Recently there have been a lot of articles regarding the decline in the popularity of CPM and Banner (read brand advertising) on the web. I think its obvious by now that the scarcity model that drove impression based pricing in TV, Radio, and Print doesn’t work on the web now because its a two-way channel that anyone can contribute to.
Surely this will continue to be unsettling for many publishers that are used to this model, but their inventory is still of value and usable with performance pricing, so there shouldn’t be too much panic on the train at this point. Advertising has finally evolved to what marketers have always sought (at least on the web): Pay for performance.

There is nothing wrong with this evolution for online media and there is a lot of money to be made (look at GOOG). If publishers can learn to live with the new rules of performance pricing and become experts in inventory management, they will learn lessons from this evolution in pricing and potentially apply it to older media channels.

If publishers are willing to evolve and admit that these pricing changes will dramatically change the model, then there can be a smooth transition. However, if they continue to try to foist old models on new media, then its going to be a multi-stop local with pain in every car.

Here are a few of those link referenced above:

Silicon Alley Insider: Online Display Ads Will Fall Sharply In 2009

Life2Beta: The slow death of CPM on the web

ClicketyClack: Thoughts On The Display Ad Market And Monetization

What do you all think?

The subject of good design has been popping up a lot recently both in our business and out on the web.

In 2007 Apple went from 0% to 27% market share in the smart phone market via the introduction of well designed hardware and intuitive software that the average person can access and utilize. Further, through both software and hardware design differentiation Apple maintains a gross margin of 33.6% versus Dell’s GM of 18.5% .

A nice visual analogy of Apple’s design approach versus Microsoft’s is depicted below:

An even more interesting stat comes from a January Reuters article:

In data provided to the New York Times, Google disclosed that it received more traffic from iPhones this Christmas than from any other mobile device, despite owning only 2 percent of the smart-phone market and less than 1 percent of the overall mobile-phone market. That means that while fewer people own iPhones, those who do possess the device use it to access the Internet much more than those with competing handsets.

Apple is essentially a design company. Their hedgehog principle is good design. They innovate and command market share by making technology simple to use by everyone. The simple fact that both of my parents are making active use of the web, web services and multiple (and synced) devices illustrates that with good design, you can teach an old dog new tricks (sorry Mom and Dad!).

As the world becomes more technically complex, design is commanding a more important role in our lives. Tech has been notoriously bad at making its amazing advances and productivity tools accessible by a mass audience. This is changing rapidly. The devices of yesterday are becoming real products before they come to market by necessity…the market is demanding it. William Davidow wrote a great book about the difference between devices and well designed products years ago…and its a worthy read for any marketer, product manager, engineer or CEO.

From a January article in the Journal:

With all the fuss, PC makers have begun hiring more people with degrees in industrial design and related disciplines — and listening to their opinions. “We found people designing from the outside in, not the inside out,” says Mooly Eden, vice president and general manager of Intel’s mobile systems group. “This was the revolution.”

So as we go about marketing our customers campaigns and offers via our Advaliant performance marketing platform, we are seeing the fruits of this ‘differentiation by design’ ethos.

Our customers come to us with a simple goal in mind: acquiring new customers. Many of them have their own creative that they wish to use and some of it is very well designed and the user experience is well thought out. Generally, we have seen these campaigns perform better than the lesser designed ones that make their way onto the platform.

Recently, we have been taking some of the offers that don’t convert well into our design studio and creating an alternative design direction and user experience (with client approval, of course). We then split-test these offers versus the original. Nine times out of ten the re-design performs better. The reason: we have taken the time and effort to make sure each campaign is designed to more simply communicate the benefit to the customer.

Not surprisingly, our expertise in the area of helping our advertisers generate more appealing campaigns has kept their loyalty and engagement with our platform. Further, because the campaigns perform better, our affiliates and publishers are happier because better designed campaigns help improve their bottom lines.

While direct response performance marketing can be a complex process, the same principals in the use of design to differentiate has enabled us to deliver our business constituents more value from our platform.

Got any other examples of good design making a “direct to bottom line” difference? Please share below!

Richard McManus of ReadWriteWeb put together a great presentation about how he defined the Web 3.0. 

I highly recommmend taking the time to look at the deck linked to below. In his presentation he characterizes two things VERY nicely.

1. He defines the term Web 2.0 as an era, like the dotcom era, that graduated the web from ‘read only’ to ‘read/write’ (slide 3). This is a key developmental ‘era’ as it leverages the crowd to load the web with valuable information that can later be translated, analyzed and made more consummable by v. 3.0.
2. He makes the distinction that in Web 3.o, web sites will become web services as sites become less important. He emphasizes that the data behind them (if structured) becomes the critical element. When this data becomes structured and machine-readable, the semantic or thinking web kicks in to make this data smarter as the transactions between people and computers are recorded and analyzed with the purpose of delivering user or scenario centric information.

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Do you share his perspective on the New New Web? Wed love to hear your thoughts.

With the wild success of highly transactional performance marketing models like Google AdSense /AdWords, its easy to get starry-eyed around the dollars and lose track of the fact that in some cases human expertise and “craft” are ever more relevant in today’s performance markeitng landscape.

”The Goog” relies on a millions of small machine mediated transactions to earn its gobs of revenue. As we all know, the model is superb for many forms of promotion.

Yet the need still remains for the human touch. Not to toot our own horn too much here, but we receive quite a bit of praise from our Advaliant customers who cherish the personal attention and expertise our reps provide to them on a daily basis to help improve the efficacy of thier campaigns.

In our CPA network model, we rely on both the machine and man. However, when it comes to optimizing a campaign’s success, much of it relies on the “feel” of our business development reps who have the experience of running thousands of campaigns and the knowledge of the network of affiliates.

In the Advaliant business, the more premium there is on qualification, the more need there is for great campaign management from the advertiser and the network representative. These types of transactions are less prone to plug-and-play software applications of marketing..they require the human element.

While this model does not necessarily scale as well as the Google model, there is a sizeable market of Affiliate networks that serve the needs of marketers looking to acquire customers and qualified leads that don’t lend themsleves as readily to unmediated PPA or PPC campaigns running on a vast network of publishers of all sizes and shapes.

The principal issue in the success in these types of human-mediated campaigns is the quality of the human. A bad reputation exists in some marketer’s minds regarding Affiliate marketing networks. This stems from the lack of integrity and honesty due to prior greedy behavior of some of the unscrupulous networks, some of which still exist today.

Advertisers seeking to leverage the benefits of human-assited Cost Per Action marketing should seek out the networks that are looking to build long-term sustainable partnerships and ones that readily offer information transparency regarding the campaign. Also, most good CPA networks will only charge for performance (thought sometimes there is a minimal upfront fee). This aligns the goals of the advertiser and the network.

The quality CPA networks will continue to profit in today’s landscape becasue there are simply some things that the “machine” can’t do and that only the human mind is capable of.

A while back I did an entry on demand generation and facebook’s Beacon experiment.

It got me thinking about whether you can actually generate demand. As my friend David Taber writes: 

“Excluding fads, impulse buys, snake-oil, and vice, it is virtually impossible to profitably create demand. People either need your product / service, or they don’t:  it’s a matter of making people aware they have a need, making them aware that there are solutions and you offer one, and focusing their desire on your offering.”

The idea that you can program someone to need something is far fetched at best. Quite simply: People need it or they don’t. It seems a bit lofty to think that one can actually make someone need something, short of actually creating an event that forces need. However, the problem is the same if they do wake up one morning realizing they need tires because theirs mysteriously went flat. The target with need must be found in a sea of noise.

Again, this is where search excels. You have a need, you conduct a search, you find vendors, you click, you buy. Demand fulfilled.

Creation of demand depends on so many exogenous factors that are beyond the realm of a marketer’s control. So what’s the answer to demand creation?

Its not rocket science. Most of you know this already. You have to get your demand fulfillment game on to satisfy the demand when it occurs. You need to make sure your demand fulfillment is easily discoverable and that you have productized your offering in a way that its easy to learn about and easy to consume. Her are a few things that have proven over time to work:

1. Buy search terms that point people with a need to your product. (Use SEM, SEO and Social Media)
2. Provide simple information to give the people the data they need to make a buy decision. (build an informational area on your website about your product category that positions you as a thought leader in the space and provides the seeds of relationship building. Make sure you have a good listing of user testimonials and recommendations - these travel well in social media if leveraged properly. Also use content/product recommendation engines to stimulate site visitors to look at relevant goods — this helps people find what they are looking for in a helpful, non-intrusive way)
3. Price the product or service in a way that is competitive. (Its important to understand what a product means: Its not just the mp3 player. Its the download service, the simplicity of using the device, the integration with other tools, the cool factor and other product experience attributes). In this case, if your product requires service, you might be able to charge more than a mail order shop because you are local. If you are an instant gratification product marketer, you might be able to charge more than online stores in a retail environment)
4. Continue the dialog after the purchase to ensure you are front of mind when demand strikes again (Use email newsletters, well placed banner ads for branding if you have the budget). Also be sure to arm the customer with any follow on information they need through your service support, follow on contacts, etc. Use blogs, wikis or forums on your site to encourage the community. This will go a long way to help them make a recommendation on your behalf when others smitten by demand ask them where they fulfilled a similar demand earlier.

Having said all of this, there are instances when demand is generated over time through great marketing. I’ll use the iPod again. If you see those white headphone wires enough over time (great product marketing decisions), you will begin to ask yourself why so many other people have them. You’ll do an “ipod’ search. You’ll go to the Apple site, you’ll see from the information (well written, easy to consume words about features and benefits). You’ll realize the benefit of loading 5000 songs in your pocket and listen to anything at the click of a button. You’ll realize that the CD player in your pocket (if you can fit it) is no longer convenient. You are already at the website…why not buy now?

Now most of us don’ have Apple’s budget or cool-factor. So it takes a lot of work to get qualified leads. And the process is not a one time deal. It has to be ongoing. Again, quoting David Taber:

“…most of the marketing strategies do not depend on one-shot tactics or miracles:  the magic is a low cost, repeatable process involving:

• Valuable content that is frequently updated to attract and interest people.
• Web infrastructure to get the users (SEO, widgets, CMS, webinar archives, web analytics).
• Web infrastructure to encourage community development (wikis, blogging engines, forum engines, and web analytics).
• SFA and email blast/drip engines to stimulate conversion.
• eCommerce and recommendation engines to enable an instantaneous transition from audience to customer, and to make upsells frequent.
• Easy access to partner products and services, to make the “whole product” easier to consume.
• For the enterprise, really tight Telemarketing/Telesales to cultivate leads and encourage more serious interest.
• Logistical cleverness, particularly for product customization and returns.  Few, if any “middlemen” should be required — distributors and resellers only make sense when there’s a bulky physical good — as almost anything can be drop-shipped from your warehouse.

Until there is a true demand creation tool, well organized demand fulfillment should be front of mind.

 
Your thoughts?

Just a quick word to let everybody know that we will be attending Affiliate Summit West in Las Vegas. We are looking forward to seeing our existing advertising and affiliate partners and meet some new ones.

We are excited about what’s happening in the CPA space. As more money moves into CPA because of the high ROI equation and measurability, trustworthy CPA networks will be in a great position to capture lucrative and long-term relationships with tier 1 advertisers. This obviously means great things for affiliates.

One of the great things about the potential “Micro-hoo” merger is that it will bring more attention to the CPA space — its assumed that Micro-hoo will use a pure CPA model to combat Google’s PPC model. Mason Wiley of iMedia Connection states the point clearly:

“CPA is not new, but all these consolidations mean CPA will be the darling of online advertising. Microhoo and Google’s advertising customers will demand guaranteed results and they will be compelled to provide them…Since CPA advertisers only pay when based on predefined customer actions, Microhoo — using CPA — immediately has a leg up on Google’s soon-to-be-archaic model, which is susceptible to click fraud and suffers from lack of transparency.”

As a CPA network, we believe the higher awareness and prevalence of performance marketing is a huge opportunity for us, our advertisers, and our publishers. The opportunity will be fruitful only if all three parties (advertiser, affiliate and network) conduct business with integrity, honesty, transparency and trust. If other CPA networks get greedy with this new money moving into the space and start acting like they did in the late nineties, it will again hurt the reputation of our industry and those of us who conduct a legitimate business and earn an honest living.

We are excited to meet with those of you who make it to Las Vegas and we look forward to working with you all in the future. The future of CPA marketing is bright for those of us who care about quality, reliability and trust.

After reading and digesting Publishing 2.o’s Scott Karp’s comprehensive piece on the forthcoming war over data, it seems to me there is an obvious component to the “debate” of data ownership that should be considered here: principally that the war will be over as soon as users realize just how much this data is worth to them both in other applications and directly to their bank accounts.

Today there are many reasons a user might want to remove or move data: for use in another app, privacy and security, fatigue with a “platform” that no longer provides utility, etc. But in the not-so-distant future there will be even more reasons to move data.

A model or application will come along that shows users the real value in data about how they spend their attention. It may be the next logical evolution of advertising (think Discover Card Ads: “the advertising that pays you back”), or some other such incarnation. As sure as innovation and capitalism live and breathe, it’s coming…and users will get their data.

Most of the TOSs of the prominent web gateways (search engines, social networks and productivity tools) state that they own the data and Scoble’s “scraping” of the data isn’t lawful.

So today the conversation looks like this:

USER: I am spending my attention on your site. My attention creates data stored in your environment. I should be able to move the data I have created to another site so I don’t have to replicate the time I took to create it in a new environment. My data should follow me around. 

SITE OWNER: Yeah right! you agreed to the TOS. We provide this service for free. The data belongs to us and we use it to make money so we can provide you with the service without charging you for it.

In the future, it will be more like this:

USER: Hand it over.

SITE OWNER: What format? XML? APML? OPML? RSS? 

Data Portability.org is seeking an open standard for APIs to talk to one another so a user’s data can be moved from one site to another without a lot of fuss. Many web 2 apps and even Microsoft have joined. From this move to join DataPortability, it’s clear that the issue of portability is technically nearly solved, and that there is a financial reason to be a part of the solution — many of the firms that have joined are those who would benefit greatly to giving their users the ability to grab data from other sites and port it to their own properties to create a stickier site where users will spend more of their attention.

Many of these joining firms also recognize that in order to have the honor of being a “holder” of someone’s data they will need to offer the option to collect that data and use it elsewhere. If users can’t move their data, they will take their attention somewhere else.

While many will never actually port their data elsewhere, they will certainly want to know that it’s theirs to do so, should they desire. It’s critical to the element of trusting the vendor you spend attention with. To quote Fred Wilson of Union Square Ventures:

Why does this matter? Because trust is going to become a bigger issue going forward. I realize that many people trust Google and others to safeguard their data. But the best way to garner trust is to tell people that they “own their data” and they have the right to put it anywhere they want. The simply act of doing that will garner even more trust.

Control will ultimately be with the user (they can and will join hands and fight to be able to move their data—there are more of them and no shortage of lawyers in this country). People will want to pull data out of Facebook when they graduate and have a job (and less attention to waste on Facebook) and put it to use in a more productive environment that enhances their career, bank statements, social life, etc.

Users will find a way.

Oh, and Open always wins.

Our own Affiliate Manager, Geofferson Marcy of Advaliant tells his affiliates how to earn a higher payout. Geofferson relates that the keys are:

1. Account history
2. Goal Oriented requests
3. Future Potential 
4. Campaign Competiveness
5. Relationship Status

As with any mutually-beneficial business relationship, the key is working together toward a common goal with a common set of values. If you would like to speak directly with Geofferson, he can be reached at: 647-258-3057

In search for the Holy grail of online advertising

I have recently been thinking about the efficacy of the online ad industry’s ability to generate demand.

It’s an interesting problem…and one which, in my opinion, hasn’t been solved yet by the industry.

The efficacy of search is a result of its ability to satisfy a prior demand. It’s elegant: you want to learn something, so you search for more information. Your results (and links to relevant products), are presented next to the information. It’s no surprise then that 40% of the of the $21.4 billion US online ad market is paid search.

So the problem then isn’t the fulfillment of demand — it’s an efficient process for those of us that use the web regularly.

According to Chamath Palihapitiya, the VP, Product Marketing and Operations at facebook: “For every dollar spent on demand fulfillment, there are hundreds spent on demand generation.”

He rightly believes that there is a huge opportunity in the demand generation space. Today, Google is a demand fulfillment company worth $217 billion, similarly, Yahoo! is a $33 billion company. If his math is right, then the dollar opportunity for demand fulfillment is represented by $25 trillion.

Today, facebook is groping with this opportunity. While Beacon has had a very rough start and may perhaps end up pushing away many users (teens are notoriously wary of marketers), Beacon was an attempt to use the associations among its users to present brands and products in what they thought was a non-intrusive way. The theory was that if friends saw friends buying Budweiser, they might consider buying Budweiser themselves.

The assumption is that if your friends do it, you are more likely to do it. Unfortunately this assumption also flouts another key teen ideal: independent thinking. The humorous image below from bokardo.com depicts how these Beacon ads seem to have been received:

While the Beacon experiment’s final results won’t be seen for some time, facebook should be applauded for trying to innovate and capture a part of the demand generation opportunity. Given the bright minds over there, I am sure the experiment will evolve into something that monetizes the attention of its users and works for all parties.

Yet the big question remains: How will the industry create a win-win solution to demand generation? Obviously, the relevance and timing of the marketer’s messages are critical. However, delivering relevance or timing without the other will come across as intrusive, or even worse: spying. Beacon is an attempt at providing relevance, but it’s difficult for something like a can of beer to be timely unless those promotions about that product run at 5 PM on Thursday, Friday and Saturday night. If they can get that right, and the ad message comes across as additive to the experience, then they are on the right path.

The problem with demand generation and most of today’s solutions is that if you don’t get relevance right, it’s just wrong. Wrong = intrusive, and intrusive = an ignored message or even worse, a negative impression.

The Holy Grail of demand generation hasn’t changed: Right message at the right time to the right user. But I think the solution is more complex than simply showing friends what friends are doing. There needs to be some intelligence to the recommendation of the ad message and that intelligence has to take into account timing and context. Recommendations also have to consider recent behavior of the recommending party and the recommended party. Another problem is that most facebook users present themselves in a way that portrays their own self image versus who they really are and what they really do. This reality prevents an ad server’s decision from being accurate.

Many smart people are working on this problem today, because of this, I look forward to the day when ads are complementary to the online experience and deliver a message that is both relevant and encourages me to start thinking about (latent demand) products or services that I normally would not.

So how far away is this Holy Grail???

 It’s likely that most of you have seen this already. However, it sheds a humorous light on the bubble-like behavior surrounding our industry. Its worth the look.