New ways of doing business

The pattern that is emerging for the commercial internet has close parallels with the business models that have prevailed in the television industry, which are largely based on advertising revenues. While all existing models will certainly continue to be used on the internet, it is innovation in advertising techniques that will drive growth over the next few years.

All markets are sensitive to price, so the advert-funded approach is a highly effective method of customer acquisition, but care is needed in implementation to ensure the advertising is not over intrusive. Happily, there are many ways of generating value from traffic being developed that do not involve unwelcome adverts.

Proactive promotion of products or services to meet customers’ known needs discovered from contextual information is usually well received. Selling data on customer activity to provide this type of information is another source of revenue. A well thought out strategy for proactive customer engagements can significantly improve the service delivered while attracting revenue from a variety of product suppliers.

What is needed is an infrastructure for application developers that enables them to take advantage of these revenue-generating opportunities, share customer data and provides a platform for their applications. So who will provide the huge investment necessary to create this environment?

The answer is the major portals. Companies like Google and Microsoft are expanding their services to meet the dual needs of the user population, who want usable access to the overwhelming choice available on the Web, and the application providers, who need an infrastructure that gives access to revenue earning mechanisms and a route to market. There are clear signs of this massive investment taking place now and the infrastructure will be fully operational by 2010.

The forces driving these developments are compelling. Major internet service providers know a tremendous amount about their users through their search, buying and email activities. This knowledge can be used to provide a highly personalized and valuable service to the user, encouraging loyalty. In addition to intelligently bringing all the capabilities of the Web to the user, by providing a cooperative platform for applications and sharing information with them, it can further refine the service it delivers and gain better marketing data.

A natural consequence of the model is that, in the same way as TV networks pay to present the best programs in order to improve ratings, internet service providers will pay, in some form, to attract the best applications. Providing revenue earning methods and marketing facilities for application developers will become important incentives. Small and new application providers will benefit the most from this trend as the internet allows niche products to reach an enormous, worldwide audience with low costs.

By effectively managing the internet for the users, application providers and product suppliers, the aim of the major service providers is to establish the largest possible customer base, thus controlling a greater share of the global advertising spend.

Conclusion