Direct Response Advertising Online – Different From Lead-Generation and What’s Next

Who represents the largest segment of buyers online today?  Aside from the data that tells us financial services, adult content and retail?  It’s Direct Response advertisers.  Companies looking to generate leads, sell specific products or specifically promote a desired result are the ones that buy up the greatest amount of inventory online.  One caveat, they buy it at the lowest price.  They buy all the remnant space and that is a lot of inventory.

Network-buys, cost-per-lead, cost-per-acquisition, cost-per-action – whatever you want to call it – is everything but CPM.  Direct Response advertisers are looking for the end result only.  The problem is that the mechanism that produces these results, network-buys, CPC, CPL, CPA does not enable the advertiser to measure or determine which message worked better than others.  All they can do is optimize based on the site or network’s performance in contrast to another site or network.  They have no way of knowing is a banner working well or not, because they do not know the impression or click-thru rates.

Some Direct Response advertisers have begun to care about optimization of campaigns, however, because they have nailed the sites and networks that perform well, they have reached a demand generation plateau.  Now they need to figure out how to better message to the audiences that they reach if they want to pull greater numbers. 

Enter the ad server.  How does a direct response advertiser, who has no idea how many impressions they have been receiving, budget and plan for the use of an ad server who will charge on a CPM basis?  Ad servers can’t change their pricing model and charge on a CPA because that model is based on bandwidth costs, which is a per-ad-served overhead.  So what do direct response advertisers do?

Here is where some Direct Response advertisers actually become differentiated from lead-generators.  I have not described this classification up until now.  Lead generators stay at this level.  They continue to look for more places to buy leads, actions or acquisitions and forgo ever learning which messages actually work better than others and forgo gaining the ability to optimize campaign messaging.

Direct Reponse advertisers, however, move forward.  These advertiser cross the line and venture on to, or back to, testing CPM advertising.  But when they do so they look for specific placements that will offer them higher return opportunities.  This is where we once again get into the realm of targeting.  Behavioral target-ors are pouncing on these direct response advertisers like vendors flocking to tourists getting off of a cruise ship.  They promise superior response rates and the ability to reach specialized audiences through event-based targeting technologies.  The networks are big on this.  It’s their upsell to the Direct Reponse advertiser.  Tacoda and Advertising.com are the leaders of the pack. 

But how good is the inventory to begin with?  I know major advertisers that experiment and even include these networks in their media buys because its the best they can find.  Because there is nothing better out there.  When it comes down to it, however, event-based targeting has not proven to be a cost-effective alternative.  See some of my earlier posts on behavioral targeting as the limitations are obvious.  And there is better.  Direct Response advertiser therefore continue to test CPM markets cautiously to see if they can find niche placements that will perform.

The newest thing on the block is customer re-targeting.  Direct Response advertisers are beginning to appreciate that while they advertise to acquire new business, they are simultaneously advertising in front of their existing customers.  So if given the opportunity to message to their existing customers at the same time, they have the opportunity to increase demand by cross-selling, up-selling and driving existing customers to transact again.  Event-based targeting attempts to do this, but it does not leverage the knowledge that a marketer has about its customers.  TruEffect’s DirectServe Technology does. 

This post is not about product promotion so I will leave it for another time.  But in short, DirectServe leverages an advertiser’s database of customer knowledge to re-target customers through online advertising.  So an advertiser can recognize its existing customers through an online ad campaign, distinguish them from non-customers and message to each audience differently in real-time.  Pretty cool.

So for the Direct Response advertiser looking to leverage CPMs, customer re-targeting becomes an attractive option.  Lead-gen brings in new opportunities.  And customer re-targeting can be used to re-engage existing customers and drive recurring revenue.

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