Other Ways to Spend Your Ad Money

Baldwin Louie — Mon, 22 Feb 1999 14:00:00 -0800

Building brands on the Web requires more than just an advertisement on Yahoo (YHOO). If there's one thing Net marketing experts agree on, it's the need to take a flexible approach to online advertising strategies.

"There's an alarming tendency to believe that if you don't have advertising on one of three big-name sites on the Web, you're nowhere," says Kathy Biro, president of Strategic Interactive Group in Boston. "I don't buy that."

While marketers keep tinkering with new ways to reach a mass audience on the Web, a few strategies stand out. At the moment, the most popular alternative to banner campaigns on the usual major sites is affiliate marketing.

Amazon.com (AMZN), the pioneer in affiliate marketing, began its program in July 1996. Affiliates in Amazon's network feature an Amazon button somewhere on their site. When the button is clicked, it takes the customer to Amazon.com. If the bookseller makes a sale, the affiliate gets a cut. Advertisers don't pay for intangibles like "impressions" or "click-throughs." They pay for sales.

Other affiliate networks have modified the model. The Amazon.com method doesn't really work for higher-ticket items - like say, cars - since people don't buy enough of them to make the model work. As an alternative, a car dealer might agree to pay an affiliate for a qualified lead.

For some companies, affiliate programs have been a big success. A case in point: Art.com, a Lake Forest, Ill.-based startup that sells framed and unframed prints. "My VCs didn't exactly give me the kind of money where I can advertise on the Super Bowl," says William Lederer, Art.com's founder and president. "We're a pure e-commerce startup, we're not on either coast, and I don't have any significant relationships with other sites that account for most of my traffic. My customers come from incredibly diverse places."

For Art.com, affiliate marketing offered a good solution. The company determined that its cost of acquiring each customer was $100 with broadcast advertising, $30 with banners and only $15 with affiliate programs. "With our branding strategy, the only way we can survive is to be a guerrilla," says Lederer. "It goes to show how poor the effectiveness of traditional advertising really is." With 2,000 affiliates linked to his site, Lederer pays each a percentage on sales, qualified leads or marketing information.

"This is a recession-proof marketing channel," asserts James Marciano, CEO and founder of Up-Set in New York, which owns affiliate marketing company Refer-It. "When the economy tanks, the CEO cuts the marketing budget first. The sales budget doesn't get cut. With these programs, you're out there already, making money for nothing."

An alternative for Internet businesses is e-mail marketing. The problem is that the whole idea gives off the odor of spam.

Still, the notion of moving direct-mail to the Net has allure, and some retailers are trying new methods to spruce up their e-mailed ads.

Calvin Klein (dossier) recently launched a campaign of outdoor billboards that feature photographs of fictional people along with their e-mail addresses. Sending an e-mail to any of the addresses elicits an automatic response from that character, and a regular "correspondence" in which the character describes his or her part in a fictional drama - and in the process bombards the consumer with references to the Calvin Klein brand.

Meanwhile, direct-mail companies like Experian and Acxiom (ACXM) Direct Media, which invented and refined the art of demographically tailored direct mail in the 1980s, are moving onto the Net.

"This is a cost-effective way to reach new customers," says Regina Brady, business unit leader for interactive services at Conway, Ark.-based Acxiom. "As I talk to different marketers, it turns out they've set aside serious money for this next year. We're at the beginning of a growth spurt."

When direct-mail tactics are combined with the next generation of database marketing technology, consumers will have no place to hide. Some vertical industries are taking advantage of public databases for clues on potential online customers. In New York, for instance, the Department of Motor Vehicles makes its records public, enabling online auto brokerages to search the database for people who have expiring car leases.

As the range of products sold over the Net expands beyond computers, books and music, retailers have to shift their marketing tactics. Event-based businesses - such as those that focus on things like births, weddings and graduations - have to make contact with potential customers before those dates come around. BeforeYouMove.com, a startup that offers an online change-of-address service and aggregates moving-related services through partnerships, has a highly scattered target market. In a twist, this online company looks to offline direct marketing to meet their goals.

"Big insurance companies send out hundreds of millions of pieces of mail to policy holders every year, so we take the real estate on the back of their envelopes advertising our change-of-address service," says Richard Libby, CEO of Before You Move. "The game in the real world is getting in front of as many people as we can on a premove basis."

Scott Heiferman, founder and CEO of I-Traffic, an interactive agency in New York, says that his work is diversifying quickly. In a promotion for Beyond.com, which sells software online, e-mail has effectively extended their marketing campaign for tax-preparation software. "The goal is not necessarily to get someone to buy tax software on Jan. 15," says Heiferman. "But the e-mail reminder on March 15 is very useful."

And when Web sites aggregate enough users and partners that they can begin to effectively mine their own database of customers, new marketing opportunities will emerge. Eileen Hicken Gittens, CEO of Personify, a San Francisco-based company that builds marketing solutions for Web sites, says even the most homogenous set of consumers actually has various preferences that e-commerce companies must learn to track. "We work with ComputerLiteracy.com," says Gittens. "They have two segments buying the same books in very different ways - one segment uses the search engine, the other browses. It's not a question of databases; it's a question of who's on the site."

It's hard to predict how marketing practices on the Web will develop. Marketers talk about the importance of creative and strategic work, but the factor that will prove most influential on the Web is marketers' sense of propriety about consumer privacy.

Marketers currently walk on eggshells when it comes to consumer-privacy issues, but as more businesses set up shop on the Internet, the rules will change, and marketing methods will change with them.

"Someday, companies in affinity-related businesses will share a base level of common consumer information," says Gittens. "It's about what consumers get in return for information they give away about themselves."

The Industry Standard - Other Ways to Spend Your Ad Money - Comments

Other Ways to Spend Your Ad Money