The Medium Becomes a Market

By Howard Rheingold

...a radical change in the power balance between consumer and advertiser.

"The medium is the market," claim Donna Hoffman and Thomas Novak of the Owen Graduate School of Management,the first marketing theorists I've come across who actually know how to use many-to-many media. Now that billions are being invested in the commercial version of cyberspace, actual clues about how the new media market might work are rare and valuable. Hoffman and Novak's Project 2000 Research Program on Marketing in Computer-Mediated Environments is one good place to find those clues.

I had first encountered Hoffman on the WELL a couple years ago, when she stepped right into ongoing bull sessions about the commercialization of the Internet and authoritatively debunked fallacies. It quickly became evident that she knows marketing theory, she knows research methodology, and she and her partner had come upon a vast new territory where no school of management had gone before. While the usual online pundits speculated about what it all might mean, they had some tools and methods for actually doing research. And what they discovered might mean a radical change in the power balance between consumer and advertiser.

Citing speculation by other researchers that web-based marketing sells "ten times the units for 1/10 the advertising cost," Hoffman and Novak recently wrote, in "Commercial Scenarios for the Web: Opportunities and Challenges":

"Anecdotal evidence suggests that Web-based commercial efforts are more efficient and possibly even more effective than efforts mounted in traditional channels....As a commercial medium, the Web offers a number of important benefits which can be examined at both the customer and firm levels ... Buyer benefits arise primarily from the structural characteristics of the medium and include availability of information, provision of search mechanisms, and online product trial all of which can lead to reduced uncertainty in the purchase decision. Firm benefits arise from the potential of the Web as a distribution channel, a medium for marketing communications, and a market in and of itself. These efficiencies are associated with Web technology and the interactive nature of the medium."

Hoffman and Novak point out that the online marketplace is radically different not just for it's many-to-many global reach, but because it is possible to collect detailed information about consumer decisions. To the companies who want to sell products and services, information about what their customers want, and who their customers are, is golden. New communication media make possible new markets and at the same time make possible new methods of information-gathering about the people who make up those markets. Suddenly, old definitions of "privacy" and "trust" are up for renegotiation.

When today's infotainment consumers click our way through the web, advertisers have to win and retain attention in new ways.

Having captured and retained our attention, the web advertiser has to give us, customers who have extraordinary power to switch to other vendors at any moment, a continuous stream of good reasons to come back.The web-based market of the future, if Hoffman and Novak are to be believed, is one that is very closely attuned to, judged by, and dependent upon the perceptions, beliefs, and decisions of the consumers.

All who are trying to envision commerce and culture in the online future might benefit by looking through the lenses provided by the social sciences. Social scientists can't do magic, but they do have some tools for looking at data and creating credible models of what might be going on. In the absence of real data, ignorance feeds rumors and fear. Stupid legislation and bad business planning results. Hoffman and Novak's research is not the end of the quest for better data about how cybermarkets behave, but it's a start.

We need ethical discussion as well as market research and political debate to truly understand what we are getting into, because questions of privacy and trust involve our deepest cultural values.

If we are going to put our privacy up for sale, citizens ought to understand the terms of the agreement.

Last modified October 28, 1995.
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