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Computers and the Internet are becoming faster and capable of new and exciting things every day. Through this evolution, businesses have begun to reach out to consumers in new, unprecedented ways. With the amazing growth of users of the Internet, and the enormous growth that is expected to continue, businesses are aware that there is tremendous potential to provide and promote products and services in previously inconceivable ways. Electronic commerce, also known as e-commerce, has reshaped considerably through the capabilities of the Internet. It is through these advances in e-commerce that businesses continue to build new methods of providing consumers and other businesses with products and services in more profitable ways.


Contrary to popular belief, e-Commerce did not begin with the development of the Internet and the World Wide Web. E-commerce to many people is simply business done through the Internet. However, e-commerce encompasses commerce that is done through any electronic media or electronic platform. E-commerce actually began unknowingly with the development of the 800 number by AT&T. (Komenar) With the development of the 800 number, consumers were provided a new way to purchase, and a revolutionized customer care process through the use of the telephone, and toll-free calling. (Komenar) Any business done through interactive kiosks, automated teller machines (ATM's) or any other electronic means can be classified as e-commerce.

The "New E-Commerce"

The "New E-commerce," as it is sometimes referred to, is e-commerce performed through the Internet. (Zwass, 16) According to Howard Rosenbaum, Indiana University electronic commerce professor, E-commerce through the Internet includes "the marketing and planning strategies, consumer behavior and legal and regulatory policies relating to the commercial development of the Internet." ( Businesses and consumers first began to come together on the Web with the development of the first popular Web browser, NCSA Mosaic, in 1993. (Zwass) The border-less landscape and potential of the Internet, has fed the e-commerce craze to the state that it is now in. By including the opportunities found on the Internet in its strategy, businesses can benefit from costs being reduced and an increase in accessibility to customers, among other benefits. Consumers benefit through more control being placed in their hands through middlemen being reduced, which lowers prices and through the availability of more choices and information only a click of the mouse away. Consider this fact, according to a study done by the United States Government, using the internet, it only costs about 1 cent to conduct a banking transaction. If handled by a teller at a bank, the cost is more than one dollar.( Businesses large and small have the ability to create a worldwide presence by creating a web page and providing product information, or the ability to purchase products on-line. There are many estimates of the "Internet Universe" which is the number of people with access to the Internet. Current estimates range from approximately 119 million (NetResults,1/00) to 304.36 million people with online capabilities worldwide. (Nua Internet Survey)


With the potential to reach such a large amount of consumers, it is not surprising to find that 60%, or 3 in 5 U.S. companies are currently using e-commerce in some way, and 4 of 5 firms claim that they intend to utilize e-commerce in the future. (NABE Survey)

With such interest, Internet commerce is sure to have a huge impact on the way business will be done into the future.

The 3 Sectors of Internet based E-Commerce

Although most Internet users are only familiar to e-commerce on the web as directed towards the everyday consumer, the opportunities do not end there. There are actually 3 sectors of e-commerce on the Internet; Business-to-Consumer, Business-to-Business and Consumer-to-Consumer.

While there is great potential for growth in all three of these areas, the Business to Business sector is predicted to show enormous growth in the next 3 years. (Nua) A recent poll backs this by stating that firms who plan to use e-commerce for purchasing functions outnumber by 10% those planning to use e-commerce for selling. (NABE) Online sales figures are expected to rise dramatically due to this increase in the business to business application.

Online Advertising

Internet based advertising is the first new advertising platform in half a century. (News Bytes News, 4/00) Internet companies choose to advertise on the Internet for many reasons. Some of the goals of advertising include creating awareness for new products, informing consumers of product features and benefits and building brand loyalty. (MK380 Course Note book) Good advertising presents the company's product or service in a message that memorable to the viewer. Because it is often the medium, or format of advertising which influences how consumers interpret and retain the information, deciding upon the medium to use is very important for a business. Selecting the correct media that will maximize exposure to the target market while still presenting the message in a way that is memorable, is often the deciding factor towards the success of an advertising strategy.

Robin Webster, a VP at the Association of National Advertisers, states that "this is the first medium that combines every single part of the marketer's job from awareness to information to transactions to customer service. It transforms eyeballs to relationships." (Plotting a Course for Internet Ads) A single Internet advertisement can complete each of these functions, all at once. If a customer clicks on a CDNow banner that appears on a Web site for instance, they will be taken to the site where CD reviews can be read, music clips sampled, orders placed, and visitors can even interact with customer service representatives.

The level of interaction can be limited by the design of the ad that is utilized. One major factor concerning the design capability is in the speed of connection that is used on the receiving end of a site. Designs that are have high multi-media content, often contain creative ways for users to interact. Currently, online advertisers are limited in the multi-media capabilities of ads due to the modem speeds that most users have. Through phone connection, and the use of a modem, maximum speeds are 56K bits per second, compared to 128K bits per second that is possible through high-speed access. With the slower connection speeds, advertisements with high multi-media content load slowly, prompting users to exit sites before loading is complete. With the increases in technology, higher bandwidth connections are no longer only available to college students or corporate offices. High-speed access through cable providers is now spreading countrywide. In Indianapolis, primary providers such as Time Warner and Comcast now have had the wiring in place to provide most areas since December of 1999. These services are currently available for as little as $50 per month with unlimited access. Prices will lower when competition steps in and technology advances.

When high-speed access becomes more common place, advertisers will be more willing to utilize designs with high multi-media content, creating higher levels of interaction and new, innovative ways to reach the customer.

In 1999, online advertising revenues were up 141%, to a total of 4.6 Billion dollars from a 1998 total of 1.92 billion dollars. (News Bytes News, 4/00) "Far beyond expectations," as the Internet Advertising Bureau Chairman Rich LeFurgy states. "It's likely that we will meet or exceed 100 percent growth in the year 2000." (News Bytes News) A testament to its surging popularity among businesses, Internet advertising is beginning to catch up with advertising expenditures on television. In 1999, the total expenditures were nearly half of cable TV ad revenues of 9.8 billion. (News Bytes News)

Examples of Online Advertising:

On the Internet, there are several different forms of advertising that are widely used. Banners, buttons, sponsorships, interstitials, and other forms are all used to catch the attention of the visitor of a site, and to direct them to the advertisers web page, or a site in conjunction with the ad. According to Computer World, "Banner ads continue to dominate spending in the digital advertising category, accounting for 58 percent of total ad spending. Sponsorships (37 percent), interstitials (three percent) and others (two percent) accounted for the remainder." ("New Ads," Aug. 31/98)

Banners are currently the most popular forms of Internet ads. They are boxes usually placed at the top or bottom of a web page, but can be placed anywhere. Banners combine text and graphics, often animated, to catch the attention of the person viewing the particular page. The goal of the advertiser is to get the viewer of the site to click on the banner with their mouse. With a click on the banner, the viewer can be led to an Internet site that promotes, or gives more information about the advertiser. Many banners contain creatively designed graphics that stand out from the page on which it stands Designs may also incorporate drop down lists that can be manipulated to request information that interests the viewer. Below is an example of common banner design. Notice the dropdown list, which enables the viewer to customize the product to their preference.

Buttons are another form of advertising, similar to the concept of the banner. Buttons are often smaller than a banner, and generally do not contain the graphics and animation that a banner may contain. Usually symbols, logos or simple text, buttons also do not contain the messages or information content that is often found in a banner. With the click of a mouse, buttons link users to the advertiser's Internet site. Below are several examples of button advertising.

One form of online advertising that is becoming popular is through the use of online sponsorships. Similar to sponsorships found in other forms of media such as television, radio or print, online sponsorships attach the name of an advertiser to a feature page on a site. For example, advertises its name by promoting an online game by the name of Sports Jeopardy Online. Through the presence of the logo at the popular online game's site, the ESPN logo is seen each time someone plays the game, increasing traffic for ESPN, and promoting its online sports presence. Below is an example of online sponsorship through a Sports Jeopardy Online logo.

Interstitials are a form of advertising on the Internet that goes further than buttons or banners. An interstitial is an advertisement that appears in a separate window while you wait for a web site to load. Often, these advertisements are much larger than a banner, taking up a quarter of the screen or more. Interstitials are popular with advertisers because the larger size allows for large, attention grabbing graphics and more overall information content than a banner or button can offer. One drawback to this type of advertisement is that the destination page that launches the ad often takes longer to load due to the graphic and information content of the pop up page. One current example of a interstitial is an auto pop-up page that is loaded from's site. The advertisement features a new interactive game, and is sponsored by AT&T. Often loading before, or at the same time as the ESPN home page, the interstitial demands the viewers attention, as it overlays anything else on the screen. Aside from on-site advertisements, promotion by search engines is another popular form of online advertisement. Search engines offer preferred listings among search result lists. When a researcher enters a topic of search, the advertiser is provided a top spot among the search results, often at the top of the list, or standing out by means of larger sized fonts, or contrasting colors of the text. This site may often appear as that which most closely relates to the researchers' topic, leading to increased site traffic for the advertiser. These premium listings are based on keyword searches through the topic. Another service many search sites provide is in placing an advertisement that corresponds with keywords in a search topic on the search-results page. For example, a search for "Butler baseball" may provide the results with a banner promoting


One of the most popular words among online advertisers, is surely Impression. An impression is the name given to each occurrence of an advertisement's appearance on a viewed web page. For example, if's site was loaded and 2 advertisements were loaded on the page, there would have been 2 impressions. The number of impressions that an ad has measures that particular ad's exposure in terms of number of times it appeared on a web page. These statistics are tracked through the site server, or the computer that the site is generated from. Impressions are often the basis of the price for an advertisement, as they are often sold on a cost per thousand basis. The more an advertiser pays, the more impressions the ad will receive. The more impressions an ad receives, the more exposure the ad has, thus reaching a larger audience.

Segmentation Opportunities

The Internet also offers advertisers an opportunity to group their markets into small customer groups. This grouping, or segmentation, enables marketers to provide to the different needs, wants and purchasing habits of their customers. It also allows companies to provide the individual groups with specific products or services that would most likely appeal to them. The Internet is unique in its ability to do this for several reasons.

First, web sites cater to much narrower audiences than any other form of media. There are popular sites for nearly every interest: sports, hobby's, career's, and more. If you have an interest in a particular topic, and either you or someone in the world with that same interest has published a web site about that topic, than information is accessible at the click of the mouse. Advertisers can take advantage of these sites by placing ads only on the specific sites visited by those particular companies target audiences.

The ability to easily gather information adds further to the segmentation made possible by the Internet. Accurate information can be easily gathered on visitors to web sites through applications for special user privileges. Where other media formats such as print, television, or radio must rely on ratings surveys or other investigative information services, Internet sites have a variety of tools that can be used to learn about their customers. Online companies such as America Online, and EBAY require customers to sign up for free login ID's, which they must use every time they visit these sites, in order to use most of the services that the site offers. During ID registration process, a survey must be completed that often includes demographic questions such as age, marital status, occupation, and purchase habits. The web sites then provide this information to potential advertisers.

Another way of gathering information on users of a site is through "cookies." Many Internet sites use "cookies" to gather additional information on their customers. Cookies are small files placed on users' computers from the server of the web site. ( These files have information about the user of the computer, and are sent to the particular site each time the user enters the site, or leaves the site. The information that is gathered through a cookie is often the source of personalized web pages, generated by the site itself. For example, if a user has an e-mail account through, cookies may be used so that each time the site is brought up on a computer with a cookie on it, the site loads up with that persons mail without the user having to log in. Personalized Web sites are important for many online users. A study by Greenfield Online found that 71 percent of the respondents have a personalized Web site, and two-thirds of that group feel that personalized web sites are important or very important. (Consumer Fear for Their Online Privacy, 11/99) Cookies also allow a web site to collect information on the movement that a visitor makes while at the site. Total time spent at the site, path that a person makes through the site and time that a person spends at each individual page can all be tracked by the use of cookies.

These examples are only two of the most common methods of Internet information gathering used currently. Advances in Website data collection will occur with the advance of technology. These advances will only further the abilities of online advertisers to provide for their segmented markets.

Online Privacy Issues

With the amount of information that is easily collected and distributed, online privacy is a very important issue for Internet marketers to consider.

Tax Issues

Because of the broad reach across the states and nations, taxation on sales through the Internet has become an issue that is under careful consideration by all sides involved. As e-commerce stands today, there are no taxes levied on sales through the Internet. It is partially due to this tax-free market system, that prices beat those of traditional "brick and mortar" stores. In 1998, the Internet Tax Freedom Act was passed in order for legislation to tax Internet sales to be stopped for 3 years. (Rankin, 9/99) However, this act will be lifted in 2001, opening the possibility for new talks of a taxation system for Internet commerce in the U.S.

A recently established advisory commission, created by Congress, has studied the tax issue since the act, and has concluded that a tax on Internet Sales is needed in order to protect traditional retailers from unfair competition. (Rankin) While no taxation will occur before the act is overturned, One Senator has proposed a 5% national sales tax on all Internet sales.(Rankin)

Government Interaction

According to a report released by the United States Government, there are several principles that must be followed in order for the Internet to continue to grow, and develop in the right path.

One of these principles is that the private sector, or the users, must lead and continue to dictate how the Internet will evolve. (A Framework for Global Electronic Commerce) It is the belief of the U.S. Government that in order for innovation, expanding services on the Web, broad participation by businesses and consumers alike, and the continuance of low prices, a "market-driven arena," not a regulated environment must be used. (Framework ) "Even where collective agreements or standards are necessary, private entities should, where possible, take the lead in organizing them." (Framework ) This lack of interaction enables the Internet to best suit the needs of its users. By keeping the developing technology, and services from being overtaken by regulation and restrictions, the government is taking a hands off approach towards the development of the Internet. Many services, procedures and other faucets of the internet change by the day, as new technology allows for services that may have been inconceivable just months before the technology was made available.

One of the most important principles included in the Governments report was that "Governments should recognize the unique qualities of the Internet." (Framework ) This principle has evolved because of the distinct differences in what is available through the Internet as compared to current and past media platforms. The possibilities that are available through the Internet are not the same as those through Radio, Television or other media. Therefore, why should they be under the same regulation or rules that those forms are restricted by? This is the exact point that the Government is trying to make. "Existing laws and regulations that may hinder electronic commerce should be reviewed and revised or eliminated to reflect the needs of the new electronic age." (Framework )

Through these measures, the Government is taking a responsible role in cradling the evolving technology into something that benefits all that use its services. Ten years ago, no one could have imagined what is possible today. Who knows what will happen in the next 10 years. It is through the deregulated environment that the Government advocates that will allow for these advances to be made, for the good of the people.

Demographics of Online Users

Data from 1999 Forrester Research Study

Works Cited

+ Davidson, Jeff. "Marketing Online." American Business Perspectives, May/Jun2000, Vol. 221, p5, 4p

+ Machlis, Sharon. "New Ads." Computerworld, 8/31/98, Vol. 32 Issue 35, p39.

+ "cookie"

+ Rankin, Ken. "States Stirring up Net Tax Interest." Discount Store News, 9/06/99, Vol. 38 Issue 17. P12.

+ Komenar, Margo. Electronic Marketing. Wiley Computer Publishing, New York. 1997.


+ Zwass, Vladimir. Structure and Macro-Level impacts of E-Commerce.

+ NetResults. Advertising Age, 1/17/20000, Vol 71. Issue 3, p43


+ NABE Panel Cites Widespread Usage of E-Commerce, Special Survey.


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