Topic One (Advertising and the Internet)

With the maturation of the Internet and the realization of potential commercial profits, the importance of advertising has become paramount.  In the past, Internet advertising has consisted of a variety of banner ads.  These advertisements have varied in complexity and effectiveness.  However, in general, they have consisted of static images, with the occasional rotating icon, in a vain effort to attract the attention of the hapless Internet user and to lure consumers to the product home page.  In order to continue to serve as an effective advertising medium, banner ads are being forced to evolve in response, and in anticipation of, changes in consumer behavior and commercial marketing strategies.

In many aspects, the most notable characteristics of past banner ads have been their mundane nature. A television commercial or magazine advertisement that leaves no impression with the consumer, nor creates any consumer interest, would quickly be eliminated.  However, the same standard has not been applied to Internet advertising.  The result has been the creation of banner ads, simplistically designed and ubiquitously placed on an incredible variety of web pages, whose sole intent is it to try to get the consumer to click on the ad and go to the product page.  This approach had proved successful in the early days of the Internet, most easily observed in the advertising campaigns of Amazon.com and BarnesandNoble.com.

The increase in available bandwidth and the increasing sophistication of the average Internet user has forced Internet advertising to deviate from past practices and to identify new alternatives.  No longer will random mass placement of a banner ads be sufficient to entice customers.  This has been conclusively proven by studies measuring the average click-through rates, which measures the number of consumers who actually click on a banner ad to visit a specific site.  According to PC Computing, the click-through rates have dropped to an all-time  low of 1 out of every 100 visitors to the portal site on which the banner ad is located.

As a result of changing customer behavior, companies will be forced to utilize, or to develop, new technology that will allow for more interactive and entertaining advertising.  This trend is most easily observed in the new popularity of Enliven 2.0, produced by Narrative Communications.  This software allows an advertiser to create an interactive ad on which questionnaires, quizzes, games, or any other interactive element may be incorporated.  In addition, the customer response is recorded and saved for demographical database creation.  Most surprisingly, this entire procedure takes place on the host site and does not force the customer to leave and visit a product site.  A recent study by Excite@Home and market researcher IPSOS-ASI has found that “interactive broadband advertising, incorporating full-motion, multimedia video and animation” was more memorable to the Internet customer and increased click-through rates by 35 percent.  In addition, a survey conducted by Andersen Consulting reinforced the importance of banner advertising, claiming that it “was more effective than TV or radio in luring web shoppers.”

Not only will the advances in technology alter the advertising image, but it will also allow for a corresponding change in marketing strategy.  Rather than employing a strategy of placing the banner ads in every conceivable location in order to maximize market exposure, advertisers will be able to engage in database marketing in which they gather the necessary demographical information to target specific consumer groups.  The future banner ads will appear in the context of a site’s content.  Targeting will be based on demographics, geographical information, and buying and browsing behavior.  In addition, companies will be able to respond more quickly to consumer demands and provide more effective customer relationship management.

Despite the new improvements in Internet advertising, these alone will not ensure commercial success.  Internet companies are being forced to adapt to changing consumer behavior and to adopt a more holistic approach to sales.  According to CNN.com, consumers who purchase items on the Internet are now less concerned about rock-bottom prices, and more concerned about accompanying services, such as ease of use, deliverability, and reliability.  In addition, the growth of free ISP services and the increasing popularity of Internet use will continue to increase the number of potential consumers and the volume of sales conducted over the Internet.  However, advertising will be the major differentiating factor in attracting consumers to the various sites.  Companies that are able to adapt to the new means of advertising will have a considerable competitive advantage over their peers.
 
 

Topic Two (Virtual Integration:  The Company of the Future)

Without a doubt, the advent of the Internet has brought cataclysmic changes to the business environment.  No longer can businesses afford to remain static.  Companies must now anticipate and embrace change rather than respond to it.  In this environment, flexibility and adaptiveness are prerequisites for success.  Therefore, traditionally accepted business models and tenets are no longer applicable in many situations.  In addition, the instantaneous flow of information has provided managers with much more information about their operations and allowed for increased integration of business processes.  As a result, the Internet has enabled the adoption of a new business model in which technology and information are used to blur the traditional boundaries in the value chain between suppliers, manufacturers, and customers.

 The successful firms of the future will reap the advantages of being vertically integrated, without incurring the associated costs, and, at the same time, achieve the focus, agility, and speed of a virtual organization.  This will be done through virtual integration.  A virtually integrated company is one in which core business functions, as well as non-core functions, take place in external organizations.  Virtually integrated firms are so tightly organized that it is often difficult to determine where one company ends and another starts.  As a result, the firms operate as a single organization with shared goals, processes, and, oftentimes, corporate cultures.

 The purpose of creating a virtually integrated company is to gain strategic competitive advantage with existing resources.  It is nearly impossible to excel in all areas needed for the creation of a product or the provision of a service.  As a result, firms are most successful when they are able to focus on core business functions in which they are experts.  In addition, increases in complexity shifts advantages away from broad-based organizations towards specialists.  Thus, by concentrating resources on particular functions, the companies achieve something akin to economies of scale.  Furthermore, the speed at which modern technology is changing creates an unpredictable environment.  This rapidity of change combines with high levels of complexity to create uncertainty and risk.  Therefore, by limiting the firm’s operations to the core areas in which it unquestionably excels, it is possible to create a sustainable competitive advantage and minimize the exposure to risk and uncertainty.  In addition, this focus enables the firm to recognize and implement customer requirements at a much faster pace than previously accomplished.

The successful application of a virtually integrated company will be characterized by the competitive performance of essential elements of product development, manufacturing, and sales by a plethora of companies, each utilizing their particular expertise in a specific area, and all reaping the rewards.  Due to the continued growth of the Internet and eCommerce, financial and technical integration between customers and suppliers is growing.  This model is already illustrated through an examination of the electronics industry.  Cisco, long considered the market leader for Internet-routing gear, only has three manufacturing plants for high-end equipment and prototypes.  All other products are made by contract manufacturers.  In fact, many Cisco products are never even touched by a Cisco employee.  Another example is observed through the practices of Ericsson, a Swedish telecommunications firm, in which non-premium products are outsourced.  This trend has led to the prediction of “vertical disintegration” (Economist, 2/12/00) within the electronics industry, in which traditional firms focus on marketing and product development while manufacturing is performed through global suppliers.  If this trend is extended to its logical conclusion, in which firms concentrate on their areas of respective expertise, then the virtually integrated paradigm emerges.

Inherent with the creation of virtually integrated companies is the formation of portal sites or “market makers” that will facilitate the interactions among the various companies.  It is of no use for a firm to possess a particular specialty if it cannot access other firms with complementing areas of expertise.  In addition, the size of the Internet and the number of users creates a chaotic environment in which it is difficult to locate all potential partners and compare them in order to create the most advantageous combination.  Thus, a forum must be established in which a firm can approach other firms for the purpose of forming alliances in the creation of a product.  However, this forum will serve as more than a meeting place.  Since the ultimate goal is to maximize profit through a high quality, low cost product, firms with competitive advantages in a certain specialty will excel at the expense of less competitive firms in the same area, creating a laissez faire environment rewarding the efficient and innovative.

These business to business markets are quickly growing in size and importance.  Already, a number of marketplaces have emerged in obvious areas such as chemicals, office supplies, oil and gas, coal, and electricity.  The sole purpose of these markets is to bring buyers and sellers together and ensure that both parties fulfill their ends of a contract.  E-Steel, due to open in the second quarter of this year, is a perfect example of this concept.  In North America alone, there are 30 major steel producers, 3,000 service centers, and 100,000 processors and fabricators.  Thus, e-Steel has overcome the prohibitive vastness of the steel market and will provide easy access through which large and small companies alike will compete in their respective business functions.

The presence of the Internet and the integration of technology will make the formation of the virtual company inevitable and will irrevocably transform the traditional business model.  In the future, supply chains will consist of blurred alliances of companies, each performing a specific service.  The alliances will be constantly shifting to take advantage of existing conditions and changed as the competitive environment is altered.  This flexible and responsive environment will force firms to compete solely upon their respective areas of expertise, rather than an array of business functions.  The result of this will be a democratizing effect in which large and small business compete electronically based upon the quality of the product they can provide, with the ultimate winner being the consumer.
 
 

Topic Three (Internet2)
Without a doubt, the introduction of the Internet has been one of the great accomplishments of the twentieth century.  The Internet has revolutionized the way in which business transactions are done, indelibly altered the methods of traditional communications, and fundamentally changed the entertainment and media industries.  The rapid acceptance of the Internet has spurred the growth of new technology, each aiming to achieve faster speeds, higher quality, or better functionality.  Although existing Internet infrastructure has proven to be acceptable for most purposes, there are limits to potential applications and usefulness.  Thus, in an attempt to create the next generation Internet, the Internet2 (I2) initiative has been created to develop advanced network applications and technologies with the overarching goal of accelerating the speed and multimedia content of tomorrow’s Internet.

Internet 2 is a nonprofit consortium of 170 universities working in cooperation with over 60 leading companies.  Managed by the University Corporation for Advanced Internet Development (UCAID), Internet 2 is currently off-limits to the general public.  As explained by Douglas Van Howeling, CEO of the UCAID, “We’re a halfway house for Internet technologies.”  Internet 2 researches are focusing their efforts on three specific areas of development:  higher bandwidth, multicasting, and guaranteed delivery and performance.  The goal of the research is to allow for the transmission of media-rich information at higher rates.  This will be achieved not only through the creation of faster networks, but also through the introduction of powerful new applications.

The current network that supports Internet 2 operates at approximately 2.4 gigabits per second.  Nicknamed Abilene (after the railhead in Abilene, Kansas that opened the western U.S.), this network is almost 45,000 times faster than the typical modem.  These speeds are achieved through the use of new Internet Protocols and network configurations.  Rather than the current Internet Protocal (Ipv4), I2 uses Ipv6.  Ipv6 utilizes a different package scheme, incorporating native multi-casting, high reliability, and high capacity along with quality of service controls.  As a result, Ipv6 will allow applications requiring high bandwidth to coexist with each other simultaneously.  In addition, the inclusion of multi-casing within IPv6 enables users to send one content packet to many locations, rather than the current method of sending many packets to many locations, and/or send data with guaranteed delivery and performance.  Therefore, real-time data can now be utilized in real time.

The IPv6 protocol is not the only novel facet of I2.  The network configuration has also been altered.  Rather than building high bandwidth connections to each other, I2 members utilize a gigabit capacity point of reference (gigapop).  The gigapops is a high-capacity, state-of-the-art interconnection point where I2 participants can exchange advanced services traffic with other I2 participants.  The advantage of this network is easily apparent because individual institutions do not have to maintain connections among themselves.  Instead, they simply have to build a connection to the gigapop which is already connected to the other member institutions.  Thus, the institution can guarantee delivery of high bandwidth data while only paying for the connection to the gigapop.  This is illustrated in the following figures.

The implications of this technology are substantial.  Since the I2 consortium has tried to employ currently available technology and to avoid proprietary solutions in order to promote full access to data on network performance, it is expected that the costs for the creation and maintenance of an I2-type network will continue to fall, allowing for the utilization of the network by average people.  The implications of this are enormous.  A network such as this could enable such activities as telemedicine in which a surgeon in New York remotely operates on a patient in Los Angeles.  In addition, real-time video conferencing will be readily available and full-length movies with theatre-like sound will be easily obtainable.  There are even more futuristic technologies being developed, such as the research at the University of North Carolina-Chapel Hill in which scientists are learning how to transmit the sense of touch.  If even a few of the current applications under development prove to be viable, the impact could be substantial.

 Internet 2 represents the next generation of the Internet.  The introduction of this technology promises the creation of unforeseen opportunities and the adoption of radical new technology.