Figure 1-4. Banner ad for American Express
In 1995, when the first ecommerce stores began to appear online, marketers spent a lot of time convincing both large and small companies that they needed an online presence. Many companies thought the rush to the Web was similar to the gold rush: it was unjustified, and it would eventually die down. By the end of 1996, fewer than 50,000 websites were online and fewer than 2.6 million transactions were conducted on ecommerce websites.[2]
In the three years that followed, more companies embraced the Web, though often without focus. Many companies established an online presence because doing so was supposed to increase brand reach and open new revenue streams. As ecommerce was still in its infancy, very few companies could figure out how to actually generate online revenue or create sustainable business models. Having a website became a business goal in and of itself.
During these first few years, companies struggled to determine the technical and marketing complexities of selling online. At the same time, consumers were hesitant to hand over their credit card information to an online business. Security and privacy concerns for a brand-new medium were valid and stopped many customers from considering ecommerce as a viable option. In a 1998 article published in the New York Times, “Security Fears Still Plague Cybershopping,” the reporter points out the following:
While not many of the 19.7 million Americans who visited commercial Web sites from their homes in 1997 have reported problems with Internet credit-card use, some surfers—and security experts—say they are concerned enough about Internet crime that they would rather auction off their firstborn child than use a credit card to buy something on the Web.[3]
We’ve come a long way, haven’t we?
Back in 1999, at the height of the dot-com era, we worked with a software client who wanted to capture the online customer relationship management (CRM) space. The company was funded by a group of technologists who believed that their $40 million startup would take the Web by storm. They projected that the site could generate more than $100 million in its first year of operation. The company’s entire marketing plan seemed to center on a one-minute flashy spot during the Super Bowl.
Sound familiar? The first day the site was live, it had fewer than 1,000 visitors. Things did not improve. With no real online marketing plan to promote the website, the numbers continued to dwindle. Management learned a very hard lesson: it is not enough to build a website; you must spend the money to bring visitor “traffic” to it. Of course, our client was very similar to numerous other startups during the dot-com bubble. Too many companies assumed a website was a great marketing tool in and of itself. The reality is that for this marketing tool to be successful, you first must market the marketing tool!
Companies were quick to learn from their mistakes. By the late 1990s, companies started spending millions of dollars to advertise and bring traffic to their websites. By 2005, online advertising reached $12 billion. The online channel has been growing steadily since 2003 and is on track to surpass the $61 billion annual level of ad spending for the first time in history by 2010.[4] Online advertising budgets, as displayed in Figure 1-6, are expected to continue to grow by close to 10% annually[5] worldwide to surpass $110 billion by 2015.[6]
For the most part, the purpose of these large investments is to drive as many consumers to a website or a landing page as possible. By the end of 2007, data from our ecommerce customers showed that 50% of online marketing budgets was spent on SEO. In 2008, spending on SEO increased to close to 60%.
