Quality will kill incentivized marketing

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adotas_med_011.jpgDM CONFIDENTIAL — Among almost all forms of performance-based online advertising, not many have enjoyed the fame and notoriety that incentivized marketing has.

Its initial rise to prominence took place in a similar setting – a media recession with a surplus of untargeted inventory available. The incentive promotion ads, think “Free iPod” offers, did what other types of online advertising could not. They took someone who hasn’t expressed any intent about a product or service and turned them into customers for a variety of products and services.

Those who mastered this made large sums of money, so much so that they can afford to purchase other companies with a better public image, e.g. Intreprid Investments buying Q Interactive.

Those who mastered it even better, found themselves in the cross-hairs of the FTC. Distilled to its core, though, the incentive promotion companies operated on a simple principle – users want something, e.g., an iPod, and they will jump through hoops (complete offers) in order to get it. At that level, it doesn’t seem conceptually different than the alternative payment platforms. This newer generation of companies uses the same ads, the same tracking methodology; they just get their users through a different way – app traffic instead of banner/email/search traffic.

Given the boom and bust that the original innovators of incentivized marketing have undergone, the big question for many tracking the unexpected popularity of the real Incentivized Marketing 2.0 is what does the future hold in store for them?

It is a topic that entrepreneur Niki Scevak, and the most widely quoted blogger (from Andrew’s blog to Venturebeat) for someone with supposedly fewer than 200 RSS readers, discussed in his fantastic post, “The Impending Doom of Facebook Apps.” At the heart of the issue – quality. The incentive promotion space gained a reputation for burning through advertisers due to its horrible quality. Users who signed up for offers didn’t really want the offer. They just wanted their now not so free goods. And a whole cottage industry even sprung up on how to game the system to get your iPod or other electronic for as little real money as possible. Is the same fate to beset the alternative payment platform space? Says, Niki,

“The consumer behavior has changed only subtly from five years ago: instead of completing a laundry list of offers to qualify for a $150-250 value product, each consumer is completing a small number of offers for a smaller economic value to be used in the game or application.

But just like credit card companies and Netflix were happy to give the free ipod guys a shot, they are also happy to completely shut down the channel as well, once it proves it doesn’t work. As the category of leads/customers grows, the more important it will be for more senior marketing folks to take a real look at the quality of leads provided through Facebook games and apps. And they’ll find the same result of quality they did back in 2004-5: a whole heap of shit.”

Types of Offers

Front and center in the ecosystem are the ads that these “Managed Offer Platform” companies (a term coined by Offerpal Media) run. At the end of the day, they pay the bills. In the world of online advertising, ads tend to fall along one of the following payment metrics – per thousand (CPM), per click (CPC), or per action (CPA).

Those in the offer platform space focus on the last, per action. But, per action is a broad term encompassing the following subcategories – per sale (CPS) and per lead (CPL), the chief distinction being that the former requires data plus credit card whereas the latter requires just a user’s data. To confuse the situation further, we could create a whole new category of CPA ads based around subscription services (a form of cost per sale) – one that includes payment with credit cards, e.g., Netflix or the (potentially) more sinister free trials (acai berries for example.) This subscription category also includes services where the transaction occurs using the mobile phone (ringtones, quiz, crush).

In case you haven’t installed an app that uses one of the offer platforms, here are some sample ads that you would see. This example looks at ads as a user tries to earn Lunch Money, a virtual currency managed and tracked by alternative payment platform company OfferPal Media. You will see examples for per lead (auto insurance), mobile subscription (IQ Challenge), credit-card subscription (Netflix), per sale (Zone Alarm), and even one incentive promotion 1.0 offer (free laptop). Here they are:

Take the IQ Challenge!

Quiz Ad – Todays high score is 125. See if you can beat it? Compare your score to others in the IQ Challenge community!

No credit card needed to receive L$ within minutes.

L$ awarded after submission of a valid mobile number and PIN confirmation.

Price – 7.05

Netflix DVD Delivery Service – Free Trial & GET L$!

Try Netflix DVD home delivery for FREE and get some L$. No coupon codes allowed! If you use a coupon code, your L$ will not be awarded.

Purchase required to receive L$ within minutes.

L$ awarded upon registration for home DVD delivery. New members must order and receive initial movie order or L$ will be reversed.

Price – 15.00

Get Free Auto Insurance Quotes and easy L$!

Direct Insure Online offers exciting new insurance quotes fast, free and easy. Just fill out a simple form and get up to FIVE quotes which can help you save money on your Auto Insurance.

Free! No purchase required to receive L$ within minutes.

L$ awarded upon Complete insurance quote request. Fraudulent information will lead to expulsion from application.

Price – 3.78

Share your thoughts on Laptops, and get one for FREE!

Answer a short survey on laptops and receive one for FREE! Participation required.

Free! No purchase required to receive L$ within an hour.

L$ awarded after submission of a valid email address, personal information, and navigation to the final offers page where you must click on an offer.

Price – 3.00

Make your PC Safe and FAST

The Most Complete Internet Security. Need home protection for up to 3 PCs? Get the ZoneAlarm Internet Security Suite 3 User-Family Pack for just $10 more!

Purchase required to receive L$ within minutes.

L$ awarded when you buy now.

Price – 19.80

The “Price” reflects what the user earns as a result of their efforts. In this case, Lunch Money (L$) gets awarded in the millions, but we rounded down to the nearest million. And, for those who do not want to earn their lunch money, they can purchase them. The rate is $9.99 per 100 million L$.

It’s a data point that might not seem like a lot but provides us with a very important starting point for assessing quality.

Courtesy of DM Confidential editor

3 COMMENTS

  1. While I do believe that the road ahead is bumpy for the transactional advertising players I don’t buy into the fact that what they do is a “pile of s****” If you look at TrialPay for example they have broken into the top 5 alternative payment players (Google Checkout, PayPal, Amazon and Bill Me Later). They may face a rough road but TrialPay has already proved its here to stay…

  2. I agree with the comment above. There will be hurdles to face, however the volume is so great with incentive traffic that advertisers can’t turn their back on it. In addition, advertisers will get more savvy and realize the black hat networks who blend traffic aren’t giving them the ROI they are paying for. There will be many networks who continue to get burned by incentives as they don’t have the necessary compliance controls and vetting for new publishers.

  3. Amen
    To the above and drug companies that hand out such rich incentives in product margins that 80% of email traffic is Drug spam. Too much money can spoil a whole system.

    Rod

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