In the new era, due to competition, business houses are exploring new modes of communication to achieve a balance in speed and cost of reaching their target audience effectively. This leads to an effective mode of communication termed as advertising. In the last few years, Indian internet advertising spend has increased dramatically. Advertising over the internet has become the most significant development in the industry.
Researchers have estimated that the internet population will double in a short span of time. This rapidly growing new medium holds tremendous
potential for advertisers and service providers in various aspects. The internet offers two-way, graphical, world wide communication with technology-oriented early adopters. Internet advertising is capable of delivering information to a mass audience effectively and efficiently. It has been observed that internet advertising affects the consumers in different forms. Due to interdependence of the variables being affected by internet advertising, there arises disagreement among the different stakeholders regarding the impact of internet advertising. Thus, it becomes important to measure the impact of internet advertising in terms of abstract parameters. The study was undertaken to measure the impact of internet advertising on consumer demand.
The internet is the fastest growing information channel throughout the world as it offers two-way graphical communication. The internet is the new form of mass communication and provides users with a new economy of information distribution and acquisition. Usually, users of the internet are welleducated, upscale individuals and the number of people with access to the internet is increasing at a tremendous speed. The main advantage of the internet is that it is not very costly; as a result, many businesses are going on-line to gain relatively inexpensive access to potential consumers. Ojha (2006) stated that the internet has a lot of potential for advertising.
Internet advertising debuted in 1994, when the first banner advertisement on HOT WIRED was sold and the first web browser was made commercially
available (Hyland, 1998). At that time, the most basic form of advertising was the sponsorship of a website. In the middle of 1997, banner advertisements were improved with the introduction of sound effects in the advertisements. Later, a new type of advertising technology came into existence that featured video in banner advertisements in order to attract more visitors to the website. As a result, companies like Dell
Computers, Amazon.com, Wall Street Journal, etc. developed their websites with audio and video enabled features. In the late 1990s, interactive banner advertisements, that enabled consumers to buy their products and services, became popular.
In a short span of time, advertising on the internet reached around 21.1 million people in mid of 1997 and the estimated revenue from advertising on the internet was $301 million (Coats and Heather, 1997). According to Romeo and Nyhan (2002), internet in India has finally made its cut as a sober advertising vehicle. The number of internet users is expected to grow at 20 to 30 percent year-on-year. The internet has penetrated over thirty percent (30%) of India’s Englishspeaking urban audience. The most significant forms of internet marketing and advertising are banners,
permission-based e-mail, keyword-targeted search engine advertising, floating animated page takeovers, interactive on-page rich media ads, streaming audio and video, and consumer-fuelled ‘viral marketing’ (Krishna, 2001). Presently, most internet advertisements are centred on banner advertisements, which come in a wide variety of shapes and sizes.
Suresh (2006) found that the benefits offered by the internet are customization, interactivity and low costs in reaching out to a dispersed audience, thus making it very attractive for advertisers. Internet advertising is quickly becoming an immediate and cost-effective advertising channel, because internet advertising gives unique power to the marketers to become highly targeted and selective about where their advertising
message is seen (Krishna, 2001). According to Romeo and Nyhan, (2002), there is no longer any doubt that internet advertising is an effective marketing tool.
A consumer can be defined as an individual who buys products or services for personal use, and not for manufacture or resale. The amount of a particular economic good or service that a consumer or group of consumers will want to purchase at a given price is known as demand. Demand for a product or service is determined by many different factors other than price, such as the price of substitute goods and complementary goods. In extreme cases, demand may be completely unrelated to price or nearly infinite at a given price. Along with supply, demand is one of the
key determinants of the market price. Abowd and Wissink (1999) said that consumer demand is a study of how people use their limited means to make
purposeful choices. It assumes that consumers understand their choices (possibilities) and the prices (opportunity costs) associated with each choice, and also assumes that consumers consider the alternatives and choose the one that they like best.
Russell and Lane (1996) revealed that one of the most difficult aspects of determining the economic contributions of advertising is the inability to precisely identify the role that advertising plays in moving consumers to purchases and its contributions to company profits. Unlike offline advertising channels, the internet lets advertisers target their advertisements to the activity that users are engaged in (Goldfarb, 2012). Advertising can help stimulate demand for new products by communicating relevant information and facts. Advertising offers consumers a right to choose by providing a variety of options in terms of price, features and benefits. Some critics claim that advertising restricts consumer choice because large companies use the power of advertising to limit consumer opinion to a few well-known brands (Kazmi and Batra, 2004).
According to Hackett (2000), consumer demand depends on factors like consumer preference, consumer budget constraints, and the price of rival
goods. Earlier economists were interested in comparing and aggregating utility levels across individuals in the hope to find a way to develop a
metric of comparison of utility across individuals. According to Murthy and Bhojanna (2007), there has been criticism in abundance that advertising offers unwanted products i.e., products for which demand does not exist. The subject of the effect of advertising on consumer demand is complex and it is agreed that promotional activity leads to consumer demand. It is believed that other than advertising, economic and social factors impact consumer demand like increase in population, choice in lifestyle etc.