers) how much you care about their opinions.
But as intimidating as that may sound, all it takes is a bit of respect and concern for your
customer base.

For some companies who’ve already made errors in this department, their objective is
simply to remove any negative associations with their company and show customers that
they’ve seen the errors of their ways. Though the improvements won’t happen overnight,
and bad online PR can be difficult to get rid of, the Internet is a solid tool for repairing
damaged reputations.

Objective #6: Become an influencer in your field

Every industry has a few well-known individuals or companies that others look to as thought
leaders. They stay at the forefront of new technologies and ideas, and are often the first to
share new information.
Unfortunately, every industry only has a particular amount of room at the top. The people
who become experts and influencers are those who strategically position themselves to give
out great advice and information, often without much obvious monetary gain.

For instance, an influential company might write and share blog posts and articles on a
regular basis. Their CEO and other top employees might keep their LinkedIn and other social
profiles up to date and share them as well. The company might offer free webinars on up-
and-coming industry news. All of these efforts combined can position them as an expert not
only in the eyes of other industry professionals, but also in the eyes of potential clients.

Is it possible to achieve all of these objectives?

The possibilities with Internet marketing are plenty, and it’s entirely possible to achieve all
of these objectives. That being said, without a dedicated Internet marketing team, it can be
difficult.
If you’d like some assistance with creating a strategy, or with adjusting your existing one,
feel free to contact us. Our talented team of Internet marketers is more than happy to help
you achieve all of your online goals.
 8 Major Limitations of Internet Marketing
It is rightly said that the only thing constant in this secure and that leaves fear in the mind of the people
world is change, no matter how powerful or effective and leaves internet marketing vulnerable.
the impact of a thing or a person is, the time changes
the situation. 5. Internet Marketing
Internet marketing faces a major current as well as
Mobile replaced a lot of things like a pager, calendar, the future issue of “infollution” – the issue of
codeless, and many such things. Typewriters were distracting and old data on the internet. There are lots
replaced by computers and in the same of websites that are decades old and no information
manner, internet marketing is overtaking the market is updated on it for a long time. If a customer relies on
and getting popular along with conventional it and makes a decision, there is a high chance that it
marketing. can lead to some trouble. This thing is not an issue in
conventional marketing as people timely update
But, there is one other saying as well, that every coin things in the real world. Whereas there is no such
has two sides and so does this coin too. Internet filter available in the virtual world.
Marketing is undoubtedly the future of Marketing as
on a daily basis people are getting more and more 6. Secure your Website
obsessed with virtual life. But still, there are a lot of One major issue and an important question are that
potholes on this road of the future. “is your website safe?” In internet marketing it is very
easy for competitors to attack your website and put
Below are such 8 critical limitations of using internet in some hack in it, there are a lot of such examples
marketing as your source of medium. where competitors tried and also succeeded in
damaging the brand image via some online hack or
1. Online Marketing negative attacks.
Online Marketing as people allegedly say does not
happen to be free of cost, there are a lot of things that 7. Internet Marketing
add to the cost of internet marketing and they are not One of the major reasons why conventional
at all cheap. Some of the major expenses are the cost marketing is not affected that much from Internet
of hardware, software, website designing, online Marketing is good old fashioned customer service.
content, and product distribution costs, maintenance The majority of online marketers fail to deliver ideal
of the site as well as server, web hosting of the response programs as well as customer service. There
website and the costliest thing is time, all of these are thousands of website live which has no customer
must be considered while planning for care service and still are running. But, the word
Internet Marketing budget and strategies. travels really fast in this virtual world and if a website
fails to deliver desired customer service to even a
2. Conventional Marketing single customer, there is a high possibility that the
Where conventional marketing helps in spreading customers will spread out a negative word in the
awareness as well as selling, the internet is industry and news no matter genuine or fake, travels
considered as a medium to gain information to most faster in the virtual world.
of the customers. There are still many industries and
areas where internet marketing is incapable of 8. Marketing Strategy
generating trust and sale of the product or the One major benefit of Conventional marketing is that
service. There are still lots of fields where people it is not that easy to imitate a conventional marketing
prefer to live interaction when they buy. move. It takes the time to do that and in the
3. Access to Internet meanwhile, the initiative taker gets the benefit of
Still, 50% of the world does not have access to the risk. But, if we talk about internet marketing, there
internet and there are many such areas where people are a lot of instances where one successful strategy
are not even literate enough to access the internet. will be copied in less than 24 hours by your
This is a major limitation of internet marketing in the competitors. Thus, you fail to get the desired benefit.
current scenario.

4. Cyber Crimes
Cyber Crimes are increasing day by day as well as the
scams. The rules if cybersecurity are still not that
156 Digital Marketing

6.10.1 Brand Promise

6.10.2 Brand Personality
6.10.3 Unique Selling Proposition
6.10.4 The Web place in Brand Building
6.11 E-commerce Social Networking Sites
6.11.1 Marketing on SlideShare
6.11.2 Marketing on MySpace
6.11.3 Marketing on LinkedIn
6.11.4 The Shopping Cart and Check Out process
6.11.5 Intuitive and Personal Content Provision
6.11.6 Feedback and Reviews
6.12 Online Promotion Techniques
6.12.1 Search Engine Marketing
6.12.2 Online PR
6.12.3 Online Partnership
6.12.4 Interactive Advertising Social Media
6.13 Summary

6.1 AN OVERVIEW OF SOCIAL MEDIA SITES

What are Social Media?
When one examines definitions of social media, several criteria emerge. They are: Internet-based
but not totally so. Meetup.com, for example, uses the internet to set up local face-to-face meetings.
The internet is the organizing agent but communication is personal.
1. User-Generated and Published Information: However, users often republish information
they have discovered elsewhere, so user generation is loosely defined. Community
sharing – posts and comments, file sharing, community of interest. Community interest
varies by individual and group.
Some blogs, for example, spark hundreds of comments. Others generate none. The
community of interest can be active or passive.
2. Multimedia: Blogs, podcasts, videos, photos, forums, internet messaging, texting. The
internet subsumes all audiovisual and print media because it can transmit them. Social
media, by extension makes use of all media forms. There is even a growing possibility of
hectic communication – the mechanical simulation of touch – across the internet, which
social media will adopt once it is fully developed.
3. Immediate: It takes less and less time for one to publish on social media.
With a service like Twitter or internet messaging, it is a matter of seconds – the time it
takes to type or speak. Social media can be – and often are –live.
Social Media Marketing 157

4. Collapsed Geographically: There is no distance in social media. One can follow the
Tweets of another who is half-way around the world or “friend” other thousands of miles
away or blog to anyone on any continent who is interested in what you have to say.
5. Incorporate old and new internet technologies: The World Wide Web is 16 years old at
the time of writing. The internet is 50 years old. Social media incorporate all of the
technologies developed over those time spans from e-mail through forums, instant
messaging, file sharing, video transmission and more.
Social networks are communities of people who typically share a common behaviour, idea,
interest or activity. A social network indicates a graph of relationships (social familiarities) within a
group of individuals (people, organizations). Social networking sites have increased in the last decade.
The most popular social networks include Facebook, MySpace and LinkedIn. They facilitate
communication by providing a variety of ways for users to interact with each other like e-mail or
instant message.
Social networks provide a medium for people to interact with others who are influential and
make recommendations about products and services. These sites can improve lots of business
activities, including: word-of-mouth marketing, market research, general marketing, idea generation
and new product development, co-innovation, customer service, public relations, employee
communications and reputation management.
Social Media Marketing is marketing that focuses on people, not products. The products can be
presented by the company with as many qualitative features and promotional tools as possible, but
what really matters is the comments and appreciations left by the customers. People provide the
content, and this is the reason why Social Media Marketing is so scary and challenging for marketers.
They do not control the marketing content anymore. Negative word-of-mouth can be spread
worldwide in a couple of minutes only. With the explosion of Internet-based messages transmitted
through the Social Media, they are now a main factor in influencing many aspects of consumer
behaviour, such as awareness, consideration, information-gathering, opinions, attitudes, purchasing
decisions and post-purchase evaluation.
To make your social marketing venture a success, you need sizzling content. Ideas, if they need
to be put across, must be wrapped in a package of infotainment. Your content must have the power to
cut through the layers of cynicism in people today and make an impact. It helps to address people who
you know are sympathetic about the cause that you are looking to uphold. You get that added
advantage on social media platforms where you know your target readers better.

6.2.1 The Rise and Dominance of Social Marketing

Social media has been a buzzword from the last few years now in the digital world. It has helped
a number of online businesses to constantly contact their users in a very effective way. In this age, if a
business is not using right marketing strategies or not changing strategies, it can become extinct. So, it
has become important to embrace technology and enjoy the rewards.
It is possible for a business to have an online presence all on own, but it is much sensible idea to
hire social media marketing consultants in India to help get good visibility. This is because they know
exactly where to focus to bring in more traffic to create a win-win situation for the business.
158 Digital Marketing

Nowadays, for any more or less important purchase, it has almost become vital to learn about the
brand, product or service, and compare it with the equivalent of competing brands before considering
purchasing it. While potential consumer do so, they interact with friends, Google the products, search
on Twitter and read experiences of those who have used the brand, product or service earlier. This
section will analyze the Social Feedback Cycle, taking into account the effects of Social Media on
consumers’ buying behaviours, comparing it to the classic purchase funnel for traditional media.
Social media marketing services in India and the world over can be utilized to gain maximum
visibility, improved sales and better brand awareness. Companies offering different types of digital
services use a number of Social media marketing platforms to help businesses promote their business.
Some of these social media sites include:
Examples of Online Social Networks
Various social networking sites exist in today’s online communities. Hundreds of social networks
websites have been created on the Internet, and new ones continue to pop up every day. Table 6.1 lists
some of the popular online social networking sites.
Table 6.1: Sample Online Social Networking Sites and their Characteristics

Name Classification People count Average stay Launched Number of

(based on the (02/2007) (aka Stickiness, members
main focus) in minutes)

MySpace General 5,94,92,362 25 : 58 03/2003 26.7 million

Facebook College/High 1,29,92,305 13 : 12 02/2004 11.1 million
School students
Xanga Blogging 44,76,188 08 : 21 1998 7.9 million
Flickr Sharing Photos 1,41,90,467 06 : 17 02/2004
LinkedIn Business 5,06,189 06 : 56 05/2003 3,54,188
Ning.com General 87,252 08 : 02 10/2005 n/a
MySpace: MySpace is a social networking website which enables users to connect to friends
they want to connect with. The site also provides facilities to create personal profiles, blogs, and
groups. In addition, the users may choose to upload their photos, music, videos, etc., to their personal
page. Facebook is a social networking site initially developed for college and university students, but
is now made available to anyone. People may register under various networks, such as school, place
of employment, geographic region, etc.
Facebook: Facebook is the most popular social media marketing networking site on the Internet.
Social media marketing consultants in India help businesses share their business information along
with products details, photos, videos, and useful content with large number of people. By using this
platform, it becomes very easy for a business to measure the demographics and interests of their
prospective customers. The brand page of a business will have more and more friends and fans and
will get more recognition in market.
Social Media Marketing 159

Fig. 6.1: Source: www.facebook.com

Xanga is a community of online diaries and journals. Users may create an online journal on the
site, to be shared with others.
Flickr is a social networking site where users can upload their photos and keep them organized.
Users can share photos and stay in touch with friends and family. Thus this site too takes the form of
social networking. Ning enables its users to create their own social networks, public or private. They
also offer some premium services at an extra cost.
LinkedIn: LinkedIn is a business-oriented social networking site indented for professionals to
network with each other. The main purpose of the site is to allow registered users to maintain a list of
connections that are people they know and trust in the business.
LinkedIn is used by businesses to share business information with others in the same target
industry. It allows them to join groups related to their industry and get relevant valuable suggestions
from other professionals in the same field.
Twitter: Twitter allows businesses to broadcast short messages to their followers, customers and
prospects. Mainly, this social networking site is used to publicize promotions and launch new products
and events. Professional digital agencies help businesses to take help of this site in the best possible
way to promote their products and services.
160 Digital Marketing

Fig. 6.2: Source: twitter.com, specht.com.au

Fig. 6.3: Source: www.linkedin.com

Reaching out to so many people has never been so easy for businesses before. Today, businesses
can hire the services of Social media marketing services in India to promote their products and
services to a large number of people who are interested in their services. These professionals are
experts in their field and have the appropriate knowledge to implement the right marketing strategies.
Social media marketing services in India are no doubt, the most innovative way to make one's
business or presence visible in the market.

6.2.2 Who is Using Social Media and W hy?

Nowadays, Social Media Marketing is widely used by businesses because it represents a cost-
effective marketing solution. The Social Media Marketing tools can be used largely for free and very
easily, in comparison with other promotional tools. The main purposes of using Social Media
Marketing are the amplification of word-of-mouth marketing, market research, general marketing,
Social Media Marketing 161

idea generation and new product development, co-innovation, customer service, public relations,
employee communications and reputation management. Indeed, social networks can increase product
and brand awareness, web traffic, customer loyalty, but also improve the company’s Search Engine
Optimization, and even increase the success of new product launches.
1. Direct Communication: Social Media Marketing facilitates one to one communication
between the company and its customers. At any point, organizations are free to ask for
feedback and suggestions for ways to improve their services and products. This factor
brings about proper customer engagement.
2. Brand Exposure and Awareness: The main benefit acquired by businesses implementing
Social Media strategies represents the increase in brand exposure. Brand exposure occurs
when the customer becomes aware of a product, service or advertisement through at least
one of their five senses, whether or not they paid attention to it. Thanks to the Social Media
platforms, new brands can establish themselves and foster awareness. For existing brands,
Social Media platforms also raise awareness...
3. Ability to Advertise More Effectively: Setting up pages and profiles on Social Media
channelsoffers many opportunities for advertising and for the brand to be seen and reached
by its audience. Exposure is the first step for new brands. Without any exposure, the
company will just fail its launch. Moreover, the marketer can use Social Media channels to
promote their products and services. The brand’s Social Media pages provide the
opportunity to present the products and services in a more interactive way. Consumers will
have the choice of reading or not products’ description, watch photos and videos, and read
reviews and comments about these products.
4. Cost Effective: One of the biggest advantages of Social Media Marketing is that it is
extremely cost effective. Social Media Marketing is a promotional tool that does not need
high advertising costs or an extremely high amount of time. It is a strategy of doing good
and costless business marketing. If a company is aware of where its target audience is a
small investment is enough to get a Social Media strategy started and the returns can be
amazing.
5. Save up on time: Ever need to reach out to your customer round the clock or visa-versa?
Social Media Marketing is that tool which is available 24/7 for all 365 days. With various
tools available, most of the work can happen on a weekend or on the go using just a
smartphone.
6. Increasing Organizational Visibility: Social Media Marketing increases brand awareness
by extending the online presence of the products and brand. When Social Media platforms
are widely used by a business, it becomes extremely important to measure the impacts of
Social Media Marketing on brand awareness.
7. Leads Generation: Social Media is used to generate leads for marketing product.
8. Targeted traffic: With millions of users, Social Media Sites make a convenient target base
for people who are trying to market products or services to people online. Actually, Social
Media Marketing has become a very effective way to drive targeted traffic to
companies’ website or blogs. Search Engine Optimization (SEO) still plays a significant
role in the website traffic, but Social Media has opened many new doors, generated an
extremely high amount of online traffic. Indeed, Social Media channels are now providing
a huge avenue for business owners, as they have millions of members and make the scope
of the reach unlimited.
162 Digital Marketing

In contrast, targeted traffic is traffic that reaches a website thanks to an interest in the
product or service offered. Targeted traffic is when the audience reads an ad for a product
or service that a brand is promoting on its website and they are actually interested in
purchasing that product, and so they click this link to go to the company’s website.
9. Effective Monitoring of Competitors: Besides, Internet and Social Media has completely
transformed the way market research and competitor monitoring is being accomplished.
Thanks to the amount of data left in the archive of the Social Media channels, information
about the target audience and the competitors is easily accessible. Therefore, Social Media
highly facilitates market insights.
10. Target Specific Information: The data available on the Social Media channels also
directly concerns the target audience. Indeed, analyzing the data of the people interaction
on the Social Media channels provide marketers with demographics and behaviour
characteristics of their consumers.
Factors Influencing Online Marketing
Real-time Interaction
Social Media channels represent a wide interactive dialogue between brands and their current and
prospective customers. Through the Social Media Sites, consumers are able to leave feedbacks and
share their opinions, but they can also request help and support. The communication is interactive and
often fosters relationships between companies and their customers. Marketers can have a direct
conversation with precisely the individuals who are purchasing their products or services, or who are
currently looking for what they have to offer.
Quality Customer Service
By offering such a quick, efficient and personalized customer service, consumers will appreciate
it and feel different. Strengthening the customer service online is also a way of presenting the brand,
products and services in a more human, interactive way. It offers a human face in the form of a social
spokesperson, with person-to-person conversations which build trust in the company’s authenticity
and professionalism.
Benefits in PR and Human Relations
Another important benefit for businesses implementing a Social Media strategy is concerning the
domains of Public Relations and Human Resources. Public Relations specialists were some of the first
people to embrace the power of Social Media. They use it every single day to get the word out about
clients, to communicate with customers and to respond to questions or problems. Anybody can now
connect with people in their industry, impress them with their professionalism, and gather information
that can directly help them in their professional career.
Social Media cannot be controlled
Defining what that brand experience ultimately means to the customer is neither the job nor
privilege of the marketer. It’s up to the customers. The more the brand means to them, the more they
connect with it. That in turn determines their purchase decision, their loyalty, and whether they feel
strongly enough to advocate for the brand in the future.
Social Media Marketing 163

Here are 10 reasons why social media marketing could be right for business:
1. Social Media does help get the word out: First and foremost—social media does in fact
help get the word out about business. But even more important than the exposure it
provides your organization is the opportunity it provides to grow the relationships with that
target audience. The Facebook Fans, Twitter followers, and LinkedIn connections are
people who know your organization, have likely done business with you in the past, and
will be most likely to tell their friends about you...
2. Social Media is popular—really, really, Popular: You don’t need to be a dedicated
reader of tech blogs or an expert in online marketing to know that social media is really
popular among consumers. With over 1 billion people on Facebook, 200 million people on
Twitter, and 200 million more on LinkedIn—social media will touch nearly every customer
that walks through your door.
3. Social Media sites are free: Getting started on social media is completely free.
Facebook, Twitter, Pinterest, and LinkedIn all offer free accounts to users and businesses
and signing up won’t require anything more than an e-mail address. Some sites – like
LinkedIn – do offer paid accounts with features that are targeted at more advanced users,
but for the purposes of getting started, there’s no upfront cost for most of the social
networks.
4. Social Media reaches all ages and demographics: Social media has really broken down
all of the age barriers that once accompanied the ways people thought about social media.
5. Social Media users are active: One thing you have to know about social media users is
that when they say they are on social media, they are really on social media.
6. Social Media encourages two-way communication: There is no marketing tool available
to small businesses today that provides the type of two-way communication that comes
with using social media.
7. Social Media is perfect for customer service: Providing stellar customer service is likely
already a top priority for your small business. But along with the two-way communication
that social media provides, it also offers a unique opportunity to step up your customer
service game and provide instant gratification to your target audience.
8. Social Media lets you share a lot of information about your business: Social media sites
are becoming the preferred places for consumers who want to learn more about a business.
That’s because these sites allow businesses to offer the most up- to-date information about
anything from products, services, or upcoming events.
9. Social Media can make a big difference for your e-mail marketing: Social media has
completely changed the game when it comes to how small businesses think of e-mail
marketing. Sharing your e-mail newsletter across your social networks can open your
content up to a whole new audience and finally generate the type of buzz you’ve been
looking for.
10. Social Media is everywhere: The benefit of the increased presence of mobile activity in
our daily lives is huge for small businesses. Every major social network (Facebook, Twitter,
Pinterest, LinkedIn, etc.) offers free mobile apps that let business-owners manage their
presence on-the-go. More importantly, the Smart applications let customers connect to their
favourite sites wherever they are. For a site like Twitter, 60% of its entire user base is
connected via their smartphones, tablets, or other mobile devices.
164 Digital Marketing

Here are a few scenarios to consider when looking for that special blend of social media and
traditional marketing:
1. New Web site: Announce your new web site through Facebook, Twitter and also through a
post card mailer to increase your web site traffic.
2. Photography: The use of images is a long standing marketing practice. By
leveraging images in social media and creating multimedia posts, your
photography investment can go much further.
3. Article “Teaser”: Publishes a brief article in your local newspaper or trade magazine
that discusses a particular problem that your business can address. But do not give away
“all” of the clues or answers. Instead refer them to your social media accounts for more
information.
4. Analytics and Tradition: Social media analytics can tell you what demographics are
attracted to your brand. From there you can tailor your print, radio and television ads to
that audience.
5. Contests and Sweepstakes: A very effective blend of marketing is to launch a contest on
your social media site such as Facebook, and reference that contest in all of your materials.
Include in your sales flyers, on your voice mail, with your customer service reps, and in
your e-mail newsletters.
6. Surveys: Leverage social media to get existing customer feedback as well as acquire
information about prospective customers. Also include an offer to take the social media
survey on your store receipts or in your e-mail newsletters.
Why is the combination of social media and traditional marketing so effective? There are two
primary reasons:
1. Timing is everything: Blending the methods increases your likelihood of being available at
the right time and place for your target market.
2. Ease of Use: Not everyone reads everything that is on printed paper, and many do not want
to take the time to fill out an info card then mail it. If they glance at the card, and then
happen upon your business through social media, you can have them fill out the form
online, which makes it easier for you as well as your target customers.
The right blend of traditional marketing with a social media approach gives your business a
delicious boost that will bring your target audience to your door.
Here are seven ways to blend social media with traditional marketing:
1. Make print a social driver: If you are like many other small businesses and your
Facebook page is becoming your main online hub, print and other traditional marketing
tools can be used to help drive people to your page. Promote your Facebook address on
counter cards, posters, invoices, receipts, brochures, napkins and menus. Post your
Twitter address in the window. Put your social media listings on everything from cups to
coupons.
2. Showcase social mentions in print: Use your print ads to showcase what others are saying
about your business, products or services through Facebook, review sites, Twitter or
elsewhere. This helps amplify the buzz about your business and can generate (or reinforce)
all-important word-of-mouth.
Social Media Marketing 165

3. Capture the cross-promotional power of QR codes: These handy devices are an ideal
tool for integrating print ads with your digital presence. The website DexSocial.com
has helpful articles on QR code basics for small business.
4. Create an offline promotion with an online benefit: For example, a cosmetics store
can offer a free makeover along with a photo of the customer (with your brand or logo in
the background) that the customer and you can use on Facebook or other social media sites.
A photography business might do something similar.
5. Build engagement and lists with e-mail signup sheets or opt-in cards: Customers are
sometimes reluctant to provide an e-mail address, so this works best if combined
with a promotion or when they are enjoying a product or service you’ve just provided.
Remember that most customers – even your most loyal – will not join your social media
circle on their own. They need to be asked or nudged by you. You can also use print to
promote rewards for customers who take certain actions online – such as liking you on
Facebook or sharing your posted content with others.
6. Get everyone in your business involved: Every employee should be trained to inform
customers of your social media presence and to recommend they visit you on Facebook.
Think of it as pure one-on-one offline marketing.
7. Cross-sell continuously Online and Offline: Each time you use a marketing channel,
mention the other channels you are using and what you are doing there. For example, your
e-mails, direct mail promotions and yellow pages ads should all mention how to find you
on social media. On the flip side, your Facebook page and Twitter tweets can tell people to
be on the lookout for a special offer that’s coming through another channel.

6.3 SOCIAL MEDIA OPTIMIZATION AND SOCIAL MEDIA

MARKETING
Over 73% of small business-owners are now using sites like Facebook, Twitter, LinkedIn, and
Pinterest to help grow their businesses. If you are still standing on the social sidelines, there’s never
been a better time to get started, because it works. If you’re a business-owner, chances are you’ve
already considered using social media to help get the word out about your business. You’re not alone.
In a recent survey, 95% of small business- owners reported that not only were they using
Facebook to market their business, but 82% of those people found it to be effective. Perhaps that’s
why, in that same survey, 81% of those currently using social media marketing to connect with
customers, members, and prospects, said they expect to increase their efforts in the coming year.
Consider an organization like Freescale, a spin-off of Motorola. Freescale uses YouTube for a
variety of sanctioned purposes, including as a place for current employees to publish videos
about their jobs as engineers: The purpose is the encouragement of prospective employees—given
the chance to see “inside Freescale”—to more strongly consider working for Freescale. Or, look at an
organization like Coca-Cola: Coke is reducing its dependence on branded microsites in favour of
consumer-driven social sites like Facebook for building connections with customers. Coke is also
directly tapping customer tastes through its Coca Cola Freestyle vending machines that let consumers
mix their own Coke flavours. Comcast and many other firms now use Twitter as a customer-support
channel. The list of examples of the direct integration of collaborative and shared publishing
applications in business—beyond marketing—is growing rapidly.
 Chapter 1 Introducing digital marketing 33

Social network placements in the natural or organic listings using search engine optimisation where no
A site that facilitates ­peer-
to-peer communication charge is made for clicks from the search engine.
within a group or between 2 Online PR. Maximising favourable mentions of your company, brands, products or
individuals through
providing facilities to
websites on third-party websites such as social networks, blogs, podcasts or feeds that
develop user-generated are likely to be visited by your target audience. Also includes responding to negative
content (UGC) and to mentions and conducting public relations via a site through a social media news centre
exchange messages
and comments between or blog, for example.
different users. 3 Online partnerships. Creating and managing long-term arrangements to promote your
Blog online services on third-party websites or through email communications. Different
Personal online diary,
journal or news source
forms of partnership include link building, affiliate marketing, aggregators such as
compiled by one person, price comparison sites like Moneysupermarket (www.moneysupermarket.com), online
an internal team or sponsorship and co-branding.
external guest authors.
Postings are usually 4 Display advertising. Use of online ads such as banners and rich media ads to achieve
in different categories. brand awareness and encourage click-through to a target site.
Typically comments can
be added to each blog
5 Opt-in email marketing. Renting email lists or placing ads in third-party e-newsletters
posting to help create or the use of an in-house list for customer activation and retention.
interactivity and feedback. 6 Social media marketing. Companies participate and advertise within social networks
Podcast and communities to reach and engage their audience. Viral marketing or online word-
Individuals and
organisations post online of-mouth messages are closely related to this. Here content is shared or messages are
media (audio and video) forwarded to help achieve awareness and, in some cases, drive response.
which can be viewed in
the appropriate players Social media marketing is an important category of digital marketing which involves
(including the iPod which
first sparked the growth in e­ ncouraging customer communications on a company’s own site, or social presences such
this technique). The latest as Facebook or Twitter or in specialist publisher sites, blogs and forums. It can be applied
podcast updates can be
automatically delivered
by RSS.
Feed (or RSS feed)
Blog, news or other
content is published by
an XML standard and
2 Online PR
syndicated for other
sites or read by users • Publisher outreach
1 Search marketing 3 Online partnership
in RSS reader services • Community participation
• Search engine • Affiliate marketing
such as Google Reader, • Media alerting
optimisation (SEO) • Sponsorship
personalised home pages • Brand protection
or email systems. RSS • Paid search • Co-branding
stands for Really Simple Pay-per-click (PPC) • Link-building
Syndication. • Paid for inclusion feeds
Viral marketing
A marketing message Offline communications Offline communication
is communicated from 1 Advertising 6 Direct mail
one person to another, Website
2 Personal selling 7 Exhibitions
facilitated by different and social
3 Sales promotion 8 Merchandising
media, such as word-of- presences
mouth, email or websites,
4 PR 9 Packaging
in particular social 5 Sponsorship 10 Word-of-mouth
network or blogsites. Viral
marketing implies rapid
4 Interactive ads 6 Social media marketing
transmission of messages
• Site-specific media buys • Audience participation
is intended. 5 Opt-in e-mail
• Ad networks • Managing social presence
Social media marketing • House list e-mails
• Contra-deals • Viral campaigns
Monitoring and • Cold (rented list)
• Sponsorship • Customer feedback
facilitating customer-to- • Co-branded
customer interaction and • Behavioural targeting
• Ads in third party
participation throughout e-newsletters
the web to encourage
positive engagement
with a company and its Online communications Offline communications
brands. Interactions may
occur on a company site,
social networks and other
third-party sites. Figure 1.11 Six categories of e-communications tools or media channels
Source: Chaffey and Smith (2012)
34 Part 1 Digital marketing fundamentals

as a traditional broadcast medium – for example companies can use Facebook or Twitter
to send messages to customers or partners who have opted in. However, to take advan-
tage of the benefits of social media it is important to start and participate in customer
conversations. These can be related to products, promotions or customer service and are
aimed at learning more about customers and providing support, thus improving the way a
­company is perceived.
The growth of social networks has been documented by Boyd and Ellison (2007), who
describe social networking sites (SNS) as:
Web-based services that allow individuals to (1) construct a public or semi-public profile
within a bounded system, (2) articulate a list of other users with whom they share a con-
nection, and (3) view and traverse their list of connections and those made by others
within the system.

The interactive capabilities to post comments or other content and rate content are
­surprisingly missing from this definition.

Different types of social media marketing tools

There are many, many sites and tools which comprise what we call ‘social media’. To gain
an idea of just how many, complete Activity 1.5, which lists many tools in 25 categories.
A social media site is much more than simply a website. From a technology viewpoint,
most of these sites can be considered as software applications or web services which give
access to users at different levels of permission and then enable management and storage
of different forms of user-generated content. Messaging is also an important feature of

Digital marketing insight 1.2 Social media matters – the Cluetrain Manifesto sparks the
social media marketing revolution

When Levine et al. (2000) coined the phrase ‘markets are conversations’, they perhaps
did not realise how fundamental this idea would be to the success of marketing in the
digital age. Creating a social media or customer engagement strategy is challenging
because it requires a change in mindset for the company wishing to exploit it. The
challenge is that the company may have to give up some control of their messaging
to enable them to communicate with customers effectively. The change in approach
required is clear from a movement that originated in the USA in 1999, known as the
Cluetrain manifesto (www.cluetrain.com). The authors, Levine et al. (2000), say:

The cluetrain used email, newsgroups, mailing lists, chat and web pages to facilitate
internet based conversations and human interaction in a digital space. Conversations
among human beings sound human. They are conducted in a human voice. Most
corporations, on the other hand, only know how to talk in the soothing, ­humorless
monotone of the mission statement, marketing brochure, and your-call-is-important-
to-us busy signal. Same old tone, same old lies. No wonder networked markets have
no respect for companies unable or unwilling to speak as they do. Corporate firewalls
have kept smart employees in and smart markets out. It’s going to cause real pain to
tear those walls down. But the result will be a new kind of conversation, which gives
everyone permission to take part in the discussion. And if this is the case it will be the
most exciting conversation business has ever engaged in.
 Chapter 1 Introducing digital marketing 35

many of these sites, particularly the main social networks which will alert users when new
content related to their content or connections is published. APIs for exchanging data with
other web services interfaces are also a key feature of social networks which enable them to
be more useful and allow them and their members to extend their reach and influence by
incorporating social comments into other sites.

Activity 1.5 Assessing social media marketing platforms

Purpose
To explore the range of social media sites and tools, to categorise them and assess
their business applications.

Activity
Visit the Conversation Prism (www.conversationprism.com), which is a visual map of
the social media landscape. Identify the types of social media sites you and your col-
leagues use. How do you think the popularity of tools would differ for different types of
B2B and B2C sites? Discuss how businesses should decide on the most important to
invest in to achieve their goals.

According to Weinberg and Ekin (2011), social media is neither a perfect substitute
for traditional marketing, nor is it a one-size-fits-all. Marketers can effectively use social
­media by taking their message directly to consumers and focussing on traditional objec-
tives. Since there are so many types of social presence, it’s helpful to simplify the options to
manage. You can see there’s more to social media than social network…
1 Social networks. The core social platforms in most countries where people interact
through social networks are Facebook for consumer audiences, LinkedIn for business
audiences, Google+ and Twitter for both.
2 Social publishing and news. Nearly all newspapers and magazines, whether broad or
niche, now have an online presence with the option to participate through comments
on articles, blogs or communities.
3 Social commenting in blogs. A company blog can form the hub of your social media
strategy and you can look at tapping into others’ blogs, whether company or personal
or through blog outreach.
4 Social niche communities. These are communities and forums independent of the main
networks, although these do support sub-groups. You can create your own community
this way.
5 Social customer service. Sites like GetSatisfaction, as well as companies’ own customer
support forums, are increasingly important for responding to customer complaints.
6 Social knowledge. These are reference social networks like Yahoo! Answers, Quora
and similar, plus Wikipedia. They show how any businesses can engage their audiences
by solving their problems and subtly showing how their products have helped others.
7 Social bookmarking. The bookmarking sites like Delicious (www.delicious.com), which
are relatively unimportant in the UK except if you are engaging technical audiences.
8 Social streaming. Rich and streaming media social sites – photos, video and podcasting.
9 Social search. Search engines are becoming more social with the ability to tag, com-
ment on results and, most recently, vote for them through Google+1.
10 Social commerce. We’ve left this one until last, because it’s mainly relevant for the
­retail sector. It involves reviews and ratings on products and sharing of coupons about
details.
36 Part 1 Digital marketing fundamentals

Web 2.0 concept Web 2.0

A collection of web
services involving data The Web 2.0 concept emerged in 2004. was summarised in an influential article by Tim
exchange between sites
that facilitate participation O’Reilly (2005). A brief reference to the concept has been retained in this edition, although
and interaction of web the term is not used in practice today. The main types of services that developed as part of
users with sites to
create user-generated Web 2.0 which still underpin website–social media interaction are: free to use, ad-support
content and encourage web-hosted services or interactive applications for different media formats such as Flickr
behaviours such as
community or social
for images; YouTube for video; Bing or Google Maps; blogging services such as Wordpress.
network participation, com; and rating of content and services through rating systems. Data exchange between
mashups, content rating, sites through XML-based data standards, for example RSS, is still used for direct shar-
use of widgets and
tagging. ing of content from business blogs to social network updates. The ‘Ajax’ (Asynchronous
Video marketing
JavaScript and XML) implementation is still used for developing many interactive features.
The use of video to Video marketing was also part of ‘Web 2.0’ and has grown in importance since.
gain visibility in search Since the Web 2.0 concept has been widely applied, it is natural that commentators
marketing, video hosting
sites and to engage site would try to develop it to the Web 3.0 concept, although the term has not been widely used
visitors. to date. Figure 1.12 summarises the evolution of digital and web-related technologies.
Web 3.0 concept
Next-generation web ●● Web applications. Usage of web-based applications and services (like Google word pro-
incorporating high-speed cessor and spreadsheets). Using the web in this way is sometimes termed cloud comput-
connectivity, complex
cross-community ing where all that is really needed for many activities is a computer with a web browser
interactions and an with local software applications used less widely.
intelligent or semantic
web where automated
●● Syndication. Increased incorporation of syndicated content and services from other
applications can access sites or a network into a site (using tools such as Yahoo! Pipes and XML exchange
data from different ­between widgets). We refer to this concept as ‘atomisation’ in Chapter 9.
online services to assist
searchers perform
●● Streamed video or IPTV. Increased use of streamed video from existing TV providers and
complex tasks of supplier user-generated content (as suggested by use of YouTube and IPTV services such as Joost).
selection.

Web 4.0
Semantics of Information Connections

The WebOS
2020 – 2030
Intelligent personal agents
Semantic Web
SWRL
Web 3.0 Distributed Search
OWL 2010 – 2020
SPARQL Semantic Databases
OpenID AJAX Semantic Search
ATOM Widgets
RSS
P2P RDF Mashups
Javascript Flash
SOAP XML
Web 2.0 Office 2.0
Social Media Sharing
2000 – 2010 Weblogs
World Wide HTML Java Social Networking
Web HTTP Directory Portals Wikis SaaS
VR
Keyword Search Lightweight Collaboration
BBS Gopher Web 1.0 Websites
1990 – 2000
MMO’s MacOS SQL
Groupware
Desktop SGML Databases
Windows
BBS File Servers
Email
PC Era
FTP IRC 1980 – 1990
USENET
PC’s File Systems

Semantics of Social Connections

Figure 1.12 Evolution of web technologies

Source: Adapted from Spivack (2007)
 Chapter 1 Introducing digital marketing 37

●● Virtual worlds. Increased use of immersive virtual environments such as Second Life.
●● Personal data integration. Increased exchange of data between social networks fulfilling
different needs
●● The semantic web. Increased use of semantic mark-up leading to the semantic web envi-
sioned by Tim Berners-Lee over ten years ago. It seems semantic mark-up will be needed
to develop artificial intelligence applications which recommend content and services to
web users without them actively having to seek them and apply their own judgement as
to the best products and brands (i.e. an automated shopping comparison service) (as
suggested by the use of standardised data feeds between shopping comparison sites and
Google Base).

Benefits of digital media

In the section on digital marketing strategy, we described some of the applications of

­Internet marketing to support communications with customers across the purchase ­cycle
from generating awareness, achieving direct response for lead generation or sale and
­supporting customer service and relationship marketing. In this section we explore key dif-
ferences between digital media and traditional media which savvy marketers exploit.
Digital marketing communications differ significantly from conventional marketing
communications because digital media enabled new forms of interaction and new models
for information exchange. A useful summary of the differences between new media and
traditional media originally developed by McDonald and Wilson (1999) and still valid –
they describe the ‘6 Is of the e-marketing mix’ which are practical benefits of digital mar-
keting that the marketer should exploit.

1 Interactivity
John Deighton was one of the first authors to identify these characteristics of a digital
medium (Deighton, 1996):
●● the customer initiates contact
●● the customer is seeking information or an experience (pull)
●● it is a high-intensity medium – the marketer will have 100% of the individual’s atten-
tion when he or she is viewing a website
●● a company can gather and store the response of the individual
●● individual needs of the customer can be addressed and taken into account in future
dialogues.
Figure 1.13(a) shows how traditional media are predominantly push media where the
marketing message is broadcast from company to customer, although interaction can be
encouraged through direct response to phone, website or social media page. Online it is
often the customer who initiates contact and is seeking information through researching
information on a website. In other words, it is a ‘pull’ mechanism where it is particularly
important to have good visibility in search engines when customers are entering search
terms relevant to a company’s products or services. Amongst marketing professionals this
powerful new approach to marketing is now commonly known as inbound marketing (Shah
Inbound marketing and Halligan, 2009). Inbound marketing is powerful since advertising wastage is r­ educed.
The consumer is proactive Content and search marketing can be used to target prospects with a defined need –
in seeking out information
for their needs, and they are proactive and self-selecting. But this is a weakness since marketers may have less
interactions with brands control than in traditional communications where the message is pushed out to a defined
are attracted through
content, search and social audience and can help generate awareness and demand.
media marketing. Figure 1.13(b) shows how digital media should be used to encourage two-way commu-
nications, which may be extensions of the direct-response approach. For example, FMCG
suppliers use their website or Facebook presence as a method of generating interaction by
providing incentives such as competitions and sales promotions to encourage the customer
to respond with their names, addresses and profile information such as age and sex.
38 Part 1 Digital marketing fundamentals

Push
Company Customer

Direct response

Traditional TV, print, radio media

(a) Direct mail communications

Interactivity
Dialogue not monologue

Pull/Push

Company Customer

Intelligence

(b) Two-way feedback

Figure 1.13 Summary of communication models for (a) traditional media, (b) new
media

2 Intelligence
Digital media and technology can be used as a relatively low-cost method of collecting
marketing research, particularly about customer perceptions of products and services, as
described in Chapter 10 which reviews digital analytics and market research.

3 Individualisation
Another important feature of interactive marketing communications is that they can
be tailored to the individual (Figure 1.14(b)) at relatively low costs, unlike in traditional
­media where the same message tends to be broadcast to everyone (Figure 1.14(a)). This
individualisation is based on the intelligence collected about site visitors and then stored
in a d
­ atabase and subsequently used to target and personalise communications to cus-
Personalisation tomers to achieve relevance in all media. The process of tailoring is also referred to as
Delivering individualised ­ ersonalisation – Amazon is the most widely known example where the customer is
p
content through web
pages or email. greeted by name on the website and receives recommendations on site and in their emails
Sense and respond based on previous purchases. This ability to deliver ‘sense and respond communications’
communications is another key ­feature of digital marketing and is explored further in Chapter 6.
Customer behaviour
is monitored at an
individual level and the 4 Integration
marketer responds with
communications tailored The Internet provides further scope for integrated marketing communications. Figure 1.15
to the individual’s need.
shows the role of the Internet in multichannel marketing. When assessing the market-
Outbound Internet- ing effectiveness of a website, the role of the Internet in communicating with customers
based communications
The website and email and other partners can best be considered from two perspectives. First, there is outbound
marketing are used ­Internet-based communications from organisation to customer. We need to ask how does the
to send personalised
communications to Internet complement other channels in communicating the proposition for the company’s
customers. products and services to new and existing customers with a view to generating new leads
 Chapter 1 Introducing digital marketing 39

Customer

Company Customer

Same message
to all customers
Customer
(or customers in
(a) each segment)

Customer

Company Customer

Different messages
to each customer
Customer
(or customers in
(b) micro-segment)

Figure 1.14 Summary of degree of individualisation for: (a) traditional media

(same message); (b) new media (unique messages and more
information exchange between customers)

Inbound Internet-based and retaining existing customers? Second, inbound Internet-based communications from
communications customer to organisation: how can the Internet complement other channels to deliver cus-
Customers enquire
through web-based forms tomer service to these customers? Many companies have now integrated email response
and email. and website callback into their existing call centre or customer service operation.
Some practical examples of how the Internet can be used as an integrated communica-
tions tool as part of supporting a multichannel customer journey (Figure 1.16) are the
following:
●● The Internet can be used as a direct-response tool, enabling customers to respond to
­offers and promotions publicised in other media.
●● The website can have a direct response or callback facility built into it. The Automo-
bile Association has a feature where a customer service representative will contact a
customer by phone when the customer fills in their name, phone number and a suitable
time to ring.
●● The Internet can be used to support the buying decision even if the purchase does not
occur via the website through assisted selling via live chat or phone. For example, Dell
has a prominent web-specific phone number on its website that encourages customers
to ring a representative in the call centre for support.
40 Part 1 Digital marketing fundamentals

Intermediary

Web

E-mail
Company Customer

Phone

Mail

Person

Figure 1.15 Channels requiring integration as part of integrated e-marketing

strategy

Offline Online

Product Product
evaluation evaluation

Decision to Decision to
purchase purchase
1

Specify Specify
Mail, purchase purchase
fax,
3
phone,
person Payment Payment
4
5

Fulfilment
Fulfilment
(digital)

Figure 1.16 The role of mixed-mode buying in Internet marketing

 Chapter 1 Introducing digital marketing 41

Activity 1.6 Integrating online and offline communications

Purpose
To highlight differences in marketing communications introduced through the use of
the Internet as a channel and the need to integrate these communications with existing
channels.

Activity
List communications between a PC vendor and a home customer over the lifetime of a
product such as a PC. Include communications using both the Internet and traditional
media. Refer to channel-swapping alternatives in the buying decision in Figure 1.16 to
develop your answer.

5 Industry restructuring
Disintermediation Disintermediation and reintermediation are key concepts of industry restructuring that
The removal of
intermediaries such as should be considered by any company developing an e-marketing strategy and are ­explored
distributors or brokers that in more detail in Chapters 2, 4 and 5.
formerly linked a company
to its customers.
For marketers defining their company’s communications strategy it becomes very
­important to consider the company’s representation on these intermediary sites by answer-
Reintermediation
The creation of new ing questions such as ‘Which intermediaries should we be represented on?’ and ‘How do
intermediaries between our offerings compare to those of competitors in terms of features, benefits and price?’
customers and suppliers
providing services such
as supplier search and 6 Independence of location
product evaluation.
Electronic media also introduce the possibility of increasing the reach of company
­communications to the global market. This gives opportunities to sell into international
markets which may not previously have been possible. The Internet makes it possible to
sell to a country without a local sales or customer service force (although this may still be
­necessary for some products).

Mini case study 1.3 Online pureplay startup Travel Republic achieves growth through
taking advantage of benefits of digital marketing

Travel Republic is the highest ranking independent online travel agent in the UK, with over 1 million travellers
booking every year. It’s an example of a pureplay that has deployed digital marketing techniques like search,
social media and email marketing to grow both in the UK and internationally.
Online travel agent Travel Republic topped The Sunday Times Virgin Fast Track 100 list four years after the
company was launched. The Kingston-upon-Thames based business was set up in 2003 and is the brainchild
of three university friends – Paul Furner, managing director, Chris Waite, IT director, and Kane Pirie, finance
and operations director.
Today the company can no longer be termed a startup, with revenues increasing 14.5 per cent in 2014 to
£67.5 million, giving it an operating profit margin of 20 per cent and with separate sites for local audiences in
Spain, Italy and Ireland.
The company employs more than 150 staff. TravelRepublic.co.uk appears in the IMRG-Hitwise Hot Shops
List, which ranks the UK’s top 50 most popular Internet retailers, across all sectors (ranked by number of web
visitors). In the online travel agency sector TravelRepublic.co.uk is more popular than Opodo and ebookers.
com, although Expedia.co.uk and lastminute.com rank higher.
42 Part 1 Digital marketing fundamentals

A major reason for the growth of Travel Republic is that it has taken advantage of the ‘pull’ effect of web
communications. Through using sponsored links in search networks such as Google AdWords, it has been
able to target its offering precisely to an online audience looking for a competitive price on a holiday or a flight
to a particular destination. Of course, this has to be backed up by a strong proposition, an easy to use, high-
performance website and trust in the brand indicated by user reviews and holiday guarantees (Figure 1.17).
TravelRepublic.co.uk caters for a broad range of customers including families, couples and groups. The web-
site offers charter, low-cost and scheduled airlines, powerful rate shopping technology for hotel rooms and
apartments, plus hotel reviews and resort guides written by its customers.
Customers can save up to 50 per cent on the price of a comparable package holiday purchased online
or on the high street. TravelRepublic.co.uk works with over 100 different flight operators and offers flights to
more than 200 destinations. The website also offers over 30,000 discounted hotels, apartments and villas
plus a wide range of other services such as taxi transfers, airport parking and car hire. The website gives cus-
tomers complete flexibility with flights, hotels and durations.
Paul Furner, managing director of TravelRepublic.co.uk explained how the company developed:

Chris, Kane and I met at university but then followed very different careers – Chris in software d
­ evelopment,
Kane in corporate finance/private equity and me in software quality assurance. These differing back-
grounds, all outside of the travel industry, have allowed us to take a fresh new look at the sector and
­become one of its leading innovators.
However, equally important has been our commitment, from the outset, to deliver gold standard cus-
tomer service to our customers. At a time when it is often said that there is no loyalty on the web we would
beg to differ. Our levels of repeat and recommended business suggest that we have a real affinity with our
customers which we plan to build upon in the coming months.

Source: Travel Republic press release, 2 December 2007, Travel Republic is the UK’s Fastest Growing Private Company, www.travelrepublic.
co.uk/help/pressReplace_003.aspx

Figure 1.17 Travel Republic (www.travelrepublic.co.uk)

 Chapter 1 Introducing digital marketing 43

In terms of deploying campaigns, these are further benefits of digital communications:

●● Accountability. Digital media are potentially more accountable through the use of
measurement systems known collectively as web analytics. Google provides a free tool
known as Google Analytics (www.google.com/analytics) to enable its advertisers to test
the value generated from its ads.
●● Testing. Potentially, testing becomes more straightforward at a lower cost with the
­o ption to trial alternative creative executions, messaging or offers. Google offers
­another free tool – the Website Optimiser – to test alternative landing pages.
●● Flexibility. Campaigns can be more flexible, with the capability to change copy or o
­ ffers
during a campaign. Alternative ads can be served within Google to evaluate which
works best. Google AdWords also offers dayparting, where ads can be displayed at
­different times of the day.
●● Micro-targeting. Alternative messages can be delivered for different audiences accord-
ing to what they are searching for. Potentially a company can show a different advert in
Google AdWords for each term searched on.
●● Cost-control. Costs can be controlled for each group of search terms entered by cus-
tomers through the search engine, managed collectively, and bids made can be increased
or decreased with the aid of software.

Key challenges of digital communications

It is sometimes suggested by some suppliers of digital media that they are ‘quick, cheap
and easy’ to deploy. This is a great misconception since there are many challenges which
need to be overcome when managing digital campaigns. Again referring to a Google
­AdWords campaign as an example, these include:
●● Complexity. To enable the benefits we have mentioned above – such as personalisation,
testing and dynamic variation in ads through time – time has to go into configuring
the campaign although the search engines provide defaults to enable easy setup. This
requires specialist expertise either in-house or at an agency to manage the campaign.
●● Responding to competitors. Since competitors can also change their approach readily,
more resource has to be used to monitor competitor activity. Automated tools known
as bid management tools can assist with this – they will automatically check amounts
competitors are paying and then adjust them according to pre-defined rules.
●● Responding to changes in technology and marketing platforms. Google and the other
­ad-serving companies innovate to offer better capabilities for their customers. This means
that staff managing campaigns need training to keep up-to-date. Google offers ‘Adwords
Qualified Professionals’ so that companies can be certain of a minimum skills level.
●● Cost. Although costs can be readily controlled, in competitive categories the costs can
be high, exceeding €10 per click.
●● Attention. While online paid search ads are highly targeted and there is arguably little
wastage, not everyone will view paid adverts, indeed there is a phenomenon known as
‘banner blindness’ where web users ignore online ads (see Chapter 9 for more details).
Engaging with the audience with advertising is also a problem in social networks and
other publisher sites, which can lead to a very low rate of people clicking on ads.

Key communications concepts for digital marketing

In this section, we introduce three key concepts which underpin digital communications
across the digital media we have introduced in this chapter.
1 Customer engagement.
2 Permission marketing.
3 Content marketing.
44 Part 1 Digital marketing fundamentals

1 Customer engagement
This difficulty in gaining attention online on all types of sites has led to the emergence of
Customer engagement the concept of customer engagement as a key challenge with which digital marketers are
Repeated interactions that
strengthen the emotional,
increasingly concerned. cScape (2008) describe customer engagement as:
psychological or physical
investment a customer repeated interactions that strengthen the emotional, psychological or physical investment
has in a brand. a customer has in a brand.

While for Haven (2007), customer engagement is:

the level of involvement, interaction, intimacy, and influence an individual has with a
brand over time.

Arguably, the biggest difference in communications introduced by the growth of digital

media and the web is the capability, or many would say necessity, to include customer’s’
conversations as an integral part of communications. Today, proactively managing con-
sumer participation which occurs through social networks such as Facebook, Google+
and LinkedIn, video postings and comments on YouTube and myriad blogs and forums is
essential since, when a positive sentiment is expressed by a real person independent from a
company this confers credibility on the company.
Equally, there are negative sentiments or comments made by consumers on the web that
need to be managed. For example, on one site (www.haveyoursay.com) a purchaser of a car
was highly critical about a make of car and the comments appeared near the top of the
Google search results page when someone searched for the brand, yet for several years the
manufacturer did nothing to manage this.

2 Permission marketing
Permission marketing Permission marketing is an established approach to online marketing which is still highly rele-
Customers agree (opt vant today as a practical foundation for CRM and online customer engagement. ‘‘­Permission
in) to be involved in an
organisation’s marketing marketing’ was a term coined by Seth Godin. Godin (1999) noted that while research used
activities, usually as a to show we were bombarded by 500 marketing messages a day, with the advent of the web
result of an incentive.
and digital TV this has now increased to over 3000 a day! From an organisation’s viewpoint,
this leads to a dilution in the effectiveness of the messages – how can the communications
of any one company stand out? From the customer’s viewpoint, time is seemingly in ever
shorter supply; customers are losing patience and expect reward for their attention, time and
Interruption marketing information. Godin refers to the traditional approach as interruption marketing. Permission
Marketing marketing is about seeking the customer’s permission before engaging them in a relation-
communications that
disrupt customers’ ship and providing something in exchange. The classic exchange is based on information or
activities. entertainment – a B2B site can offer a free report in exchange for a customer sharing their
email address or ‘Liking’ a brand, while a B2C site can offer a newsletter or access to their
wall with valuable content and offers. We cover the principles of permission marketing in
more detail and with examples related to CRM in Chapter 6.

3 Content marketing
Content marketing
The management of Success in permission marketing requires exceptional, compelling content. To emphasise
text, rich media, audio the importance of content marketing to gaining permission, encouraging sharing and
and video content aimed
at engaging customers ongoing engagement through websites and social media, the concepts of content market-
and prospects to meet ing and content strategy have developed to describe best practice approaches. Today, by
business goals published
through print and digital
content we refer to the combination of static content forming web pages, but also dynamic
media including web rich media content which encourages interaction. Videos, podcasts, user-generated content
and mobile platforms and interactive product selectors should also be considered as content which should be
which is repurposed and
syndicated to different refined to engage issues.
forms of web presence You can see the challenge content strategy presents since today there are so many
such as publisher sites,
blogs, social media and
­different types of content delivered in different forms to different places on different access
comparison sites. platforms, yet it is increasingly important to engage customers in social media.
 Chapter 1 Introducing digital marketing 45

The definition suggests these elements of content management that need to be planned
and managed:
1 Content engagement value. Which types of content will engage the audience – is it sim-
ple product or services information, a guide to buying product, or a game to engage
your audience?
2 Content media. Plain text, rich media such as Flash or Rich Internet applications or
mobile apps (see Chapter 3), audio (podcasts) and hosted and streamed video. Even
plain text offers different format options from HTML text to ebook formats and PDFs.
3 Content syndication. Content can be syndicated to different types of sites through
feeds, APIs, microformats or direct submission by email. Content can be embedded in
sites through widgets displaying information delivered by a feed.
4 Content participation. Effective content today is not simply delivered for static con-
sumption, it should enable commenting, ratings and reviews. These also need to be
monitored and managed both in the original location and where they are discussed
elsewhere.
5 Content access platform. The different digital access platforms such as desktops and
laptops of different screen resolution and mobile devices. Paper is also a content access
platform for print media.
Smart Insights (2015a) explain the key elements of a content hub using the diagram
shown in Figure 1.18, or, as they put it, a ‘content marketing machine’ as:
1 Create the right types of sharable content formats to meet customer interests and
company commercial goals. The quality and range of content must be sufficient and
sustained to compete. (In Chapter 9, the Smart Insights Content Marketing Matrix is
presented as a method of reviewing the most appropriate content formats to use.)

Figure 1.18 The Content Marketing Hub

Source: Smart Insights (2015a)
46 Part 1 Digital marketing fundamentals

Content marketing hub 2 A defined branded content marketing hub or repository for accessing all relevant
A central branded location ­content marketing assets.
where your audience
can access and interact 3 Invest in seeding content and working with partner sites and influencers to increase
with all your key content awareness and sharing of content.
marketing assets. In
a practical sense, the 4 Content marketing should be linked into search marketing and particular search
content hub can be a blog ­ arketing, since if there is a regular stream of quality content Google will favour the
m
or new section, an online
customer magazine or a
site when searchers are looking for information or products.
resource centre. 5 The right people, process and tools need to be in place to monitor content and sharing
effectiveness in social media. This should include following up on any comments from
social media.
To conclude this chapter, read Case Study 1 for the background on the success factors
which have helped build one of the biggest online brands.

Case Study 1 eBay thrives in the global marketplace

Context We believe that this trend has expanded our address-

It’s hard to believe that one of the most well-known able market.
­dot-coms has now been established 15 years. Pierre At the time of writing eBay comprises two major
Omidyar, a 28-year-old French-born software engineer businesses:
living in California, coded the site while working for
another company, eventually launching the site for 1 The eBay Marketplaces. The mission for the core
business on Monday, 4 September 1995 with the more eBay business is to ‘create the world’s online mar-
direct name ‘Auction Web’. Legend reports that the ketplace’. In 2008, eBay’s SEC filing notes some of
site attracted no visitors in its first 24 hours. The site the success factors for this business, for which eBay
became eBay in 1997. In 2014 eBay had 155 million seeks to manage the functionality, safety, ease-of-
active buyers, an increase from 90 million active in 2009. use and reliability of the trading platform. By 2011
This shows how established pureplays have continued the strategic priorities had changed to trust, value,
to grow with global adoption of the web. selection and convenience.
This summary and many others in the text are based 2 PayPal. The mission is to ‘create the new global
on the SEC filing of the business. The Security and standard for online payments’. This company was
­Exchange Commission (SEC) required by company law acquired in 2003 but was repurchased at a later
in the US gives deep, relatively hype-free insights on the date.
main online platforms based in the US and is recom-
This case focuses on the best known eBay business,
mended for students studying these types of business.
the eBay Marketplace.
Mission
Revenue model
eBay describes its purpose as to ‘pioneer new commu-
The vast majority of eBay’s revenue is for the listing
nities around the world built on commerce, sustained
and commission on completed sales. For PayPal pur-
by trust, and inspired by opportunity’. eBay’s 2014
chases an additional commission fee is charged. The
­report describes the company’s view on current use of
margin on each transaction is phenomenal since once
e-commerce:
the infrastructure is built, incremental costs on each
Driven by the ubiquity of the Internet and the prolifer- transaction are tiny – all eBay is doing is transmitting
ation of mobile devices, we believe that the way con- bits and bytes between buyers and sellers. To grow rev-
sumers engage with each other, brands and services enue eBay has acquired and developed other sites such
is fundamentally changing, blurring the lines between as comparison site Shopping.com and StubHub (event
offline retail and online e-commerce, and effectively tickets). eBay has also created vertical formats, such
creating one market for commerce and reinforcing as ­Classifieds, Daily Deals, Fashion, Motors (vehicles,
the connections between commerce and payments. parts and a­ ccessories) and Electronics.
 Chapter 1 Introducing digital marketing 47

eBay also expanded into providing infrastructure For sellers:

for other retailers in 2011 with its purchase of GSI, a ●● access to broad markets
provider of e-commerce and interactive marketing ●● cost effective marketing and distribution
services encompassing websites and fulfilment centres ●● access to large buyer base
to enterprise clients that include some of the world’s ●● good conversion rates.
leading brands and retailers covering merchandise
categories, including apparel, sporting goods, toys and In 2007, eBay introduced Neighbourhoods ( http://
baby, health and beauty and home. neighbourhoods.ebay.com) where groups can discuss
Advertising and other non-transaction net revenues brands and products they have high involvement with.
represent a relatively small proportion of total net rev- This social commerce experiment has now ended.
enues and the strategy is that this should remain the In January 2008, eBay announced significant
case. changes to its Marketplaces business in three major
areas: fee structure, seller incentives and standards,
Proposition and feedback. These changes have been controversial
The eBay Marketplace is well known for its core service, with some sellers, but are aimed at improving the
which enables sellers to list items for sale on an auction quality of experience. Detailed Seller Ratings (DSRs)
or fixed-price basis giving buyers the opportunity to bid enable sellers to be reviewed in four areas: (1) item as
for and purchase items of interest. described; (2) communication; (3) delivery time; and
Software tools are provided, particularly for frequent (4) postage and packaging charges. This is part of a
traders, including Turbo Lister, Seller’s Assistant, Selling move to help increase conversion rate by increasing
Manager and Selling Manager Pro, which help automate positive shopping experiences, for example by including
the selling process, the Shipping Calculator, Report- more accurate descriptions with better pictures and
ing tools, etc. Today over 60 per cent of listings are avoiding excessive shipping charges. Powersellers with
­facilitated by software, showing the value of automating positive DSRs will be featured more favourably in the
posting for frequent trading. search results pages and will gain additional discounts.
Fraud is a significant risk factor for eBay. BBC (2005)
reported that around 1 in 10,000 transactions within the
Competition
UK were fraudulent; 0.0001 per cent is a small propor- Although there are now few direct competitors of o ­ nline
tion, but scaling this up across the number of transac- auction services in many countries, there are many
tions makes a significant volume. ­indirect competitors. The SEC filings describe compet-
eBay has developed ‘Trust and Safety Programs’ ing channels as including online and offline retailers,
which are particularly important to reassure customers distributors, liquidators, import and export companies,
since online services are prone to fraud. For example, auctioneers, catalogue and mail-order companies, clas-
the eBay feedback forum can help establish credentials sifieds, directories, search engines, products of search
of sellers and buyers. Every registered user has a feed- engines, virtually all online and offline commerce par-
back profile that may contain compliments, criticisms ticipants and online and offline shopping channels and
and/or other comments by users who have conducted networks.
business with that user. The Feedback Forum requires
feedback to be related to specific transactions and Top
Objectives and strategy
Seller status was introduced in 2010 to increase trust in The overall eBay aims are to increase the gross mer-
the service. There is also a Safe Harbour data protection chandise volume and net revenues from the eBay
method and a standard purchase protection system. Marketplace. More detailed objectives are defined to
eBay has increased use of mobile commerce since achieve these aims, with strategies focussing on:
2009, yet it still only accounts for 20 per cent of pur-
1 Acquisition – increasing the number of newly regis-
chases in 2014, including sales from 240 million app
tered users on the eBay Marketplace.
downloads since inception.
2 Activation – increasing the number of registered
According to the SEC filing, eBay summarises the
­users that become active bidders, buyers or sellers
core messages to define its proposition as follows:
on the eBay Marketplace.
For buyers: 3 Activity – increasing the volume and value of transac-
tions that are conducted by each active user on the
●● trust
eBay Marketplace.
●● value
●● selection The focus on each of these three areas will vary
●● convenience. ­according to strategic priorities in particular local markets.
48 Part 1 Digital marketing fundamentals

eBay Marketplace growth is also driven by defining ●● legal uncertainty regarding liability for the listings and
approaches to improve performance in these areas. other content provided by users, including uncer-
First, category growth is achieved by increasing the tainty as a result of less Internet-friendly legal sys-
number and size of categories within the marketplace, tems, unique local laws and lack of clear precedent
for example: Antiques, Art, Books and Business & or applicable law;
­Industrial. Second, formats for interaction: the traditional ●● difficulties in integrating with local payment providers,
format is auction listings, but it has been refined now including banks, credit and debit card associations,
to include the ‘Buy-It-Now’ fixed-price format. This and electronic fund transfer systems;
fixed-price listing now accounts for well over half of all ●● differing levels of retail distribution, shipping and
transactions. communications infrastructures;
●● different employee/employer relationships and the
eBay’s growth strategy existence of workers’ councils and labour unions;
In its SEC filings, success factors eBay believes are ●● difficulties in staffing and managing foreign
important to enable it to compete in its market include: operations;
●● ability to attract buyers and sellers;
●● longer payment cycles, different accounting prac-
●● volume of transactions and price and selection of tices and greater problems in collecting accounts
goods; receivable;
●● customer service;
●● potentially adverse tax consequences, including
●● brand recognition. local taxation of fees or of transactions on websites;
●● higher telecommunications and Internet service pro-
According to its 2010 SEC filing: vider costs;
Our growth strategy is focussed on reinvesting in
●● strong local competitors;
our customers by improving the buyer experience
●● different and more stringent consumer protection,
and seller economics by enhancing our products data protection and other laws;
and services, improving trust and safety and cus-
●● cultural ambivalence towards, or non-acceptance of,
tomer support, extending our product offerings into online trading;
new formats, categories and geographies, and im-
●● seasonal reductions in business activity;
plementing innovative pricing and buyer retention
●● expenses associated with localising products,
strategies. including offering customers the ability to transact
business in the local currency;
It also notes that in the context of its competitors, other ●● laws and business practices that favour local com-
factors it believes are important are: petitors or prohibit foreign ownership of certain
●● community cohesion, interaction and size; businesses;
●● system reliability; ●● profit repatriation restrictions, foreign currency
●● reliability of delivery and payment; exchange restrictions and exchange rate fluctuations;
●● website convenience and accessibility; ●● volatility in a specific country’s or region’s political or
●● level of service fees; economic conditions;
●● quality of search tools. ●● differing intellectual property laws and taxation laws.

This implies that eBay believes it has optimised these

factors, but its competitors still have opportunities for Question
improving performance in these areas which will make Discuss how eBay uses different parts of their site
the market more competitive. to focus on certain activities and how this has con-
tributed to continued growth.
Risk management
The SEC filing lists the risks and challenges of
conducting business internationally as follows:
●● regulatory requirements, including regulation of
auctioneering, professional selling, distance selling,
banking and money transmitting;
 5
C h a p t e r

Ethical and Legal Issues*

The main goal of this chapter is to help you explore the ethical and legal issues
that e-businesses face in marketing online. You will learn about the current and
emerging issues that have caused concern among a variety of stakeholders, including
e-businesses and consumers.

After reading this chapter, you will be able to:

■ Compare and contrast ethics and law.

■ Discuss the implications of ethical codes and self-regulation.

■ Identify some of the main privacy concerns within traditional and digital contexts.

■ Explain some of the important patent, copyright, trademark, and data ownership issues

related to the internet.

■ Highlight key ethical and legal concerns related to online expression.

* This chapter was updated and augmented by Lara Pearson, Esq. and Inna S. Wood, Esq. Lara is a vice president and
the Sustainability Steward at Exemplar Law and the Chief Pontificator at BrandGeek.net, a branding law blog where IP
law and corporate social responsibility collide. Inna’s expertise is primarily focused on Corporate and Business Law.
She holds an LLM degree from the University of California, Berkeley, School of Law and a degree in Jurisprudence
from the Moscow State Law Academy. Inna is admitted to practice law in the State of California as well as the Russian
Federation.
117

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 118 Part 2 • E-Marketing Environment

• The benefits to both accessing and contributing to

the wealth of information appear to have no end.

trend Indeed, far from simply making life more efficient and
enjoyable, there are now a whole host of products,
services, and (especially) apps that help keep people
safe, right when they might need it most.

trend
watching
.com
• Softbank released the pantone 5 107SH in Japan,

impact
a smartphone with an inbuilt Geiger counter. The
Android device can measure radiation in the
surrounding air to within 20% accuracy, via a
button adjacent to the LCD screen.

Software Infringement
Have you ever broken the law while sitting at your software sales to pay for innovative upgrades
computer? Most people would probably say no— and new products, which they cannot do or do as
not recalling the times they installed computer much—if they lose income. Also, software makers
software that they did not purchase (sometimes must raise the price paid by legitimate buyers to
called software piracy). Infringement of copy- replace income lost to infringement.
right in software occurs when people download This cause and effect relationship between
copyrighted software from the internet without a protection and innovation plays out around the
license, loan copyrighted software CDs to others, globe. The United States, Japan, and most of the
or install copyrighted software on more comput- countries in Europe are examples of countries
ers than is allowed under their software licenses. producing and protecting trillions of dollars worth
Counterfeiting occurs when copyrighted software of new software every year. In stark contrast,
is duplicated and distributed to others without the Asian-Pacific countries with very weak software
consent of the copyright owner. Both infringement copyright enforcement—like China, India, and
and counterfeiting violate U.S. copyright laws and Vietnam—produce little by way of valuable soft-
are illegal. ware, and tons of infringing software, which every
So what is the big deal? Suppose you spent year costs software owners billions of dollars in
months writing a best-selling novel and then lost revenue. The United States has the lowest rate
learned that thousands of people were copying of software infringement in the world. Globally,
it instead of buying it. That copying would cut however, over 40 percent of the software sold is
into your income and reduce your enthusiasm an infringing version. Cutting this number by even
for writing more novels. Infringement of soft- a third would create millions of jobs and generate
ware copyrights creates a similar situation. The hundreds of billions of dollars in new economic
firms creating software use the income from their growth around the world.

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 Chapter 5 • Ethical and Legal Issues 119

What can companies do? Microsoft, one of weapon. Many people who use infringing soft-
the main victims of software infringement, uses ware do not know they are stealing, and it is not
several methods: It proposes intellectual property against the law or against cultural norms in many
legislation, files civil lawsuits, and creates non- countries. For example, executives in some coun-
infringement technologies such as digital rights tries believe that if they buy one copy of the soft-
management (DRM) security programs embed- ware, they can use it as they please, as with other
ded in its software CDs. Critics have argued products. To support its educational goal,
that security measures like DRM do little to stop Microsoft created a Web site about software
sophisticated international counterfeiters, while infringement that, like the campaigns of many
making legal use of the software more difficult other large copyright holders, refers to software
for the average user. A few years ago, Microsoft infringement as piracy (click on “piracy” at
tried a system of sniffing out users’ hard drives microsoft.com). Infringement and counterfeiting
while they were online, but privacy advocates remain huge problems for the software industry—
objected. In the end, Microsoft, and many com- problems that are unlikely to be solved for a
panies like it, believes that education is the best long time.

Overview of Ethics and complex. Unfair laws, a common by-product

Legal Issues of one-sided lobbying efforts, overly generous
political contributions, and other special influ-
Scholars often treat ethical and legal issues as ences have been the focus of criticism and call
separate, even unrelated, subjects. In reality, for reform. The problem has become so unwieldy
­ethics and law are integrally related. As we will that it prompted one of the world’s premier copy-
see, ethics frequently concerns the values and right scholars, Lawrence Lessig, to consider a bid
practices of professionals and others who have for Congress, running primarily on the platform
expert knowledge of a specific field. Ethics is of reducing political corruption. Groups seeking
also a general endeavor that takes into account the reform of international copyright and patent
the concerns and values of society as a whole. laws are fielding political candidates under the
Law is similar to ethics in the sense that Pirate Party affiliation. The Pirate Party platform
it, too, is an expression of values, but while eth- also seeks to strengthen personal privacy rights
ics may be directed toward individual or group and increase governmental transparency. Pirate
endeavors, laws are normally created for broader Parties are currently active in over 30 countries.
purposes, with the goal of addressing national, Even in a perfect world of no political cor-
or sometimes international, populations. In the ruption, new laws cannot anticipate every nuance
Anglo-American tradition, law is made by legis- of how people and companies will push the pro-
latures such as Congress or Parliament, enforced verbial legal envelope months, or years, down
by executives or agencies, and interpreted by the road. New laws regulating the internet are at
the courts. In all these instances, it is a public a particular disadvantage. Given the speed with
endeavor, which is reflected in the fact that law which the internet landscape changes and the
is often the result of political and social compro- slowness with which laws are enacted, some laws
mise. Additionally, law attempts to be consistent are nearly obsolete by the time they are passed.
in both time and place, so that citizens will be Similarly troubling, even when Congress passes
familiar with their rights and obligations. “good” laws, many questions remain concern-
Because law results from combinations of ing the meaning of the law itself or about how
interests, beliefs, and goals, the processes that the law is to be enforced. Thus, aggrieved parties
lead up to the making of laws are often slow and file lawsuits demanding courts to interpret these

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 120 Part 2 • E-Marketing Environment

laws and to determine their impact on particular inquiry is not limited to purely theoretical bound-
conflicts. Administrative agencies such as the aries. Rather, questions are studied at all levels of
Federal Trade Commission (FTC) also promul- human interaction and often appear as political,
gate rules and opinions governing online ­activity. legal, and commercial issues. Consequently, the
Given the complexity of the task, efforts to tame scope of ethics is virtually as wide as its subject
online transactions can be slow, particularly matter. Similarly, many types of ethical positions
within the new and often unfamiliar context of compete against each other for acceptance.
digital communication. A particularly important aspect of ethical
Ethics make important contributions to legal inquiry involves the study of professional activi-
developments, influencing lobbyists, legislators, ties. Traditionally, groups of individuals possess-
and eventually judges. The filtering that takes ing special skills or knowledge have established
place as an ethical tenet moves from idea to law codes and systems of fair practice. A classic
and to enforcement interferes with what would example is the Hippocratic Oath of physicians.
ideally be a seamless legal enforcement of an ethi- Ethical standards work both externally and inter-
cal precept. As a result of this imperfect system, nally. They help to communicate consistency and
laws do not correlate directly with ethics. Ethics trustworthiness to the community at large, while
can be a casualty of the debates and compromises also assisting in maintaining stability and integ-
that end up dictating the metes and bounds of a rity within the profession. In these ways, ethics
resulting law. Problems like legislators’ weak are both pragmatic tools and essential elements of
grasp of complex information technology issues, professional identity.
biased lobbying efforts, and the large time lag Documents such as the American
between online innovations and laws that govern Marketing Association’s (AMA) Statement of
them mandate that the law itself be merely the Ethics1 (also referred to as the “AMA Code of
beginning, and not the end, of the ethical inquiry. Ethics”) reflect the recognition of a commitment
Laws lag far behind online innovations. to the exercise of honesty, responsibility, trans-
Ethical debates surrounding these innovations, parency, respect, citizenship, and fairness within
however, happen in real time. It is critical that all professional transactions. In addition to articu-
lawmakers understand innovations clearly before lating overall values, professional codes provide
trying to mold the laws governing them. Digital members with guidelines that are specific to their
marketers play a crucial role in assisting legisla- pursuits. They are often products of the combined
tors. Legislators seeking insight into the complex experiences of practitioners, scholars, and the
ethics of a particular online issue look to experts public that are passed along to the entire mem-
and real-world entities for guidance. Impressions bership and eventually published. Historically,
from the trenches are lawmakers’ most unvar- codes have been interpreted or revised to respond
nished source of information concerning the to changed circumstances and new issues. In the
ongoing ethical debate. past, these processes have been relatively gradual,
with modifications often coming in conservative
degrees. Today, this situation has changed.
Ethics and Ethical Codes
Modern technology presents a radical chal-
The study of ethics has been in existence for lenge to marketing ethics as well as to those of
more than 2,500 years. The central focus of this other professions. The extent of this demand is
study is the analysis and description of such perhaps best reflected in the revolutionary fea-
basic concepts as right and wrong and how we tures of the computer itself. When compared
judge the differences among them. An impor- with other major technical advances such as the
tant dimension of this investigation concerns the printing press, telephone, or automobile, digi-
types of conduct that comprise ethical behavior. tal media is arguably unique in its capacity for
These tasks necessarily involve the examination speed, ubiquity, and versatility. Computers serve
of rights, responsibilities, and obligations. Ethical as data collectors, compilers, and disseminators.

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 Chapter 5 • Ethical and Legal Issues 121

They represent the fastest-growing form of com- role of formal law in the regulation of online
munication and, through the internet and simi- conduct. Throughout their tenures, the Clinton,
lar systems, forge global links of unprecedented Bush, and Obama administrations have expressed
proportion. the position that the development of the inter-
These factors create vacuums in ethical net should be largely left to the free operation
policy. Although they do not directly challenge of the market. Within such a system, rather than
such general ideals as fairness or honesty, digital mandate behavior through legislation, ethical
processes and potentialities are so new that ethics, codes developed by trade associations, commer-
like many other social endeavors, is only begin- cial standards groups, and various professional
ning to adapt itself to the computer revolution. organizations dictate appropriate behavior of
Currently, a number of critical issues confront participants.
those who work within electronic environments, Supporters of the self-regulation model
including the ownership of intangible data, often point to the private sector’s ability to rapidly
termed intellectual property; the role of privacy identify and resolve problems specific to its areas
in a virtual world without walls, locks, or doors; of competence, particularly when compared
the extent to which freedom of expression should to the seemingly confusing, contradictory, and
be allowed; the uses of data, including methods lengthy processes of the law. According to this
of collection; and the special status of children view, problems encountered within technologi-
who log on to digital networks. cal environments are particularly amenable to the
Easy solutions are seldom achieved within expertise possessed by market actors. Once con-
ethics or law, and, in the electronic context, progress sensus is reached, uniformity is achieved through
is complicated by a lack of comparative historical members’ compliance with ethical codes, as well
situations. Likewise, the ability to analogize com- as by ongoing education of providers and con-
puters to objects or institutions with which society sumers. Although the law cannot normally force
has had greater experience is often questionable. anyone to adhere to these codes, many believe
Is the computer network more like a broadcasting that improved consumer confidence resulting
station, a printing press, or a public library? Our in enhanced economic opportunities will ensure
current lack of experience in these matters makes voluntary compliance.
it difficult to say for certain. Finally, the fact that Critics of self-regulation argue that its
electronic spaces are global in nature accentuates incentives are insufficiently compelling. They
the earlier observation that ethical positions are by note that perpetrators of fraud and deception
no means agreed upon. What is accepted in Europe frequently benefit from schemes of short dura-
may be rejected in Asia or America. tion and are rarely interested in the long-term
The seemingly limitless opportunities gains offered by adherence to ethical codes. On
afforded by computers also suggest the need for a broader level, it has been suggested that com-
the constant assessment of their implications. mercial self-interest and pressures to maximize
Each participant in electronic marketing is given profits compromise the private sector’s ability to
not only the responsibility to adhere to profes- police itself and that, absent the type of sanctions
sional codes but also, in a very real sense, the only the law can provide, true deterrence cannot
unique opportunity to contribute to these stan- be achieved.
dards in a meaningful way. Although the resolution of this debate is
far from over, recent policy-making activities
indicate that governments are asserting them-
The Problem of Self-Regulation
selves more frequently in internet regulation
Although law and ethics are frequently directed and control. Issues of online privacy, data pro-
toward the same goals and often provide mutual tection, and particularly internet crime and fraud
assistance in the examination of complex prob- prevention have been already addressed by many
lems, one emerging area of conflict involves the countries.

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 122 Part 2 • E-Marketing Environment

Exhibit 5.1 OnGuardOnline.gov Website Source: www.onguardonline.gov/

The Australian Competition and Consumer tips and recommendations on OnGuardOnline.

Commission (ACCC), the Office of Fair Trading gov, the Web site developed specifically for the
in the UK, and the consumer protection agencies in purpose of online fraud prevention (Exhibit 5.1).
several other countries, including the United States, The number of new governmental agencies,
have already implemented various programs aimed private and not-for-profit companies, and associ-
at decreasing the spread of online deception. ations fighting online fraud keeps growing world-
The International Consumer Protection wide. As it was well noted by U.S. President
and Enforcement Network (ICPEN), an organi- Barack Obama: “Cybersecurity is not an end unto
zation uniting consumer protection authorities itself; it is instead an obligation that our govern-
from almost 40 countries, conducts annual inter- ments and societies must take on willingly, to
net sweeps to detect online traders that defraud ensure that innovation continues to flourish, drive
consumers. In 2001 the ICPEN created the markets, and improve lives.”2
“econsumer,” a network Web site which gathers In 2006 the UK government initiated the
e-commerce consumer complaints and shares this “Get Safe Online” campaign, which was meant
information with the participating law enforce- to provide helpful information and practical guid-
ment agencies. ance to internet users and prevent internet fraud.3
The FTC in the United States likewise con- The project, which was also broadly supported by
siders detection and suppression of domestic and major businesses, proved to be very successful
international fraud to be a priority. It regularly and remains active today. On October 4, 2010,
holds different seminars and trainings sessions the National Cyber Security Division (NCSD),
for internet users as well as posts many useful a division within the Department of Homeland

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 Chapter 5 • Ethical and Legal Issues 123

Exhibit 5.2 Stop.Think.Connect. Cyber tips Source: www.dhs.gov/

Security (DHS) launched the “Stop. Think. follow established customs of social boundar-
Connect,” a similar campaign aimed at improv- ies, detailed consideration of this subject did not
ing internet security awareness and educating the come about until 1890 when Samuel Warren and
public about common methods to detect cyber future Supreme Court justice Louis Brandeis
threats (Exhibit 5.2). published an article that urged the recognition
Even though heightened governmental of a right to privacy within American law. This
involvement appears to be an increasing response protection was defined as the “right to be left
to many online issues, it is significant to note alone.”4 Significantly, many of the justifications
that lawmakers in the United States and else- for this new idea were reactions to the phenom-
where have entered into a close dialogue with ena of a maturing industrial and technological
private entrepreneurs, public interest groups, and age, including the mass distribution of newspa-
commercial associations. Such arguably unprec- pers, the development of listening devices, and
edented instances of cooperation and sharing of the widespread use of photography. In essence,
resources suggest that future regulations will take privacy’s young tradition has always been about
the form of “networked responsibility” among information and the means of its delivery.
many participants. Although it has been the subject of constant
debate since the Warren and Brandeis article, pri-
vacy has proven to be an elusive concept, both
Privacy
ethically and legally. One reason for legal con-
The concept of privacy encompasses both ethi- fusion is the lack of any specific privacy provi-
cal and legal aspects. It is also relatively new to sion within the Constitution. This situation was
both disciplines. Perhaps more than any other recognized in the U.S. Supreme Court’s 1965
legal or ethical issue, privacy is a product of decision of Griswold v. Connecticut, 5 which
the twentieth century. Although many cultures held that privacy in the use of contraceptives

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 124 Part 2 • E-Marketing Environment

could be inferred from a number of enumerated individuals to protect personal material from
Constitutional rights, including those of associa- unauthorized release.
tion, freedom from illegal searches and seizures, Both seclusion and access control models
self-incrimination, and the quartering of soldiers. provide measures of protection, but their focus is
Later, in the 1973 opinion of Roe v. Wade,6 the concerned more with how information is released
Court found a privacy right in a woman’s repro- and less with what actually constitutes private
ductive decision making. Through the Fourth data. A third theory, known as the autonomy
Amendment to the U.S. Constitution, the pri- model, attempts to provide such a definition. It
vacy of the home has been established against does so by identifying private matters as those
­g overnmental agencies, which are required to necessary for a person to make life decisions.
obtain warrants before entering upon and search- This model entails freedom from the coercive use
ing a dwelling. This provision is, however, appli- of personal information as well as the ability to
cable only to officials or those acting on their be alone when reflection is necessary.
behalf and not against private individuals. In addition to presenting difficulties in
In addition to Constitutional developments, definition and scope, privacy exists as one value
privacy has been addressed in the common law. among many. Within society, privacy interests
Common law refers to decisions, presump- routinely compete against concerns of personal
tions, and practices traditionally embraced by and public safety, economics, and even the social
Anglo-American courts. The common law has and psychological need for association with
established a series of privacy violations that, ­others—a process that can require the divulging
both individually and together, form the basis of of sensitive information. The ways in which these
invasion of privacy lawsuits. These are arranged interests are coordinated involve complex bal-
into four categories: unreasonable intrusion into ances that can result in difficult choices. Often
the seclusion of another, unreasonable public- people are willing to give up personal informa-
ity of another’s private life, the appropriation of tion for benefits they perceive to be worthwhile—
another’s name or likeness, and the publication credit cards, frequent flyer mileage, and security
of another’s personal information in a false light. precautions in airports are but a few examples.
These elements are codified in many state stat- In such cases, ethics and law attempt to provide
utes and appear in the influential legal treatise, guidelines helpful in critically examining defini-
Restatement of Torts.7 tions, priorities, and implications.
Despite these developments, much dis-
agreement remains as to what privacy entails. The
Privacy Within Digital Contexts
identified central attributes of privacy fall into
three general areas. The first is the Warren and Information plays a pivotal role in the concept
Brandeis concept of a right to be left alone, often of privacy, as well as that of marketing and elec-
referred to as the seclusion theory. Privacy within tronic commerce. It is, therefore, not surprising
this perspective is the ability to remain isolated that conflicts about how data should be collected
from society. This model encourages laws and and used have developed.
ethical standards that are oriented toward main- A starting point for this discussion is the
taining personal distance and punishing those American Marketing Association’s Statement
who cross the limits set by individuals. A second of Ethics (available at marketingpower.com). It
intermediate theory, known as access control, states that the AMA and its members will “seek
does not presume isolation as a norm but places to protect the private information of customers,
its emphasis upon laws and standards that enable employees and partners.” This principle is concise
persons to reasonably regulate the information and straightforward in general terms, but it must
that they are giving up. Expressions of this model be applied to the internet’s many information-
can be found in laws and standards that empower gathering mechanisms.

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 Chapter 5 • Ethical and Legal Issues 125

In the spring of 2000, the attention of the many purposes. For example, they may handle
media, the government, and the public was cap- online information, creating features like shop-
tured by reports that DoubleClick, an online ping baskets to hold purchases. They may recall
advertising firm, was engaged in an effort to stored sales information to remind users of items
collect and compile large amounts of personal already ordered or to suggest new products.
consumer information. Within the relatively Significantly, cookies may collect other data,
brief history of internet marketing, DoubleClick such as full name, e-mail and postal addresses,
achieved success by establishing a system of phone numbers, a computer’s geographic loca-
more than 11,000 Web sites with advertising tion, and the time logged online.
that, when clicked, enabled users to visit product Although cookies may be configured
sites. The system also recorded the responses, within a browser to run only with explicit permis-
known as clickstreams, within its own databases. sion, they are normally automatically executed
Clickstream information was then available to without any user action. Cookie packets may
form a user profile, allowing the transmission of be combined with other digital information and
individually targeted advertising. Users were not may be transferred between servers or sold on the
required to give their active consent to this col- open market. User tracking occurs when cook-
lection. At the time, DoubleClick had reportedly ies are appended and examined in the course of
accumulated 100,000 online profiles. a user’s online travels. The result is an ability to
Although privacy advocates had already pinpoint an individual’s online behavior. With
voiced concern about the system’s potential for the integration of offline data, such tracking takes
abuse, the controversy reached a new height on a more encompassing, and more troubling,
when DoubleClick acquired a second company, dimension.
Abacus Direct, which specialized in the acqui- The DoubleClick controversy illustrates
sition of offline consumer data. Abacus Direct several significant aspects of the online privacy
had amassed an electronic list that included the controversy. Perhaps the most basic reflects the
names, addresses, and buying histories of a unsettled nature of privacy itself. Many people
large percentage of American households. With value privacy as a closely guarded right unto
the merger, plans were reportedly under way to itself. According to this view, the ability to remain
integrate data, providing a premium subscription secluded from unwelcome intrusion as well as the
service that would, for the first time, link these capability to control the disclosure of personal
real-life identities to DoubleClick’s online per- data is presumed. This position advocates policies
sonalities. Pursuant to this news, a coalition of that require individuals to be explicitly informed
privacy, civil rights, and consumer groups filed of any data collection event and then to allow the
a complaint with the FTC in an effort to prevent individuals the opportunity to participate (opt in)
the tying of the Abacus Direct information to or decline (opt out). Supporters of systems such
online profile data and to enjoin the registration as DoubleClick’s argue an opposite presumption.
of users to the new database without first obtain- They presume most users wish to receive the ben-
ing each subject’s consent. Google purchased efits of targeted advertising. This position reflects
DoubleClick in 2008 and currently applies its pri- the view that privacy is only one of many values
vacy standards to the advertising subsidiary. to be balanced. It generally supports an opt-out
The most common means by which these policy, which presumes that data collection will
types of data are obtained is through the use take place, but still allows users to withdraw con-
of cookies. Cookies are packets of data cre- sent by a variety of methods, including sending
ated within a user’s hard drive in response to e-mail to collectors requesting removal from their
­instructions received from a Web page. Once databases.
stored, cookies can be retransmitted from a user’s Pro-privacy critics of opt-out presump-
computer to a pertinent Web site. Cookies serve tions point to the fact that most users have no

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 126 Part 2 • E-Marketing Environment

significant knowledge of how computers operate advertisements and sharing this information with
or process data. They question whether the aver- third parties.
age person will take the steps necessary to with- While Facebook provides methods for
hold data and suggest that many opt-out routines limiting the disclosure of personal information,
are confusing and thus are unlikely to be success- critics argue these methods are intentionally com-
fully accomplished. Commercial proponents of plex and often misunderstood by users. While
opt-out solutions emphasize consumer surveys some users have deleted their Facebook accounts
that reveal a preference for targeted advertis- in response to the distribution of their personal
ing and argue that the data necessary to provide information, deleting a Facebook account can be
this service should be collected unless otherwise as difficult as trying to prevent disclosure of per-
denied. Although several Congressional bills are sonal information in the first place. Users have
pending, no law yet exists to resolve the debate. even called for the creation of an “open source”
Similarly, industry has not developed a widely alternative to Facebook, which gives users the
accepted solution to the challenge. Presently, ability to control all aspects of how their personal
many firms and associations are emphasizing information is displayed and shared.
notification as the best approach. Others, such One of the most famous cases in this
as Real Media Corporation, have developed rou- respect is Lane v. Facebook,8 a class action law-
tines that do not allow the sharing of their visi- suit filed by one of Facebook’s users whose per-
tors’ information with other Web sites. sonal information was disclosed by the Beacon
The DoubleClick matter was partially application launched by Facebook. Beacon was
resolved by the withdrawing of the database based on targeting advertising and allowed users
integration plans within months of the initial to share information about their online purchases
announcement. Attention continued to be focused with their Facebook “friends” or network. The
on the company until 2001, when, pursuant to an plaintiff bought a diamond ring for his wife as a
investigation, the FTC concluded that no privacy surprise gift. Unexpectedly and without his con-
violations had been committed by the company. sent, this information was disclosed to every-
In the spring of 2002, a remaining group of state one in his Facebook network, including his
and federal class action privacy suits were settled. spouse. The plaintiff claimed that he did not give
The preliminary terms of this agreement provide Facebook permission to publish such information
a template for contemporary industry standards on the Web site and that the company’s actions
in consumer privacy. They include the obliga- intruded upon his privacy. The parties settled in
tion to provide clear notice of data collection, 2010. One of the provisions of the settlement was
a ban on combining existing data with personal termination of the Beacon program by Facebook.
information unless explicit (opt-in) permission Another remarkable privacy case involved
is obtained. Moreover, data obtained from cook- Google and its e-mail users. In 2009 Google cre-
ies must be routinely deleted and new cookies be ated a new messaging tool for its e-mail users,
programmed to deactivate at five-year intervals. called “Buzz.” The application was embed-
Finally, DoubleClick was forced to initiate an ded into the Gmail program and allowed users
extensive program of consumer privacy educa- to chat and share photos and other information
tion and submit to regular, independent audits. more efficiently than by e-mail. In 2010, a class
Critics of the settlement point to the relative brev- action lawsuit was filed against the company
ity of its two-year term of enforcement and to the by a Harvard Law School student who claimed
overly generous lifespan given to cookies. that Google violated privacy standards by fail-
More recently, Web sites like Facebook ing to request prior consent from Gmail users
have come under fire for using the personal for the new service. As it often happens with
information of their users. Facebook has been such notorious cases, the parties agreed to settle
accused of using users’ personal information in it.9 This, however, was not the end of the story.

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 Chapter 5 • Ethical and Legal Issues 127

At the same time as the lawsuit was initiated, the privacy is a significant consumer concern. This
Electronic Privacy Information Center (EPIC) realization has prompted a greater use of privacy
filed a complaint with the FTC claiming similar policies, including a more extensive use of opt-
violations. It argued that prior consent was nec- in routines.12 It remains to be seen, however,
essary because the purpose of the new applica- whether these outward expressions will translate
tion, that is, social networking, was different into greater protection of private information, or
from the purpose of general communication via merely serve as a cover for greater, more wide-
e-mail. Following EPIC’s logic, it was deceptive spread exploitation of personally identifiable
for Google to introduce such a service without information.
providing their e-mail users with an option to opt In addition to issues of data collection, the
out. Subsequently the FTC initiated an investi- problem of access to data is of fundamental sig-
gation of Google’s privacy policy and issued an nificance within the context of online privacy.
order to amend it. The FTC also required Google In this area, the status of sensitive information is
to abstain from misrepresenting their privacy not only a matter of hardware security but also
practices, to receive prior consent before “any one of administrative policy. A clear example
new or additional sharing” by the company of of the problem arose in 1998 when, with only
the user’s personal information, and to develop a an informal request, the U.S. Navy was able to
“comprehensive privacy program” to ensure bet- obtain from America Online (AOL) the per-
ter protection of personal information.10 sonal user data of a serviceman who was sus-
To comply with these requirements, Google pected of violating military rules concerning
introduced new privacy policies and stronger homosexual conduct. The resulting prosecution
safeguards for processing and maintaining per- was later terminated after a court found that the
sonal data. As opposed to its previous practices, Navy’s request had likely violated federal pri-
now all information about each user from various vacy law.13 An apology and compensation from
Google servers will be merged into one profile. AOL resulted, but the incident illustrates the risks
This decision caused an immediate reaction from involved after data leave the control of a user. The
EPIC which filed a complaint in the district court majority of privacy-related debates focus on tradi-
for the District of Columbia stating that such tional methods of data processing and the recently
consolidation would be detrimental to user pri- developed, but already well-established, use of
vacy and compelling the FTC to prevent Google cookies. Beyond these technologies, cutting-
from acting this way. Although the court denied edge applications promise to gain popularity and
EPIC’s motion, it is not yet known which posi- to raise additional issues.
tion the FTC will take regarding the new devel- Java is a Web-friendly programming lan-
opments in Google’s privacy policy.11 guage that allows the downloading and running
While wholesale exploitation of person- of programs or applets on individual computers.
ally identifiable information has decreased since These applications are increasingly used to pro-
the turn of the century, technology has increased vide such enhancements as dynamic animation,
the ways in which such information is collected. Web-based simulations, and other useful addi-
Accordingly, while the impact may not be as tions to plain hypertext. Java may also be used
noticeable to consumers, the usage is more wide- to design programs known as hostile applets,
spread. Adding to the problem is the confusion which can be used to surreptitiously access and
over what Web sites do with the information they transmit data on hard drives, including e-mail
collect. Nearly every major Web site collects addresses, credit card records, and other account
some type of personally identifiable information. information.
Just over half, however, specify on the Web site Intelligent agents are a growing topic of
exactly how the information will be used. For interest within Web marketing and computer
several years, the industry has recognized that ­science research. The products of developments

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 128 Part 2 • E-Marketing Environment

in artificial intelligence agents are programs that, response to research, reports of abuses, and
once released by a user, can function autono- lobbying from parents and other advocates,
mously within the Web to make electronic deci- Congress passed the Children’s Online Privacy
sions. Some potential tasks include the searching Protection Act (COPPA).14 In effect since 2000,
of sites or the buying of products that conform the law requires that Web sites and other online
to an individual’s tastes or interests. Critics of media that knowingly collect information from
agents worry that the preferences they hold may children 12 years of age or under (1) provide
be chosen or controlled by entities other than notice to parents; (2) obtain verifiable parental
their “owner.” Such a situation would limit the consent prior to the collection, use, or disclosure
individual’s ability to make autonomous deci- of most information; (3) allow parents to view
sions and could create an incentive to distrib- and correct this information; (4) enable parents to
ute personal information contained in the agent prevent further use or collection of data; (5) limit
applications. personal information collection for a child’s par-
Cookies, Java applets, and intelligent ticipation in games, prize offers, or related activi-
agents are ubiquitous applications; that is, they ties; and (6) establish procedures that protect the
are able to function in the course of nearly any “confidentiality, security, and integrity of the
online session, without a user’s knowledge or personal information collected.” In addition, the
control. The ease of their operation explains FTC, as required by Congress, enacted specific
why some sites would not want to inform users rules to govern and enforce the act15 and, in its
that data are being collected. This objectionable second year of administration, instituted a total
attitude places technological ease above ethical of six COPPA enforcement actions. One major
principles. Similarly, because much of the infor- change brought about by the act is the increasing
mation is not of an explicitly confidential char- presence of data collection policies on sites used
acter, it may be tempting to disregard privacy by children and the provision of an active means,
implications. This argument ignores the fact that such as a click button, for parents to confirm their
even apparently innocuous data may, when com- awareness of these practices. In some cases, sites
bined, result in very specific information. previously open to children now restrict admis-
In addition to application-based collec- sion to users of certain ages.
tion, sites may gather information through online While federal laws relating to internet pri-
forms and e-mail, often in exchange for browsing vacy remain in debate, many explicit offenses
privileges or other benefits with or without the can be addressed by conventional criminal stat-
full disclosure of the terms of use. Regardless of utes. Sanctions for misuse of consumer data are
how it is elicited, the use of information as a form present in the Fair Credit Reporting Act16 and
of currency has raised ethical questions, particu- the Electronic Communication Privacy Act
larly when most average users (as well as infor- (ECPA).17 Additionally, organizations such as
mation experts) are understandably uncertain the Direct Marketing Association (DMA) have
of the ultimate value of the data. Although such developed comprehensive guidelines for Web
valuation may indeed be undeterminable at this privacy.18 One troubling development within this
stage of internet development, consumer educa- area is a decision of a federal trial court to dismiss
tion about all uses of revealed data has been sug- a class action suit that alleged breaches of privacy
gested as a solution to help users make informed policies by an airline. The dismissal was based,
judgments in this area. Information may also be in part, upon the court’s finding that even though
gathered through explicitly fraudulent methods— an allegedly violated privacy policy was posted
an approach that has unambiguous ethical and on the airline’s site, the plaintiffs did not claim
legal implications. to have read its contents and therefore had few
A particularly active area of study involves actual privacy expectations.19 Critics of this deci-
the collection of material from children. In sion claim that requiring such a showing would

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 Chapter 5 • Ethical and Legal Issues 129

impose an enormous burden upon those attempt- Even though the document does not have the
ing to enforce Web privacy policies, essentially status of a law and many critics forecast its low
making those policies worthless. efficiency, at least this initiative is a sign of gov-
The problem of privacy within e-mail ernmental concern about online privacy, whether
remains an unsettled aspect of online interac- it is effective.
tion. Under U.S. law, users who operate e-mail
accounts on private services (those that are not International Privacy Issues
advertising supported) are generally assured of
On an international level, privacy issues have
their legal privacy through service agreements
also received close attention. The most compre-
with their internet service provider (ISP). In
hensive privacy legislation so far has been devel-
addition, the ECPA addresses the privacy of ISP
oped by the European Union (EU).
clients, with certain exceptions that include situ-
The foundation stone in creating the cur-
ations in which e-mail is inadvertently discov-
rent personal data protection system was the
ered through system maintenance. The opposite
Privacy Guidelines prepared by the Organization
condition applies to employees who use their
for Economic Co-Operation and Development
organizations’ computers or networks to com-
(OECD) on September 23, 1980.21 These guide-
municate. Here, the current law generally extends
lines introduced basic principles for personal data
no expectation of privacy to workers, particu-
protection and processing such as collection limi-
larly those employed by nongovernmental enti-
tation, data quality, purpose specification, use
ties. Many companies emphasize this status in
limitation, security safeguards, openness, indi-
their memoranda of policies, but even when such
vidual participation, and accountability. Although
notices are absent, the employee’s wisest course
helpful, these guidelines were not mandatory for
of action is to assume that all material that passes
the member countries of the OECD.
through workplace facilities is monitored. Ethical
In order to bring more clarity and enhance
questions remain as to whether strict surveillance
enforcement of data privacy rules, the EU devel-
policies adequately reflect reasonable expecta-
oped the Data Protection Directive (95/46/
tions or values of personal autonomy and integ-
EC), which became effective in October, 1998.
rity. Compare this to laws that prohibit unlimited
According to this act, all member states of the
monitoring of employer-owned phone systems or
EU were instructed to enact national laws to pro-
dressing rooms.
tect “fundamental rights and freedoms of ­natural
In the beginning of 2012, the Obama admin-
persons, and in particular their right to pri-
istration came out with an official framework
vacy with respect to the processing of personal
to improve protection of internet users’ privacy
data.”22
rights (commonly referred to as the “Consumer
The directive’s provisions require that:
Privacy Bill of Rights” or the “Privacy Bill of
Rights”)20. Through this initiative, the govern- • Subjects be apprised of how their data are
ment instructed the National Telecommunications used and be given opportunities to review
and Information Administration (NTIA) to work and correct information.
out a new set of rules for internet companies • Data use be restricted to the announced
(“codes of ethics”), which will establish clear purpose.
and fair standards for processing and safety of • The origin of data be disclosed, if known.
online personal information. These policies will • Procedures to punish illegal activities be
be developed in close cooperation with the inter- established.
net community and should address seven basic • Consumer data collection procedures con-
online privacy rights: individual control, trans- tain opt-out capabilities.
parency, respect for context, security, access and • Sensitive data collection cannot be accom-
accuracy, focused collection, and accountability. plished without explicit permission.

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 130 Part 2 • E-Marketing Environment

• Any international transfer of data be exe- privacy rules which will consolidate, modify, and
cuted only with countries possessing ade- extend its prior privacy guidelines to address the
quate privacy protection laws. current technology challenges facing the union.
As opposed to the industry-based approach for
In March 2000, after extensive negotia- privacy policy implemented in the United States,
tion, the U.S. Department of Commerce and the the EU leans to a more universal regulation which
European Commission reached an agreement that will apply to the public as a whole irrespective
U.S. organizations would submit to a series of of their business focus. The new regulation sets
safe harbor provisions for the protection of EU forth stricter rules for personal data process-
citizens’ data. These provisions essentially reflect ing and greater responsibility for those personal
the directive’s emphasis on notice about collec- data operators which violate legislative require-
tion, purpose, and use; choice in ability to opt ments. According to the European Commission
out of disclosure and third-party dissemination— this reform will end fragmental data privacy leg-
including a requirement of affirmative permis- islation and lift bureaucratic and administrative
sion in matters involving sensitive personal data; barriers for businesses by establishing clear and
third-party transfer protection; and provisions concise data protection principles. The financial
for security, data integrity, redress, and enforce- gain from the proposed regulation is estimated
ment.23 Companies participating in data trans- at 2.3 billion euro for businesses per year.27 The
actions with the EU can fulfill the safe harbor new regulation is expected to take effect in two
provisions by allowing the U.S. government to years following its adoption by the European
monitor compliance, by affiliating with a self- Parliament and EU member states.
regulatory group under FTC supervision, by There is also growing attention being paid
reporting directly to EU data protection agen- to the issues of personal data protection in Asia.
cies, or, if not currently online, by promising to The increasing popularity of this region among
work with an EU privacy panel. A criticism of international businesses and overall globaliza-
this plan focuses on its reliance on private com- tion call for data privacy standards and legislation
pliance. Critics are particularly worried that with- in this region as well. Particularly responsive to
out active governmental supervision, the aims of the new challenges in this field are Hong Kong,
the safe harbor plan may largely be unfulfilled. Japan, South Korea, and Singapore.
The European Commission issued several reports The Personal Data (Privacy) Ordinance28
on the safe harbor agreement process, affirm- adopted in Hong Kong in 1996 contains a set of
ing the establishment of required procedures, basic requirements for personal data operators,
but expressing concern that some U.S. corporate which are broadly defined as any private or public
policies and dispute resolution processes failed to organization that collects or processes personal
meet expectations.24 data. The law protects any personal information
Another important EU privacy act is the that could reveal the identity of the individual.
DirectiveonPrivacyandElectronicCommunications The other Hong Kong law in the area of data
(2002/58/EC)25 which was introduced in July 2002 privacy is the Code on Access to Information,29
and amended in 2006 and 2009. The act supple- which governs how those governmental agencies,
ments the Data Protection Directive of 1995 and that by the nature of their service have access to
covers questions related to computer data privacy private information of individuals, manage and
such as spam, cookies, and confidentiality of protect that information.
online information. The Personal Information Protection Act of
In light of various developments in rap- Japan (PIPA)30 became effective in April 2005.
idly growing computer technology, in 2012 It is based on the same principles of data pri-
the European Commission proposed the Data vacy as the EU Data Protection Directive but has
Protection Regulation, 26 a new single set of more limited coverage; that is, it applies only to

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 Chapter 5 • Ethical and Legal Issues 131

those businesses which process the information policies. It also has wide coverage; that is, its
of more than 5,000 individuals. In March 2011, application is not limited to Singapore-located
a similar Personal Information Protection Act personal data operators only but extends to any
was passed in South Korea.31 The law has a very foreign organizations that process personal data
broad scope, applies to all companies and organi- in Singapore.
zations, and replaces various fragmented regula- There is an expectation that other Asian
tions that existed prior to its enactment. countries will follow these initiatives and intro-
The Singapore government is also becom- duce similar data privacy laws. At the moment
ing proactive in its development of a data pri- most Asian countries, including the People’s
vacy framework. Although the country does not Republic of China (PRC), Thailand, and others,
currently have overarching data privacy legis- have no overarching data privacy laws with the
lation, in 2012 aiming to meet the heightened data privacy issues being regulated instead by
demands of the country’s consumers for protec- industry-specific acts and regulations.
tion of their personal information, the Singapore Although there is much debate over which
Ministry of Information, Communications and privacy policies most evenly balance corporate
the Arts (MICA) initiated a draft of the Personal and individual interests, the following norms
Data Protection Act. 32 Besides the commonly identified by the FTC33 represent a consensus
known principles of data protection (e.g., prior regarding the minimum requirements in the ethi-
consent for personal data collection and pro- cal use of consumer information (Exhibit 5.3):
cessing, free access by individuals to their per-
sonal data) the bill contains several additional 1. Notice: Users should be aware of a site’s
requirements for those who collect personal information policy before data are collected.
data, aka personal data operators. For example, 2. Consent: Users should be allowed to
it requires any such organization to appoint at choose participation or exclusion from the
least one individual who will ensure the orga- collection.
nization’s compliance with the rules of the Act 3. Access: Users should have the ability
and other applicable privacy legislation along to access their data and correct them if
with implementing internal data protection erroneous.

Exhibit 5.3 FTC Online Privacy Policy Source: www.ftc.gov/

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 132 Part 2 • E-Marketing Environment

4. Security: Policies to ensure the integrity of mechanisms—patent, trademark, and copyright

data and the prevention of misuse should law. It is important to note that none of these
be in place. areas of law protect ideas. Rather, they protect
5. Enforcement: Users should have effec- inventions, expression, and brands.
tive means to hold data collectors to their Patent law is centered upon inventions and
policies. the ability to reproduce or manufacture an inven-
tor’s product. Copyright addresses the realm of
The FTC has been actively involved in
creative expression—specifically, the right to
the development of additional recommendations
publish, duplicate, or alter expressions of ideas.
for the internet community which would help
Trademark is concerned with brands—source
to improve personal data protection. Likewise,
identifiers that consumers use to identify and dis-
in March 2012 the FTC issued a detailed report
tinguish products and services in the marketplace.
which clarified the agency’s position on privacy
It is important to note that these categories have
issues and established an extensive framework
been flexible and often the boundaries between
for companies involved in collection and process-
them have been modified by legislation and the
ing of personal data.34
courts. In addition, international treaties can rede-
The framework basically repeats the key
fine both distinctions and protections.
privacy standards outlined in the proposed EU
Computer-based communication poses par-
Data Privacy Regulation. It expresses concerns
ticularly difficult problems for intellectual prop-
about the methods used by large ISPs to process
erty. These communications may incorporate
personal data of online users. It also encourages
elements of patent, copyright, and trademark or
personal data operators: to promote consumer
any combination thereof. A single communica-
privacy; introduce reasonable safety measures
tion may contain: (1) a novel way of communi-
for personal data protection, retention, and dis-
cating covered by a patent; (2) text and pictures
posal; limit collection of personal data only to
protected by copyright; and (3) proprietary
such information which is specifically necessary
branding covered by trademark law.
for their business purposes; and ensure accuracy
of personal data and implement procedural pro-
tections (e.g., internal policies and regulations) Patents
in order to enforce the data protection principles.
The application of patent law to computing is a
It also indicates that companies should develop
continually developing field. Under conventional
clear and transparent privacy guidelines for
American law, patents are granted by the U.S.
consumers and provide them with an adequate
government for inventive processes or steps.35
mechanism to access, modify, and control their
Grounded in English legal foundations and the
personal data and its collection. The FTC report
heritage of conventional invention, the law is
demonstrates a current global trend that even
tailored toward industrial or mechanical con-
though the government allows self-regulation in
cerns. In 1998, the case of State Street Bank &
data collection, it is gradually increasing its con-
Trust Co. v. Signature Financial Group, Inc. held
trol over it.
that a computer program could be patented. This
ruling has since been expanded to include other
methods of doing business. Since State Street,
Digital Property
online businesses have been making use of this
A primary function of law is to define owner- type of patent protection. A primary motivation
ship, but this is constantly being challenged for this may lie in the fact that, unlike copy-
by the ­m ercurial nature of digital technol- rights, patents prevent competitors from doing
ogy. Traditionally, the law protected intangi- the same thing in a different way. However, like
ble or intellectual property through three basic copyright, American patent powers derive from

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 Chapter 5 • Ethical and Legal Issues 133

Constitutional concerns. Thus, public access to both courts and Congress are being called upon to
patented material is assured after the term of the carefully examine whether historical data support
patent has expired and the patent itself is always the inclusion of software and business practices
on file with the government. within a patent’s ambit. Advocates of inclusion
The inclusion of software under patent law argue that the granting of patents in these areas
is largely based upon the assertion that programs will encourage productivity and innovation.
describe inventive processes. A contrary opinion Critics argue the opposite, stating that both the
holds that software at its root consists of encryption matter and the unanswered issues of
­algorithms—formulas that are generic in nature the Amazon case point to the potentially stifling
and, therefore, cannot be owned by anyone. A and monopolistic effects of patent law’s strong
similar criticism states that programs are merely protections.
schemes or plans that machines actually execute. In 2010 the U.S. Supreme Court ruled on
The details of both sides’ arguments are complex the biggest “business method” patent case since
and promise to be the subject of much future debate, State Street. The issue in In re Bilski was the
litigation and, perhaps, Congressional action. An allowable scope of business method patents. 37
area of current internet focus centers on the use In particular, the court considered whether an
of business patents that describe such activities as invention had to be tied to a machine or trans-
marketing approaches and methods for conducting form something from one state to another to
commerce. Patent protection has been claimed for become patentable. The plaintiff in this case
reverse online auctions, secure credit card process- appealed the U.S. Patent and Trademark Office’s
ing, and incentive-based methods for reading Web refusal to patent his risk-management business
site advertising. When the Patent Office first started method, which was further affirmed in court. The
granting patents on business methods, the review U.S. Court of Appeals for the Federal Circuit
process was less than vigorous. Many overly held that the business method was not patent-
broad patents were issued in a short period of time. able because it did not meet the “machine-or-
Opportunistic companies bought large numbers of transformation test.” This decision placed under
these patents and began filing infringement law- risk all other business methods which would have
suits around the country. These patent trolls are been deprived of patentability if the Supreme
still around, reaping millions of dollars in royalties Court affirmed as well. While the Supreme Court
every year for doing nothing but threatening to sue affirmed the decision of the lower court that the
on somewhat suspect patents. specific risk hedging method was unpatentable,
An example of the attempted enforcement it completely disagreed that business methods
of a software patent is found in the claim that as a whole were unpatentable. It also found that
secure digital time-stamping is a unique and pro- the “machine-or-transformation test” was not the
tected process. Critics fear that if this assertion only basis for determining the patent eligibil-
is upheld, the majority of online encryption rou- ity, but rather a helpful tool that could be used
tines will be affected. Similarly, in Amazon.com to resolve disputes.38 The main outcome of this
v. Barnesandnoble.com, the plaintiff (Amazon. case is that business method patents will be very
com) relied upon a patent to allege that it alone carefully scrutinized and depend on the circum-
had the ability to use 1-Click ordering routines— stances of each situation. They also are likely to
a now common practice within the internet.36 The be heavily litigated.
matter was settled in 2002, without final judicial
resolution and the details of the settlement have
Copyright
not been disclosed.
The U.S. Patent Office recently decided to At this comparatively early stage of online legal
increase the rigor with which it reviews applica- development, copyright appears to be estab-
tions for software-related protection. Likewise, lished as the primary means of protecting most

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 134 Part 2 • E-Marketing Environment

expression on the internet, including text and particularly at a time when there is great debate
other data. In the conventional world, copy- about the economic value of electronic material.
right has protected expressions of ideas in such A related law, enacted in 1998, is the
formats as books, recordings, and film. Under Digital Millennium Copyright (DMCA) Act.41
American law, copyright law is derived from The DMCA is a complex piece of legislation that
the Constitution as a protection established for contains several provisions. It grants ISPs pro-
the benefit of the public. Chief among these pro- tection from acts of user infringement as long
tections are the doctrines of fair use and of first as certain procedures are followed, including
sale.39 Fair use consists of the ability to copy— the prompt reporting and disabling of infring-
without cost—reasonable portions of protected ing material. Supporters of this legislation claim
material for purposes of such public activities that the DMCA will free ISPs from liability for
as education, news reporting, and editorial com- their users’ illegal actions and, thus, encourage
ment. The doctrine of first sale limits the ability industry growth. Critics believe that the reporting
of a copyright holder to obtain profit from the sale and disabling requirements may cause innocent
of his or her work after the initial time at which behavior to be presumed infringing and wrong-
the material is sold. Purchasers are subsequently fully censored.
given the ability to transfer or otherwise dispose The DMCA also criminalizes the circum-
of their copy. The first sale doctrine is viewed as vention of software protections and the develop-
benefiting such institutions as public libraries and ment or distribution of circumvention products.42
can also increase access to intellectual material As with the NET Act, DMCA supporters believe
through discounts such as those offered by used that this law will increase commercial willing-
bookstores. The issue is unsettled when it comes ness to place material on the internet by deterring
to digital property, like music downloads. online infringement. Although some exceptions
In 1997, President Clinton signed the exist for educational and scientific activities, crit-
No Electronic Theft (NET) Act 40 into law. ics maintain that the DMCA goes well beyond
The NET Act confers copyright protection for this goal by banning the development of innocent
computer content and imposes sanctions when and useful applications that may have minor cir-
infringement is committed for commercial or cumvention capabilities, giving copyright holders
­private financial gain, or by the reproduction or a veto over any development that they perceive as
distribution, either commercial or noncommer- a challenge to their profits.43
cial, of one or more copies of copyrighted works The DMCA was enacted in part to
having $1,000 or more in retail value. Punishment ­c omply with the World Intellectual Property
under this provision may include criminal pros- Organization’s (WIPO) Copyright Treaty and the
ecution. While proponents believe that the NET WIPO Performances and Phonograms Treaty.44
Act will encourage innovation by protecting These documents set forth international stan-
material placed on the internet, critics believe dards for copyrighted material and were recently
that the definition of infringement has been made ­ratified by the United States. Treaty proponents
problematically broad by shifting its traditional argue that, in a global networked environment,
meaning, which is normally associated with per- international consensus regarding ownership,
manent or semipermanent reproduction (known protection, and transfer of digital property is
as fixing), to now include electronic distribution essential. As with the DMCA, critics argue that
without reproduction. It is argued that such acts the specific laws required by the treaties unfairly
could include the mere perusal of digital material favor copyright owners.
through a Web browser and, thus, make criminal In 2011, there were serious efforts made in
activities of what has been previously protected Congress to pass the two legislative acts aimed at
by the First Amendment. Additional criticism has establishing stricter guidelines for internet com-
been directed to the use of criminal sanctions, panies operating Web sites involved in copyright

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 Chapter 5 • Ethical and Legal Issues 135

infringement. The Stop Online Piracy ACT that the trademark is protectable. Generally, the
(SOPA)45 and the PROTECT IP (Preventing more distinctive (unique) the mark, the greater is
Real Online Threats to Economic Creativity the strength of this claim. The Act also prohibits
and Theft of Intellectual Property, or PIPA) dilution—the unauthorized use of famous trade-
Act46 called for enhanced enforcement against marks in association with goods or services that
individuals and companies engaged in copyright is likely to lead to a lessening of the uniqueness
infringement. of the trademark.
The introduction of these bills caused a In 1995, the U.S. Congress passed the
great storm of protests among the internet com- Federal Trademark Dilution Act (FTDA) 51
munity and its supporters. Google, Mozilla, which established guidelines on how to determine
Facebook, Twitter, Yahoo!, and many other whether a particular trademark has been diluted.
internet companies started a petition against Dilution protects the substantial investment made
the proposed legislation which reportedly col- by owners of famous marks—those widely rec-
lected approximately 4.5 million signatures.47 ognized by the general consuming public of the
Wikipedia, Google, Craigslist, Mozilla, Flickr, United States in those marks.
Reddit, Peter Gabriel, and other Web sites per- There are two types of dilution: blurring
formed a 24-hour blackout on January 18–19, and tarnishment. Blurring results from activi-
2012.48 ties that reduce the “distinctiveness” (unique-
On the black background of its English ness or brand recognition) of the famous mark.
page, Wikipedia placed a mourning message Tarnishment occurs when the famous mark is
warning its online users against the fatal conse- cast in an unflattering light.
quences of the proposed legislation to the open In response to the Supreme Court’s rul-
internet. Several other internet Web sites took ing in Moseley v. V Secret Catalogue, Inc., 537
similar actions and eventually, due to the enor- U.S. 418 (2003)—which interpreted the FTDA
mous pressure caused by numerous boycotts and to require actual dilution—the Trademark
picketing, the bills were rejected. The Obama Dilution Revision Act of 2006 (TDRA)52 was
administration spoke against the bills stating that enacted on October 6, 2006, to substantially
it would not support such legislation. However, it revise the FTDA. Under the TDRA, if a famous
also indicated that the issues of online copyright brand is likely to be diluted, then the brand owner
infringement remain very important and called has grounds to file suit.
for an open dialogue between the ISPs and those Trademark law has recently been applied to
lobbying for stricter regulation. 49 Thus, there the internet-naming system. Domain names (aka
remains a strong likelihood that the government’s domains) are unique configurations of letters or
attempts to increase control over the internet will numbers that are used to route data. The most
continue and similar bills will be proposed in the familiar examples of domains are addresses of
future. Web sites, for example, someplace.com. In addi-
tion to designating Web sites, domain names are
used in e-mail addresses. As the primary means
Trademarks
to reach commercial destinations, the signifi-
Trademark law is the area of intellectual prop- cance of these identifiers is obvious.
erty that governs source identifiers for goods or Although the creative application of lan-
services. At its heart, trademark law is a con- guage provides for many distinctive names, it is
sumer protection law. Under the federal Lanham inevitable that some similarity will occur. For
Act, 50 trademarks may be registered with the example, “General Signpost” can plausibly be
government. Registered or not, however, they thought to resemble “General Sign,” but tradi-
may still be protected under the Act. To pur- tionally, trademark law has been able to allow
sue an infringement case, claimants must prove such similarities because trademark protection is

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 136 Part 2 • E-Marketing Environment

typically limited to a particular class or classes of recent matter in which a former Playmate of the
goods or services. When enough dissimilarity of Year included similar terms within her site, albeit
goods or services exists, overlap in the similarity repeatedly noting that she was not ­p resently
of brands is permitted. associated with Playboy Enterprises. Here, the
Another type of trademark violation is use was upheld as applied to the metatags, with
known as cybersquatting. This activity involves the court holding that their presence was “nomi-
the registration of domain names that resemble or native,” meaning that the terms were simply
duplicate the names of existing corporations or descriptive and did not inaccurately imply an
other entities. The initial registrants are typically endorsement or make other misrepresentations.
unrelated to the institution at issue. The domain Significantly, the court did find that the repeated
name is then offered for sale at a price far greater use of a trademarked term on the site’s wallpaper
than that originally paid. On November 29, 1999, did constitute an infringement and was unneces-
President Clinton signed the Anticybersquatting sary for the purposes of simple description.55
Consumer Protection Act (ACPA). 53 Under A variation of the metatag problem is found
this law, a person is liable if, in bad faith, he or in the practice of assigning keywords within
she registers, traffics, or sells a domain bearing search engines. In one case, the cosmetic manu-
a name that is identical or confusingly similar facturer, Estée Lauder, sued Excite and others,
to a protected trademark, or which would dilute alleging that the entry of its trademarked name at
the worth of the trademark. As a national law, the Excite Shopping Channel would direct users to
the Act makes it easier to place notoriously elu- the site of a specific, unlicensed dealer.56 In addi-
sive cybersquatters under the control of the court tion to deception, Estée Lauder claimed that the
system and allows for swift possession by a practice diluted its trademark. The case was sub-
successful complainant of the disputed domain sequently settled with Estée Lauder reacquiring
name. Heralded by trademark holders, the Act has control over its name. The selling of trademark-
received criticism similar to that lodged against protected keywords has also been claimed to
the DCMA, specifically, that the swiftness of the occur at other Web portals where these words
transfer of contested domain names may unfairly or phrases trigger banner advertising that is not
deprive a defendant of a proper hearing and due sanctioned by or directed to the trademark holder.
process. In addition to word appropriation, trade-
Metatags are HTML statements that mark law has been implicated in matters involv-
describe a Web site’s contents. They are not nor- ing use of hyperlinks. Although the Web has
mally displayed by browsers. They allow search flourished with its abilities to seamlessly trans-
engines to identify sites relevant to topics of their fer information from site to site, some entities
inquiries. Accordingly, these tags can provide have become concerned that links that take users
a valuable means of attracting users to a site. to areas other than their introductory page may
Because metatags are defined by HTML authors, cause confusion or deprive the target sites of
it is possible to insert words or phrases that are revenue obtained through the selling of advertis-
calculated to provide optimal a­ ttractiveness, ing. Such deep linking was the subject of litiga-
including material protected by trademark. In a tion when Microsoft’s Seattle Sidewalk created
matter involving Playboy Enterprises, Inc., the deep links to city-specific event sales within a
defendant included in its metatags the protected site run by Ticketmaster. Here, Ticketmaster
words Playboy and Playmate. In the subsequent claimed that the practice diluted Ticketmaster’s
suit, the court found that the intent of the site was trademarks and constituted unfair competi-
to profit from a false association with Playboy tion. Microsoft countered that the placement
and prohibited the inclusion, stating that dilu- of any material within public areas of the Web
tion of the trademarks had occurred as a result.54 would make it open to access. These contrasting
This outcome should be contrasted with a more theoretical positions were never subjected to

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 Chapter 5 • Ethical and Legal Issues 137

a final court ruling because the case was ulti- Google’s computers but simply provided a link to
mately settled with Microsoft agreeing to link the Web sites of their owners, such activity of the
only to Ticketmaster’s primary entry page.57 search engine was not illegal.60 Considering the
Related to linking is the practice of framing, fact that Google’s product was highly transfor-
a process in which a Web browser is instructed mative, the court ruled against Perfect 10.
to divide itself into two or more partitions
and load within a section material obtained
Licenses
from another Web site through the execution
of an automatic link. In Washington Post v. An increasingly popular method of intellectual
TotalNEWS, Inc., a suit was filed over the use property protection involves the use of licenses—
of a collage of frames, some linked to the Post, contractual agreements made between consumers
within a page dedicated to a sampling of news on and software vendors, which allow the buyer to
the Web. Among other things, the Post alleged use the product but restrict duplication or dis-
that the unattributed displays diluted trademarks, tribution. Because laws related to licenses are
appropriated copyrighted material, and deprived derived from the commercially oriented law of
the Post of advertising revenue.58 The matter was contract, rather than through the constitution-
settled before decision with TotalNEWS agreeing ally related realm of copyright or patent, public
to use only nonframed, attributed textual links to policy exceptions have traditionally played a less
the Post. important role in its development. Moreover,
Several court cases about linking and fram- because it is assumed that parties to contractual
ing have been decided in California. Most of agreements bargain under conditions of informed
these lawsuits were initiated by holders of copy- ­s elf-interest, licenses may contain waivers of
righted images against various search engines many protections normally found in consumer
that used linking and framing to display such transactions (see the “Let’s Get Technical” box).
images in their search results. As a rule, the Within the computer environment, a great
courts were supportive of the defendant if they deal of attention has been paid to the valid-
used such images only as “thumbnail” pictures ity of licenses appearing upon or within soft-
linked to the Web sites of their copyright owners ware. Variations of this format are often known
and not as genuine images. For example, in Kelly as shrinkwrap or break-the-seal licenses (when
v. Arriba Soft Corp. the court ruled for Arriba’s appearing outside of software) and clickwrap
search engine, which used thumbnail images of licenses when a user is required to click a but-
Kelly’s photographs in order to catalogue them ton online or within a program to acknowledge
for searching purposes. Stating that its use of acceptance of terms. Although common to con-
Kelly’s images was a “fair use,” the court found ventional business situations, the extent to which
that Arriba’s use served a new purpose of a licenses with noncommercial purchasers will be
“transformative nature” of the images and cre- enforced by the courts is not entirely clear, pri-
ated a significant value for the public.59 The cre- marily due to the lack of bargaining that takes
ativity of Arriba’s product outweighed any slight place between the user and the seller. Normally,
economic harm caused to the plaintiff under the a contract requires that an agreement can be dem-
circumstances. onstrated and it is uncertain that average buyers
The same approach was taken by the court agree to or even read the fine print in the software
in Perfect 10 v. Amazon which involved Google. licenses that appear on their diskettes, boxes,
In this case the court determined that framing of installation routines, or software manuals.
copyrighted images by Google could not be con- The legal trend seems to favor enforce-
sidered as “display” of such images under the ment of software licenses. Courts have upheld a
meaning of the applicable copyright law. Taking shrinkwrap term that limited the vendor’s liabil-
into account that such pictures were not stored on ity for errors within the program.61 At least one

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 138 Part 2 • E-Marketing Environment

Let’s Get Technical

Licensing Technology Software piracy is often misunderstood, and it
occurs in many different forms. Software piracy also
Filename: LatestOperatingSystem.zip
includes illegal use of fonts. Licenses can be issued
Download Time: 10 hours and 34 minutes for fonts, and using copyrighted fonts without a
Number of Files: 4215 files, 78 folders license is illegal. Whether using the software or font
Price: $0.00 for business or personal purposes, using it without a
license is illegal and is punishable by law. Forms of
Legality: 100% ILLEGAL
software piracy include the illegal use of a software
The feud between music fans and the music industry program over a network, distributing specialized edu-
over the illegal distribution of albums and songs has cation versions to unauthorized markets, and report-
been all over the media. As many already know, com- ing an inaccurate number of users using software at
puter users with high-speed connections can down- a site. Even the possession of software that has been
load a client to get in on the trading—illegal trading, illegally copied is piracy.
that is. Software is distributed through this medium Many organizations have been created to mon-
as well. Just like copying music files to shared fold- itor software piracy and the illegal duplication of all
ers, users are copying the contents of installation CDs copyrighted material worldwide. Examples include
for such software as Microsoft Office, Macromedia the Software & Information Industry Association’s
Flash, and Adobe Photoshop. Anti-Piracy Division ( siia.net/piracy ) and the
However, when a user purchases software, he Business Software Alliance (bsa.org). The SIIA’s
or she is most often just purchasing one license, or Anti-Piracy Division conducts proactive campaigns
the right to install and run the software on one com- to educate users about software piracy. The Business
puter. When purchasing and installing the software, Software Alliance (BSA) recently stated that soft-
the user agrees to the end user license agreement ware piracy cost the software industry nearly $64
(EULA). He or she agrees by selecting “I agree” or billion in sales in 2011. The BSA ranks countries
“I accept” in the installation process. The EULA also by their piracy rates. According to the BSA, piracy
protects the software company from liability in case rates in the United States, Japan, New Zealand, and
the software causes damage to the user’s computer. Luxembourg hover near 20 percent (a relatively low
Breaking the agreement used to be simple. The figure) while those in Armenia, Bangladesh, Georgia,
user simply had to copy the CD and the CD’s product and Zimbabwe all exceed 90 percent. Software man-
key and distribute it freely. Software companies then ufacturers, such as Microsoft and Adobe, have also
became more advanced in their quest to stop soft- set up Web sites to help determine whether users’
ware piracy, or the illegal distribution of software, software is legal and to report software piracy.
by instituting activation procedures. Upon installing Apple, always an innovator, takes a unique
the software, the computer user is allowed to either approach to piracy by acknowledging that some
run the software for a certain number of days or open forms of copying are reasonable. Buy an app on your
it a certain number of times. Once the user activates iPhone or iPad and you can install it on multiple
the software, either online or via telephone, the limi- devices that you own as long as all the devices are
tations are removed. The activation stops software tied to your Apple ID. This works especially well for
piracy because it allows the software associated with families that have multiple devices and do not wish
the product key to be activated only once, and thus it to buy separate apps for all the devices. Buy a movie
can be installed on only one computer. on iTunes and you can watch it streamed from the
Also, this feature allows software companies cloud, or download it to your iPad or computer. All
to distribute trial versions of their software. Once the of the permissions are keyed to your Apple ID.
limit has been met, the software cannot be used with- In the professional world, it is tempting to hand
out purchasing a full version. Other trial versions just a CD and product key to one’s coworker to install.
offer limited features until a license is purchased. However, if an audit is conducted by an outside

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 Chapter 5 • Ethical and Legal Issues 139

source, that simple act can get the company in hot An SLA, or site license, is simply a license to use the
water. Software manufacturers can take such actions software within a certain facility. The license usually
as warning, fining, or suing the company. In a profes- entails whether the software can be installed on all
sional setting, it is best to pursue a site license agree- or specific computers or servers and if copies can be
ment (SLA) for the organization to use the software. made and distributed within the facility.

court also found enforceable a clickwrap term internet’s popularity. The achieving of a balance
that dictated the state in which a suit against the between both concerns will be an important and a
vendor could be brought.62 Whether a particular continuing task for digital law and ethics.
language in a clickwrap license will be legally
enforceable will often depend upon the reason-
Trade Secrets
ableness of the language, as it is in contract law
in general. Language prohibiting unauthorized The field of trade secrecy has taken on new pro-
copying and distribution of copyrighted material portions with the advent of online technology.
likely will be enforceable; language mandating A trade secret is an economically valuable busi-
$300,000 for each infraction likely will not. ness secret that is not generally known or readily
A broad effort to enforce the terms of soft- ascertainable. The federal Economic Espionage
ware licenses comes in the form of the Uniform Act of 199663 was enacted in part to address digi-
Computer Information Transactions Act tal advances and now makes it a criminal offense
(UCITA). In the two states which have adopted to divulge trade secrets, which are broadly
it (Virginia and Maryland), the UCITA governs defined to include such areas as commercial, sci-
all legal agreements pertaining to software trans- entific, and technical endeavors. Trade secrets
actions, including sales. Supported by the major- can include, but are not restricted to, formulas,
ity of software manufacturers and publishers as a market data, algorithms, programs, codes, and
measure of legal uniformity, critics argue that the models. They may be stored online or in tangible
UCITA will enforce license provisions, includ- formats. Significantly, computer-based disclo-
ing those restricting copying and resale of mate- sures such as e-mails, downloads, Web publica-
rial, liability for damages incurred from defective tions, and similar means are within the scope of
software, and possibly the ability to criticize soft- the act.
ware performance. Because the UCITA applies to Employees with access to trade secrets may
any material in computer-readable form, includ- be prohibited from engaging in similar businesses
ing electronic books and other reading materials, for a period of time—so long as the time and geo-
librarians and educators fear it will effectively graphic scope of the restriction are reasonable
remove the public policy protections of copyright given the nature of employment. In one notable
and patent, making online information expensive case, a court determined that an employee’s par-
and restricted. In 2001, the attorneys general of ticular skills in Web marketing were sufficiently
32 states and 2 territories stated their opposition to protected under a noncompetition agreement with
the act, and in 2002 a task force of the American a former employer to prevent him from working
Bar Association issued a call for its redrafting. As for a competitor within a one-year period follow-
the debate on intellectual property continues, it ing his departure from a company.64
will be important to consider that, although intel- Another important Act in trade secrets
lectual property laws can act as incentives to cre- law is the Uniform Trade Secrets (UTSA)
ate useful material, they can also work to restrict Act that was introduced by the Uniform Law
the data exchange that has contributed to the Commission in 1979 and amended in 1985. So

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 140 Part 2 • E-Marketing Environment

far 47 states have adopted it. 65 The main pur- auction information through spidering. The
poses of the UTSA is to unify the existing trade information collected from eBay was unpro-
secrets legislation across all 50 states and, con- tected by copyright. Advocates of eBay’s posi-
sequently, to provide certainty to U.S. busi- tion that it has proprietary rights in its auction
nesses that their confidential information will data claim that another’s use of the data consti-
be protected uniformly throughout the whole tutes unfair competition and dilutes the worth
country. of eBay’s business. They also maintain that the
spidering activity constituted a trespass of prop-
erty, potentially impairing the eBay system.
Data Ownership
Supporters of Bidder’s Edge expressed concern
It is not an overstatement to say that the online that if data are cordoned off from the rest of the
world runs on data. Not surprisingly, access online community, the presently information-
and ownership questions relating to data and rich internet will increasingly become a gated
databases abound in current legal and ethical community where actions in trespass will
debate. As the electronic market becomes more become the predominant means of enforcing
­competitive, attempts to obtain the advantages boundaries. The matter was settled before judg-
provided by control of information become more ment on the merits, after the court sustained
numerous. eBay’s request for a preliminary injunction of
Until recently, data relating to such techni- Bidder’s Edge’s activity based upon the tres-
cal issues as Web site usage was easy to access pass claim.66
and were often shared among site owners, mar- A final area of consideration is that of the
keting professionals, advertisers, and consumers. special protection of data relating to facts. As
Currently, a new technology is being introduced previously noted, U.S. copyright law protects
that would make information collected from ban- expressions of ideas but not the ideas them-
ner advertisements invisible to site owners and selves. This distinction is owing to the public
their clients. These click data have been impor- policy emphasis of protecting the raw material of
tant in determining such factors as site content free expression and national learning. For simi-
and marketing strategy. Such protective technolo- lar reasons, copyright cannot be used to protect
gies raise new issues concerning the ownership facts. Because electronic databases often contain
of information that is both a necessary element of arrangements of facts, a movement is growing
online interaction and of extreme value in itself. within the law to protect specially compiled or
A particularly significant question is whether the sui generis data.
fencing in of data will achieve the same status as The Agreement on Trade Related Aspects
the more formal application of copyright, patent, of Intellectual Property Rights (TRIPs) of 1995
trademark, or licensing laws. This process will is part of the World Trade Organization’s (WTO)
challenge the model of cooperation that has been program of international treaties. Provisions
a characteristic of online dynamics and, arguably, within this agreement set forth sui generis
a primary reason for the success of the interactive ­p rotection. The EU’s Database Directive 67
digital medium. also includes protection for compiled facts.
Another complex issue involving online Currently, the U.S. Congress has not adopted a
data is an activity known as spidering. This sui generis law.
process involves the use of software applica- Arguments favoring sui generis protec-
tions called robots to enter targeted Web sites tion revolve around the belief that this type of
and obtain data for the use of its owner. In a protection will afford an incentive for database
recent matter, the online auction site eBay insti- vendors to create more of their products by
tuted an action against Bidder’s Edge, which assuring them of potential return on their invest-
operated a service that presented comparative ments and that their product will not be copied

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 Chapter 5 • Ethical and Legal Issues 141

or diluted. In the long run, society will benefit Although spam has been the subject of
from the increase in the number of databases, much-justified criticism, its regulation must be
which would in turn help decrease the price of approached with some caution. First, the topic
information. implicates freedom of expression, which is
Critics of these laws argue that no eco- a right protected under the First Amendment
nomic proof indicates that such incentives would in the United States. Disagreement remains
produce an increase in databases or that, with an between those who believe that participation
increase, prices would necessarily come down. in mass e-mails should be restricted to those
Instead, they state that worries about copying and who voluntarily agree to receive mailings and
dilution can be addressed through encryption and those who advocate an opt-out-only approach.
similar methodologies. In the balance, they claim The DMA has established such an opt-out list
that sui generis protection could erect legal barri- for those who seek to avoid mass e-mail mes-
ers that stifle innovation and lead to a monopoli- sages. Although it is certainly a progressive
zation of the basis of all education and learning. step, critics point out that only DMA members
Another troubling fact is that many current pro- are obligated to respect this list and also worry
posals allow a virtually infinite term under which that, like other opt-out systems, complexity and
data could be kept out of the public domain. difficulty will prevent many average users from
Under U.S. law, settling these issues will involve participating.
a close examination of the reasons underlying the Within the law, spam has become a major
constitutional aversion to the ownership of facts, issue. In the case of Cyber Promotions, Inc. v.
and it will raise ethical questions about whether America Online, Inc., 68 the court held that a
facts are merely commodities or are so valuable spam producer had no First Amendment right
that exclusive control can never be granted to one to send its product to AOL subscribers and that
individual. consequently the ISP could block its messaging
activity. Similarly, a court ruled that spamming
activity violated the federal Computer Fraud and
Online Expression
Abuse Act. 69 Additionally, Congress passed,
The mass distribution of unsolicited e-mail or and President Bush signed, the Controlling
spam has been the subject of much complaint the Assault of Non-Solicited Pornography
within the online world. The practice has been crit- and Marketing Act of 2003, better known as
icized on many levels. ISPs point to the burdens the CAN-SPAM Act. 70 The act creates a com-
that spamming places upon networks’ resources. prehensive, national framework for the use of
Spam is, by definition, unrequested, and users marketing-directed e-mail. Although criticized
complain of the unwanted intrusion into their by some consumer organizations as being more
affairs. Privacy-related worries are not restricted lenient than many state laws, the act permits
to transmission alone. Much spam is derived federal and state authorities as well as ISPs to
from mailing lists that are collected from e-mail initiate both civil and criminal actions against
addresses posted on such locations as Web bul- advertising deemed to be conducted through
letin boards or newsgroups without any intention spamming activities. Currently, the task of
to participate in mass mailings. Similarly, many precise definition of illicit spamming is being
users are disturbed to find that information given determined by the FTC, but will include com-
to individuals or entities for one purpose may be munications containing deceptive information,
collected and sold for mass distribution. The frus- misleading statements, and false representations
tration with spam is further compounded by the of an e-mail’s content as displayed on the sub-
fact that often these messages are sent without ject line. It will also require that e-mail headings
valid return addresses or unsubscribe links, making reveal their commercial nature and that, in most
it nearly impossible to stop receiving them. circumstances, recipients are provided with

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 142 Part 2 • E-Marketing Environment

clear instructions on how to terminate further online law and ethics. In 1996, the federal
contact. Finally, the use of autonomous data Telecommunications Act of 1934 was amended
collection applications (e.g., spidering) will be to include the Computer Decency Act (CDA),
prohibited. To many critics, a significant defi- which in relevant part made it a criminal act to
ciency of the legislation is the absence of a pri- send an “obscene or indecent” communication to
vate right to pursue actions against spammers. a recipient who was known to the sender to be
Criticism of products or industries has under 18 years of age. An additional provision
also been addressed within and outside the made it an offense to use an interactive com-
spam context. In one case, a court prohibited an puter service to present material that “depicts or
individual from sending mass e-mails to a cor- describes, in terms patently offensive, as mea-
poration’s employees complaining of employ- sured by contemporary community standards,
ment violations. The trial court reasoned that sexual or excretory organs” in a context avail-
corporate e-mail does not resemble traditional able to minors. In 1997, in the case of Reno v.
places of commentary and should, therefore, American Civil Liberties Union, 75 the U.S.
not be treated as a public forum, but instead, Supreme Court found that these provisions were
constituted private property, subject to trespass unconstitutionally vague, prohibiting, among
allegations. The decision was appealed to the other things, the exchange of information about
California Supreme Court, which reversed the such subjects as AIDS and reproductive decision
ruling, finding that because no impairment of making. It further noted that the provisions would
the computer system or network occurred as a hinder or chill adult speech through the place-
result of the mailings, a trespass action could ment of undue burdens.
not be maintained. 71 Less-specific mailings Although the broad regulatory attempts of
may also be restricted through terms of service the CDA failed, a number of efforts are under
agreements. A Canadian decision enforced such way to provide more narrowly defined regula-
a contract that prohibited spam activity by an tions for children’s content. In addition, the use
ISP’s users.72 of filtering models has been considered. Perhaps
The inception of ISPs gave rise to a ques- the best-known program is the Platform for
tion about the liability of network owners for Internet Content Selection Rules (PICS). This
defamatory messages posted on bulletin boards application allows the filtering of sites that are
or other public areas. Although most courts adopt deemed inappropriate for minors. Advocates
the view that like publishers, ISPs are not nor- claim that PICS will place control into the hands
mally susceptible to suit, Congress resolved the of parents and schools. Some civil rights groups
problem by placing this immunity within federal are concerned that this device, which works
law.73 The primary reason for this provision is behind the scenes, presents a subtle but powerful
a fear that if liability were at issue, a provider means of censorship.
would be required to actively monitor and cen- In December 2000, Congress passed the
sor activity within its service, thus decreasing Children’s Internet Protection Act (CIPA).
the level of free expression. The significance The legislation links federal funding to librar-
of this policy was demonstrated when a court ies with the use of filtering software in public
determined that an ISP could not be held liable internet terminals. In May 2002, after hearing
for negligently publishing anonymous, allegedly extensive evidence, a federal judicial panel
false, and defamatory statements concerning an invalidated the Act, stating that blocking soft-
individual’s profiteering from the Oklahoma City ware cannot adequately guarantee that only
bombings.74 material harmful to minors would be screened.
The issue of expression directed to chil- The decision was appealed to the U.S. Supreme
dren remains a highly visible issue within Court, and on June 23, 2003, a plurality opinion

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 Chapter 5 • Ethical and Legal Issues 143

reversed the lower court, holding that public of any private regulatory organization to enforce
funding can be made contingent upon the use of its decisions within the online community. Along
filters. Significantly, this declaration was effec- these lines, parties to serious disputes may attempt
tively limited for, in the course of the proceed- to bypass ICANN or other arbitration arrange-
ings, the government stated that libraries would ments in favor of the conventional enforcement
retain the ability to remove filtering software abilities of legal forums, through trademark
if simply requested to do so by a patron. This infringement suits and cybersquatting claims.
concession was cited by two individual concur-
rences and likely played a determinative role in
Jurisdiction
the outcome.76
These examples strongly suggest that the The establishment of ICANN reflects the grow-
boundaries of expression will continue to be chal- ing awareness that online controversies transcend
lenged by the internet. Although specific out- physical boundaries. Jurisdiction is the legal
comes remain open to question, it appears that term that describes the authority of a court over
expression will be protected when the courts and a given party. Jurisdiction is traditionally based
the legislatures realize the purpose and impor- upon physical presence, which becomes an issue
tance of electronic communication. Education of in the nonphysical nature of the online world.
all parties involved may prove to be the best secu- Similarly, attempts to exercise jurisdiction within
rity for the continued flourishing of online speech. the geographic territories of other nations or
states will most likely be rebuffed.
The majority of cases decided within the
Emerging Issues United States have focused upon the character
Along with the more conventional problems of and quality of contacts with the forum’s state;
online dynamics, additional challenges are partic- generally, the more active the involvement, the
ularly unique to the internet at its current stage of more likely that jurisdiction will be conferred.
development. The responses to these challenges Thus, jurisdiction over online activity was found
will require the same levels of imagination and where the court determined that an out-of-state
creativity demonstrated in the internet’s creation. defendant had knowingly and purposefully done
business within the state of suit. 77 In contrast,
another court found that mere advertising within
Online Governance and ICANN
a state (i.e., via a Web site) will not subject the
In 1998, the U.S. Department of Commerce called advertiser to the jurisdiction.78 A similar deci-
for the creation of a private, nonprofit regulatory sion held that the ability to access a Web site
body that would be responsible for the admin- within a particular state does not subject the
istration of the internet name and address sys- site owner to jurisdiction.79 As previously men-
tem. In response, the Internet Corporation for tioned, digital licensing agreements that defined
Assigned Names and Numbers (ICANN) was the jurisdiction in which a suit may be brought
formed. Ideally, the purpose of ICANN is to gov- have been upheld. Similarly, a recent state court
ern the assignment and possession of domains and decision indicated that such a selection may
resolve the conflicts that arise in relation thereto. be contractually specified by digital means. In
Today, ICANN is comprised of a governing board upholding the vendor’s choice of forum, as dis-
that currently faces substantial criticism for oper- closed through an internet hyperlink, the court
ating under secrecy and for failing to represent noted that the use of hyperlinks to convey infor-
the broad range of online users. Many of these mation has become an increasingly accepted
problems may be attributed to the newness of this practice and can validly designate a forum’s
endeavor, but other questions concern the ability choice.80

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 144 Part 2 • E-Marketing Environment

In addition to conventional legal tribunals, introduces several factors that affect preven-
such mediation-oriented programs as Virtual tion efforts. The first general factor relates to
Magistrate81 have been developed to resolve the technical nature of networked communica-
online disputes. These programs often attempt tion. The average person is not in a position to
to tailor their procedures toward the special cir- understand exactly how information is displayed,
cumstances of the internet. Advocates of these transferred, or stored, and this lack of k­ nowledge
approaches argue that their online orientation will provides opportunities for novel deceptions.
encourage users to work out difficulties within Included within this category is the use of e-mail
a non-confrontational framework. Critics voice or Web sites to impersonate individuals or cor-
concerns that online arbitration cannot adequately porations. This activity, known as spoofing, is
ensure enforcement or recognition of judgments. often used to extract sensitive information by
The previously mentioned cases dealt exclu- leading a user to believe that a request is com-
sively with U.S. jurisdictional questions. Although ing from a reputable source, such as an ISP or
difficult problems are presented, they are arguably a credit card company. Other common swindles
less complex than those involving international involve the use of programs that secretly dial
disputes. One method aimed at achieving inter- long-distance locations for which the unknow-
national cooperation is through the mediation of ing user pays the fees, or false login pages that
organizations. For example, the WIPO Arbitration record account information.
and Mediation Center82 exists to resolve commer- A second factor involves the psychology
cial disputes relating to intellectual property. of digital environments. The media is full of
Supranational organizations such as the EU stories concerning technological advances and
may also regulate disputes between their mem- opportunities for profit. Unfortunately, many
bers. Likewise, treaties may provide for interna- people are unable to differentiate genuinely
tional resolution and enforcement. The Model worthwhile endeavors from those presented by
Law on Electronic Commerce83 by the United mere opportunists. Messages originating from
Nations Commission of International Trade the online world are likely to be viewed by some
Law (UNCITRAL) has been established to pro- as having an air of authority, solely due to their
vide for global uniformity in digital commerce. association with the digital revolution. Many
This developing collection of laws addresses such investment opportunities make use of this rheto-
matters as digital signatures, electronic documen- ric, often promoting breakthrough technologies
tation, sales of digital goods, contracts, exchanges and applications.
of information, and credit records. The force of The problem of consumer fraud is being
such model laws comes through their actual adop- addressed on several dimensions. Federal agen-
tion or through the pressure that they can exert cies such as the FTC and the FBI have increased
upon national legislatures and other organizations their efforts to track and prosecute fraudulent con-
to conform to international standards. Although duct (Exhibit 5.4). Likewise, many state agencies
acceptance of jurisdiction cannot be forced upon have begun to prosecute criminal activity within
non-cooperating countries, the weight of inter- their borders. The range of sanctions available
national agreements concerning key questions includes stipulated lifetime bans in the conduct
favors the mutual enforcement of obligations. of internet commerce, civil judgments, forfei-
ture of property, and referrals for criminal pros-
ecution. In 2009, the FTC issued new guidelines
Fraud
prohibiting online reviews that do not disclose the
The use of deception and false claims to obtain relationship between the reviewer and the owner
profit is, of course, not unique to the inter- of the product reviewed. Similar initiatives have
net. However, the nature of online dynamics been undertaken by authorities of other countries.

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 Chapter 5 • Ethical and Legal Issues 145

Exhibit 5.4 FBI Warns against Cyber Scams Source: www.fbi.gov/

The basis of fraud is usually incomplete or potential for conflicts of interest or less than
false information. Thus, a consumer’s ability to rigorous enforcement of rules. Recent revela-
evaluate online material is essential. Promotion tions of unpunished violations by members of
and adherence to codes of ethics, such as those eTrust,84 the internet’s largest nongovernmental
promulgated by the AMA, are one means of privacy watchdog, have caused many to won-
inspiring consumer confidence. Codes may der whether industry-based enforcement is truly
include requirements that members refrain from possible.
doing business with questionable clients or third Even though law must frequently play a
parties. Many online and real-world businesses, reactive role, the conditions of the online envi-
particularly those within the finance and credit ronment create unique opportunities for market-
industry, require that their licensees follow strict ing professionals to educate potential victims
legal and ethical protocols and may withdraw of fraud. Professional associations have par-
affiliation in cases of violation. ticular abilities to establish sites that outline and
Although the establishment and enforce- explain minimum standards and consumer pro-
ment of laws are necessary responses to the tections. They may also serve as clearinghouses,
problem of fraud, the internet’s global reach reporting unethical or illegal conduct. Even
continues to frustrate even the most comprehen- within the information-rich environment of the
sive of enforcement plans. On the other hand, internet, online knowledge continues to be a need
a weakness of purely private regulation is the without limits.

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 146 Part 2 • E-Marketing Environment

Chapter Summary

Ethics is concerned with the values and prac- patent law (covering inventions), copyright
tices of professionals and experts, as well as the ­(covering the expression of ideas), and trademark
concerns and values of society. Law is also an (covering brands). A company can license its
expression of values but created for the broader intellectual property, while restricting unauthor-
goal of addressing national or even global popu- ized duplication or distribution. Companies are
lations. Groups of individuals with special skills concerned about legal protection for trade secrets
or knowledge have established ethical codes over and about the ownership of information such as
the years. Differing views exist of the role of law Web site content, usage data, and facts. Online
and self-regulation in ethical online behavior. expression issues include concerns about spam,
The notion of privacy emerged during criticisms of products or industries, and expres-
the twentieth century as a key ethical and legal sion directed to children. Three emerging legal
concern. Key aspects include seclusion, access and ethical issues are online governance, jurisdic-
control, and autonomy. Online privacy issues tion, and fraud.
in the United States and other countries relate Changes within the ethical and legal frame-
to how data should be collected and used. U.S. work of networked communication are occurring
firms can participate in a safe harbor plan to with swiftness equal to the technical, economic,
protect data from EU’s internet users. The and social transformations this medium has
FTC set forth five basic norms for ethical use brought about. As critical participants within
of consumer information, including provisions the online world, marketing professionals will
for user notice, consent, access, security, and not only be required to remain well informed of
enforcement. regulations and accepted practices but will also
Intangible or intellectual property is pro- be increasingly called upon to contribute to the
tected through three basic legal mechanisms: global dialogue on electronic spaces.

Exercises

Review Questions 6. Which types of trademark dilution exist and how

do they differ from each other?
1. Define ethics and law and show how they are 7. What does it mean to clickwrap a license?
­different and similar. 8. What are the NET Act and the DMCA?
2. What are some of the threats to internet user 9. What is the doctrine of first sale? How should it be
privacy? applied online?
3. According to the FTC, what are the ­m inimum 10. What is the doctrine of fair use and how should it
requirements for ethical use of consumer be applied online?
information? 11. What are the EU safe harbor provisions and why
4. Evaluate the current trend and direction in are they important for U.S. companies doing
­copyright law. ­business in Europe?
5. How does copyright differ from patent and trade-
mark law?

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