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1.1         Definition of Terms

The following is the list of some of the terms used in this paper, which need to be understood in order to follow the paper:

q       Internet - this is the number of computers connected together for the initial purpose of exchanging and sharing information. Also, such terms as Internet, Net, and Web mean the same thing in this project.

q       WWW – these three letters stand for World Wide Web. In practice, the WWW is a number of interconnected documents that are composed altogether and is called web page or website.

q       Search engine – a powerful database, where users of the Internet can find different documents using the keywords in the search system.

q       Banners – banners are known to be small images of different size on web pages containing advertisements in a form of pictures and/or text.


1.2         The Hypothesis

The purpose of this project is to show that there are advantages in advertising on the Internet and that is has potential and promising future.


1.3         The Methodology

The title of this project is “Advertising on the Internet.” This project will start with few sections for Internet history, how it is organised and statistical data. Then there is going to be brief discussion of the worlds famous companies such as Microsoft, Hotmail, Yahoo and others that made their business on the Net. So that those examples will show companies that have become some of the world most famous either by innovations, inventing things no body ever thought about and most importantly companies grown so called endogenously – grown out of nothing. Thus, these examples will help in supporting the hypothesis of this project, which is to show that on-line advertising has a future. Then, the paper will smoothly proceed to the core of the topic discussing what online-advertising is, what its differences from the classical one are, what its advantages and disadvantages are. And, then, towards the conclusion of the paper there is going to be shown some secondary research facts and then an implementation of the primary research findings that will be conducted. Finally, the conclusion will be drawn, under what circumstances there is the potential for online advertising.




1.4         History of the Internet

So what is the Internet? In simple terms, this is the number of computers connected together for the initial purpose of exchanging and sharing educational information. The history of the Internet began in 1969, when Advanced Research Agency (A.R.P.A.) went online connecting four major U.S. Universities. That network was initially designed for education, research and governmental organisations. Additionally, though, it was made for linking the country in case when a military attack would destroy the communication systems. Through the 70s, this network started to grow being known as Internet. In 1972, electronic mail was introduced. In 1973, the so-called TCP/IP protocol was designed, which has become the standard for communicating between computers over the Internet. Through the 90s, there has been a rapid growth of business organisations deciding to launch their sites on the Internet, as well as different non-profit and governmental organisations. In other words the Internet moved on to the stage of having its services for commercialisation in the early 1990s.


“The Internet is not owned or funded by any one institution, organisation, or government. It doesn’t have a CEO, and it’s not a commercial service. The Internet is however directed by the Internet Society (ISOC), which is composed of volunteers.”[1]


The book called “Understanding Business on the Internet” gives an introduction to the Internet by informing readers about the ten things they can do on the Internet. “Ask questions of unknown experts; e-mail the White House; buy a book; find out about company products; transfer software updates; search the library of Congress; read summaries of management research reports; look at the Mona Lisa; find out the Budget details; follow a training course.”[2] Of course these ten things are just the general hints, whereas indeed, nowadays, on the Internet you can do roughly everything one can imagine. At the first sight, Internet seems to be a perfect solution for future communications, businesses, marketing, advertising, data storing, and so on, but it’s got its disadvantages as well. Some of the disadvantages today are that it is time consuming, it usually threatens users with information overload, and it can be slow.


1.5 Growth through Time/Life-Cycle

So let’s move on and see a bit of a numbers, how the Net has been actually growing. In 1998, there were approximately 70 million people using Internet all around the globe.[3] For instance, in the United States, there were 13% households out of the entire population of US officially using Internet[4], not taking into consideration students using it from their institutions, people visiting web-cafes, Internet-clubs, or employees using internet primarily from their working places, etc. During the year of 1996, the number of registered commercial sites on the Internet increased by more then 500%.[5] The Internet is accessible from more then 100 countries. The growing rate of people using the Internet is very high and still keeps growing rapidly; for instance, today; there are from 10 to 20 thousands of new people each month. It  should  be  mentioned  that  a  lot  of people

Actually get to know Internet by starting using e-mail. Lots of businessmen, students, housewives and other people find email very efficient and very  useful.  Here



you can take a look at some of the opinions of business people. “My initial activity has been to correspond with friends and ex-colleagues who are not within easy reach.” “Whenever I have placed a request for help on one of the newsgroups I have usually had the correct answer within twenty-four hours.” “I am using e-mail to swap data between the various companies in our group. We  are  an  interna-

Table 1.1 Number of people with Internet access at various times


Number of People

1 1970

2 1980

3 1990

4 1993

5 1995

6 1998

7  2000








Source: Web Advertising and Marketing;  pg. 4, 1998-99


tional company. Using a mail box means we are now tied to any routine or physical presence.” “I joined primarily to


Figure 1.1 Life-cycle of people with Internet access


be able to send electronic mail to my daughter at university.”[6] That is how different people find e-mail usefulness and more importantly, as already mentioned efficiency. From the Table 1.1 it is shown that from 1970 to 2000 there has been the increase of people having an access to the Internet from 400 people (1970) to 150,000,000 people. Also, on the Figure 1.1, the life cycle of people with Internet access shown. The graph shows that the life cycle of people with Internet access is still on growth stage.


1.6 Some of the Real Life Examples


1.6.1 Microsoft Corporation

Nowadays, it is difficult to find a person in a well-developed country who doesn’t know what Microsoft is. Dating back to 1975, the mission statement of Microsoft was to create software for the personal computer that empowers and enriches people in the workplace, at school and at home. Its early vision was computer on every desk and in every home. These are the vision and mission statements of 70s[7]; basically, the success of the company was due to the detailed study of the market and the entrepreneurial policy of the CEO - Bill Gates. Bill Gates uses one very simple rule: “Freedom to Innovate.” He wants his workers to sit and dream, innovate, to come up with new ideas, to always try something; he doesn’t want standardised and routine work. Today as a result of the latest challenge, which is the Internet, the company goes not only by software, but also by latest Internet-related technologies. The company has obviously the strongest competitive advantage comparing it to Microsoft’s competitors. US Government sets different regulations to prevent the company from gaining too large market share. Although there are law suits against Microsoft, the company has nothing that it makes customers unhappy, rather, Microsoft claims that customers are happy but competitors aren’t.[8] This associates with what Michael Porter said in one of his videos “Do it or your competitors will do it for you.” This is exactly what happens on the Net now meaning that there are so many opportunities not taken now that every person can find a way to earn money sitting at home. Today the term “Virtual Organisation” is very popular, and nobody will think that one is crazy if he/she says that his or her office is on the Internet. Another example of the co-called virtual organisation is Hotmail. Hotmail is a free-of-charge service that provides everyone with free e-mail account; it is called a “virtual post-office.” In fact, these days, there are a lot of services like that, but the Hotmail was one of the first ones that invented such a service. At first sight, one may ask, what is the point in providing free e-mail accounts? But, here, the only answer is advertising. The way that Hotmail survives is by showing advertising messages while people check/compose/send their e-mails. Upon the creation of this virtual organisation, they didn’t make enough money; they simply had fair profit to keep going. But, in 1998 Microsoft Corporation bought the Hotmail. The point here is: what is the difference between Microsoft and Hotmail? Microsoft is a world leading software providers since 70s and Hotmail is a free-web-based e-mail founded in early 90s. These two organisations cannot be compared. But, from being nothing in early 90s, Hotmail Company worth over $50 mil in late 90s. That’s where Microsoft’s CEO foresee opportunity for the future potential and buys it.


1.6.2 Yahoo!

Another example of the company, which turned to tens of millions of dollars in assets from being nothing, is Yahoo. Here’s the story starts from two students, Ph.D. candidates in Electrical Engineering at Stanford University, who decided to get all of their favourite addresses of the Internet web-pages together and make a list of them so that they could keep track on them easily. Further, they found that their list was getting too long, and they decided to get it all together as a database web page and publish it on-line. During 1994 they converted Yahoo into customised database designed to serve the needs of the thousands of users who began to use the service. In early 1995, co-founder of famous Netscape Communications (competitor of Microsoft) invited them to locate their computers at Netscape house. Right now, it’s over tens of millions of dollars in assets offering such service as Internet gateway, free web-based email account, cyber clubs, e-mail and name directories, local directories, news, and others.[9]


1.6.3 ICQ

ICQ, these three letters, which mean “I Seek You” (ICQ),

meant nothing back in late 1996; whereas now, it’s a necessity for most of the Internet ICQ users as a chat/communication software. On the Image 1.1 you can clearly see the increasing number of users from December 1996 to December 1998. Basically, in two years the company attracted 30,000,000 users. That of


Image 1.1

course would never have been possible if the company had not used the right marketing and smart advertising campaign. On the left-vertical axis you see the number of subscribers, and on the bottom-horizontal axis you see the time. Therefore, by looking at the curve you can imagine how many users this Israeli company gained. One more thing that should be added regarding this company is that it is being run by 4 people the oldest of whom is only 27, and youngest is 24.[10]


1.6.4 Tripod Inc

Tripod Inc is nowadays wellknown name. This project was organised by 27-year-old entrepreneur, which he recently sold for $58 mil. One can be sure that just by looking at the amount of money that Internet projects cost makes us think a lot about it. Tripod is just a provider of free web-space for users who want to create their own home pages for free.[11] The secret of the company is very simple. The Tripod service gets famous by providing free hosting for web pages. Then, when their service is very famous on the Internet, commercial servers and organisations are willing to show their advertising messages, or simply banners, on those pages. In other words if one creates my personal page on their server, they have rights to show their banners on one’s page. That is the agreement upon the creation of account. So, advertising is where most of the profits are coming from talking of Tripod.


1.6.5 Other Miscellaneous Data

There are also some of the facts that are published on Internet Industry News. According to the research of Edison Media Research & Arbition Co., about 13% of the entire population of the United States of America listen to the radio on-line. About 7 months ago this number was just 6%. So, roughly saying, in about 7 months, the listeners of the radio online (i.e. on the Internet or while on the Internet) have doubled.[12] Another interesting finding was reported by International Data Corp.; according to their research, financial organisations of USA, who are willing to maintain their current market share and expand it more, are trying their strength on the Net.[13] Victorias Secret reported another interesting fact. As a result of their show of underwear, traffic to their site was increased by 3 in a week-time.[14]


These were some of the real life examples, which certainly is a good prove that Internet is a big opportunity for potential young businessmen. As to this project, these facts are support to what this project is going to inform, prove, and argue for.


On the Table 1.2 you can see the growing number of sites connected to the Internet. From June 1993 to March 1997 the number of sites increased from 135 to 700,000 sites. Figure 1.2 proves that the life cycle of sites connected to the Internet is still on growing stage.



Table 1.2 Sites connected to the Web


Number of sites

1 June 1993

2 September 1993

3 October 1993

4 March 1994

5 June 1994

6 November 1994

7 March 1995

8 March 1996

9 March 1997











Source: Web Advertising and Marketing;  pg. 11, 1998-99






Figure 1.2 Life cycle of sites connected to the Internet




































2.1 The Popularity of on-line Advertising

The Internet became a very valuable, efficient and promising means of advertising and marketing as it has grown and became known. A lot of opportunities were found on the Web; and now, successful business people know that it is wise and important to observe as well as learn from the experience and mistakes of others made on the Internet. “Marketing in the Internet is a work in progress…,” says the article in the Megmag-Online magazine.[15] Really, unlike the regular classic marketing, in the virtual world there are no set standards, strict rules and regulations, that’s what partly creates all the opportunities. In other words, entrepreneurs can find plenty of opportunities in the Internet using their ideas for innovation as well as things they aren’t allowed to do in the classic business world. Then, the Internet has created a true global market, this means that there’s a chance to target people all over the world, not only local market; this also means that there are no national borders technically, for marketing, targeting the audience of the company. Bill Gates, the President of Microsoft says: “The Internet is the first medium that allows anyone with reasonably inexpensive equipment to publish to a white audience… It is the first medium that distributes information globally at almost no marginal cost.”[16] Here it is important to mention the implementation that has to do with the proper targeting of the audience; in other words, selective targeting should be used instead of extensive. Otherwise, the whole thing of the Internet marketing or/and advertising maybe worth nothing and will fail; but this is a subject that will be discussed in details later on in this paper.


2.2 The Concept of Internet Advertising

What is Internet advertising like? There is a lot of ways to advertise in the Net, but there are some standardised and perfect ways which barely can be replaced with anything else, unless of course something new comes up in the future. The advertising is organised by different advertising agencies. Let us see the policy of these agencies and the way of earning money. The structure of advertising business on the Internet is very simple, much simpler then the classic one. The businesses apply to advertising agencies asking for such services as to design banners, target the right market, conduct a market research, maintain the specified number of hits to the page per day and more. The number of hits is the most popular and profitable service. Thus, let’s consider the situation of a virtual shop which seeks let’s say 200 hits to his page per day (i.e. 200 hits is 200 visits to the page).


2.3 Ways to Advertise: Banners

One of the most popular and efficient ways to advertise is banners. Banners are known to be some small boxes placed either on top or in the middle or the end of the page containing the message to the potential customers. There are three different commonly known standards of banners (measured in pixels, i.e. points on the display) - a). 468 x 60; b). 88 x 63; c). 81 x 31. In the Image 2.1 you can see some of the examples of the actual banners and see what it actually is. For a). and b). kinds of banners, there’s an exception - they can appear everywhere on the page, in any place you can imagine.


Image 2.1


a). 468 x 60



b).  88 x 63


c).  88 x 31



Banners are very smart creations that bring plenty of ways to attract people. There are many different ways to present the ad itself. Also, it’s a paradise for creative people, such as designers. For instance, banners can be animated; this effect cannot be achieved in newspapers or magazines. It can be done on TV though, but the costs between two are totally different. Then, for example, let’s say the customer got interested in a product or a service which was advertised. What can he/she do? Hurry up to write the contact info down? No! On the Internet, the customer can simply click on the banner and the computer will take him to the place to get a product or service like, for instance, virtual store of book, tapes, CDs, flowers, etc.


Now, to achieve the specific number of hits is not a problem, the problem nowadays is to have the right people come to the page. This may seem to be a non-problematic issue but it actually is nowadays, especially advertising online. Because some advertising agencies don’t increase the traffic of the right people to the page, they simply make any visitors come to the page no matter whether he or she is interested or not. The way it is getting done is simply fooling people showing them misleading banners, the example of which you can see in the  Image 2.2.  Just


Image 2.2


the example of misleading banner









take a look at that sample of banner shown in the Image 2.2.a for a while… For the person not knowing a lot about the way Internet pages work, it simply looks like an additional window of some player of talking e-mail. Notice that it is an image on the current page and not an additional window, which is designed so as it looks like an additional window. It makes the person, who believes it is an additional window, either press the “Play”-button, or to press the “x”-button (cross) to close the additional window. Therefore, the regular user would go ahead and press on that banner either to try to play the so-called e-mail, or to try to close that window. The thing is designed in such a way that wherever you press, it takes to some destination that the advertising agency wants you to go. So, in other words, the computer will take the fooled user “somewhere,” then the user will realise that this isn’t the place he/she thought it was and leave the place; however, the advertising agency will get the commission for the additional comer to the page. Another similar example of such a banner you can see on the image 2.2.b; basically it offers you to speed up your Internet connection. Again, the regular user either tries to speed up the Internet connection as the banner suggests or tries to close the window by pressing cross button on the banner to close the window. The same story, wherever you press on the image it takes you to the same destination. And let’s consider the last example of this kind shown on the image 2.2.c. it asks you “Would you like a free advertising on your website?” Alright, if the customers wants it he/she will get it, what if it’s not the case? Where are you likely to press? “Cancel” is the button user presses, but it takes him or her to the destination as user would press “Ok”. Shortly, wherever the user presses on the banner, whether it is “Ok,” “Cancel,” or some other place, computer takes him or her to the same destination. Therefore, these kinds of banners are misleading and inefficient.


2.4 Ways to Advertise: Pop-Up Windows

Another way to attract people is so-called pop-up windows. The term pop-up window stays basically for additional windows that come up or pop-up while you are exploring on the Internet. In most of the cases it is a small windows, the size of which is about ¼ of the entire window or display, containing promotional message in most of the cases. In my opinion this trick has no potential future at all. First of all, this is very annoying and people just tend to try to close the pop-ups even before some message turns up on it - as a result that it either slows the computer down or simply it gets on people’s nerves. Second, a lot of people switch some function off in the configuration of their Internet Explorer so that they won’t even have to close these windows and other dangerous for their computer stuff. Therefore, this way of advertising is quite unsuccessful but still used a lot. One of the reasons why it is still one of the ways to advertise is that some advertisers think that pop-up windows bother users less then banners on the page itself. Another typical reason is that some banner exchange networks give credits to web sites for simply showing the banners without necessarily clicking on them. In other words, one site, let’s call it X, that is registered in banner exchange network shows the network members’ banners on its pages and they show X’s banners on their pages. Therefore, the more banners X shows on its pages, more banners advertising X will be shown on banners exchange network members’ pages. That’s why some web-masters still use pop-up windows.


2.5 Ways to Advertise: Direct Marketing

Then, yet another way to advertise is using so-called Direct Marketing or Market by E-mail. Just like the previous example, this way isn’t very successful but has a potential future though. It’s called direct marketing or market by e-mail simply because advertising agency tries to contact the customer directly by e-mail. Initially, this service was launched as a result that many customers wanted to receive different kinds of news, newsletters, product offers, etc. But later advertising agencies adopted this way of reaching the audience to advertise. Shortly, they faced the problem of the shortage of people to send ads to. Without having to wait for too long to solve the problem. They contacted different news groups and offered them a deal: newsgroups sell them thousands of e-mail addresses that is all. Certainly, not every newsgroup will sell the e-mail addresses of its client, because of privacy violation and ethics. But there is enough shares of newsgroups that would do it, after all no one will find out about the deal. So, after the advertising agency have got thousands of e-mails it simply sends their advertising messages to these people.


The bad side of this goes right away. If person didn’t subscribe to the newsletter (ad-message can be easily called newsletter) he or she is highly likely to delete it without reading through. This sort of stuff also called junk mail. Even worse that can happen if when the customers get fed up and they might block all messages from either the certain e-mail address or the whole Internet provider (meaning all mails from the certain Internet provider are blocked). But, as it’s said in the beginning of this section that there is a potential future for direct marketing, if you use it with care. In order not to fail in direct marketing, first what needs to be done is to identify what kind of message goes to customers. It might be information about producer, services, job openings, policy information, surveying people etc.  So that when it’s known what kind of info is going to the customer, the advertiser, will go to the next stage of conducting the actual message itself, in a way to attract customer first, and more importantly not to bother him or her at a first glance. Then advertiser has to make sure he/she not over-communicating customers as well as giving them a chance to unsubscribe from the list.[17] Let’s see what Broadwatch Magazine has to say about their experience in market by e-mail: “For others, this makes e-mail inherently more risky, while for us it is the main line of our business and should therefore be an important communications channel as it reinforces our customer relationships.”[18] Therefore, using market by e-mail should be a careful work done, and as the Broadwatch Magazine says that the book must be written on how to be successful in market by e-mail.


On the Table 2.1 you can see the prices of Direct Marketing of IMC Marketing Agency. Number of email addresses is how many recipients will get the message. Special Offer is a special price offered by the    advertising


Table 2.1


Number of email addresses


Special Offer







10,000,000 and more






to be discussed






to be discussed



Source: IMC Marketing, 1999

agency for  the  certain period of time.


2.6 Advantages and Disadvantages of Online Advertising


2.6.1 Review of Online Advertising

Now, as the concept of on-line advertising is clearer let’s see the advantages and disadvantages of it comparing it to other media. First of all, I’d like to speak of targeting. If we take for instance TV-advertising, targeting there exists but it is very limited. That is the ad message cannot be different for different audience; in other words, if one sees TV show with advertising of, say, bicycles during the commercial brake. Obviously, the same ad will be shown to everyone who watches the same TV-show. Let’s say if it’s some TV-series, this advertising of bicycles will be shown to children, students, housewives, people in the work force, and other markets. Now let’s see some similar situation with On-line advertising. Here, the advertising agency, using latest computer technologies, can target different markets more precisely. For instance, markets can be targeted on such criteria as age, sex, location, interest and other criteria. For instance, the advertising message of fast food places can be shown only during working hours from Monday to Friday only to people in the work force. This adverting message will not be shown to any other kinds of markets, so that the effectiveness of the advertising campaign will be maximised.


Here it would be a good idea to explain the way it is possible to target markets so precisely since there are a lot of arguing around it that it isn’t really possible. Let’s take a look at Hotmail service that now belongs to Microsoft Corporation. Hotmail is one of the first free web-based e-mail providers. When someone wants to sign up for Hotmail he/she goes on-line, fills in the fields for the questionnaire and proceeds to getting free e-mail account. The whole procedure takes about 2 minutes or even less and the person got e-mail account and the company got one more customer with all the details about him such as age, gender, location, interests, education level and other factors. Thus, this information that the customer submits is in most of the cases correct and that is what the advertising agency is using to show the right ads to people.


Moreover, talking of targeting or as it is called among Internet marketing people – focusing, advertising agency can control the ad messages shown to individuals or small group of people. For example, teachers of the University of Indianapolis can be controlled by advertising agencies using their IP-addresses. Therefore, teachers will see messages appealing to themselves only. For example, the ad can be something like “All teachers of UI are invited to the educational fair…” and similar messages. Shortly, small groups of people or the staff of a particular organisation can be traced by their computer addresses and further used in advertising campaigns.


Second speciality of on-line advertising is the ability to precisely define the effectiveness of advertising campaign. Banner advertising service includes the statistics of how many times the banner was shown and how many times people actually clicked on the banner. The effectiveness of banner advertising is measured using the numbers of how many times banners were clicked over how many times they were shown. But, still we don’t know what the person did after he/she clicked on the banner. Because one might click on the banner and then leave the page right away for different reasons. However, the solution to this problem has been found as well. Using more advanced methods of tracing people’s actions on the Web, it has become possible to actually see what people do on the page, where they go, if they go at all, if they fill in different questionnaire, how much time they spent on a particular page. All this helps to see if the traffic going to the web page is interested in the material which is there or not. For example, using the ability to see what sub-pages have been visited within one page and how much time was spent on some particular page we can conclude if the person found something interesting for him or her or not. All this helps advertisers see if something needs to be improved. Like, if the effectiveness of banner advertising is low, for example 4.2% (21 clicks/500 times banners were shown), we can conclude that banners aren’t attractive enough and we need to improve the graphics and attractiveness of it. Or, if we find that customers spend little time of the company pages, that they don’t even bother to go further in details of the page; we conclude that our page isn’t interesting for the customers. So we need to do something about it, maybe update it or change its appearance or the content of it.


2.6.2 Online Advertising vs. other media

World Wide Web offers a lot of advantages. So as when comparing it to other media it looks perfect way to advertise.


Talking of a large national coverage of advertising, only World Wide Web is excellent medium here. Radio, Newspapers, Periodicals and Magazines, and TV cannot ensure large national audience. Only Direct Mail can be as effective as World Wide Web as far as Large National Audience goes.


Examining the international exposure, World Wide Web is the best for sure. WWW can target customers all over the world at low costs. It could be done with TV and/or magazines but at very high costs comparing to WWW.


Talking of targeting to a specific audience, only WWW and Direct Mail can succeed at it efficiently. Neither TV, radio, nor newspapers can target to specific audience as precisely as WWW or Direct Mail. Again WWW has an advantage here, as it’s much cheaper then Direct Mail.


Audience members can view ads at their convenience when we use WWW or Direct Mail. In other words, audience members have a choice of whether to view ads or not, and ads don’t bother them as much as when they see them on TV, hear them on radio, or read through the newspaper.


The cost of advertising is a very important and strategic factor when it comes to promotion of a product or service. Talking of different media we can say for sure that WWW is the cheapest way to advertise.[19]


It looks like there are no media that can compete with the Internet except for Direct Mail. Direct Mail is the strongest competitor of the Internet but still has its weaknesses in costs, interaction between customer and client, and international exposure. The summary of advantages and disadvantages of different advertising methods you can see on the Table 2.2.


Table 2.2 Advantages and Disadvantages of Selected Advertising Methods[20]

Marketing Quality

World Wide Web





Direct Mail

Large national audience







International exposure







Can be targeted to a specific audience







Audience members can view ads at their convenience







Relative expense







Instant customer interaction







Source: Web Advertising and Marketing;  pg. 23, 1998-99


To conclude the comparison of different methods of advertising just take a look at some of the hints on the Table 2.3.


Table 2.3 What Does $700 Buy You These Days?


Two 30-seconds spots on a morning show of a major metropolitan station


Once a week of three-by-five-inch ads in the classified section of a largely circulated newspaper


A small classified ad in a trade or hobby-related magazine

Direct Mail

About 700 mailers sent to clients throughout the United States

The Web

Development and one month publication of a five page Web-site

Source: Web Advertising and Marketing;  pg. 35, 1998-99


2.6.3 Online Advertising as a Medium

Now, let’s see how online advertising works as a medium. Let’s compare the person sitting in front of the TV and the person sitting in front of the computer display. Watching TV, people are usually sitting relaxed and whenever the commercial brake comes on people tend to change the channels using the remote control since the TV promotional bothers audience a lot. In the case with Internet, situation is slightly different. Browsing through the Web, users need to pay attention and they are not relaxed most of the times. So on the computer any user faces the ads and in no way can avoid it like on TV. Moreover, banners don’t bother users as much as TV commercials do because banners are small and users see them browsing through the page without necessarily having banners bother them. Banners take small percentage of the screen without taking any time of the users if not interested. Furthermore, companies can change their banner messages as often as they desire. All the process is automated meaning that the company’s representative designs banners and uploads (sends) them to the company that manages banner showings. It takes practically no time to send the banner to the advertising company. Thus as soon as they got a new banner they put it in the process. No other medium has this advantage! For instance, consider the case where you signed a contract with some magazine to show your ads. Then, when the magazine is printed and out for selling you learn that there’s some mistake in the contacting address, or in customers appeal message, or you decide that the ad isn’t good enough and you want to change it to another one… In this situation there’s nothing left to do but let it go like that – too late to change anything. The same is on TV. Coming back to comparing TV and magazine with Internet as mediums, it should be mentioned that a standard biggest banner (468x60 pixels) takes only 9% of the screen. TV ad is 30-40% of the screen. Also magazines, it is 50% of the page, where readers just turn the page and go to next article and so on. Thus, on-line advertising takes only 9% of the screen assuming that we are talking about the biggest standard banners. Then, smaller banners that were discussed earlier on take even less percentage of the screen. Obviously, on-line banners bother people less then other classical mediums.


2.6.4 Banners as the Most Successful Way to Advertise

Which way of on-line advertising is most likely to succeed and survive? In my opinion it’s banners. If you don’t like to go where the banner suggest you don’t have to go, you can simply proceed going further to the page not paying attention to what the banner says. You can see this on the Image 2.3. Therefore, it’s the least unpleasant and the least uncomfortable for customers, which is important for the advertisers. After all, if ad-messages don’t attract people it’s advertising failure. And it’s advertisers job to attract them.


Let’s see what is going on with other alternatives. Market by e-mail can be annoying, disturbing, unpleasant; on top of that it can take time to read it over to realise that it’s a junk mail and not one of those the person wanted. Moreover, it takes on-line time to retrieve messages from server, which means more time spent and costs. Another alternative is pop-up windows. This, in my opinion, is the worst and most unsuccessful one. Also, pop-ups are highly likely to fail as it has been explained before.


Image 2.4

Here you can see the way banner is presented to people who check their e-mail using Hotmail free services. The banner is right on the top. The e-mail messages are on the right frame. So it doesn’t bother people, banner is just up there, whoever finds it interesting he/she goes

ahead and clicks on it to see more information regarding it, if not interested, person doesn’t click on it or anything, but leaves it there and does the stuff he/she wants.


Obviously, the most successful and the most likely one to have the future is the way of banners. Let’s take a look at some of the published material and some of the researches conducted. A five month study of broadband advertising on the Internet found that it significantly increases brand recall as well as provides more effective branding experiences, engages viewers for longer periods of time, and offers lower costs per branding impression (CPB).[21] Furthermore, Online banner advertisements are as effective as television advertisements in their ability to significantly increase consumer awareness of brands, according to a study by Ipsos-ASI.[22] “According to the research, the recall level of an online ad is equivalent to that of a television ad when measured for immediate recall. The data shows that 40% of the respondents who view a static online ad banner will remember it, as compared to 41% of those who view a 30 seconds commercial. The research was based on America Online (AOL)/Ipsos-ASI database. Researches have tested more then 45 banner ads on approximately 7,000 randomly recruited AOL customers in various areas of the AOL site.”[23] “While comparisons to other media are extremely important to the advertising community, we believe that online advertising is even more effective than television advertising using other effectiveness measurement,” said Myer Berlow, AOL’s Senior VP of Interactive Marketing. “No other medium allows advertisers the opportunity to immediately capture the attention of active and engaged consumer; to provide them with more information about their product or service; and to complete transactions. This is one of on-line’s real competitive strengths over print and television advertising, and one cannot be duplicated in the offline world.”[24] Only few words can be added to this beautiful and straight to the point comment about on-line advertising: online advertising is very flexible and sort of alive to the consumer demands and wants. For instance, when you see the ad and you are very interested in it. Let’s take some famous CD for instance, that is being sold with some special discount; it happens that you are interested in this particular CD. You simply press on the banner and the computer takes you from the current page to the place where you can order the CD. Whereas considering the same commercial on television or printed ad, you would have to write the information down or call some music store up. So the difference is huge, the printed ads or television is fixed and predefined, but online ad-messages are very flexible, full of life, and very low costly to update/change the outlook of it. So, banners obviously are the most effective types of on-line ads.


Based on the number of the advantages discussed above as well as findings from researches discussed, one could conclude with certainty that Internet advertising is very promising and certainly has potential future. Specifically, from different means of online advertising, banners are the most commonly and successfully used way to advertise on the Net.


Now, let’s take a brief look at some of the secondary research that will support my argument and make it stronger. According to the IAB research, 18% of users support the banner advertising very much, 41% of users do like it, 34% - don’t mind it, and only 6% don’t like it and 1% are highly against it. According to the agency DOT that researched Russian Internet audience, 50% - like it, 18% of users don’t like it but understand that it is necessary, 28% - don’t mind it, 4% - don’t like it. Both of the researches prove positive attitude of Internet users towards banner advertising.[25]


There are more and more companies who launch different kinds of research projects collectively with other popular servers. One of these projects’ findings is worth to be discussed. The Ukrainian Magazine “PCCLUB” launched a so-called Questionnaire-Lottery, researching different kinds of subjects interesting for marketing-people. The project was launched collaboratively with a number of popular web-servers, so that different kinds of audience will be researched. Every 300th will get a prize. So one of the questions was “What kind of information are you most interested while surfing the NET?” On the Table 2.5 you see the results from different web pages, in other words from the results of the same questionnaire but the different audience of a particular places.


Table 2.5

What kinds of information are you most interested while surfing the NET?

Referat.Ru – an Educational project

Photo-gallery site of ICQ users - chat program

Online Internet Marketing Magazine

Online PCCLUB Magazine
































You see different results for different sites. This is obvious. Why do the people come to the Picture Gallery of ICQ (chat program)? They come for entertainment, 45.2% of answers. Therefore, entertainment messages will work on this page, and not commercial, 8.25% for commercials. Or, let’s take a look at Online Internet Marketing Magazine. 38.16% are looking for commercial information here, 22.37% are looking for internet-computers information, and 23.69% are looking for educational information. Therefore, for instance, business messages will do well on this page of Internet Marketing Magazine, and entertainment messages aren’t going to be as efficient as in the photo-gallery page. Shortly, this PcClub project proves the fact that precious “shooting” into potential customers is possible.[26]







3.1 Approach

In order to support the hypothesis of this Senior Year Project, it’s not enough to just use a secondary research. The primary research would be a good support to all of the material that was explained before. There was a lot of ideas about it, to do a huge questionnaire session, to place a web page on the Internet and try to attract people there through so-called direct marketing by e-mail. But, eventually, the decision to make a small questionnaire consisting of only two questions took place. The reason for such a decision was to make this research simple and at the same time to be able to get some custom findings and draw some certain conclusions.


3.2 The Design of the Questionnaire

The design of the questionnaire was made done in such a way that would help me to see, first of all, the age of  people who were going to  be  questioning.   On the Image


Image 3.1



3.1, you can see way the first question is presented. So, the interviewees were divided into 4 age categories. The first one is up to 16, these people we consider to be pupil in school and not yet in higher institutions. Second category is from 16 to 26; this division of interviewees is students in colleges or universities  as 

well as people entering the labour  force. Third category is basically people in the labour force that is already very familiar with computers. And the last, fourth age category is people from 40 years old and more. The last category of people might not be very much familiar as well as fond of computers as young people. The second question asks the attitudes about advertising on the Internet, specifically it asks about banners since the project is arguing that banners are the most successful, and have future. You can see the shot of the second question on the Image 3.2. So, the choice that is given interviewee is to choose from 5 predefined answers: I like banners and support them, I like them, I don’t mind them, I don’t like them but I understand the necessity of Advertising, I am highly against them. Further, if the person chooses the first or last answer, he/she is asked to give the reason for choosing such an answer. The first answer is “I like banners and support them,” and the last one is “I am highly against them.” That would be interesting to see the reasons for liking or disliking banners as well as the age categories answered so. Furthermore, it would be possible to draw some conclusions such as the tendency of people to perceive on-line advertising differently according to the age.


Image 3.2




Another thing that was necessary regarding the design of the questionnaire, to have a pretty comprehensive example of the banner on the questionnaire sheet, the copy of which you can see on the Image 2.3. Because the questionnaire is researching the opinions on banners and some people might not know this term banner, they just know it is an image with an ad message.


3.3 The Results and Conclusions

After two weeks of sending and giving the questionnaires out, there were 88 participants. You can see short summary on the Table 3.1. See Image 3.1 and Image 3.2 to remind yourself of what kind of questions there were. The questionnaire was given to a number of people of different backgrounds but computer literate. Therefore, the questionnaire was non-random, meaning that there wasn’t any particular sample questioning, just as many people of different backgrounds as possible.


Table 3.1 Short Summary-Report


Number of Question

Number of people

% of people

Question 1 – Age…

a). up to 16

b). 16 to 26

c). 27 to 40

d). 40 and more











Question 2 – Attitudes about banners…

a). I like banners and support them…

b). I like them

c). I don’t mind them

d). I don’t like them, but understand…

e). I am highly against them.
















One interesting trend that was found, as the results were entered in the database, was that the percentage of different answers for the second question, attitudes about banners, tended to stay constant. Meaning that there weren’t any reasons to continue getting more people involved in the research. In other words, the percentage of people who don’t mind banners tended to vary from 35 to 40 and as you see it ended up on 37%. The same trend was witnessed with b) and d) answer. 8% like banners and support them, 21% like banners, 37% don’t mind banners, 27% don’t like them but understand their necessity, and 7% are strongly against banners. Age groups are as following: 9% are up to 16 years old, 62% are from 16 to 25, 24% are from 27 to 40%, and 5% are 40 and more.


Another interesting finding is that as people are maturer, they find banners more interesting and helpful. And younger people blindly tended to be choosing negative answers; of course there were some objective and interesting answers, which are discussed in this paragraph. On the Table 3.2 you find the comments that participants left about banners. In the parenthesis there’s a category of the age groups of the participant (a, b, c, d, according to the question number one – Image 3.1) so you can actually see yourself different tendencies for different age groups. The same you see on the Table 3.3 but negative comments.


Table 3.2 Positive Comments About Banners

-         It gives a good opportunity to go to sites I might know otherwise know they exited (c)

-         Because they are helpful (b)

-         Very helpful (c)

-         They are effective (b)

-         In eye level (b)

-         Sometimes you need the info and you don’t know where to find it, and the other day you see on the banner just what you have been looking for, so that’s why I like them very much… (c)

-         I like them mostly, I mean I dislike them, but I work with them for promoting my site, that’s why I am kind of for them, and I think they are very useful and effective (c)


Table 3.3 Negative Comments About Banners

-         This pisses me off! They distract me and I hate them (b)

-         It isn’t what I am looking for while I am browsing and I don’t want to be distracted (d)

-         Because of Spam

-         I hate banners and any form of advertisement… (d)

-         I can’t stand them (a)

-         They are very distracted and time consuming for those whose machines are not up to date and therefore it slows them down (b)


Basically, looking at the primary research findings, there’s a big potential for advertising online. Let’s narrow our subject to banners and see what was found about then. 37% don’t mind, this answer is not very objective. But, answer d) (see Image 3.2) is very objective and, and it’s acceptable to say that this answer is positive for banners. Therefore, 27% answered it, meaning that these people don’t really like banners, but they understand their necessity, as a result of finding banners useful in some certain ways or, say, using them for promoting personal web-sites. 21% answered that they liked banners. Even if we look at negative comments about banners in the Table 3.3, we see that those opinions aren’t objective and/or good enough, unlike positive comments. Let’s analyse some of the negative comments. “It isn’t what I am looking for while I am browsing and I don’t want to be distracted” – The person says that it isn’t what he/she is looking for while browsing. But when this person watches TV, is he appreciating TV adverts? Is this person looking for advertising while reading newspaper or magazine? Is this person happy to hear ads when driving in the car listening to the radio? Of course not, but there’s nothing anybody could do about it, because, nowadays, business won’t go by without advertising. Therefore, this kind of negative comment isn’t good enough for considering it when reviewing the effectiveness of online advertising. “I hate banners and any form of advertisement…” – Nobody would bother to think about this kind of comment because it lacks the explanation for such an answer. “They are very distracted and time consuming for those whose machines are not up to date and therefore it slows them down” – This is the only kind of negative comment that should be taken into consideration by advertising agencies. But still this isn’t a good enough factor for my hypothesis because this is a technical problem that advertising agencies have to take care of. Therefore, all the negative comments received through the research aren’t good enough for arguing.


What’s going on with positive comments? “It gives a good opportunity to go to sites I might know otherwise know they exited.” “Sometimes you need the info and you don’t know where to find it, and the other day you see on the banner just what you have been looking for, so that’s why I like them very much….” These two objective comments tell us that people are actually find banners/advertising messages on the Internet useful and helpful sometimes. Specifically, people sometimes find stuff they have long time ago been looking for. Therefore, this is a good enough and objective comment.


What can we conclude from this small market research? Basically, we can say that the results are positive. The number of people who roughly dislike banners is about the same as the number of people who do like them. Even though some people chose negative matches for the question, more people from this category tended to choose the answer d) ("I don't like them, but I understand the necessity of Advertising"); meaning that this category of users is patient to the advertisements and is not against them. Only 6 people (i.e. 7% of the participants) chose the answer e) that says that they are highly against them. Moreover, there weren't any objective comments criticising online ads except for one that says that some of the online ads are time consuming on old models of computers.  Whereas there were some positive comments that gave good characteristics and usefulness of the banners. Positive and negative comments that were given by participants can be found on the Table 3.2 and Table 3.3 accordingly. Summing up, this market research proves that there is the hope for the future of online advertising.











There has been presented plenty of facts and findings, which all basically prove that there's a big and promising future for business on the Internet and Online Advertising in particular. This project narrows the subject of the business on the Internet down to discussion of Advertising on the Internet.


Advertising on the Internet has a very long way that it still has to pass to become perfect. Future of Internet Advertising and its enormous power is in the hands of Advertising Agencies. They have to examine places where they want to show banners in order to reach maximum efficiency, they have to be ethical to their customers and offer a maximum quality service, and they are who will be able to do an efficient advertising campaigns and lead online advertising to grow and probably become one of the most popular and efficient media, who knows…




































1.      Norton, Bob and Smith, Cathy. Understanding Business on the Internet. London, UK: Hodder & Stoughton Publish. 1996-19, pp. 6-7, 15, 16, 17, 36-39, 50-54, 65.

2.      Paul J. Dowling Jr., Thomas J. kuegler Jr., Brent F. Taylor, and Joshua O. Testerman. WEB Advertising and Marketing. USA: Matthew H.Carleson, 1999-98, pp. 4-5, 11, 15, 17-22,


Articles and Publications:

1.  “Getting Profits from the Internet.” Internet Files. Russia, 1998. Location:

2.  Yahoo!. Yahoo! – “Company History,” 1994-1998, Location:

3.  Gates, Bill. “Support Freedom of Speech on the Internet.” USA: Microsoft Corporation, 1998. Location:

4.  Gates, Bill. “Bill Gates Statement.” USA: Microsoft Corporation, 1998. Location:

5.  Corporate Information. Microsoft Corporation. 1999. Location:

6.  Corporate Profile. Microsoft Corporation. 1999. Location:

7.  “Marketing Your Small Business on the Net”. MegMag Online. 1998. Location:

8.  “The Advantages Of Web Advertising.” Advanced Internet Marketing. 1997. Location:

9.  “Welcome to The Geek’s Guide to Internet Business Success web site.” 1998. Location:

10.         “Internet Marketing ’98.” CIT Forum. 1999. Location:

11.         “What can US-Advertising do for Your Business.” US-Advertising. 1999. Location:

12.         Microsoft Online Sales – Advertise on MSN. MSN Network. 1999. Location:

13.         Greenbaum, Michael. “Market by E-mail without Hacking off Clientele.” Boardwatch Magazine. February 1999. Location:

14.         “Broadband Ads More Effective – Higher Recall, Better Branding for Rich Media Ads.” CyberAtlas - Articles. 1999. Location:

15.         “Banner Ads Effective at Branding – Work as well as Commercials.” Boardwatch Magazine. February 17, 1999. Location:

16.         “Consumers Tolerate Web Advertising – Banner Ads Deemed Least Irritating.” Boardwatch Magazine. November 24, 1998. Location:

17.         “Sharp Rise in Online Ad Spending – Computer Industry Leads Way.” Boardwatch Magazine. October 20, 1998. Location:

18.         Bokarev, Timofei. “Quantitative and Qualitative Audience Structure of the Internet, Development Tendency and its Meaning for the Advertiser.” CIT Forum. Location:

19.         Gagin, Aleksandr (“Netskeit”). “Internet-Advertising from the skies: today – banners, what about tomorrow?” CIT Forum. Location:

20.         “New Marketing Policy.” Computerworld. Russia. Tarskott, Don. #07/98. Location:

21.         About The Company. ICQ Inc., 1998-99. Location: or

22.         Kaminskaya Rima. “Young Millionaires.” Russian America. February 1999, pg. 14.

23.         Gorobets, Vyacheslav, “Research on the Internet.” PC-Club. Location:



[1] Quotation from World Almanac, New Jersey, USA: K-III Reference Corporation, 1997; Computers: What is the  Internet

[2] Quotation from the book “Understanding Business on the Internet,” London, UK, 1999

[3] MEGMAG Online situated at; “Marketing Your Small Business On The Net,” November 1998

[4] TIME Almanac, Boston, USA: Information Please, 1999; Computers, Internet Resources Guide

[5] World Almanac, New Jersey, USA: K-III Reference Corporation, 1997; Computers: What is the Internet

[6] Quotation from the book “Understanding Business on the Internet,” London, UK, 1999

[7] Microsoft Corporation, USA:; Company’s Profile: Corporate Profile

[8] Microsoft Corporation, USA:; Company’s Profile: Corporate Information: “Freedom of Speech on the Internet” - by Bill Gates, the President of Microsoft


[9] Yahoo! -; About Us: Company History

[10] ICQ Inc.; About The Company

[11] Russian America. “Young Millionaires.” February 1999

[12] Internet Industry News, Edison Media Research & Arbition:

[13] International Data Corp:

[14] Internet Industry News:

[15] MEGMAG Online situated at; “Marketing Your Small Business On The Net,” November 1998

[16] Microsoft Corporation, USA:; Company’s Profile: Corporate Information: “Freedom of Speech on the Internet” - by Bill Gates, the President of Microsoft


[17] Boardwatch Magazine,; Market by E-mail Without Hacking off Clientele, February 1999

[18] Quotation from Boardwatch Magazine,; Market by E-mail Without Hacking off Clientele, February 1999


[19] Web Advertising and Marketing, 1998-99

[20] Web Advertising and Marketing; “The Five W’s of Web Marketing.” Chapter 2, pg. 23. USA, 1998-99

[21] CyberAtlas: Articles - Broadbands Ads More Effective: Higher Recall, Better Branding for Rich Media Ads

[22] CyberAtlas: Articles - Banner Ads Effective at Branding: Work as Well as Commercials

[23] Quotation from the CyberAtlas Online Magazine - Banner Ads Effective at Branding: Work as Well as Commercials

[24] Myer Berlow’s (AOL’s Senior VP of Interactive Marketing) words about On-line Advertising from the CyberAtlas Online Magazine - Banner Ads Effective at Branding: Work as Well as Commercials

[25] CITFORUM (, Internet Marketing, December 1998


[26] Gorobets, Vyacheslav, “Research on the Internet.” PC-Club. Location: