The advent of the internet changed the way vendors make money. Rather than the traditional approach of paying for software or services, internet service providerssuch as Juno Online Services Inc. of New York and NetZero Inc. of Westlake Village, Calif.gave away their services and make their money instead from various advertising deals. Sometimes, they are paid simply by the number of users who view the ads; other times, they get a percentage of any sales.
Timecruiser is trying the same technique to promote its SchoolCruiser web community-building system. The company gives its software away and has joint marketing programs with its customers, who receive 50 percent of the total revenue generated. The company focuses on consumer items, such as computers, television programs, and wireless services, and avoids controversial items, such as firearms, tobacco, religious and political groups, and pornography.
The Deer Park School District viewed the program as a sound way to introduce leading-edge technology to students without having to buy it. “In every school, funding is tightso I was open to letting the advertising offset any of our up-front investments,” said Enrico Crocetti. “After all, students are exposed to all sorts of advertising daily: billboards, radio, internet, television.”
Others are not as comfortable with this arrangement. “Children are young and impressionable, so we do not feel it’s appropriate for companies to use school resources to build brand recognition,” said Angela Trout, project and marketing manager at School Center.
The advertising issue raised a red flag when the South Kingston Public Schools examined SchoolCruiser. “As an educational organization, there are always concerns when one mixes teaching and advertising,” said John Bilotta.
Initially, the district was reluctant to approve the project, but it decided to go ahead after determining that it could use the funds generated to increase access to technology. Since teachers are encouraged to use computers as a teaching aid, students who do not have PCs at home can be at a disadvantage. The additional funding will be used to increase the time during which computer labs are open at schools, as well as buy more PCs for community libraries.
While one can debate the ethical issues surrounding such decisions endlessly, wwwrrr relied as much on business reasons for turning its back on advertising. “I don’t think vendors will be able to raise enough money to sustain their businesses by relying solely on advertising,” said wwwrrr’s Paul Gullickson.
Such approaches have met with varying degrees of acceptance. On the plus side, web advertising has been much less expensive than other techniques, such as direct marketing, print advertising, and television. Also, the supplier can monitor customer activities more closely, since it can track where a person goes as soon as he logs onto a site. This information can be used to determine what steps lead to sales, so vendors can develop more targeted campaigns.
However, the effectiveness of such marketing has been suspect. The click-through rates for many web ads have not been as high as initially anticipated, and many companies fear their brand will be diluted through a seemingly never-ending series of pop-up ads.
In the end, the business drivers may determine the winner in the debate. If SchoolCruiser is successful, competitors may be forced to adopt its model; if not, competitors will continue to rely on licensing fees and subscriptions to increase revenue.