Principles of internet marketing jason miletsky

PRINCIPLES OF INTERNET
MARKETING

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


PRINCIPLES OF INTERNET
MARKETING
NEW TOOLS AND METHODS FOR WEB DEVELOPERS

JASON I. MILETSKY

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


Principles of Internet Marketing:
New Tools and Methods for Web
Developers
Jason I. Miletsky
Executive Editor: Marie Lee
Acquisitions Editor: Amy Jollymore
Managing Editor: Tricia Coia

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Brief Contents
v

Pref ace

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CHAP TER 1

An Over vi ew o f the Web

CHAP TER 2

Types o f Web Si tes

CHAP TER 3

So cial M e di a and Soci al Networki ng Si tes

CHAP TER 4

B lo g g in g . . . . . . . . . . . . . . . . 119

CHAP TER 5

Web-B as ed V i deo . . . . . . . . . . . . 149

CHAP TER 6

W ik is , RSS, Mashups, and V i r tual Worl ds . . 182

CHAP TER 7

U n der s t an di ng the Brand . . . . . . . . . 216

CHAP TER 8

Plan n in g a nd Dev el opi ng the Si te . . . . . 259

CHAP TER 9

E-Co m m erce Si tes . . . . . . . . . . . . 298

CHAP TER 10

Pro g r am s and Languages . . . . . . . . . 337

CHAP TER 11

Dr ivin g Tr af f i c: Marketi ng Strategi es . . . . 362

CHAP TER 12

Capt u r in g and K eepi ng an Audi ence . . . . 404

CHAP TER 13

Traffic Analysis and Measuring for Success . 430

APPEN DIX A

An alyzin g Si t e Traf fi c
In dex

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1

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. . 74

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. . . . . . . . . . . . . . . . . 459

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


Contents
vi

Pref ace
CHAPTER 1

. . . . . . . . . . . . . . . . . xii

An Over view o f t he Web

. . . . . . . . . .

A Brief History of the Web Through 2001 . .
A Brief History of the Web from 2002 Forward
Social Networking on the Web: Its Impact
on Relationships and Marketing . . . . . .
Trends and Demographic Breakdowns . . . .
Where Do We Go from Here . . . . . . . . .
Chapter Summary . . . . . . . . . . . . .

Key Terms . . . . . . . . . . . . . . . .
Review Questions . . . . . . . . . . . . .
Projects . . . . . . . . . . . . . . . . .
Endnotes . . . . . . . . . . . . . . . . .
CHAPTER 2

Types o f Web Si t es

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The People Behind a Web Site .
Owners . . . . . . . . . . .
Venture Capitalists . . . . . .
Creative Directors . . . . . .

Account and Project Managers
Programmers . . . . . . . .
Graphic Designers . . . . . .
Copywriters . . . . . . . . .
Marketers . . . . . . . . . .
Types of Web Sites . . . . . .
Web Portals . . . . . . . . .
B2B (Business to Business) . .
B2C (Business to Consumer) .
C2C (Consumer to Consumer) .
B2E (Business to Employee) .
Social Networking . . . . . .

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Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


CONTENTS
Informational .
Entertainment .
Chapter Summary
Key Terms . . .
Review Questions
Projects . . . .
Endnotes . . . .
CHAP TER 3

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So cial M e di a and Soci al
Net w o r k ing Si t es . . . . . . . . . . . . . 74
An Overview of Social Media and Social
Networking Sites . . . . . . . . . . . . .
The Rise and Dominance of Social Media. . .
Social Media Optimization . . . . . . . .
Social Media Marketing . . . . . . . . . .
Who Is Using Social Media and How? . . . .
Social Networking Sites: Types and Audiences
Generalist Social Networking . . . . . . .
Niche Market Social Networking . . . . . .
Social Bookmarking . . . . . . . . . . .
Chapter Summary . . . . . . . . . . . . .
Key Terms . . . . . . . . . . . . . . . .
Review Questions . . . . . . . . . . . . .
Projects . . . . . . . . . . . . . . . . .
Endnotes . . . . . . . . . . . . . . . . .

CHAP TER 4

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117

B lo g g in g . . . . . . . . . . . . . . . . 119
What Is Blogging? . . . . . . . . . . . . . . . . .
The Growth of Blogs . . . . . . . . . . . . . . . .
Types of Blogs . . . . . . . . . . . . . . . . . .
Who Blogs, Who Reads Them, How, and Why . . . . .
Blogging as a Marketing Strategy . . . . . . . . . .
The Benefits of Blogging . . . . . . . . . . . . .
The Benefits of Staying Involved in the Blogosphere .
The Pitfalls of Blogging . . . . . . . . . . . . . .
Requirements for a Successful Marketing Blog . . .
Chapter Summary . . . . . . . . . . . . . . . . .
Key Terms . . . . . . . . . . . . . . . . . . . .
Review Questions . . . . . . . . . . . . . . . . .
Projects . . . . . . . . . . . . . . . . . . . . .
Endnotes . . . . . . . . . . . . . . . . . . . . .

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Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

vii


CONTENTS
CHAPTER 5

Web-B as ed V i deo . . . . . . . . . . . . 149
Figuring Out the Format . . . . . . . . . .
The Flash (.flv) File Format: A Closer Look .
Who’s Watching What. . . . . . . . . . . .

Video as a Social Media Tool . . . . . . . .
Web-Based Video as a Marketing Tool . . . .
Off the Web: What Goes into Video Production
Chapter Summary . . . . . . . . . . . . .
Key Terms . . . . . . . . . . . . . . . .
Review Questions . . . . . . . . . . . . .
Projects . . . . . . . . . . . . . . . . .
Endnotes . . . . . . . . . . . . . . . . .

viii

CHAPTER 6

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150
155
157
161
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180

W ik is , RSS, Mashups, and V i r tual Worl ds . . 182
Wikis . . . . . .
RSS Feeds . . .
Mashups . . . .
Virtual Worlds . .
Chapter Summary
Key Terms . . .
Review Questions
Projects . . . .
Endnotes . . . .

CHAPTER 7

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215

U n der s t an di ng t he Brand . . . . . . . . . 216
Breaking Down the Brand . . . . . . . . . .
Distinguishing the Brand from the Company
The Importance of Branding . . . . . . . .
Brand Loyalty . . . . . . . . . . . . . .
Elements of the Brand . . . . . . . . . . .
The Brand Promise . . . . . . . . . . . .
The Brand Personality . . . . . . . . . .
The Unique Selling Proposition . . . . . .
Image. . . . . . . . . . . . . . . . . .
Consistency . . . . . . . . . . . . . . .
The Web’s Place in Brand Building . . . . . .
The Web’s Hybrid Status . . . . . . . . .
Individual Message Delivery . . . . . . . .
Increased Markets . . . . . . . . . . . .
Reinforcement of the Brand Message . . .
Heightened Consumer Interaction . . . . .
Chapter Summary . . . . . . . . . . . . .

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Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


CONTENTS
Key Terms . . .
Review Questions
Projects . . . .
Endnotes . . . .
CHAP TER 8

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252
253
257
258

Plan n in g a nd Dev el opi ng the Si te . . . . . 259
Getting the Site Started . . . . . . . . . . . . .
Developing the Idea . . . . . . . . . . . . . .
Defining the Site Objectives . . . . . . . . . . .
Needs Assessment . . . . . . . . . . . . . . .
Understanding the Audience . . . . . . . . . . .
Gathering the Information . . . . . . . . . . . .
How the Target Market Affects the Development
of a Web Site . . . . . . . . . . . . . . . .
Getting the Site Developed . . . . . . . . . . . .
Working with an Outside Company . . . . . . . .
Baselines: Design and Development . . . . . . . .
Web Site Navigation . . . . . . . . . . . . . .
Navigation Elements: Search Engines, Site Maps,
Tag Clouds, and Breadcrumbs . . . . . . . . .
Page Layout . . . . . . . . . . . . . . . . . .
Graphic Design . . . . . . . . . . . . . . . .
Content Development . . . . . . . . . . . . .
Chapter Summary . . . . . . . . . . . . . . . .
Key Terms . . . . . . . . . . . . . . . . . . .
Review Questions . . . . . . . . . . . . . . . .
Projects . . . . . . . . . . . . . . . . . . . .

CHAP TER 9

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296

E-Co m m erce Si tes . . . . . . . . . . . . 298
An Overview of E-Commerce . . . . . . .
Sources of Revenue . . . . . . . . . . .
Direct Sales . . . . . . . . . . . . . .
Indirect Sales . . . . . . . . . . . . .

Paid Memberships and Subscriptions . .
Advertising . . . . . . . . . . . . . .
Shopping on the Social Web . . . . . . .
The Store Layout . . . . . . . . . . .
The Shopping Cart and Check-Out Process
Intuitive and Personal Content Provision .
Feedback and Reviews . . . . . . . . .
Chapter Summary . . . . . . . . . . . .
Key Terms . . . . . . . . . . . . . . .

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Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

ix


CONTENTS
Review Questions . . . . . . . . . . . . . . . . . . . . 332
Projects . . . . . . . . . . . . . . . . . . . . . . . . 336
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . 336
CHAPTER 10
x

Pro g r am s a nd Languages . . . . . . . . . 337
Relevant Programs and Applications .

Graphic Design . . . . . . . . .
Site Construction . . . . . . . .
Blogs . . . . . . . . . . . . . .
Databases . . . . . . . . . . .
Relevant Programming Languages . .
HTML . . . . . . . . . . . . . .
CSS . . . . . . . . . . . . . .
Java . . . . . . . . . . . . . .
JavaScript. . . . . . . . . . . .
PHP . . . . . . . . . . . . . .
Ajax . . . . . . . . . . . . . .
ActionScript . . . . . . . . . . .
Chapter Summary . . . . . . . . .
Key Terms . . . . . . . . . . . .
Review Questions . . . . . . . . .
Projects . . . . . . . . . . . . .

CHAPTER 11

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338
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Dr ivin g Tr af f i c: Marketi ng Strategi es . . . . 362
The Individual Segments of Marketing
Advertising . . . . . . . . . . . .
Advertising Campaigns . . . . . .
Public Relations . . . . . . . . . .
Why PR Works . . . . . . . . . .
How the Web Has Changed PR . .
Direct Marketing . . . . . . . . . .
Promotions . . . . . . . . . . . .
Viral Campaigns . . . . . . . . . .
Chapter Summary . . . . . . . . .
Key Terms . . . . . . . . . . . .
Review Questions . . . . . . . . .
Projects . . . . . . . . . . . . .

CHAPTER 12

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363
366
371
377
379
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386
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402

Capt u r in g a nd K eepi ng an Audi ence . . . . 404
Keeping Visitors Interested, Engaged,
and Coming Back . . . . . . . . . . . . . . . . . . . . 405
Popular Web Retention Techniques . . . . . . . . . . . . 410

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


CONTENTS
General Design and Organization . . . .
Regularly Updated Content and Design . .
Blogging . . . . . . . . . . . . . . .
Voting, Polls, and Surveys . . . . . . .
Contests . . . . . . . . . . . . . . .
Loyalty Programs . . . . . . . . . . .
Wish Lists . . . . . . . . . . . . . . .
Ongoing Marketing to Existing Customers
Chapter Summary . . . . . . . . . . . .
Key Terms . . . . . . . . . . . . . . .
Review Questions . . . . . . . . . . . .
Projects . . . . . . . . . . . . . . . .
Endnotes . . . . . . . . . . . . . . . .
CHAP TER 13

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412
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Traffic Analysis and Measuring for Success . 430
Benchmarks for Success: Setting the Right Goals
Marketing Goals . . . . . . . . . . . . . . .
Web Site Goals . . . . . . . . . . . . . . .
Establishing Numbers-Based Goals . . . . . .
Site Tracking: Breaking Down the Measurements .
Google Analytics . . . . . . . . . . . . . . .
Chapter Summary . . . . . . . . . . . . . . .
Key Terms . . . . . . . . . . . . . . . . . .
Review Questions . . . . . . . . . . . . . . .
Projects . . . . . . . . . . . . . . . . . . .

APPEN DIX A

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An alyzin g Si t e Traf fi c
In dex

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431
431
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437
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446
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. . . . . . . . . . 452

. . . . . . . . . . . . . . . . . 459

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

xi

Preface
xii

Principles of Internet Marketing: New Tools and Methods for Web
Developers will help you understand the “why” behind the “how” of Web
site development. This book will help you see sites not from the developer’s perspective, but rather from the marketer’s point of view. It will teach
you about the importance of the brand and how that relates to Web site
development, the reasons sites are developed, how they are used to build
an audience, and most importantly, how companies use the Web to earn
revenue and build recognition among their desired audience. You will
learn the strategies used to drive traffic to a site, the tools that are available to keep audiences coming back (with a focus on social media tools),
and the role marketing plays in the building of a successful Web site.
As traditional marketing and business growth becomes more integrated with the Web, and the Web becomes a more central part of
every marketing strategy, the need for programmers and marketers to
improve communication between them becomes increasingly important. Of all the Web languages you already know, this book will teach
you one more: Marketing.

The Intended Audience
This book is meant to provide insight for anyone interested in gaining
an understanding of marketing strategy as it pertains to the Web—with
a particular slant toward the Web programmer. Although no specific
code will be used or referenced in this book, it is helpful to have a basic
understanding of how to program in HTML, or at least understand
HTML’s capabilities. Ideally, as you are going through this book, you
will be continually relating what you are learning here with the various
Web programming languages and techniques that you already know.
You should also have a good familiarity with the Web, and some of the
more popular Web sites, such as Google, MySpace, and YouTube.

Organization and Coverage
Principles of Internet Marketing: New Tools and Methods for Web
Developers provides a comprehensive framework for understanding the best practices for Internet marketing and successful

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


P R E FA C E

commercial-based Internet and Web projects. The first two chapters
provide general overviews. Chapter 1 reviews the history of the
Web as a commercial entity and the impact social media has had
on the Web. Chapter 2 details the roles and responsibilities behind
the development of a Web site as well as the different types of sites
that can be found on the Web.
Chapters 3 through 6 highlight different social media applications.
Chapter 3 reviews social media as a general concept and discusses the
reasons for its popularity before exploring social networking specifically. Chapter 4 provides a comprehensive discussion on blogging and
how blogs can be used in marketing. Chapter 5 focuses on streaming
video and the increasingly important role it is playing in the lives of
viewers and marketers. Chapter 6 rounds out the social media discussion with a look at other important tools including wikis, RSS feeds,
mashups, and virtual worlds—what each of these is and how each fits
into the social media universe.
Chapter 7 moves away from the topic of social media with a look at
branding. Coverage of this important subject includes a discussion of
a brand and why it is important, the elements that make up the brand,
and where the Web fits into the brand picture. Chapter 8 moves the
reader back to the Web with a look at the planning process including
subjects that need to be considered before development starts, such

as the concept, audience, design, navigation, and pros and cons of
outsourcing development.
Chapter 9 examines e-commerce—with a look at the various sources
of e-commerce revenue and how social media has changed the way
consumers shop on the Web. Chapter 10 looks at the types of programs and languages used in Web development, while Chapter 11
examines the means and methods for driving traffic to a site through
a variety of marketing methods including advertising, public relations, direct marketing, promotions, and viral campaigns.
Chapter 12 covers the importance of keeping users on the site for longer periods of time and enticing them to come back for future visits.
Finally, Chapter 13 completes the story by taking a close look at the
importance of measuring ROI (return on investment)—what variables
need to measured and how best to go about determining success.

Features
Principles of Internet Marketing: New Tools and Methods for Web
Developers is a superior textbook because it also includes the following features:
• Objectives—Each chapter begins with a list of objectives so you
know the topics that will be presented in the chapter. In addition

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

xiii


P R E FA C E

to providing a quick reference to topics covered, this feature provides a useful study aid.

xiv

• Interviews and Case Studies: Numerous interviews and case studies with professionals in and around the Web marketing field give

expert insight throughout the book, and provide a first-hand look
at important subject matter.
• Figures—Each chapter contains many figures, including screen
shots to illustrate the various concepts discussed in the chapter.
• Tables—Numerous tables throughout the book support the concepts with recent and relevant Web and consumer-based statistics
from highly regarded sources.
• Chapter Summaries—Following each chapter is a summary that
recaps the programming concepts and techniques covered in the
chapter. This feature helps you to recap and check your understanding of the main points in each chapter.
• Key Terms—Each chapter includes a list of newly introduced
vocabulary. The list of key terms provides a mini-review of the
major concepts in the chapter.
• Review Questions—Each chapter contains 20 multiple-choice
review questions that provide a review of the key concepts in the
chapter.
• Projects—Each chapter concludes with meaningful projects that
reinforce the concepts you learned in the chapter.

Teaching Tools
The following list supplemental materials are available when this book
is used in a classroom setting. All of the instructor resources for this
book are provided to the instructor on a single CD-ROM.
Electronic Instructor’s Manual. The Instructor’s Manual that
accompanies this textbook includes additional instructional material
to assist in class preparation, including items such as teaching tips,
quick quizzes, class discussion topics, and additional projects.
ExamView®. This textbook is accompanied by ExamView, a powerful
testing software package that allows instructors to create and administer printed, computer (LAN-based), and Internet exams. ExamView
includes hundreds of questions that correspond to the topics covered in
this text, enabling students to generate detailed study guides that include

page references for further review. The computer-based and Internet
testing components allow students to take exams at their computers,
and save the instructor time by grading each exam automatically.

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


P R E FA C E

PowerPoint Presentations. This book comes with Microsoft PowerPoint slides for each chapter. These slides are included as a teaching
aid for classroom presentation; teachers can make them available on
the network for chapter review, or print them for classroom distribution. Instructors can add their own slides for additional topics they
introduce to the class.
Solution Files. Password-protected solutions to all Review Questions and end-of-chapter projects are provided on the Instructor
Resources CD-ROM and on the Course Technology Web site at
www.course.com.
Distance Learning. Course Technology is proud to present online
test banks in WebCT and Blackboard to provide the most complete
and dynamic learning experience possible. Instructors are encouraged
to make the most of the course, both online and offline. For more
information on how to access the online test bank, contact your local
Course Technology sales representative.

Acknowledgments
I would like to thank everyone at Cengage Publishing who helped
make this book happen, in particular, Amy Jollymore, Tricia Coia,
Anupriya Tyagi, Heather Furrow, and Jennifer Feltri. I’d especially like
to thank Mary Pat Shaffer and Ann Shaffer—I know I wasn’t the easiest person to work with, and I really appreciate the great job you did
keeping me in line!
I would also like to thank all of the people who took time to interview

with me and let me share their ideas and opinions with the readers.
The insights that each of you shared represent some of the best information in the book, and I’m excited to have all of you be a part of it.
Thank you, Mom and Dad, for being supportive as always. If it wasn’t
for you both reminding me that I need to stop typing and have fun
once in awhile, I might have become glued to the computer! The
same goes for my good friends, Jackie, Chris, and Luz who are always
understanding and supportive even when I can’t spend as much time
with them as I’d like.
Of course, I need to thank my business partner, Deirdre Breakenridge, who not only contributed to this book with an interview of
her own, but has been a big part of shaping my own understanding
of social media. (And thanks to her daughter, Megan, for giving me a
hug when I needed one!) In addition, I want to express appreciation
for the PFS team who work extra hard and pick up the slack when
I’m off writing.

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

xv


P R E FA C E

I am also grateful to each of the reviewers who provided their insight
during this book’s development, including Natasa Christodoulidou,
California State University, Dominguez Hills; Vicky Hardin, Jefferson
Community and Technical College; Steven McClung, Florida State
University; and Denny McCorkle, University of Northern Colorado.
xvi

Finally, I want to thank Demitre and the staff at Eros Cafe in Rutherford, and Jerry and his staff at the Barnes and Nobles in Clifton, for

keeping the Diet Pepsi’s coming and letting me take up space for
hours every night and never complaining about it.
This book is dedicated to Gabriella, Matt, Michael, and Kathleen.

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


CHAPTER

1

An Overview
of the Web
In this chapter you will learn about:
The rise of the Web from obscurity to commercial
revolution
The evolution of the Web after the Web bubble burst
Social networking on the Web and its effect on social
relationships and marketing
Important trends and demographic differences in Internet
usage
Predictions for the future of the Web and how these
developments might further impact society

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


CHAPTER 1

2

An Overview of the Web

In the 1950s, conversation centered on the dinner table, school
dances, and chance meetings in the neighborhood. People socialized
by getting together with old friends and meeting new people face-toface. People shopped at stores in their hometowns and did their
banking with a trusted personal banker. News from around the world
took days, sometimes longer, before its impact was felt, and public
opinion was most often found on the Letters to the Editor page. The
world may not have been any more innocent, but for most people, it
was certainly smaller. A lot has changed since then. In the years since
Elvis Presley first rocked the world and sparked a cultural revolution,
technological developments and events have worked to open the lines
of communication around the world and bring us closer together
(though some may argue further apart). Nothing has been nearly
as powerful a protagonist in that change as the Web and its rapid
commercialization.
According to a February 2008 BusinessWeek article, a full 2% of all
new marriages in the U.S. are the result of relationships that started
on just one online dating site, eHarmony.com.1 Often, these new
relationships are between people who, due to geographic, career,
or schedule differences, would never have had the chance to meet
if not for the Web. Similarly, the neighborhood bank has fewer visitors. According to a December 2007 survey of Internet activities by
the Pew Internet & American Life Project, over 53% of all Internet
users now engage in online banking.2 On the surface, the Web has
changed the way we buy, sell, research, and explore. Looking deeper,
we see the true and lasting effect: as the Web has evolved into a single
source for instantaneous, global communication, it has radically
changed the way we live.

A Brief History of the Web Through 2001
In the 1950s, while the typical American was meeting his or her
friends at the soda shop on the corner, ARPA (Advanced Research
Projects Agency)—a division of the U.S. Defense Department—was
launched in response to Sputnik, the Soviets’ first venture into space.
Most likely, the original ARPA members would not have guessed
that the technology advancements they would soon make, including
computer networking and the first hypertext system, would rattle the
world just decades later. These innovations continued to come to life
through the 1970s and 1980s, out of the public eye, until at last the
commercial world was ready for them.
In June 1993, HTML was released and changed the world forever. For
the remainder of the 1990s, the “Web Boom” brought with it rapid
and dramatic changes both online and offline. Netscape, an early and

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


A Brief History of the Web Through 2001

popular Web browser, was released in October 1994. After its release,
Netscape dominated the way people viewed the Web, diminishing in
popularity only after Microsoft made a play for the throne almost two
years later, when it released the first version of Internet Explorer.
The Web Boom sparked other developments in technology, as well.
Computer usage, fueled by the commercialization of the Web,
improving technology, and falling prices, exploded. According to
the U.S. Census Bureau, by 1997, the percentage of households that
owned computers had ballooned to 35% from only 15% in 1990, while
the amount of money spent on computer-related equipment and

associated hardware more than tripled.3 Companies around the world
were also quick to take advantage of the opportunities that the tech
boom offered. Low interest rates made borrowing funds affordable,
and companies of all sizes rushed to install new equipment, establish
servers, and launch their own Web sites for marketing purposes.
In the mid-1990s, BBC News measured the number of Web sites in
existence as fewer than 19,0004—a pittance by 2008’s standard of
nearly 176,000,000 (as measured by Internet research company
Netcraft).5 Still, that was enough to raise the eyebrows of investors
worldwide. Venture capitalists, investors who invest cash in new
and emerging businesses, rushed to fund new ideas and get in on one
of the greatest technological growth periods since the start of the
Industrial Revolution. This early crop of investor-funded sites included
Cadabra.com and Auctionweb.com (now known as Amazon.com
and eBay, respectively).
To understand the importance of venture capital and the effect
the Web had on investors, one only needs to look at the statistics.
According to a 1997 report by the U.S. Small Business Administration, the total amount of investments made by venture capitalists
tripled from $3.4 billion in 1991 to over $10 billion in 1996.6 In that
same period, however, the average amount of money that venture
capitalists invested into any one company only rose from $4.1 million
to $6.8 million—meaning that the number of new projects being
funded was expanding quickly year after year. The Web’s impact on
these statistics can’t be ignored. In 1996, technology-based companies
received the most investments, a full 60%, and software companies
came in second.7
Thanks to the growing Web economy, low interest rates, easily available credit, and improving technology, the economy flourished. By
the time the stock market reached its peak in early 2000, as shown
in Figure 1-1, the U.S. unemployment rate stood at only 3.8%—a
benchmark it hadn’t seen since in over 40 years according to the U.S.

Department of Labor, Bureau of Labor Statistics.8

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

3


CHAPTER 1

An Overview of the Web

5000

4000
3000

4
2000

1000

1994

2000

2003

Figure 1-1 A graph of the NASDAQ exchange between 1994 and 2003.
The dot-com bubble hit its peak in 2000. S O URCE: U.S. Department of Labor,
Bureau of Labor Statistics, Aug. 2008.

And then, it ended.
The bursting of the Web bubble wasn’t an instant collapse. It was a
momentum-building process, and once the ball got rolling it picked
up speed with ease. Investors became anxious to start seeing positive
returns, which were few and far between as burn rates (the rate at
which companies spend their available cash) were accelerating much
more quickly than income was being generated. As venture capital
money dried up, many dot-coms, the name given to the growing
batch of new, investment-driven Web sites launched in the mid-to-late
1990s, quickly ran out of cash. Some struggling Web sites were based
on outlandish concepts and had no business being funded in the first
place. Other sites, while conceptually viable, simply didn’t have sufficiently experienced management behind them. Even legitimate sites
were struggling to pay operating expenses, such as salaries and leases.
Inventory costs climbed, and due to an increasingly crowded marketplace, advertising expenses soared. These financial pressures mounted,
while consumer skepticism toward online shopping remained high.
The stock market topped out in the early part of 2000, and one dotcom bankruptcy after another throughout the rest of that year sent
investor optimism into a tailspin. When high profile sites like eToys
and Webvan finally filed for Chapter 11 bankruptcy protection in
February and July of 2001, respectively, the cracks in the wall could no
longer be covered. The media, which had brought the Web so much
positive attention during the 1990s, also rushed to report its demise,
sending worried investors running for cover. Shares were sold, and
stock prices plummeted. The bubble had finally burst.

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


A Brief History of the Web Through 2001

There were many investment-funded sites that went under in the
frenzy. Some of the more high-profile failures include:
• Webvan (1999–2001)—A company with a good idea that grew
too fast, Webvan allowed people to order groceries online and
have them delivered right to their door. Webvan expanded to eight
cities with plans for 26 more, burned through more than $375 million, and began development of $1 billion in high-tech warehouses
before it realized it was missing one key ingredient: customers.9
• Pets.com (1998–2000)—The famed Pets.com sock puppet
mascot was so well known that it was featured in a Super Bowl
commercial and as a balloon in the Macy’s Thanksgiving Day
Parade in 1999. After its initial funding, Pets.com raised $82.5
million in an IPO.10 IPO stands for initial public offering, which
is the first sale of shares from a private company on a public
stock exchange. Unfortunately, the site was not able to draw
enough customers and the company undercharged for shipping,
causing it to lose money on almost every transaction. It barely
lasted two years.
• Kozmo.com (1998–2001)—Like Webvan, Kozmo.com was
actually a pretty good idea. Just log on and order practically
anything—a DVD, a bagel with cream cheese, a deck of cards—
and it was delivered to your door shortly after. But with free delivery, small items just cost too much to deliver, and after blowing
through $280 million (plus an additional $150 million earned from
a promotion deal with Starbucks), Kozmo.com was gone.11
• Flooz.com (1998–2001)—Cut up your credit cards—you won’t
need them anymore. At least, that’s what the people behind Flooz.
com thought, in one of the silliest ideas to hit the market. The concept was that users would buy Flooz—a new, online currency—and
use it to make purchases at online retailers. Why? Neither initial
investments of $35 million nor spokesperson Whoopi Goldberg
could give consumers a compelling reason.12
• eToys.com (1997–2001)—The online toy retailer raised $166 million in an IPO and went on an advertising and technology spending spree.13 However, eToys realized too late that it was spending a

lot more than it was earning, and it closed its doors in high-profile
fashion.
The ten years following the launch of the Web were eventful. Figure 1-2
provides a detailed timeline of important benchmarks in the Web’s
history between 1991 and 2001.

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

5


CHAPTER 1

An Overview of the Web

1991
AUGUST 6

TIM BERNERS-LEE INTRODUCES THE WEB
Tim Berners-Lee had developed a system meant to “allow links to be made to any
information anywhere,” by combining hypertext with the Internet. On this date, he
introduces his Web project on the alt.hypertext newsgroup and releases all of the
files necessary for people to duplicate his invention.

6
DECEMBER 12

PAUL KUNZ SETS UP FIRST U.S. WEB SERVER
After meeting with Tim Berners-Lee at the CERN Labs (CERN is the European
Organization for Nuclear Research) near Geneva, Paul Kunz (of the Stanford Linear

Accelerator Center (SLAC)) sets up the first Web server in North America. Using
Berners-Lee’s software, SLAC launches the first U.S. Web site.

1993
APRIL 22

MOSAIC WEB BROWSER FOR WINDOWS IS RELEASED
Developed at the National Center for Supercomputing Applications in the U.S., the
first-ever Web browser, named Mosaic, is released. Mosaic allows the general public
to navigate through the limited but growing amount of information on the Web.

APRIL 30

CERN ANNOUNCES FREE USE OF THE WEB
CERN is persuaded by Tim Berners-Lee and a colleague to provide Web technology
and codes at no cost for anyone to use. This is a turning point, fueling the rapid
expansion of the Web.

MAY

‘THE TECH,’ PUBLISHED BY M.I.T. STUDENTS, BECOMES THE FIRST ONLINE
NEWSPAPER

JUNE

HTML PROGRAMMING LANGUAGE IS RELEASED

NOVEMBER

FIRST WEBCAM GOES ONLINE

Who says a watched pot never percolates? A group of coffee-drinking computer
scientists at Cambridge University, annoyed at having to walk up many flights of
stairs only to find the coffee pot empty, install the first Webcam to monitor the pot
remotely.

1994
FEBRUARY

YAHOO! ONLINE
David Filo and Jerry Yang, students at Stanford University, launch “Jerry’s Guide to
the World Wide Web”—a hierarchical directory of other sites. It is later named Yahoo,
which stands for Yet Another Hierarchical Officious Oracle.

OCTOBER 13

NETSCAPE BROWSER RELEASED

Figure 1-2 Timeline of the Web 1991–2001. S OURCE: “Fifteen Years of the Web.” BBC News
<news.bbc.co.uk/1/hi/technology> 5 Aug. 2006. (continues)

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.


A Brief History of the Web Through 2001
(continued)
OCTOBER 25

FIRST MAJOR BANNER ADS APPEAR ON WEB SITES
AT&T and Zima (a clear beer that never really caught on) are among the initial crop
of banner advertisers.

1995

7

FEBRUARY

RADIO HK LAUNCHES FIRST FULL-TIME WEB RADIO STATION

JULY 1

ONLINE BOOKSTORE AMAZON.COM IS LAUNCHED
Jeff Bezos launches Cadabra.com, an online bookstore later renamed Amazon.com,
one of the first e-commerce sites.

AUGUST 9

THE WEB BOOM HITS THE STOCK MARKET
Netscape, one of many Web companies to go public, records the third largest IPO
share value ever on the NASDAQ exchange.

AUGUST 24

INTERNET EXPLORER RELEASED
Microsoft launches Internet Explorer as part of Windows 95, igniting the so-called
“browser wars.” This signals the end of the Netscape era and ushers in a new series
of headaches for site programmers.

SEPTEMBER 4

EBAY AUCTIONS BEGIN
Originally named AuctionWeb by founder Pierre Omidyar, eBay goes on to facilitate
tens of thousands of transactions every day (the first sale is for a broken laser
pointer sold for $13.83).

DECEMEBER 15 ALTA VISTA IS LAUNCHED AS THE FIRST MULTILINGUAL SEARCH ENGINE
1996
JULY 4

HOTMAIL IS LAUNCHED

1997
JUNE

DOMAIN NAME SALE FRENZY HEIGHTENS
The high-priced game of selling domain names turns into a modern-day gold rush,
as the domain name Business.com is sold for $150,000. Court cases over domain
name ownership rights vs. trademark infringement begin to spring up.

DECEMBER 17

LET THE BLOGGING BEGIN
Jorn Barger, editor of Robot Wisdom, coins the term ‘Weblog’ (later shortened to
‘blog’) to describe the process of logging on the Web.

Figure 1-2 Timeline of the Web 1991–2001. S O URCE: “Fifteen Years of the Web.” BBC News
<news.bbc.co.uk/1/hi/technology> 5 Aug. 2006.

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.

CHAPTER 1

An Overview of the Web

(continued)
1998
SEPTEMBER

GOOGLE IS LAUNCHED
From their California garage, Stanford University postgraduates Larry Page and
Sergey Brin unveil their research project—a search engine designed to analyze the
relationships between Web sites in order to rank their importance.

8
OCTOBER 19

FIRST BLOG COMMUNITY, OPEN DIARY, IS LAUNCHED

1999
MARCH 16

EVERQUEST GETS ROLLING
Although not exactly a household name, Everquest, a “massively multiplayer online
role-playing game” preludes social networking.

JUNE 1

MUSIC INDUSTRY GETS ROCKED
Launched by college student Shawn Fanning as a way for him and his friends to

find and share mp3 files, Napster becomes the first widely used peer-to-peer
file-sharing device. Napster makes it easier for listeners to obtain music (for free)
and raises the ire of the music industry. After a series of highly publicized court
cases involving Napster, new laws helped shape modern copyright standards
and paved the way for newer, legal forms of mp3 download programs, including
iTunes.

2000
JANUARY 10

AOL PURCHASES TIME WARNER
The largest corporate merger to date, the sale of Time Warner to AOL would later
become one of the most highly criticized as AOL eventually lost its luster.

JANUARY 14

THE DOW JONES INDUSTRIAL AVERAGE REACHES AN ALL-TIME HIGH

MARCH 10

THE NASDAQ REACHES ITS PEAK
The NASDAQ exchange, where many Web and technology stocks are traded, hits
its high, thereafter losing ground as investors begin to take a grim look at their
Web investments.

AUGUST

NUMBER OF WEB SITES HITS THE 20 MILLION MARK

Figure 1-2 Timeline of the Web 1991–2001. S OURCE: “Fifteen Years of the Web.” BBC News

<news.bbc.co.uk/1/hi/technology> 5 Aug. 2006.

Copyright 2009 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.