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Internet Marketing & e-CommerceWard HansonKirthi Kalyanam

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Part Two: Chapter EightTraffic Building

“A wealth of information creates a poverty of attention.”

Herbert Simon, Designing Organizations for an Information-rich World

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Value and Scarcity Online

• Volume of online content is growing far faster than the number of Web users

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Value and Scarcity Online

• Volume of online content is growing far faster than the number of Web users

• Every site faces unique challenges to attract new visitors

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Value and Scarcity Online

• Volume of online content is growing far faster than the number of Web users

• Every site faces unique challenges to attract new visitors

• As Web users grow more experienced, they are less likely to explore new sites

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Value and Scarcity Online

• Volume of online content is growing far faster than the number of Web users

• Every site faces unique challenges to attract new visitors

• As Web users grow more experienced, they are less likely to explore new sites

• The true scarcity online: user attention

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Value and Scarcity Online

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Planning for Maximum Traffic

• Drawing more visitors to a site requires a thoughtful web traffic plan

• Web traffic plans should consider each of the five main traffic categories:

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Planning for Maximum Traffic

• Drawing more visitors to a site requires a thoughtful web traffic plan

• Web traffic plans should consider each of the five main traffic categories: – Branding decisions (e.g. domain name)– Search engine marketing– Affiliate networks – Online banner advertising– Publicity and word of mouth

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Planning for Valuable Traffic

• Effective traffic plans assess the volume and quality of traffic generated

• Spotting broad use patterns through visualization tools helps calculate the cost and productivity of new visits

• Key tool for traffic-building analysis is cost-per-action: the number of visits that end in a particular action divided by the cost of the campaign

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Planning for Valuable Traffic

At each stage, visitors decline and costs rise

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Traffic-Building Goals

• Basic goal: best traffic at lowest cost• But how to define best traffic?

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Traffic-Building Goals

• Basic goal: best traffic at lowest cost• But how to define best traffic?

Best Traffic with Least Cost

Maximum Profit

Minimum Cost-per-Action

Maximize Actions

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Traffic-Building Goals

• Profit guidelines that include web site branding; ignore ad branding impact:

– Spend on traffic sources that maximize difference between unified visit value and cost per visit

– Acquire traffic as long as the cost per visit is less than the unified visit value

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Traffic-Building Goals

• Profit guidelines that ignore branding and all other impacts:

– Spend on traffic sources that maximize difference between customer lifetime value and web customer acquisition cost

– Acquire traffic as long as online customer value exceeds acquisition cost

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Traffic-Building Goals

Variation in Average Customer Acquisition Costs for Four Net Companies

Company Time Period Acquired Customers Customer Acq. Cost

e-Commerce firms

Amazon.com 3/1997->3/2002 33,800,000 $7.70

eBay 12/1996->3/2002 46,100,000 $11.26

Online brokerages

Ameritrade 9/1997->3/2002 1,877,000 $203.44

E*Trade 12/1997->3/2002 4,117,370 $391.00

SOURCE: Gupta, Lehmann, Stuart: “Valuing Customers,” Journal of Marketing Research 41, no. 1 (Feb. 2004)

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Search Engine Optimization

• The power of landing “Above the Fold”

SOURCE: FPG/Getty Images

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Search Engine Optimization

• Top placement in search returns is key to generating organic Web traffic

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Search Engine Optimization

• Top placement in search returns is key to generating organic Web traffic

• User’s willingness to investigate falls sharply as items drop on the return list

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Search Engine Optimization

• Top placement in search returns is key to generating organic Web traffic

• User’s willingness to investigate falls sharply as items drop on the return list– Higher click rate on top-rated items– Few users go beyond first page or two

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Search Engine Optimization

• Improving search engine placement– Get indexed on main search engines– Use meta-tags and develop content with

appropriate keywords that trigger higher search engine rankings

– Structure site content and navigation to reinforce search engine algorithms

– Cultivate links from appropriate sites

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Keyword Advertising

• Clickable, text-based ads bring in billions of dollars of ad revenue

• Ads steer traffic to an organization web site; fee charged only if click occurs

• Competitive bidding process determines a keyword’s value

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Keyword Advertising

• Evaluating keyword portfolios– Identify a site’s most relevant keywords– Test and expand list, based on conversion and

click-through rates

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Keyword Advertising

• Evaluating keyword portfolios– Identify a site’s most relevant keywords– Test and expand list, based on conversion and

click-through rates• Bidding and tracking

– Higher bids increase chance at higher keyword position

– No click costs more than maximum bid– Price charged depends on intensity of

competition

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Keyword Advertising

Collecting Keyword Data

Keyword Phrases Clicks Conversions Cost per click to hold position Conversion rate

Skylark fuel pump Position 1 62 6 $0.10

9.68%

GM fuel pump Position 2

148 18 $0.20 12.16%

Buick partsPosition 2

1246 48 $0.25 3.85%

Used Buick Skylark Position 1 8678 95 $0.23 1.09%

BuickPosition 3

362 15 $1.37 4.14%

Used car partsPosition 2

17265 98 $0.34 0.57%

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Traffic by Association

• In traditional advertising, marketers put a company’s message where consumers work, live, play

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Traffic by Association

• In traditional advertising, marketers put a company’s message where consumers work, live, play

• Same concept holds true online

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Traffic by Association

• In traditional advertising, marketers put a company’s message where consumers work, live, play

• Same concept holds true online – Banner advertising – URL placement on shopping bags,

billboards, monthly statements– Sponsorship and co-branding