A recent phenomenon in Internet marketing is the evolution of âvirtualâ organizations that provide free e-mail services or promotional rebates or even cash to.
“Goodies” in Exchange for Consumer Information on the Internet: The Economics and Issues Ai-Mei Chang Information Resources Mgmt College National Defense University Washington, D.C. 20319
P. K. Kannan Maryland Business School University of Maryland College Park, MD 20472
Andrew B. Whinston College of Business University of Texas at Austin Austin, TX 78712
Abstract A recent phenomenon in Internet marketing is the evolution of “virtual” organizations that provide free e-mail services or promotional rebates or even cash to “qualified” online consumers who are willing to interact with them. In order to qualify for such “goodies” the consumers provide these organizations information on their demographics, likes and dislikes, shopping/product preferences, etc., which the organizations, in turn, either sell to advertisers or use to target interactive advertisements of their corporate clients to the desired users. Although different terms have been used to describe the concept, from a business transaction viewpoint, these virtual organizations act as middlemen in collecting information from consumers, paying for the information, and in turn, selling it to corporate clients. In this paper, we describe the various business models that have been adopted by such organizations, explore the economic issues of such transactions and the implications for consumer welfare. We explore the continued viability of the market in light of recent concerns regarding breaches in privacy of consumer information. Finally, we also explore the impact of different schemes used for pricing advertisements on the business models adopted by the organizations. 1. Introduction A recent trend in interactive advertising over the Internet is the evolution of virtual organizations that aim to match the organizations that sell products/services with their appropriate target consumers who might be interested in their
products/services. These virtual organizations trade information—they collect information from consumers regarding their demographics, product/service preferences, likes and dislikes, etc., and based on this information they provide product/service information using interactive advertisements to the consumer groups that the corporations would like to target. While they charge the corporations for the advertisements directed at the target consumers, they compensate the consumers for their information and for viewing the advertisements using inducements such as free e-mail service, cash, promotional rebates and coupons and pointrewards that can be exchanged for a variety of goods and services. In early 1996 there were only two such organizations on the WWW experimenting with the idea, now there are more than a dozen such organizations vying for users’ attention on the Web. Each employs a different business model to attract online users to register with their organization, to ensure their involvement with the advertisement, and to charge the client organizations for the advertisement. While growth of virtual organizations on the Web is nothing new, the fact that consumers are getting compensation in some form for sharing their personal information is a new concept. This may indicate a shift in the balance of power in the marketing information market as consumers come to realize that their personal information could be of significant value (see Hagel and Rayport 1997). In this paper, we are interested in the economics of such consumer information and their implications for the marketing information market. We begin our discussion by describing a “goodie” and comparing the different schemes that the virtual organizations employ to get
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online users to view and process the advertisements in exchange for “goodies”. We explore the economics of the alternative schemes and the implications for consumer welfare. We explore the continued viability of the market in light of recent concerns regarding breaches in privacy of consumer information. Finally, we also explore the impact of different schemes used for pricing advertisements on the business models adopted by the organizations. The overall focus of the paper is to present these issues and make arguments for and against different positions so that we can better appreciate the complexities involved in analyzing the market for “goodies” for consumer information. 2. The Business Models A “goodie” in the context of our paper is generally any hard goods or services, the value of which is easily imputed based on prevailing market prices. Thus, a “goodie” could include free e-mail services, cash, rebates and discounts on products, reward points that could be exchanged for products and services, the value of all of which can be easily imputed. Although we do not explicitly include them in our definition, our discussion can also be extended to those “soft” goods such as information products (such as reviews on music, or tips on restaurants, etc.) where the valuation is fuzzy, under the assumption that the costs of producing such information are clearly known. The advertising-revenue supported “goodies” for consumer information models can be classified into two main categories: the community model and pay-for-performance model, although there are many variations within each category. We describe each model below: 2.1 The Community Model The virtual intermediaries following the community model provide free services such as e-mail access, chat groups, news, weather and magazines, etc. in much the same way as a nofrills Internet Service Provider. Generally, the intermediaries provide free services software that users can install on their computers and free local telephone access to these services that users can tap into at no extra cost other than subscribing to a local telephone line. In return, the users signing
up with these intermediaries provide detailed demographic, psychographic and/or product/service preference information. The intermediaries sell the advertising opportunities to client organizations and tailor the advertisements to user groups based on the information they provide. When the users sign on and use the free services such as e-mail, chat rooms, news, etc., these tailored advertisements are directed to them as banners or background, at strategic locations on the interface screens. Some examples of virtual intermediaries that follow the community model include Juno, which provides free e-mail service with 1.5 million subscribers; Free@UMail, a service provided by a Washington DC area local TV station that includes free e-mail, news, chat rooms, free classifieds, etc.; Hotmail, an Internet-based email service provider claiming a 3 million subscriber base, NetAddress, RocketMail, etc. (users need to have access to the Internet to use these e-mail services and get a password to link to the e-mail services; these e-mail services tend to be very versatile in transmitting various data formats and files). Table 1 provides a list of such services. There are other virtual (true) communities that are evolving on the Internet which aim at gathering people with similar interests and may/may not relay advertising information about products/services that the community members might find of interest based on their general preference and demographic data. Examples include Firefly.com, Geocities, Tripod, etc. (see Business Week, May 5, 1997). We have chosen not to include these communities in our above classification as most of them do not explicitly provide any “goodies” (as per our definition) in return for consumer information, although the our discussion can be extended to them as they may provide information of value to the user. 2.2 The Pay-for-Performance Model The virtual intermediaries following the pay-forperformance model operate in a much different way as compared to the community model. When users sign up with these organizations, they provide demographic and product/service preference information as they would do with the community model organizations, but they do
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not get any free services. Instead they get paid cash or bonus points for viewing and interacting with the advertisements that are tailored to their preferences and sent to them via e-mail or flashed at them at certain web-sites. If the users fail to interact or remain passive to the advertisements, they do not get paid; they accrue the payments or bonus points only when they act and hence the term “pay-for-performance”. The accrued cash can be used in many ways – deposited in a bank account, used for buying products at web-sites, obtain rebates, etc., while the accrued bonus points can be redeemed for products/services similar to the redemption of frequent-flyer miles or loyalty points. The advertisers who advertise through these virtual intermediaries get charged on the basis of verified responses from users who interact with the advertisements. There are several organizations on the Web that follow the pay-forperformance model. Cybergold.com launched in 1996 offers incentives ranging from 50 cents to several dollars for such activities as viewing and interacting with advertisements, visiting Web
sites, taking surveys, filling out application and registration forms, making purchases, etc. (with a limit of one reward per person per action). BonusMail, a virtual organization operated by Intellipost Corporation operates in a slightly different format. When users join, they fill out a personal profile. Based on these profiles BonusMail directs e-mail messages containing the advertisements that might be of interest to the users. The users read the advertisements and reply to BonusMail to verify their action. To ensure that readers process the advertisements, the e-mail messages embed special MagicWords in the advertisements which the readers have to identify prior to replying. The users accrue “rewards” which can then be redeemed for products/services, rebates, etc. There are many variations of the pay-for-performance model that different organizations use (e.g., PowerAgent and Target One are some new ones, see Table 1) but all of them provide some type of guarantee for user interaction and response to the advertisements.
Table 1 Examples of Organizations Providing Goodies for Consumer Information
Organization Friendly E-Mail Hotmail Juno MailCity 2.0 Beta NetAddress RocketMail traveltales Excite CyberGold BonusMail PowerAgent Target One
Web Address http://www.mypad.com http://www.hotmail.com http://www.juno.com http://www.mailcity.com http://www.netaddress.com http://www.rocketmail.com http://www.traveltales.com http://mailexcite.com http://www.cybergold.com http://www.bonusmail.com http://www.poweragent.com http://www.target1.com
Model Community Community Community Community Community Community Community Community Pay-for-Performance Pay-for-Performance Pay-for-Performance Mixed
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ADVERSTISERS
INTERMEDIARY
CONSUMERS
Figure 1 The “Goodies” for Information Market
3. The Economics Information
of
Goodies
There are several factors that need to considered in evaluating the economics of two alternative models of “goodies” consumer information. Let us start by laying a simple framework for analysis.
for
be the for out
1. As shown in Figure 1, we have two parties
2.
3. From the users viewpoint, they are getting
transacting business – the online users, (the suppliers of consumer information), and the virtual intermediary who provides free service or cash for obtaining the information. (We do not consider the advertisers for now, but will include them later). Since the intermediary provides free service or cash without knowing much about the “quality” or “reliability” of the information it is getting from the users who sign up, it is justifiable to assume that it is risk averse in its transaction with the users.
4.
free service or cash for viewing/interacting with advertisements for products/services in which they are interested in anyway. Therefore, we can assume that they are risk neutral in their transaction with the intermediary. We also assume that the valuation of consumer information to the intermediary is the same whether it follows the community model or the pay-for-performance model. There is an important difference between these models with respect to the revenue that can be earned from the advertisers on the basis of exposure of ads to the consumers versus verified responses from consumers, but for now we assume that the revenue that is earned using the collected consumer information is the same whether the intermediary follows the community model or the pay-for-performance model.
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The first question we examine with respect to the “quality” or “reliability” of the information that users provide is: is there any incentive for users to provide false information regarding their demographics and product/service preferences? Even if we consider the viewing/interacting with the advertisement as a chore that users perform for getting goodies, they would rather perform the chore with advertisements that are of some interest to them. It is not very likely that consumers would deliberately provide false information and interact with advertisements that are of no interest to them. Thus, there is a built-in incentive in the scheme that ensures truthful information assuming that the consumer is risk neutral. 3.1 Monopoly Market Given that the valuation of consumer information is the same under the community and the pay-for-performance models, which model will generate more profit for an intermediary under a monopolistic framework? Let us first examine the community model: 1. Assume that, in the community model, the time t that users will use free services such as e-mail, chat room, etc. per advertisement exposure be normally distributed with a mean µ and standard deviation σ. 2. Let the cost per unit time of the free service that the intermediary incurs be Cc. 1 3. Let the utility function of the risk averse intermediary be of the form exp(-ky) where k is a risk parameter and y the surplus. 4. Let the valuation of consumer information, v, be distributed across the consumers according to a continuous and twice differentiable function, f(v). Assume that the market size is normalized to one
1
The costs such service providers incur is not exactly linear in usage time. Normally, the costs are associated with server capacity and bandwidth costs and do not vary in the short run. But if the network becomes congested with more users then the service provider has to increase capacity, so in the long run the costs do increase with more usage of the network. Also, real time demands like chat rooms are more difficult to handle in terms of peak load on the system than e-mail applications which can be delayed and relayed at another time. We have assumed unit time costs for simplified exposition.
(corresponding to 100 percent of the market). It is easy to see that the organization will make a profit only on those consumers where the valuation, v, is greater than Ccµ, and on all other consumers it will incur a loss. In the pay-forperformance model, let us assume that the intermediary incurs Cp in incentives and other costs per advertisement that is targeted at the consumer. In this case, the intermediary makes a profit on those consumers where the valuation, v, is greater than Cp. While a comparison of Ccµ and Cp will determine which model is profitable, it is interesting to see the effect on market size if the intermediary chooses to optimize profits. In the monopolistic case, the intermediary may choose to restrict the membership to only those consumers where the valuation exceeds costs. If this happens the market size in the case of the pay-for-performance model would be ∞
∫ f (v )dv.
(1)
Cp
while the market size in the case of the community model would be
∫
∞
Ccµ + kC 2 cσ 2/2
f (v )dv
(2)
Assuming Cp = Ccµ (same incentives in both models), it is obvious that the market size in (1) (pay-for-performance model) is bigger than in (2) (community model). This is because the pay-forperformance model takes away any risk that the intermediary faces as the consumer gets an incentive which is limited to Cp , which is only for verified responses, while in the community model, the risk averse intermediary has to insure against the uncertainty of the usage of the free service and hence refuses service to consumers when v - Ccµ - kC2cσ2/2 < 0.
(3)
One obvious way to avoid the uncertainty of excessive usage of the free service by the users is to put a cap on the maximum usage, which will avoid refusal of services to some consumers. This is particularly important in a nonmonopolistic market, as building a large market share is necessary for a powerful bargaining position with the advertisers. In all of the above analyses, we implicitly assume that the
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consumers find the services to be of some value and hence are willing to participate in transactions with the intermediaries. We will consider consumers’ valuation of the services and their impact later in the paper. 3.2 Market With Competition When we consider a market with more than one intermediary, building a large market of users becomes the prime objective of the intermediaries. This is similar to the objective of the players in the broadcasting (television or radio) industry where a larger market share translates to higher advertising revenues. The difference between the broadcasting media and the Internet is that in the models we consider the demographics of users can be measured very accurately based on the information collected from them. Since intermediaries can precisely determine: the profile of their user base, the different demographics that are represented in their user base, their market shares in different demographic groups, and the precise profile of users viewing/interacting with the advertisements, the valuation of consumer information to an intermediary itself may vary depending on the market share that the intermediary has in a demographic group. Thus, an intermediary having a 50 % market share in the teen demographic group may value the membership of other teens much more than if it were to have a 5% market share in that group. This is because it would be very beneficial to the intermediary, from an advertising revenue viewpoint, to have a significant reach in a particular group. On a similar note, the valuation of consumer information may differ from intermediary to intermediary depending on the market share they possess in the different demographic segments. While the change in the valuation of consumer information as a function of market share may occur even in the monopolistic case, it would be more pronounced in a competitive market. This has obvious implications for the value of the goodies that the intermediaries would be willing to exchange for certain consumer information and membership. Let us consider a competitive market where all players adopt the community model. In this case, all players will strive to increase their market share and, thus, their market clout. An interesting phenomenon of the consumer information market is that the users could sell their personal
information to more than one intermediary without much loss of value due to the increased However, in the case of dissemination.2 competition between intermediaries adopting the same community model, there is not much incentive for the users to obtain multiple free services of the same kind (say, free e-mail services). Thus, consumers are likely to choose only one intermediary depending on their valuation of the free services that the intermediaries offer. For example, consumers may choose the intermediary that offers more goodies for the consumer information they are providing. An important factor that needs to be considered in the case of the community model is that costs of switching (for the users) from one intermediary to another will be high. For example, having setup an e-mail address using an intermediary’s services and interacting with others for a while, a user may find it inconvenient to switch accounts to another intermediary’s services. Similarly, services such as chat rooms, personalized news etc., may make the switching costs high (note that in this competition between intermediaries adopting the community model, switching involves moving users from one “community” to the another which by definition is difficult). Given the relatively high switching costs, there is a significant first-mover advantage in this market. It is possible for the first entrant to provide a high-value service free in exchange for the consumer information and membership, thereby building up a large market quickly and making it difficult for the followers to enter the market (the followers have to provide more value in exchange for consumer information to induce users of the leader to switch, making their costs higher -an effective entry barrier). The followers may have to adopt “niching” strategies to counter the leader’s market clout. The above scenario is actually being played out in the community model market presently. Juno.com entered the market nationwide with free e-mail service for consumer information in early 1996 and it claims 1.5 million subscribers so far. Its competitors and followers, such as Free@ Umail, offer more free services such as local news, weather, sports, chat-rooms, etc., in addition to free e-mail 2
In the financial market, this may not hold. If some private information about a particular stock is revealed to more than one buyer at the same time, the value of that information decreases.
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service. Instead of taking on the leader head-on, the followers are targeting niche markets such as users in local markets because such consumer information and membership would have more value with local advertisers such as retailers and restaurants from whom the intermediary would derive revenues from (for example, Free@ Umail, operated by UPN20, a Washington D.C. local TV station, targets users in the D.C. area). Let us now consider competition between intermediaries where one follows the community model and the other the pay-forperformance model. Since the nature of goodies provided in the two models are quite different, they could well be players in two different markets. Since users can exchange their same information with both intermediaries without any loss in value, there is nothing to stop them from participating in exchanges with both intermediaries, except for time constraints. If we consider the users imputing a value for their time spent in viewing/interacting with the advertisements, then depending on those valuations and the valuations of the goodies, consumers may choose to transact with one intermediary or both or none of them. From this viewpoint, the intermediaries would have to consider the values that users derive from competing models and match it to ensure participation. The last case is the competition between intermediaries that follow the pay-forperformance model. Again, as consumers can sell their information to multiple intermediaries for exchange of goodies, they have the opportunity to shop around for the best deal to invest their time in. Consumers may take part in as many pay-for-performance deals as they want and have time for. From the intermediary’s viewpoint, the competition brings in an element of uncertainty as to whether consumers may interact with a particular advertisement. This now becomes a function of what competing schemes are on at that time, how much goodies they pay, and how much time consumers have on their hand to view and process advertisements. Again, given the variation in consumers’ valuation of the goodies, there may be a deal-prone segment of users who may participate in all schemes and there may be another group who are more selective in what schemes they choose to participate in.
In actual practice, the competitive market of intermediaries is quite compartmentalized in the manner that we have discussed above. Most intermediaries that follow the community model by providing free e-mail service, chat room, news, etc., target users who do not have access to the Web/Internet from their home. For a user to participate in the pay-forperformance models at present he/she needs to have access to the Internet or e-mail service already. This implies that the pay-forperformance models are targeted at current Web users. Thus, the two types of models are directed at different user groups. While CyberGold targets the sophisticated Web surfers, and BonusMail assumes that the user has an e-mail address already (market size of 40 million users according to the latest Business Week estimate), Juno.com and Free@Umail targets the naïve first-time users who would like to have access to e-mail, chat room service, etc., which is a bigger market. Hotmail, which follows the community model, assumes that the user has access to the Internet but not to an e-mail address and may compete with CyberGold for users’ attention. It is expected that as users of the free services offered by intermediaries following the community model become more sophisticated, they may acquire their own access to the Web and e-mail and graduate from the community model to the pay-for-performance model. Thus, the community models act as a training ground for users to become more comfortable with email and other services before they spend their own money to get these services.
3.3 Consumers’ Valuation The valuation of the services and incentives offered by intermediaries from the consumers’ viewpoint has two components. One is the valuation of the “goodies” and the other is the valuation of the advertisements that the consumers view and interact with. The value of advertisements arise from the fact that they reduce the search costs of consumers in acquiring goods and services. We can assume that such valuations of advertisements would be the same whether the intermediary uses the community model or the pay-for-performance model and thus, would not enter into consideration in differentiating between these models.
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The consumers’ valuation of the free goodies provided by the intermediaries following the community model and the pay-forperformance model has an important implication for their business transactions with the intermediaries. Hitherto, we have assumed that the goodies offered by the intermediaries is being compared in pure dollar terms by the consumers, but this need not be the case. For example, in the community model, the free services of the intermediary provides the means for the user to interact with others. While they are viewing the advertisements that appear on the screen they are also performing some useful tasks – composing an e-mail, or chatting with a community member or watching news, etc. The advertisements are passive. When the users interact with the intermediaries they are motivated by their needs to interact with other users, watch news, or something other than the need to view advertisements per se. This is not the case with the pay-for-performance model, where the users expressly log on with the intermediary to interact/process the advertisements, visit web sites, etc. However, the incentives they get is cash or bonus points that can be exchanged for many things not just free e-mail or chat room service. Thus, valuations of these goodies may vary across populations and the intermediaries following different models may attract different kinds of consumers. It may be conjectured that, on the basis of these valuations, the community model may foster more loyalty among its users than in the pay-for-performance model where its users may be more likely to switch from one incentive to the other. By the same token, the community model may provide more opportunities for the intermediary to target advertisements to its user base, as their interaction with the intermediary may be motivated by more needs than just to view the advertisements per se. In the pay-forperformance model the time the user interacts with the intermediary is purely to view and process the advertisement. But this has its advantages in that it guarantees the processing/interacting with the advertisement, while in the community model there is no such guarantee that the user processed the advertisement. Thus, in one model we have higher participation but with no guarantees on advertisement processing and in the other we have guaranteed processing of advertisements but a possibly lower participation rate.
Given the variation in consumer valuation of goodies, one of the challenges that the intermediaries may face is how to come up schemes to attract consumers with higher thresholds of participation at the same time minimizing the costs of goodies. That is, how to attract consumer information of higher valuation by selectively providing higher incentives to those particular consumers (similar to the price discrimination problem). In the above discussions we have not considered any delay factor that could arise in delivering the free goodies, such as delays in logging on to the e-mail, chat room services, delays in accessing web sites, processing or interacting with the advertisements. Such delays increase the costs for the users thereby reducing the valuation of these goodies. The intermediaries, therefore, will have to ensure that there is sufficient network capacity to handle the network traffic arising from the free services/goodies.
3.4 Privacy Issues When users provide their personal information along with their preference information to the intermediaries the usual assumption is that the information would be used solely to direct appropriate advertisements to the users. To the extent such advertisements reduce the search costs of the users, they actually benefit from it. However, as has been the practice in the direct marketing industry, consumer information could be bundled and sold by the intermediary to other marketers interested in selling their products/services. If the consumers are sent information which they consider “junk” then it is an added cost to them, which the intermediary chooses to ignore when they sell the information. When such an “externality” is present, these additional costs enter into consumers’ valuation of the services they get for information (Varian 1996). The net impact could be that a portion of consumers may drop out of the market due to these additional costs. In order to retain them, the intermediaries may have to increase the value of goodies being offered to the users. The above scenario is much less serious than cases in which leakage of personal information results in thefts, physical harm, and other losses (see Bernstein 1997), or a situation where an individual’s buying behavior and prices paid for different goods are used for price
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discrimination. If such scenarios becomes more common, consumers may not be risk neural in their transactions with the intermediaries. They may become risk averse. This implies that the incentives and goodies have to increase in value before users venture to transact with the intermediaries. This may not augur well for the growth of the market as we would two players in the market who are risk averse in the exchange process. In order that the privacy concerns do not detrimentally affect the costs of procuring information and the growth of the market, the intermediaries may choose to provide contracts to safeguard consumers’ privacy when they enroll with the intermediary or an assurance that they will not be singled out for any special treatment. This may be necessary to build trust in the exchange relationship. Also, as the market size grows (as more and more users enroll), the market size itself may provide consumers some kind of assurance that they are not the only ones providing the information and that there is safety in numbers.
3.5 Pricing Advertisements on the Web The community model and the pay-forperformance model differ in their potential to bring in advertising revenue. Advertisements on the community model are targeted at users usually as banners and, although animation and other techniques can be used to attract user attention, they are for the most part passive. The model also does not call for any interaction with the advertisements on the part of the users. Thus, the concept of an advertisement in the community model is very much the same as the concept of an advertisement in the print or TV media. The pricing, therefore, is based on the number of exposures an ad gets with the target market. While this pricing scheme is appropriate in other media where it is difficult to measure what consumers do on seeing the ad, in the interactive medium such as the Internet, it should be easier to measure the interactivity generated by the advertisement. This is what the pay-forperformance model capitalizes on. Since an incentive is provided for interacting with the advertisement or visiting a web site, the advertisers in the pay-for-performance model pay for advertisements based on the guaranteed interactive responses from the users and not just for exposure. There is a movement afoot in the
interactive advertising industry to come up with pricing schemes based on the transactional qualities of the advertisement medium (see Ephron 1997). Already, companies such as P & G are moving away from exposure based pricing to response based per inquiry pricing of advertisements on the Internet. The implication of the above for the business models adopted by the intermediaries is clear. Advertisers would be willing to pay more for the schemes where they get guaranteed responses from target markets. Thus the revenue generated per user that responds to the interactive ad in the pay-for-performance model will be higher than the revenue per user that views the ad in the community model. But the question of which model can generate more gross revenue cannot be answered with this information alone. It depends on the number of users that enroll with the different models. Although advertisers may prefer the guaranteed response pricing, it may not be beneficial if the user base for the pay-for-performance is not large enough (and even if it is large, the advertisements still have to generate the responses from users). By the same token, if the community model generates enough traffic then an exposure based advertisement may still be a good value for money as compared to the interactive ads.
4. Conclusion In this paper, our objective was to explore the various factors that could impact the economics of goodies for consumer information market. As we have seen, there are many factors that contribute to the evolution and growth of this market. However, it should be pointed out that we have restricted ourselves in our discussions to viewing the problem mainly from the intermediaries’ and consumers’ perspectives. While they are, no doubt, important players in the market, the revenue generated from the advertisers is what keeps the market alive. This depends on how the interactive medium delivers as compared to other media such as television, radio and print in terms of return for advertising dollars. The initial reports are not very promising. Recent reports suggest that the Internet ranks last among the media with respect to its persuasive power (Internet Advertising Report, June 1997). It is probably too early to
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measure the effectiveness as advertising in this medium is still in its experimental stage and it will be a while before the optimal form of advertising emerges. Also, the existing intermediaries may not have the critical mass of user base to attract ad spending. Till the market potential increases, new form of ads emerges, and their effectiveness is accurately measured, the new medium may not draw a significant share of ad spending from major advertisers. This is one of the reasons that there has been a spate of failed ventures already in the market. For example, CyberFreeway which offered free Internet access in return for user demographic information, will be discontinuing services effective July 3, 1997. Another intermediary j3 Communications has also canceled its free Internet access program (News.com, June 1997). These instances show that the concept is still not mature, given that the Web is still in its early growth phase. However, as our exploratory analysis shows the economics do indicate a viable market, the size of which will ultimately depend on how the various factors we have discussed play out. 5. References Ephron, Erwin (1997), “Or Is It an Elephant? Stretching Our Minds for a New Web Pricing Model,” Journal of Advertising Research, March-April, 96-98.
Laudon, K.C. (1996), “Markets and Privacy,” Communications of the ACM, Vol. 39, No. 9, 992-1004. Varian, Hal R. (1996), “Economic Aspects of Personal Privacy,” White Paper, http://www.sims.berkeley.edu/~hal/Papers/privac y.html. Bernstein, Nina (1997), “Lives on File: Privacy Devalued in Information Economy,” The New York Times, June 12. Macavinta, Coutney (1997), “End of the Road for CyerFreeway,” http://www.news.com/News/Item/0,4,12006,00.h tml?latest, June 27. Business Week, March 24, 1997. “Service With a Click”, 19. Business Week, May Communities”, 64-80.
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Hagel, John and Jeffrey Rayport (1997), “The Coming Battle for Customer Information,” Harvard Business Review, January-February, 5365. Internet Advertising Report, http://www.lsoft.com/LISTSERV-powered.html, June 1997. News.com, http://www.news.com/, June 1997.
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