CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1.1 Concept of Online Advertising

Online advertising also called online marketing or internet advertising or web advertising is a form of marketing and advertising which uses the internet to deliver promotional marketing massages to the consumers. Consumers view online advertising as an unwanted distraction with few benefits and having increasingly turned to advert blocking for a variety of reasons (Wikipedia 2018).

Again online advertising is said to be the use of internet as an advertising medium where promotional massages appear on a computer screen. Since the communication software (browser) reveals sufficient information about the sites visitors, online advertising can be costumed-tailored to match user preferences (Business dictionary, 2016).

2.1.2 History of Online Advertising

With an increasing percentage of the consumer demographics opting to shop online, internet advertising is now a multi- billion dollar industry. This paradigm shift, however, is a result of a colourful past. We are going to take a glance back to the beginning of this industry. We revisit the journey of how it has grown and flourished and held its place in a world where once print, television and radio were the only source for advertising.

Before the Banner there was Spam

The first ever Spam email to annoy email owners was sent on May 3, 1978. The recipient list was 400 users long and was taken from the ARPAnet directory. ARPAnet, stands for Advanced Research Projects Agency Network. It is considered to be the precursor to what we now know as Internet. Widely known as the “first internet”, it was used as a highly secure medium for information flow between universities and research centers across the globe. The first four nodes that were connected to this network was located at University of Utah and Stanford Research Institute (Ankit, 2013).

The creator of the first spam email advertisement ever to hit the inbox was Gary Thuerk, also known as the father of spam, not a very inspiring title. He was a marketing manager at the Digital Equipment Corporation. Although DEC

had a strong presence in the East Coast, considering the fact that it was an East Coast based corporation, the email was an attempt to reach the West Coast technological enthusiasts. Specifically, the email was an invitation to West Coast users to a product demonstration of the then new Decsystem-20 by Digital (Chukwu and Uzoma, 2014).

Banner Advertising

Global Network Navigator, in 1993, was the first commercial website to sell a clickable advertising (later they were termed as “banner advertising”). It was sold to the law firm Heller Ehrman White & McAuliffe. GNN was basically an online information portal that consisted of a news center and it also acted as a product catalog.

• By April 1995, advertisers like Mastercard and Zima were paying GNN $1000 to $11,000 per week for advert spots.

• In June 1995, GNN was acquired by America Online(AOL) for an estimated $11 million.

• It was closed in 1996, and all the subscribers were moved to AOL’s dial up service.

However, it was in October 1994, when the team at Hotwired – the first commercial web magazine – deliberated on ways to pay their writers and the idea came in the form of selling advert spaces in large quantities and the term “banner advertising” was coined. The plan was to create special sections on the website for the banners to be displayed on. The idea was not entirely new though. American Telephone & Telegraph(AT&T) was one of the first companies to buy adverts on Hotwired. Internet was one of those things that was taken for granted. It’s hard to imagine a life without it. But before the internet, when people wanted to get connected online they had to opt for different measures. You could use a Bulletin Board System to stay connected locally unless the system operator was connected to a network like Wildcat, or to stay connected on a nationwide level, you had to use a paid service, like Prodigy. (Husaain and Adamu, 2014).

People were fascinated and excited with Prodigy’s ease of use and the fact that they could access news, sports, email, bulletin boards, and weather info along with one un-clickable advertisement at the bottom of every page, all in one place. This premium service cost $12.95 a month. All in all, people loved it. Prodigy’s failure seemed unfathomable at that time. But it happened. Prodigy never thought how much time users would spend on its portal (if you can call it that), so it was not designed for high user activity. However,

the Prodigy users instead of reading news, sports reports went straight to using interactive elements like bulletin board and email (Ankit, 2013).

Doubleclick

Next major milestone in the banner advertising industry was the launch of Doubleclick – an online advert-related- services providing agency- in 1996. This platform gave online advertising an entirely new perspective. Before Doubleclick, the adverts were not organized or coordinated. Also, before its creation it was hard for websites to find parties interested in buying advertising spaces (Chukwu and Uzoma, 2014).

Doubleclick not only created a way to track banner advertising and consumer behaviour but it also helped track the Return on Investment (ROI). The banner was a great way to produce revenue for the websites and Doubleclick themselves. It was around this time that the surge in the number of content websites, whose revenue was based on selling advertising spaces, happened (Bibhas and Chouhan, 2012).

Before the end of the year 1996, Doubleclick developed a technology called DART (Dynamic Advertising Reporting and Targeting) which helped advertisers to track the clicks and optimize their adverts.

As a result of its huge network, Doubleclick allowed its advertisers to advertise in a plethora of websites, and unlike print and radio, Doubleclick provided the advertiser a chance to customize their advert campaigns depending on its performance. For example, if an advert was not doing well on one website, the advertiser had the option to take it down from that website and focus on another one that was producing results. DoubleClick made its revenue by brokering adverts and by offering premium tracking and analytical services to their advertisers. The price for advertising on their network was based on Cost per thousand impressions (CPTI) model. Doubleclick also generated CPTI revenue from the email marketing services it provided (Chua and Sharma, 2005).

The Dot Com Bust

In the mid 90’s to 2000 was known as the dot com bubble and it finally busted in the year 2000. The most highly affected area was the Silicon Valley. Dot com bubble was fueled by the opening of thousands of new websites, and tech startups. But most of these companies saw a huge loss of money, depleted their raised capital and could not raise more, which gave rise to a small recession on the beginning of 2001. Banner adverts were resulting in lower click through rates. But companies were

still spending millions buying a spot. The ROI was not anywhere near impressive. Most of these new businesses focused on expanding their consumer reach instead of focusing on profit growth. They assumed that reaching a huge customer base would also increase their profits. To reach this goal they spent a huge amount on advertising, which didn’t pay off. Investors were blindly investing in startups with big ideas rather than strong business models (Ankit, 2013).

Pay Per Click Advertising Model

By 1999, the online advertising industry had already reached $1 billion. With the number of web sites increasing in the late 90’s, the need for search engines became more predominant. It was during this time that Search engines like AltaVista, Lycos, and Info seek expanded their services. Yahoo also diversified its services from just being a directory of websites to a search engine and then a web portal (Husain and Adamu, 2014).

Pay per click came into being as a means to help search engines generate revenue. It was in 1998, same year as Stanford graduate students Larry Page and Sergey Brin founded Google, that Goto.com’s Bill Gross invented a similar model to PPM called the paid placement model (PPM). Goto.com, later became Overture, and was then acquired by Yahoo for $1.63 billion.

Credit for paid placement model is generally given to Bill Gross (Luk, Chan and wand, 2012).

Google was looking for a way to monetize its search engine, and because the brand was known for providing the best quality search experience for its users, monetizing with textually relevant adverts instead of banner adverts seemed like a good option. Google launched its search engine service in 1999 and it was in 2000 that the Adwords was introduced. The paid placement model however, was included only in 2002, before that it was all CPTI. Yahoo, on the other hand, offered its advertisement based on the paid placement model right from the beginning in 1998 (Ankit, 2013).

In 2002, Google revamped its Adwords program. It reintroduced Adwords which now included the option of PPC advertising. Google’s version was different from Overture’s PPM. Where Overture allowed its users to buy their way to the top, as in – the higher your bid, the higher your listing; Google understood the importance of relevance and better user experience. You see, any big company could buy their way to the top, but if the advertisement was not relevant then it would generate less clicks, the users who end up clicking will not get anything relevant to what they searched for and the company would make no profit either (Overby and Lee, 2006).

The Era of Social Media Advertising Social media has revolutionized the online advertising industry. It’s interesting to note its development. It won’t be wrong to say that, online advertising has gotten powerful in a veryshort period of time thanks to social media.

Let’s look at Facebook. Although primarily formed for people to stay socially connected, the fact that more than 7.3% of the world’s population use Facebook has made this platform perfect to be used as a marketing tool. Reports show that advertisers have spent more than $4 billion on Facebook advertising. Facebook didn’t really concentrate on advertising until 2 years after being created. In 2006, Facebook announced a one year marketing agreement with J.P. Morgan Chase to promote its credit card. Facebook members at that time were able to see adverts inviting them to join an exclusive Chase network that would earn them reward points. That same year, Facebook and Microsoft teamed up for advertising syndication. It was a strategy to bring relevant adverts to the 9 million Facebook users. Microsoft was the sole provider of banner adverts and sponsored links on the Facebook platform.

In the year 2007, due to the negative response of Vodafone and other Britain based companies adverts appearing next to a far-right British Political party, Facebook introduced the opt out feature giving advert owners the ability to prevent their advert from appearing.

In 2008, Facebook launched “Facebook adverts for businesses and it also established the advert platform, “Beacon” that was more geared towards viral brand messaging. In 2009, Facebook added features with which advertisers could now target demographics based on language and radius. It also launched Self Service advertisement through which anyone could purchase an advert with a credit card.

• In 2010, Facebook shut down Beacon. It then introduced social context metrics to its analytics.

• In 2011, Facebook launched Sponsored stories.

• In March 2013, Facebook acquired

Microsoft’s advertising platform – Atlas. The deal was valued at less than $100 million while the technology behind Atlas was purchased in 2007 by Microsoft for

$6.2 billion.

They are now focusing on optimizing their advert platform for mobile users as they account for majority of their traffic. At $5 billion, Facebook advertising makes up for majority of their revenue (Ankit, 2013).

2.1.3Types of Online Advertisement According to Parul (2016) and Laplante et al (2011), different types of online advertisement are as follows:

Floating Advertisement: A floating advertisement is a type of rich media Web advertisement that appears uninitiated, superimposed over a user-requested page, and disappears or becomes unobtrusive after a specific time period (typically 5-30 seconds). The most basic floating advertisements simply appear over the Web page, either full screen or in a smaller rectangular window. They may or may not provide a means of escape, such as a close button. More sophisticated versions can come in any shape or size and include sound, animation, and interactive components.

Expanding Advertisement: These are advertisements that expand when users click on them. The adverts do not expand just from mousing over hyperlinks, which is a technique used by some other advertisers. They often take a long time to download, which in turn can negatively impact the visitor's experience on that page. Polite advertisement formats were developed to address this challenge by enabling advertisers to serve larger file

formats without disturbing the load time for the rest of the images on the page. A polite advertisement format is loaded in two phases:

a. Phase One: The initial load is a compact image or SWF file that is smaller in size, so there is no delay in loading other contents on the page. This could be the first few frames of the advertisement, or a teaser.

b. Phase Two: The main load is the full version of the advertisement. The full advertisement can have a larger file size. It is loaded only after the whole web page has finished loading into the visitor's browser.

Wallpaper Advertisement: An advertisement which changes the background of the page being viewed.

a. Trick Banner: A banner advertisement that attempts to trick people into clicking, often by imitating an operating system message.

b. Pop-up: A new window which opens in front of the current one, displaying an advertisement, or entire webpage.

c. Pop-under: Similar to a Pop-Up except that the window is loaded or sent behind the current window so that the user does not see it until they close one or more active windows.

2.1.4 Significance of Online advertising Online advertising, however, is much less expensive and reaches a much wider audience and will probably give you more profit than traditional advertising. It has a lot of advantages that traditional advertising haven’t even dreamed about. This new form of advertising gives such wide verities, this includes: video advertising, advertising on social networks, mobile advertising,e-mail advertising, banner advertising, Google Search advertising and a lot more. Ayo et al (2011) and Bridges et al (2008) reported the benefits of online advertisement as follows:

1. Less Expensive: The main benefit of online advertising is that it has a much affordable price when compared with the traditional advertising costs. On the internet, you can advertise at a way more inexpensive cost for a much wider audience.

2. Wider Geographical Reach: Online advertising gives your campaigns global coverage, which helps your online campaigns reach more audiences. This will definitely help you achieve superior results via your online advertising strategy.

3. No Rigorous Payment: This is another appealing benefit of online

advertising. In traditional advertising you have to pay the full amount of money to the advertising agency, no matter the results. In online advertising however, you have to pay only for the qualified clicks, leads or impressions.

4. Easy Result Measurement: The fact that it’s so easy to measure makes online advertising more appealing than the traditional advertising methods. You can find a lot of effective analytics tools in order to measure online advertising results, which help you, know what to do and what not to do in your following campaigns.

5. More Targeted Audiences: In comparison with traditional advertising, online advertising helps you to easily reach the targeted audience, which leads to your campaign’s success.

6. Speed: Online advertising is faster than any of the offline advertising activities and you can start sending out your online advertisement to a wider audience, the moment you start your advertising campaign. So if you have a large targeted audience online at the time of triggering your online advertisements, then your advertisement will be served to majority of the audience in no time.

7. Informative: In online advertising, the advertiser is able to convey more details about the advertisement to the audience and that too at relatively low cost. Most of the online advertising campaigns are composed of a click-able link to a specific landing page, where users get more information about the product mentioned in the advertisement.

8. Better Return On Investment: Since online advertising is mainly focused on performance based payment, your ROI is sure to be far better when compared with offline advertising. You can also easily track and analyze the performance of your online advertisements and adjust them so as to improve your ROI.

9. Easy Audience Engagement: Most of the online advertisement platform makes is easy for the audience to engage with your advertisement or products. As an advertiser we would be able to get more feedback from the audience and thereby improve the quality of our advertisement going forward.

10. Better Branding: Any form of advertising helps in improving the branding and online advertising stands a notch high in improving the branding of your company, service or product. If your digital advertising campaign is well planned, you have the chances of getting your brand name spread virally over a larger audience.

2.1.5 Disadvantages of Online Advertising

The biggest disadvantage of advertising on the Internet is that your marketing materials are automatically available for anyone in the world to copy, regardless of the legal ramifications. Logos, images and trademarks can be copied and used for commercial purposes, or even to slander or mock your company. This is not the case with television and magazine advertising, wherein images must be replicated rather than simply copied electronically. Another disadvantage is the fact that the Internet- advertising gold rush has begun to introduce advertising clutter to the Web. Web users are so inundated with banner advertising and spam email that they have begun to ignore internet advertising just as much as advertisement on traditional media (To, Liao and Lin, 2007).

2.1.6 Effectiveness of Online Advertising Unlike other media, the internet allows advertisers to evaluate the effectiveness of their marketing on an almost instantaneous

basis – thus allowing for quick refinement of their skills and a readjustment of their target audience, (Ramaraj and Suzanna, 2003). It is generally agreed that advertisements serve two functions: to inform and to persuade. Information creates awareness about a good, and persuasion induces a positive inclination towards that good, not necessarily one that stems from that information. It would thus be reasonable to assume that the dynamic nature of the internet and the advertiser’s ability to adjust information would be essential for its effectiveness. Indeed, in Ronald and Barbara (2012), it was found that the effectiveness of online advertising is derived mostly from its interactive nature. Estimating the effectiveness of an advertisement is an integral part of the marketing campaign. Once an advert reaches its target audience in a beneficial way, the usefulness and profitability of the campaign rises. Advertisements can be useful in several of the following ways: in making a stand, increasing levels of familiarity, recollection and degrees of identification.

2.1.7 Online Advertising Motivations and Consumer Purchasing Behaviourr Gallarza, et al. (2011), covered future idea to concentrating on elements like pleasure, feeling, aesthetics, emotion, and satisfaction to obtain high profitability and consumer motivations. Empirical work shows that customer motivation has been shifted from the utilitarian online advertising lookout to improve concept of marketing business to convince the customer, increase cost saving and customize the product or services globally. Chua and Sharma (2005), indicated that online advertisement decision must be made to benefit customer purchase, satisfaction and high loyalty. In addition, Chen (2010), recognized the customer behaviour as goal-oriented and consideration sloping behaviors in business. In the goal oriented, consumers must have a significant shopping plan in their minds as determination of customer behaviour provide information to easier purchase products in business for consumers. On the other hand, exploration-oriented consumers do not have a substantial plan in their minds because of using easy way to access the browse or window shop by implement of advertising purchase. Concentrating customer behaviour on the advertising is similar to that in physical storefronts, which means that consumers could be performing either search activity, with or without a specific purpose. Significantly, Lee, and Shin (2010), indicated behaviour theory because its actual behaviour that convince the consumer to purchase. However, in consuming online advertising

preparations like transform and dressing up, convenient browsing medium and increase capability, consumer behaviour affects purchasing base, indicating goal- oriented and exploration-oriented in business organization. Finally, the empirical research verified online advertising value to categorize the consumer purchase behaviour, such as amount of money to spend and satisfaction procured, influences consumer behaviour.

2.2 THEORETICAL FRAMEWORK

2.2.1 Porters Theoretical Framework

Theoretical model and hypotheses concentrate on online purchase customer incentive and to revise whether various shopping incentives influences online customer purchase behavior intention (Teo and Yu, 2005). Theoretical model process analyzes the consumer purchase intention to high perspective of loyalty value, in market segmentation. McCole, Ramsey, and Williams (2010), express provider of online advertising on purchasingand gaining the product painlessly during the online customer shopping process. So, different shape of purchasing, looking, one-time buying or duplication online purchase behaviour necessarily should be connected to duration of flow theory. Additionally, intensity duration of flow may assist to one of elements such as increase in consumer’s motivation; save

costing, as well as, producing consumer to utilize online advertising practically for other aim besides actual purchasing (Parsons and Conroy 2006). As a result, researcher emphasis on model due to implement strategy in online organization and significant factor lead to high market share and profit in target segment. Cost- saving is measured as value of online advertising to encourage customer behavior in purchasing business process. The perspective of cost saving classifies the value of online advertising as adventure, social, idea, value, authority to satisfy the consumer behaviour purchasing in market (Lee and Shin, 2010). In addition, it is difficult for online advertising customer to reach these elements due to the lack of a physical purchasing surroundings and excitation from physical products In Porter’s framework, two vital target positions of theoretically maximizing revenues emphasis on lower costs or increase incomes through differentiation. Low-cost (LC) business units minimize costs, leading to savings form of lower prices in market and differentiators (DF) offer something unique (product, service component, geographic location) for which they charge a price premium. So, using the Porter framework appeared to capture how types of business divisions make to implement strategy of online advertising

on target segment, while, most business items choose either a low-cost or differentiated strategy. Therefore, they try to deliver value by being simultaneously both low-cost and differentiated (Zahay and Griffin, 2014). Tasci, Gartner and Cavusgil (2007), expressed organizational culture as a “conscious pattern of shared values and opinions which help consumer understanding, organizational function and behaviour in the organization” They stressed that it is necessary to understand the culture of an organization in order to understand the organizations of online advertising strategy. They stated that behaviour is culture and culture is strategy; therefore, one must manage culture to manage strategy. Preliminary efforts have been made to reveal relationships among the elements of bridge market orientation and business performance, those being strategy type and to some degree, specific strategy elements (Palmer, Lindgreen, and Vanhamme 2005).

2.2.2 Flow Theory

Flow theory states that elements such as playful, fact-finding, and self-motivating will restructure behavior happiness. It also occupied online advertising because of pleasure customer’s gain from the business cycle process. However, flow does not mention to a specific state exactly, it is a constant variable in that various levels of flow can occur. Some connections within computer facilitated surroundings may be more playful and tentative in empirical documents (Stoner, 2008). Ullén, et al. (2012), stated that flow theory created an optimal mentality for those consumers individually to purchase the product based on online advertising from market. Moreover, flow theory effects limitation period and cost saving to suggesting better customer service because of inherent appearances. On the other hand, customers operating within computer refereed locations to impact of various appointments in different shopping behaviors during various measurements of flow theory based on individual and/or product features for better concentration, creativity, control, and satisfaction in business (Oluwole and Joy and services, in satisfaction of their needs and wants (Business Dictionary, 2016, Muhammad and Dwi 2015)