Online Marketing’s Evolution

What’s the future of interactive advertising? Executives from interactive agencies and marketing technology tech companies tried to answer that question at two conferences this week in New York City.

Discussions ranged from the challenges of working in social media, risks for agencies in using pay-for-performance models, one online marketing sector that’s thriving, and Amazon.com’s crowdsourcing initiative. Here are some takeaways:

Social Media Marketing: In Need of a New Model?

“Advertising, by its very nature, is intrusive. Advertising on Facebook or other social media sites is mostly disruptive. That is a real violation of any kind of relationship you can have with a consumer,” said Wenda Harris Millard, chairman of the IAB and president of Media Link, while speaking at BMO Capital’s Marketing & Advertising Thought Leaders Summit.

She suggested that marketers must overhaul their approaches before working in social media. “Marketers need to stop interrupting the conversation and start being the conversation. That’s a very expensive proposition. We have to go back to square one and completely reinvent [marketing],” she said.

Some agencies are proceeding, one social media platform at a time. Ad Venture, an online marketing services company catering to the education sector, helps schools such as the Soma Institute set up a presence on Facebook. But it’s holding off on Twitter for now, said CEO Michael Platt, another speaker at the BMO conference. “Simply put, Twitter is a tool that communicates well but has yet to expand to a direct-response based tool. It may at some point and we will be keeping our eye on it closely,” Platt wrote in a follow-up e-mail to me.

Pay for Performance: Easier Said Than Done

Some interactive agencies are aiming for fees based on their marketing services’ performance, and several executives discussed the nuances of fee structures. “Professional services, like an advertising agency that creates enormous value [for a client], should be able to share in a client’s risk and share in the upside of the value created,” said Chris Kuenne, chief executive of interactive agency Rosetta. “It’s very tricky to set up,” he admitted. To move in this direction, Rosetta has tested setting aside a portion of its fee, say 10 percent or 15 percent. If a marketing campaign delivers value, the agency gets more money on top of its fixed fee or hourly rate.

Vantage Media, based in El Segundo, CA, only works on a pay-for-performance basis, using what it calls “success fees,” said CEO Steve Jillings. But its fees vary depending on how much risk the agency incurs. Dating site eHarmony rewards Vantage Media for each paid subscriber, while another client may pay for each lead generated — even if the lead doesn’t covert to a paying customer. Why? “EHarmony is a complete online experience. There’s no human intervention [in the sales]. We’re paid when the cash register rings,” Jillings said. Likewise, if a lead requires human intervention, such as a sales call, an agency incurs more risk that the lead will be converted.

Resource Interactive COO Nancy Koors said the agency has experimented with pay-for-performance pricing models but cautioned that agencies assume risk if a client doesn’t do its part to help a marketing initiative succeed. While clients might support pay for performance, Innovation Interactive’s Will Margiloff warned that clients may balk if a campaign is too successful — and makes too much money, especially after year one.

Online Marketing: Education Sector Going Strong

While the economic downturn has forced auto, financial services, and luxury sectors to slash advertising budgets, other sectors, such as nonprofit schools, are seeking out search engine marketing services and online lead generation.

Still, lead-gen agencies in this sector are being asked to provide more sophisticated analytics, such as evaluating leads based on source, student retention rates, and lifetime value to the institution, according to Jamie McDonald, CEO of Sparkroom, which sells lead-performance optimization software and services.

Platt said clients can improve their return on investment in lead-gen campaigns if they share data, such as student retention rates, with an agency. “It’s not brain surgery. It’s about cutting out lower-converting, higher-cost [leads],” he said.

Show and Tell, 2009

A decidedly different crowd — dot-com marketers in an assortment of attire rather than gray and navy suits — gathered seven blocks away at the W Hotel for the Digital Publishing & Advertising Conference. There, the speakers talked about crowdsourcing, the ongoing challenge for traditional print publishers, and the state of digital display advertising.

Speaking on a panel, Buddy Media CEO Michael Lazerow said he’s blown away by the “See a Kindle in Your City” campaign, launched by Amazon. “If you are looking to buy a $500 device, you kind of want to feel it,” he said. Yet Amazon doesn’t have any brick-and-mortar stores. So Amazon set up a microsite where people interested in seeing a Kindle can meet up with others who own a Kindle.

“Happy to show my new Kindle 2 to anyone in the Union Square area in Manhattan,” wrote Symbiat under the “See a Kindle in New York” section. “I also have the Nokia N810 which I use to read PDFs (and web surf!). There is a large Barnes & Noble store in Union Square which would be a good place to meet. I have a regular day job so I could only meet after work or during lunch (if I’m in the area).”

Lazerow, whose company develops social media applications, was ecstatic over Amazon’s person-on-the-street promotion. “They’ve crowdsourced with technology, a social platform, drove word-of-mouth marketing. This is the lowest part of the funnel. Right before [a consumer] pulls out a credit card.”

With all these different options available to marketers, it’s a wonder why the simplicity of Twitter — and its 140-character limit — doesn’t appeal to more people.

Join us for a one-day Online Marketing Summit in a city near you from May 5, 2009, to July 1, 2009. Choose from one of 16 events designed to help interactive marketers do their jobs more effectively. All sessions are new this year and cover such topics as social media, e-mail marketing, search, and integrated marketing.

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