Magazine article Marketing

Wake Up to Web Brands

Magazine article Marketing

Wake Up to Web Brands

Article excerpt

European firms are fast falling behind their US rivals when it comes to brand building on the Internet

North American companies are investing heavily to establish powerful 'cyberbrands' on the Internet, according to online business specialists. European companies have to act quickly or they will be priced out of the global market. "UK businesses have got to wake up. There is no time to waste," says Peter Matthews, managing director of Nucleus Design.

His concerns are borne out by 'The Internet Retailing Report' from Morgan Stanley. By 2000, the company suggests a "conservative" usership of 150 million people contributing retail sales worth $35bn ([pounds]21m), with business-to-business sales worth $70bn to $90bn ([pounds]42.4bn to [pounds]54.5bn). Although European usage has grown by 222% in two years and Asia by 550%, the two regions still only account for 22% and 6% respectively. North America accounts for two-thirds of users.

The greater maturity of the American market has combined with a greater willingness to make longer term investments to give US companies an invaluable head start. "The UK is only two years behind," says Matthews, "but that's a long way in a market developing so very rapidly."

"The US has built up unrivalled levels of technical virtuosity in the cybereconomy," agrees Michael Page, director of interactive services at Acxiom. Security has played a major part, with help from the US State Department, which has used the argument of state security to prevent 128-bit encryption keys - the highest level of security technology - being exported. The Supreme Court recently reversed that decision, allowing companies here to process online orders more rapidly and give European consumers a greater perception of security.

"America provides an excellent test market," says Myer Berlow, senior vice-president of interactive marketing at America On Line, the largest online service in the world. "Europeans can learn from our mistakes and replicate our successes. But you will have to do so quickly. We have moved on from the second stage of viewing the Net as an advertising medium. It has reached the third stage of being a transactional medium."

"Shopping-related activities are becoming increasingly popular online," says the Morgan Stanley report. "A recent CommerceNet survey indicated that approximately 73% of Web-using respondents spent part of their online time searching for information about specific products or services. Of this group, 53% went on to make an actual purchase (either online or offline) and 15% actually made a purchase online."

Garage sales

The most potent demonstration of the Internet's business potential is the book selling site Amazon. Launched in July 1995 from the garage of Jeff Bezos, it achieved sales of $27.9m ([pounds]4.8m) in the second quarter of this year.

It offers more than 2.5 million titles, many at substantial discounts, thanks to its highly automated structure and low overheads. Only the top-selling 700 titles are held in stock (where they have a turnover 20 times higher than those stocked by America's leading conventional book retailer).

Although it exists only within the cybereconomy, Amazon's level of brand awareness and loyalty "should create a barrier to entry for competitors", according to Morgan Stanley. In less than 30 months, Amazon has achieved a market valuation of $400m ([pounds]242.4m) and recently tied up an exclusive advertising deal with the Yahoo search engine worth $50m ([pounds]30.3m) over three years.

Similar commitment is shown by US companies such as 1-800-Flowers, Preview Travel and sharedealers Charles Schwab. Having set up the spin-off brand Eschwab, the company is achieving an online trading turnover of more than $100bn ([pounds]60.6bn).

Self-selected audience groups for individual Web sites allow precisely targeted campaigns using many different online advertising techniques. …

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