In its second-largest acquisition, Amazon buys the company for $970 million.
The superhighway running to the web store has added a few lanes, and the speed limit sign has been blown away.
Not too long ago, the mantra in Internet retailing land was "keep it simple." Web sites, it was reasoned, should not be loaded up with a video and other ambitious graphics because consumers go to sites to shop, not to be entertained or marketed or informed. All the high-content graphics did, the argument went, was slow down the site, frustrate the web shopper and lead to abandonment.
But that was before 38% of American homes got hooked up to the Internet via broadband DSL or cable connections. It was before last year, when fully two-thirds of web shoppers accessed retail web sites through broadband hook-ups to the home or work or wi-fi-rigged coffee shops. In short, the superhighway running to the web store has added a few lanes, and the speed limit sign has been blown away.
As our cover story in this issue makes clear, this growing broadband access is having a profound impact on the way Internet merchants operate. Web retailers are increasingly using video and other so-called rich media to inject a massive dose of graphical jazz into their sites. Video clips are used to sell movies, run "live" demos on products, show how products are assembled, explain how electronic accessories hook up to PCs, or extend a 30-second TV ad into a much more engaging story video on the web. Witness how Reebok.com garnered 1 million e-mail addresses last year from visitors to the site who registered to see a four-minute spot called Terry Tate—Office Linebacker. Never mind that the clip is geared to a teenage audience (that’s being generous), it nonetheless strikes a chord with a major segment of the sneaker market.
Rich media is also being used, quite successfully, to market to shoppers at web sites. Advertising spending on web sites, once considered a dead category, soared 20% last year to $7.2 billion, outpacing growth in all other forms of advertising. Rich media is the reason why. According to a recent report from DoubleClick, rich media accounted for 40% of all online advertising in the fourth quarter of 2003 and registered a 60% gain from rich media web advertising in Q4 of 2002.
This growth in rich media is happening for reasons that go well beyond the growing width of the pipe connecting web shoppers to their favorite sites. Broadband is merely the enabler; it’s not the fundamental explanation for the trend. That belongs to the force that drives all retail marketing—the cash register. Web merchants we’ve surveyed report higher conversion rates when they add video and other rich media to their sites. And DoubleClick’s Ad Serving Report concludes that rich media ads are at least 50% more likely to result in a post-impression sale than static web ads. The point is that web shoppers find rich media entertaining, informative, provocative, and stimulating; and web merchants who use the technology thoughtfully find it a rich experience in more ways than one.
So much for mantras. Unless, of course, it goes something like this: today’s web merchandising phenomenon is tomorrow’s yawn. Consider that Intel last month announced a chip based on optics that, theoretically at least, will process data 50 times faster than a conventional chip based on electrical impulses. What web merchandising looks like when that chip-making technology becomes commercial at the end of this decade is anybody’s guess. But you can be fairly certain that it won’t resemble anything Internet retailers do today.