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Business-to-Business MarketingOnline Marketing and B2B

Haas School of BusinessUC Berkeley

Fall 2008Week 14

Zsolt Katona

Today’s Topics

• Online B2B Advertising

- brand advertising

- product advertising

• Social Interactions and B2B Marketing

- online sales (eMarketplaces)

- relationship building/management

• Buying and Selling Eyeballs

- search advertising

- other traffic trade

US Online Advertising Spending

Year B2B Online Total Online Share

2006 $2.8b $16.9b 16.6%

2007 $3.5b $21.4b 16.4%

2008 $4.4b $27.5b 16.0%

2009 $5.3b $32.5b 16.3%

2010 $6.4b $37.5b 17.1%

2011 $8.0b $42.0b 19.0%

B2B Spending Increase Next Year

B2B Product B2B Services

Overall 1.61% 0.30%

Nonsales hires 6.17% 1.44%

Traditional Advertising 1.72% 5.55%

Internet Advertising 12.87% 17.75%

•Online marketing is the second most used vehicle after in-person events

Online B2B Advertising

• Brand Advertising

- Banner Ads: Flash, Video

- Targeted, but wide audience

- Link usually goes to home page

• Product Advertising

- Search Advertising

- Measurable

- Link leads to a page where you can take action

- Searchers are in different phases of buying cycle

- Some words are searched by both businesses and consumers

Where do people in look for information

IT R&D Engineer Purchasing Exec Mgmt

Search engine 69% 67% 62% 63% 67%

Intranet 15% 15% 18% 13% 12%

Physical Library 2% 5% 3% 3% 2%

Colleauge or expert

14% 9% 11% 11% 15%

Vendor Web Site

4% 2% 4% 6% 3%

Source: Outsell Information Markets Survey

Where to advertise?• Brand Advertising

- Economist, Financial Times

- Industry Specific Portals• Product Advertising

- Google

- B2B Portals

- Thomas Register (manufacturers and distributors)

- KnowledgeStorm (tech search engine)

- Bitpipe (white papers for IT)

- Business.com (general business search)

- Usually buy search ads themselves

- Offer hybrid deals and service

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How to do it?

• What do you do with the incoming clicks?

• Series of micro-conversions to sales

- separate different decision makers

- separate decision makers in different stages

- send consumers to retailers

- establish dialog with end consumers

- start blogs to find out what users want

• 47% of users make purchase online after starting to search online (55% for up to 10K, 31% above 100K)

Conclusion – Online B2B Advertising

• Companies spend significant amounts on it• Differences from B2C

– Goal: less emphasis on directly selling products

– More general brand advertising

– Separate B2B traffic

– Separate decision makers in different stages

• Carefully build the website before starting to drive traffic there: Challenges

- Reaching decision makers

- Deepening relationships

- Measuring marketing results

US B2B Online Social Network Advertising

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012

Spending($ millions)

Social Networks and B2B• Existing social networks

- Manage professional relationship- e.g. LinkendIn (alliance with NYTimes.com)- Visa Business Network on Facebook

• Create own social network- to connect customers, partners- vertical industry networks: ITtoolbox, LawLink

• Opportunities- find influencers and target them- conversation mining

The Future

• MMORPG-s (morpegs): massively multi-player online role-playing games

• Games: pre-fabricated, themed fantasy worlds

• Example: World of Warcraft– Introduced by Blizzard Entertainment

– ~15 years old

– Over 10 million subscribers (price: $20/month)

– Theme: ‘Tolkien’-type mythologies

– Defined goal: slaughter monsters and each other

New morpegs: ‘making not slaying’

• Platforms: Virtual worlds entirely generated by users• Example: Second Life

– Owner: Linden Labs– Founded by Philip Rosedale after the novel ‘Snowcrash’.– ~ 8 years old– Explosive growth since summer 2006, but in trouble recently– > 14 million subscribers with ~ 1 million regulars/month– ~ $1 million spent by residents per day– 65k acres of virtual land – No defined goal: people can do whatever they want and own

whatever they build. So what do they do?

They party!

They socialize with stars like Susan Vega and Bob Dylan playing live

They shop!

They build!

They go to church!

And may get married!

They also need a home!

There are cities!

They do everything…and more

• Culture – museums, cinemas, theaters, concerts..• Sports - races, adventures• Entertainment: film festivals, reality shows• Nightlife – gambling, sex, parties…• Shopping, shopping, shopping….• Work – top incomes are ~$200k• Business - thousands of profitable businesses• Crime – gunshots, retail fraud, terrorism• Politics – democracy, independence movements• Currency, real estate, stock markets• …..

Major corporations are present

• Starwood Hotels – showrooms/reservations• Toyota, Nissan – sell virtual cars• American Apparel – setup a virtual store for clothes• U2, Duran Duran, Susan Vega - concerts• IBM – business solutions (owns 15 islands)• Intel – tech conferences, product information• Reuters – permanent correspondent - withdrawn• Sweden has an embassy• Presidential candidates’ headquarters (Mark Warner, Sarkozy)• US congress – investigates taxable income earned• FBI investigates illegal gambling• INSEAD• …

INSEAD’s SL campus

Booming real estate market

• Land prices– ~ $100 for 4000 m2, $1600 for a small island, $10-200 monthly rents

depending on land size– Land prices evolve like in real markets

• Hundreds of real estate agents– David Storey: $26,500 island on Entropia U.– Anshe Chung:, 8 million m2 assets– themed neighborhoods– construction business, retail business– restrictions, privacy, …

• Lawsuits (Bragg against Linden Lab)

Opportunities for Businesses(Internal)

• Virtual office

• Virtual lab – development/collaboration center (Unilever, Xerox)

• E-learning/training – workshops (Intel, IBM)

• Conferences – meetings (IBM…)

• Recruiting – community building (Areva, Cisco, l’Oreal...)

IBM uses virtual worlds to facilitate collaboration between employees

Sun Microsystems’ virtual office

Health-care professionals use virtual worlds to train doctors and nurses

An energy company uses Forterra Systems to train employees to handle hazardous materials on a virtual oil rig

Opportunities for Businesses(External)

• Marketing Communications– Advertising/product placements (series, films, L’Oreal)

• $15 million spent in 2006• Over a dozen metaverse ad agencies

– Corporate identity/image– Demos, show rooms, product trial– Build community of clients – community-based brands– Trade-shows (Cisco, Startus,..)

• Alternative Channel– Sales meetings with customers– Stores (branches, shelf space, assistance)– Procurement interfaces (auctions, markets)

• Market research – Test designs (Sears, Toyota)– Customer focus groups

Xerox researchers explore Second Life for customer demos

Cisco Systems – virtual summit for channel partners

Wisconsin architect John Brouchoud shows model home on Second Life

Challenges

• ID and security – Payment– Transactions– Hackers

• Backbone logistics• Availability of the system

– Servers– Infrastructure (bandwidth)

• Competing platforms – Compatibility – Transferability of avatars– Balcanisation

• Legal issues– Copyright– Ownership rights– Taxation

Uncertain future…

Conclusion – Social Networks and B2B

• Emerging area• Not very significant yet, but could take off

• Virtual Worlds/Environment seems really useful in some areas

Multi-sided markets

MediaConsumers Advertisers

Payment (free content) Payment

Attention Attention

Website 1

Consumers

Website 2

Website 3

Two-sided markets

Buying and Selling Traffic

• Ways to acquire traffic

– Subsidizing your users

– Advertising on other sites

• What to do with your traffic?

– Charge them directly

– Sell advertising

• How do you price

– Your advertising space?

– Your product or service?

A Research Project

• How much advertising should you sell?• How do you price the advertising?• How much advertising should you buy?

• The answer depends on the margin you can make by selling your product or service (commercial margin)

Examples

Examples

Examples

Results

•Sites with a high margin should buy more advertising and•Sell less•Sites with high margin should charge more for advertising space

Pricing Methods

PPV PPAPPC

Publisher Low Medium High

Advertiser High Medium Low

Uncertainty/Risk

•PPC is most common

•PPV is used for branding (flash/video)

•Vertical search engines have combination of PPC and PPV

•PPA works with affiliate programs, but still to take off

Search Advertising

•Online advertising expenditures: 9% of all

•Search advertising 40% (exceeding $10 billion)

•Dominated by Google (77% market share)

•Some keywords cost up to $70/click

•Target to self-selected groups

•Attract consumers with the possibility of search itself

•How to price search advertising?

Another Research Project

Advertising Intermediaries

Website 1

Consumers

Website 2

Website 3DoubleClick

An Alternative Way

• Get Traffic Directly from Domain Owners

• Redirect it to Advertisers– Based on auction – For different keywords

• Example: Sendori.com• Advantages to Publishers

– Each visitor is monetized – Visitors may return to original domain

• Advantages to Advertisers– Higher conversion rates– Users do not see the advertising

Takeaway

• Online Advertising is Important in B2B– Many decision makers use search engines– Be aware of the decision process

• Social Networks and Virtual Worlds are Emerging Areas– Ideal environment for building and managing

relationships

• The Web as an Advertising Medium– Each site is a potential buyer and seller at the same time– These transactions involve B2B interactions

Industrat Final Round

Presentation Guidelines– 15 minutes, including questions and the following:

• What was your original strategy?

• What went wrong (if any)?

• What was the corrected strategy?

• What is the single biggest strategic mistake you made?

• How did you work together as a team?

• What was your experience in building partnerships?

• Tell us about your competitors

• Provide forecast of your total unit market share for Korex and Lomex after period 10

– I will transfer you all existing market research before running the last period. You can access it in the decision software: “information > Receive extra market research” on the top menu bar. Then, your Decision Support contains all the data and charts.