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Marketing in the Internet - as seen from Italy

by Giancarlo Livraghi

No. 5 - June 30, 1997
1. Editorial: how can
2. A few more numbers
3. A smart technology: smart cards
4. The structure of an online message
5. A little story of five books
red buttonSummary

1. Editorial: how can "behind"
get ahead
That Italy is behind in all online activities is something that we have discussed in this newsletter a number of times, and is well understood by people with an unbiased view and a sound knowledge of the circumstances. It is less known that Italy is lagging also in advertising investments in general. From a simple analysis of data it's easy to see that Italy (while it's part of "G7" and considered as one of the seven or eight leading economies in the world) is in 25th place as per-capita advertising investment and 39th as a percentage of GNP - and will probably slip lower on the list in coming years, especially because of the growth of advertising in some Asian countries.

This may seem strange if we look at the advertising clutter, especially in television; but we must consider that there is still an unbalance in media in our country, where television collects 55 percent of advertising revenues, as compared (for instance) to 38 in the United States, 33 in France, 32 in the UK and 21 in Germany. Also, many of our media are still too "generalist"; and fearsome media price wars offer very big discounts (especially to large advertisers) which lead to high clutter with relatively low investment.

I was pleasantly surprised to find that, at last, these hard facts are being accepted and understood by advertisers, much more clearly than in past years. On June 4, in the yearly meeting of UPA (the advertisers' association) chairman Giulio Malgara observed that "after a long recession that peaked in '92 and '93" advertising investments in Italy are beginning to grow; but... he said:

If we look at countries close to us, we see advertising investments in France twice as large as in Italy. Three times in the UK. And four times larger in unified Germany.

The time has come for selectivity. Companies can no longer count on favorable circumstances which in the past had made thing easy for everyone, including the least competent... the market will recover and will expand, but the times of bubbling euphoria are not coming back.

It's time to understand that competition is not coming only from the traditionally strongest countries. We are facing aggressive marketing from many new countries, including those that in the past were only manufacturing cheaply for other people's brands.
It's time to get rid of those service organizations that lack the necessary professionality and don't have the background of knowledge, experience and sensitivity that can be really valuable for our companies.
The recovery of investments is not just a matter of more advertisements or commercials, or a wider range of media. It must be the logical consequence of deep marketing innovation.

So we realize that we are far behind our direct competitors; and that the "easy times" (if they ever existed) are over. Some readers may be surprised that I find it pleasant to hear these comments. The reason is simple: this situation had existed for several years, but it was hidden under layers of conventional optimism or petty excuses. Now there is awareness. Before a problem can be solved it must be understood. Only a clear (and severe) diagnosis can lead to appropriate treatment.

Readers of this newsletter are familiar with the poor state of development of the net in Italy; and we have further confirmation of this fact. It's interesting that this subject was discussed in the UPA meeting only for a few minutes. In spite of all the hype and the exaggerated figures, the large advertisers have understood that the new technologies are, for the time being, quite marginal; and growth that could make them relevant is unlikely in the next few years.

After observing that Italy is even further behind in "new media" than in traditional advertising (with the added problem that not enough people speak good English) Dr. Malgara added:

With all the noise, probably exaggerated, on the growth of "new media" it seems that traditional media, including the strongest such as television and print, are falling into some sort of inferiority complex, feeling inadequate and threatened by "obsolescence."
It's true that we are facing a revolution. But it's also true that for a long time the "new media" will not take any resources away from traditional media. The "new media" will have to generate their own resources and satisfy new needs.
There will be new offerings, but they will be additional, not a replacement. At least for several years ahead. And new media will encourage the owners of traditional media to innovate, to accelerate their evolution and change.

It's interesting to note that when big advertisers talk about "new media" they are thinking mostly of digital television; and they know that the entrepreneurial and editorial initiatives that could break the domination of "generalist" television are (especially in Italy) still quite remote. In all of that meeting there was no discussion at all of the internet or interactive communication (which had been briefly discussed on similar occasions in previous years). Of course they know it's there; but they feel uneasy and skeptical.

Before someone calls me a "pessimist"... let me look at these facts from a different angle. When something is "underdeveloped", and many consider it only vaguely, or are disappointed... there can be very interesting opportunities for those who learn to use that resource effectively.

This reminds me of an old little story that was told in sales training classrooms. A shoe company sends two salesmen to study the market in two, very similar, tropical countries. After a few days two messages get back to headquarters. One says: «Nobody wears shoes, market hopeless, coming home». The other says: «Nobody wears shoes, unlimited opportunity, opening branch».

The net offers extraordinary opportunities for some Italian companies. If it's in its infancy worldwide, and especially underdeveloped here... that can be an advantage for those entrepreneurs who will know how to get in ahead of the game, and thus gain the time to understand how to use the new tools effectively. That needs patience, consistency and a willingness to learn. Immediate results may be possible, but they are unlikely; it's better to plan a gradual investment, step by step, learning in the process and developing one's own, distinctive path in the net. This is the approach that can lead to a major competitive edge - and possibly some pleasant surprises.

Being "behind" is not necessarily a disadvantage. We can learn from other people's mistakes, check the experience of more advanced markets, find shortcuts where others are lost in a maze. With the imagination, the guts, the flexibility, the ability to move in unfamiliar grounds - and above all the dedication to the service of customers - that are the winning qualities of many Italian companies.

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2. A few more numbers
Some readers ask me for further discussion on "numbers" - the confused and confusing estimates of the size of the net. Others suggest that I drop the subject, as it's quite clear that the data are unreliable (and often exaggerated) and it's better to concentrate on quality.

I understand, and share, the view of people who think that quality is the most relevant subject. But quantitative data are not totally irrelevant; and they are still discussed quite often, even in major media... so here are a few (short) observations, which essentially confirm what had been said before in this newsletter.

The Eito 97 report by the European Information Technology Observatory confirms that Europe (with a few exceptions, such as Finland) is still far behind the United States; and that Italy is far behind the better developed European countries.

On May 31, for the first time, a major newspaper expressed those doubts that had been lurking for years in the minds of experienced people. An article by Umberto Torelli in the Corriere della Sera was headlined "Internet and the dancing figures" and essentially confirmed what had been said in this newsletter four months ago.

On June 1 an article by Franco Carlini in Il Manifesto confirmed that the net is underdeveloped in Italy and estimated 110,000 ISP subscribers in our country. I don't know which sources he used, but he is well informed on this subject, and other analyses confirm his estimate - even though a statement by Tin (Telecom Italia Online) indicates that there are 200,000 "paying" users and 650,000 "total" users; and similar figures were given by AIIP (the internet providers association).

Also a report by Assinform, presented in Milan on May 26, claims that we should estimate an average of "three users for each subscriber". That would lead to an estimated total, including "occasional" users, between 350 and 600 thousand people.

I think that "multiplier" is quite doubtful, as many subscribers use the net only occasionally, and several people, for various reasons, use more than one provider.

In any case... in the end we come, once again, to the same conclusion. Approximately one Italian in a hundred has an internet connection. Maybe four or five in a thousand are regular users. There are indications that the gap between Italy and the most advanced countries may be beginning to narrow... but it's still uncomfortably wide.

To use some relatively firm figures... these are the most recent data on the fifteen countries in the European Union, based on the latest RIPE hostcount:

Number of Internet hosts    
  December 1996 May 1997 growth % hosts per
1000 inhabitants
Finland 314,141 382,339 21.7 75.0
Sweden 237,832 288,184 21.2 33.1
Denmark 106,732 130,575 22.3 25.1
Netherlands 270,511 326,787 20.8 21.4
UK 719,294 843,437 17.3 14.5
Austria 88,811 93,739 5.5 11.7
Germany 691,864 880,383 27.2 10.8
Luxembourg 3,518 3,815 8.4 9.5
Ireland 26,895 32,311 20.1 9.0
Belgium 65,046 86,181 32.4 8.5
France 236,874 286,515 21.0 5.0
Italy 147,837 237,966 60.9 4.2
Spain 113,227 155,380 37.2 4.0
Portugal 23,482 34,122 45.3 3.5
Greece 16,738 21,246 26.9 2.0

EU total 3,062,838 3,811,980 24.6 10.3

The growth of Italian hosts in five months was quite remarkable: more than twice as fast as the EU average. But in spite of this "leap" net penetration in Italy remains very low.

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3. A smart technology: smart cards
This newsletter is about human relations, communication and marketing - not technology. But I would like to make an exception for a technical application that I find particularly interesting (and much more so than the uselessly cumbersome and often faulty stuff that makes most of the headlines): smart cards.

On June 20 Roger Collis wrote in the International Herald Tribune: «It's 9:30 A.M. in New York. You've just finished reading your e-mail when you get a message confirming the meeting in Paris tomorrow morning... You download the flight confirmation details, along with your seat assignment, hotel and car-rental reservations, to your multifunction smart card... show up at the airport, wave your card within a few inches of the airline "kiosk"... which prints out your boarding pass... and go straight to the gate.» Etcetera... every step in your trip is handled faster and more easily by using your "smart card", and when you return to your office you transfer the expense data into your computer and turn them into an expense account. Also, «During the trip you will have used your card to check your e-mail by inserting it in a "smart" telephone.» Of course none of this is true yet; but it's a possible view of a not-so-distant future.

This is not just about organizing a business trip. I like to dream about arriving in a hotel room, a friend's home, an office, or a service room in an airport or a station, in any corner of the world, without a portable computer but just with a card (such as today's PCMCIAs or like the diskettes of the many magnetic or floptical devices) that I can easily keep in my pocket and contains everything I need. It will not only help me to organize everything I need in my trip, but by inserting the card in any computer I can continue my work, connect to the net, carry out all of my normal activities, as I would in my office or my home.

One could imagine that this is a complex operation; but it isn't. For instance: would they have to provide thousands of computers with special software and hardware to allow the use of smart cards? Not necessarily. Someone has already invented a device called Smarty that connects smart cards to floppy drives. Of course we don't know if this particular solution will become the standard: but the example shows that it's possible to find simple solutions for apparently complex problems.

So... my dream isn't fantasy. These solutions are perfectly possible with today's technology. What is missing (once again) is not the technique, but the organization. Service structures and systems, shared standards... that would be easily achievable if the world of information technology could get out of its primitive and confused state, with so much emphasis on bloated and inefficient software that offers everything except what we really need.

Obviously nobody knows if, and especially when, such resources will be widely available. But I am fascinated with the simplification and efficiency that they could bring to our lives. And it's easy to imagine how these technologies could be used for selective marketing and service projects. With the major advantage of not being invasive and not violating privacy, because the customer could hold the keys to his data - and choose when and how to use them.

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4. The structure of an online message
  (compared to print and television)
Online communication, of course, is different from any other. But I think it can be useful to compare it to some forms of traditional communication (commercial or not). Many people seem to think that it's like television (because we are looking at a screen) but it's much more like print (with some important differences due to its "hypertext" structure).

Here is a (simplified) comparison of three types of communication:

  • Image, sound, movement
  • Text and pictures
  • Text and pictures

    (possible sound and movement)

  • Forced time

    (time of viewing-listening determined by broadcaster)

  • Subjective time

    (reading time determined by reader)

  • Subjective time

    (reading time determined by reader)

  • Passive reception
  • Active reading
  • Active reading and search
  • Scarce depth
  • Good depth
  • Great depth
  • Limited time
  • Unlimited time
  • Unlimited time
  • Now or never

    (an instant of distraction, and the message is gone - lost forever unless it's repeated when the same person is watching)

  • Can go back

    (as long as the reader saves a newspaper or a magazine - or a clipping)

  • Can go back

    (no time limit)

  • Often viewed in a group of people
  • Individual reading
  • Individual reading
  • Difficult to save
    (very few people record)
  • Easily saved
  • Easily saved

As we can see, the structure of an online message is much more like print than like television; with a fundamental difference: no other medium allows the depth and selectivity offered by the net.

In the case of banners, obviously the closest traditional criteria are those of outdoor advertising: a simple and short message that can be perceived in a few seconds. Of course there is a basic difference: a poster stands alone, a banner offers a link to people who want more information.

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5. A little story of five books
As mentioned before... Amazon, "the world's largest bookstore", is one of the greatest success stories in the net. The key to their success is obvious - but not so easy to achieve: service. A simple and neat site, crammed with information, with no unnecessary graphics or gimmicks. Constant attention to customers.

This time I shall talk about myself as a customer. Several months ago, I was a bit cross with Amazon because of a little mystery: some packages arrived with no problems, while others were held up by customs; and nobody knew why. After a friendly but inconclusive exchange of messages, I had to surrender to the fact that neither Amazon nor their courier could explain the whimsical behavior of Italian customs. But I was left with a feeling of dissatisfaction. This is quite typical of online customers: they (we) tend to be impatient and demanding, to the point of being unreasonable.

Eventually... once again at peace with the "great bookstore", I sent one more order, for five books. Buy I made a silly mistake. As I was in no hurry, I chose the cheapest solution: mail delivery. As usual, I had immediate confirmation. But two months later I had not received the books. It's quite obvious that the supplier can track couriers, but not mail. After a fast exchange of e-mail, the "great bookstore" decided to send me the same books again, with a fast courier - with no additional charge. There is an important detail: they've no way of checking if I had received the books in the first place. So they trust my word. They only asked me to advise them in the unlikely case of my receiving the same books twice.

Guess where I shall buy my books the next time - and for years to come, if they keep up to their standards? And which online bookstore I shall recommend to my friends?

Amazon has understood, and practices, the First Rule of online marketing (and of marketing in general): the relationship with the customer is much more important than the individual sale.

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