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Marketing in the 
internet - as seen from Italy

by Giancarlo Livraghi


No. 6 - July 23, 1997
1. Editorial: the technology delusion
2. Building net culture
3. How to be found
4. Italian companies on the net
5. Net advertising in Italy
6. Small companies and innovation
7. The Bonn Declaration
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1. Editorial: the technology delusion
As a “believer” in the new avenues that new technologies can open for all sorts of companies (as well as individual people and professional organizations) I am quite frustrated by the daily experience of the gap between potential and reality; that is not narrowing, but widening, because the glitter of more and more complex technologies, of more and more powerful machines, of software fattened all the time by adding unnecessary functions... is leading an endless chase that doesn’t seem to be heading anywhere.

For over a decade I have been involved (in the service of major companies in that industry) in the complexities of the Information Technology market. Several years ago we made a rather strange discovery: «This is the only market - we said - where sellers don’t know what they are selling and buyers don’t know what they are buying». Over time, of course, things have changed: companies, large and small, have a better understanding of what they need. We have more “mature” customers; enterprises, professional groups and individual people have learnt - to some extent - to understand what they expect from electronic equipment and systems. There is improvement; but not yet a substantial change. The evolution of technology is so fast that that both providers and users are in a state of constant confusion.

From a historical and philosophical point of view, such a chaotically innovative evolution can be fascinating; but in practice it creates more problems than it solves.

If we shift our sights from information technology to information networks, it’s even worse. As a widely available resource, it’s very recent; it would be quite strange if in such a short period a coherent market had been able to develop. In other sectors, where the need-performance process is more linear, a new product or service can be fully understood by its users in a few months. In this case, no: because the general concept of “information network” (be it internet, intranet, extranet or whatever other catch-word will be coined) includes a number of quite different services and user benefits - some of which, probably, still to be discovered. The turbulent evolution in telecommunication systems make it all even more complicated.

A few days ago, I brought back to life an old computer. Without getting into technical details... it has twenty times less power and hard disk capacity, and ten times less modem speed, than the cheapest machine in a store today. It would be scorned by any child who wants to play a modern game. I gave it to a friend’s daughter, who wants it for school and (luckily) has very clear ideas about what she really needs. With a bit of care (such as not loading unnecessary functions) we’ve put in everything that serves the purpose - including some small but amusing games - with good diskspace to spare. It works, and she’s happy. Of course it’s not a final solution. One day her needs will grow; her parents will have to buy her a new computer. But she will know exactly what she wants: her family will pay much less than what it would pay now for comparable performance - and make a much more intelligent and appropriate choice.

The “moral” may seem obvious. 99 percent of companies and people could satisfy their needs with a fraction of the power they are buying and with less baroque (so less fragile) software: and so not only save money, but also the downtime due to the tantrums of unnecessarily complex software - and several problems due to conflicts and misunderstandings between people and technologies. That’s true. But - if it’s uselessly expensive and risky to rush too far ahead with technologies, sooner or later we have to adjust to the standards of the market, that (whether we like it or not) keep changing at a fast pace.

I think the central point is somewhat different.

The real problem is that too often we invest in equipment and technologies before we know what we want, and we overlook the two crucial issues: a clear and flexible definition of our needs, and the cultural development of people (that is not obtained by crash technical training, but by a gradual growth of habit and confidence). So we lock ourselves too soon into a system; and often discover, too late, that was not the right one for us.

There are also situations in which the solutions are “potentially” correct, but don’t work; because nobody (often including management) has really understood them and shared in the decision. People that feel constricted by “top down” imposed technologies put up all sorts of resistance; EDP technicians lock themselves in their “power islands” and don’t know how to communicate effectively with the rest of the staff and motivate people. The organization drops into a dismal state: one of the best experts I know calls it “a full-scale cultural emergency”.

One of the key factors in this dangerous and confusing state of affairs is the clumsy way in which many suppliers market their goods. In countless conventions, conferences and presentations we hear the same bombastic promises. «Buy our fantastic Ultrabusiness system - says the supplier - and all of a sudden everything in your company will work perfectly». That’s never true. Equally false is the promise of those who say «Let me fix you up a homepage, the world will knock on your door and cover you with gold». And so is the threat of the security vendors: «If you don’t install my protection system hordes of saboteurs will paralyze your organization, bands of spies will capture your secrets and gangs of thieves will steal your money».

My advice to companies (or people) is simple. Don’t listen to the witch doctors chasing you with magic elixirs and “good for all” solutions. The sequence is problem-solution, not solution-problem. The hierarchy is people over machines, not vice versa.

First of all, analyze your needs. Then discover which people, in your organization, are more open to innovation - and can more easily gain confidence with the solutions you have chosen. Help them to spread familiarity among their colleagues. Move one step at a time... the software you don’t install now, because you don’t yet need it, in six months’ time will be much less expensive (or, for the same price, will be improved - and, to some extent, de-bugged). More importantly, in the meantime you will have a chance to understand what you really need, and choose a solution that better fits your organization and people. You will have a more natural flow of the person-machine symbiosis: because people, with their direct experience, will help you to choose; and because if they feel part of the process they will be much less conflict and resistance when the new systems are in place. You will have lest waste, fewer headaches, fewer technical problems, fewer conflicts - and better efficiency.

Simple, isn't it? But I wonder why it's so seldom done.

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2. Building net culture
In spite of widespread perplexities, many companies still seem to want to be on the net as fast as possible, even if they don’t know why. It’s difficult, for instance, to understand if the fast growth of Italian hosts reflects a healthy development of the internet or just a rush to “be there”.

Chasing “fashion” is not just useless. It can be positively dangerous. It can antagonize customers and prospects; or lead to disappointment, so the tool is abandoned before it’s understood.

I think the right strategy is to plan and think; not only on specific and restricted objectives, but on a broader understanding of the values that a company can develop, and communicate, with a good and deep understanding of the opportunities that the net can offer.

As we have seen, the net is still small. But it’s growing, changing, and often unpredictable. There’s the time to learn and experiment; but it’s better to start early, to be well prepared when these tools will offer to our company (but also to competitors) greater practical opportunities.

The first step, as I see it, is to place the problem at the right level in the company’s strategies. A study published in October 1996 indicated that in eight out of ten companies in Italy that had a website the initiative had come from the EDP department; in one case out of ten from top management, in three in a hundred from marketing or communications. I don’t think things have changed much since then.

Once again, we see that the management of information is organized upside down: technologies prevail over strategies and human and organizational needs. It should be the other way round.

The second (and basic) step is to create as much familiarity and experience as possible: encourage people (especially in communication, marketing, client service, internal and external relations) to have direct experience of the net.

In addition to that, I think it would be useful to have dedicated groups concentrating on how the activities of the different functions in the company relate to the options offered by the net, and thus understand needs and opportunities across departments and roles. I would suggest that these groups be made up with people with an attitude for human relations and an ability to put people’s needs and idiosyncrasies over technology. There is much more technology available than we can possibly need; what lacks is the human ability to use it effectively.

The task of these groups should be to identify the crucial nodes of connection between the company and the world (internal and external) and the service values that can be generated. They should check their deductions with all functions in the enterprise - and then report directly to top management. I can’t think of any company (or public or private organization) where such an analysis would not lead to substantial savings, better efficiency and probably the discovery of new routes for expansion.

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3. How to be found
Our “window” on the net is not on a busy street. It’s hidden in a place that no people can find unless they have the address. So... the problem is to be found.

The first thing that comes to mind is to be found by search engines. That is relatively simple... but results are not immediate, we need to plan properly. If we place the right key words, sooner or later the engines will find us. Several search engines offer us an opportunity to feed in information about our site. The big “automatic” engines, that churn out everything, are the easiest to get into; but so busy that we could be lost in the crowd. The more selective ones, of course, will need to be persuaded that we are worth their attention.

The choice of key-words is not easy. We need to check out the engines and see if and how we are found. There are techniques that make it easier for search engines to find our site; they may help, but only experience and constant checking can really teach us how to improve.

Of course we can buy banners; but that, too, may not be as easy as it sounds. We need to understand which are the best sites for us: that is, the ones visited by people who are interested in what we have to offer.

There are other ways; less simple, but more effective.

One is quite obvious: placing our website address in all our communication. Not only in advertising but on messages to staff and to outside relations; on our letterhead, fax header, press releases, etc. This might sound stupid, but it’s surprising how many companies forget to do it.

There are links. It might be time-consuming, but the more good sites on subjects related to ours we can persuade to link us, the more traffic we shall get. Some may want money. Others may be interested in an exchange of links. In any case, we need to choose them well.

There are magazines, directories and catalogs - on paper and online.

But, believe it or not, the most powerful tool is personal contact.

Research data are contradictory. Some say the most used tools are search engines; some that the primary source for finding new sites is personal advice. Both may be true, depending on the type of search. But in any case a successful site is one that establishes a relationship with visitors that keep coming back.

If someone finds our site interesting, he or she not only will return, but will also tell friends. Surfing can be cumbersome and time consuming; quite often people seek the advice of other people. If we take part in newsgroups, lists or forums related to our subject, we can learn a lot - and also find opportunities to mention our site (without spamming or doing anything improper).

Above all... we need patience and a continued commitment over time. Pleasant surprises are always possible, but it’s better not to expect instant results. We need to establish genuine relationships, not with “all” people but with those that are interested in our subject. This is slow and time consuming, but sets strong foundations on which to build a long-term presence. The net will grow, seeds well sown today will be trees: a competitive advantage over any late-comers trying to get into out territory.

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4. Italian companies on the net
The third Nielsen WebSites census (the data are not available online) found 4,764 websites of Italian organizations, with a considerable increase (but slowing):
1st report 1996 2st report 1996 % growth 1st report 1997 % growth
2,855 3,988 40 4,764 19
  • A little story of five books

    I don’t think it’s necessary to get into a rather elaborate analysis of why “only” 4,764 websites were found in relation to 16,000 Italian domains - and 242,575 Italian hosts counted by RIPE in June. It’s not easy, either, to understand how these figures compare with the worldwide total of 650,000 websites estimated by Matthew Gray of MIT.

    Tiny as it may seem when compared to the development in other countries, this is not a small number in relation to the general weakness of marketing communications in Italy. For instance (though this is a comparison between quite different things) Nielsen points out that there are approximately 5000 companies in Italy with a “traceable” investment in advertising. Also, this figure is probably “understated”. While, as we have seen, other data concerning the net are grossly exaggerated, in this case “real” figures are likely to be larger (as confirmed by Nielsen). This census does not cover Italian companies with an “American” address (such as .com), small in number but relatively large in size - nor those that are “hosted” on someone else’s site.

    The picture becomes less encouraging when we look at how these sites are used. According to Nielsen, 76 percent of sites is “commercial”; the “functions” are:

    2627 sites with a pre-sell function (54%)
    222 sites offering post-sell service (5%)
    339 sites selling goods and services (7%)
    (Ten percent “not classified” is quite normal in such an analysis)

    We can’t tell from this analysis how many of the “pre-sell” sites are offering a relevant information and customer orientation service, and how many are just “image”; but Nielsen comments that most Italian websites fall in the latter category. It’s quite visible that very few companies use the net to provide customer assistance.

    By type of goods or services, the “top ten” categories are:

    Information technology 1143
    Services 908
    Manufacturing 590
    Publishing 488
    Office 357
    Fashion 181
    Real estate 152
    Home furnishing 138
    Finance/Insurance 125
    Travel 122

    Some of these categories are “generic” and not easily classified (“services” is somewhat vague and “manufacturing” includes whatever industrial goods are not included in any of the major categories - mostly business to business). The dominance of information technology is quite obvious; but if we consider how many sites (in general) are selling or providing service, we find that even in this sector the active presences are rare... over 70 percent of the information technology sites don’t offer goods or services on the net, nor provide customer assistance. Quite relevant is also the absence of other sectors, including several that are very relevant in the economy but not in the “top ten” on the net. Overall, the picture of an “immature” market.

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5. Net “advertising” in Italy
In a press conference in Milan on July 10, Nielsen presented WebAudit: a tool for the auditing of “contacts” obtained by “advertising” on the web. This is an Italian initiative; of course in the long run the objective is to have an international system, but at this time projects are being developed independently in individual countries.

We don’t need to get into the rather complex technicalities: the system appears to be quite sound and reliable. My only comment is that this audit, while it can be useful for companies that want to check on what they are paying for when they buy banners, is essentially based on the “one way” concept of traditional advertising (and likely to satisfy the notorious “number anxiety” of executives in large corporations). The evaluation of interactive communication, of course, is a different matter: best handled by a company’s own tools and perceptions.

On that occasion, there was a short discussion on the size of the online “advertising” market. There is general consensus on two things: it’s small and there are no reliable measurements. It’s not surprising that the larger investor, also in Italy, is Microsoft (“it is said” that it’s spending 100 million lire - US $ 60,000). A “guesstimate” of total net advertising revenue is below one billion lire - $ 600,000. Approximately 0.01 percent of advertising investments in Italy.

Once again, it’s quite clear that traditional media have very little to fear from the competition of “new media”; and online newspapers, as other net activities supported by advertising, are sound strategic decisions but are unlikely to have a good short-term return on investment.

If this problem is so well known in the United States (and also confirmed by a recent article in Italy’ leading financial newspaper)... one can easily imagine how critical it is in Italy. According to an estimate by Jupiter Communications reported by Cyberatlas, nearly 98 per cent of online “advertising” investments worldwide go to American sites:

“Online Ad Revenue”
(thousands of dollars - 1997 estimate)
United States Rest of the world
1,101,146 24,919

The same source estimates that online advertising revenue is less than a million dollars in the UK and Germany - countries with net development four times larger than Italy.

If we consider that export is the most promising use of the net for many European countries, it seems likely that also in coming years investments will go to destination rather than home markets - or to the large (predominantly American) systems used globally as reference points for internet “navigation”.

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6. Small companies and innovation
On a subject that is close to my heart (the “global” opportunities for Italian enterprises on the net) there was an interesting article by a leading economist, Paolo Sylos Labini, in La Repubblica on July 7. (I can’t link it, because Repubblica, as most newspapers do, provides only part of its content online and only for a limited time). Here are a few quotations:

For over twenty years economies of scale, and therefore large companies, have been becoming less dominant... This means that the growth of occupation is more and more based on the growth of small and medium companies. The decline of economies of scale is driven by increasingly diversified customer needs... and by the spreading of electronic technologies, that favor economies of specialization...

Here Italy has an advantage: our economy has always been based on relatively small companies. The advantage, however... is largely potential, because our small companies are predominantly traditional and the Italian production system is not yet characterized by innovative companies...

We need an effort to promote the creation of small innovative companies... as an essential part of policies to defeat unemployment...

I find these observations quite interesting. But the perspective may be too narrow. Innovation “with technology” is not necessarily based only on “technology goods”. Of course there are Italian companies, large and small, that have demonstrated their ability to compete globally in high technology; and it would be better if there were many more. But it would be dangerously restrictive to see that as the only opportunity for the growth of our enterprises in global markets.

As (I hope) I have been able to explain in several other issues of this newsletter, new communication technologies offer large opportunities of global expansion also for companies and crafts whose products or services may be seen as “traditional” - if they know, or learn, to use communication as a tool for marketing and service innovation.

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7. The “Bonn Declaration”
So far there was hardly any reporting in the press, and not much discussion on the net, of the declaration issued after a meeting of European Union Ministers and representatives of several other countries, including the United States, Canada, Japan and Russia, that was held in Bonn on July 6-8, entitled Global Information Networks: realising the potential.

One more statement of “good intentions” may not be particularly newsworthy. But I think this declaration is worth reading. It’s very long and rather boring; but it contains some quite precise statements (as far as this sort of document can go) on a number of specific issues concerning the economic and social potential of the “Information Society”.

Some parts of the “Declaration” may be questionable - such as a certain weakness and ambiguity in the defense of free speech. But in business areas it makes several relevant points: such as the reiterated emphasis on the role of so-called “SMEs” (Small and Medium Enterprises) in the Global Information Networks.

It seems, however, to have escaped the attention of the Ministers, as well as most economists and many other observers, that the opportunities offered by the information networks for globally competitive business (and thus economic growth and employment) are not limited to the more closely related industries, such as technology and content.

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