Bad news for banner ads = good news for 'featuretisements'?
- 18 February, 2008 09:14
On the surface, Web advertising seems healthy. Revenue in the US last year was up 27 per cent to US$25.5 billion, according to IDC.
The lion's share -- 62 per cent, according to the Interactive Advertising Bureau -- still comes from two standby structures: text links targeted through contextual programs such as Google's AdSense, and plain old banner ads.
But some experts predict that rates for banners and text links, called CPMs, are due for a fall. They blame a slowing economy and a glut of page views as more Web publishers turn away from subscriptions and toward ad-supported models.
Others say banner ads are less effective than previously thought. A study released last week found that about half of all clicks on display ads were by a tiny, non-representative, and economically unattractive group of Web users.
These "natural-born clickers," according to the study by ad agency Starcom USA, Web analytics firm Tacoda, and digital audience measurement firm comScore, comprise a 6 per cent slice of the population that is between 25 and 44 years old and in households with income of less than US$40,000 a year.
Enter the 'featuretisement'
None of this bad news around Web advertising would surprise BlueTie CEO David Koretz, who says CPM rates are already "horrible."
Instead, the 28-year-old CEO has been banging the drum for the past year for a new Web marketing technique developed by BlueTie. The company's calling it a 'featuretisement.'
For advertisers or retailers, featuretisements blend the targeting of AdSense with the one-click sale of an auction or store listing, Koretz said. For users working inside a Web application such as BlueTie's hosted e-mail and collaboration software (think a SaaS version of Microsoft's Outlook), they minimize disruption.
"With Web applications, it's all about workflow, and whether you're enhancing or disrupting it," he said.
Working with clients such as travel booker Orbitz.com and business search engine Business.com, BlueTie was able to generate about US70 cents last year from each of its 4 million users, scattered among 230,000 mostly small- and medium-sized firms.
The effort was successful enough that BlueTie has already inked similar deals with Amazon.com and FTD.com as well as BlackBerry maker Research In Motion, according to Koretz.
Amazon.com did not return a request for comment. But both RIM and FTD.com separately confirmed that they are working with BlueTie.
How it works
BlueTie is also offering a private beta of the feature that it hopes to eventually syndicate to other Web app providers, the same way Facebook released its controversial Beacon Web advertising program.
To activate a featuretisement, a BlueTie user logs into his Web-based calendar and types in an appointment. For instance, a user might go into March 18 and add "hotels in Chicago until March 20, 2008." Immediately, an Orbitz search form pops up, already filled out with the right city and dates.
Or while checking his calendar on his spouse's birthday, a user might see a pop-up screen from FTD.com or Amazon.com showing a selection of appropriate gifts that the user can buy and send with a just a few clicks.
Advertisers such as Orbitz or Amazon only pay BlueTie if the user actually clicks on the pop-up to execute that search for a flight or gift.
That sort of Cost-Per-Action (CPA) model should minimize the risk for advertisers new to BlueTie, said Joe Laszlo, director of research for the IAB.
"That gives people a lot of comfort when they are trying out a new ad model," he said.
The rule is engagement
The 9-year-old firm is much more obscure than its competitors (which include Yahoo!'s Zimbra, Google Apps, and Microsoft Outlook and Exchange) because of its upstate New York base, as well as its reliance on a 650-member network of partners to resell its services -- usually under their own brand, not BlueTie's.
The upside, argues Koretz, is that BlueTie has better access to SMBs than competitors such as Google that market only online.
BlueTie doesn't only use a CPA model. For a straight US$6 subscription per month, BlueTie plans to let its users synchronize their e-mail between their BlueTie accounts and their BlackBerries. Syncing contacts is in the works, as are syncing calendar and tasks lists.
All told, Koretz predicts featuretisements will help BlueTie pull in about US$2 per user this year. And with another 16 unnanounced partnerships in the pipeline, BlueTie should reap between US$7 to US$9 per user in 2009, he estimates.
Laszlo applauds BlueTie's attempt, along with those by other Web firms, to try ad models that exploit engagement, or how long a user stays on site, rather than just how many pages they view.
His main concern is whether BlueTie can offer featuretisements to users without making them feel their privacy is being compromised.
"You've got be like Google, which with Gmail, is making sure it never [sends ads] from words that are R-rated or beyond, which people will be very sensitive about," he said.
That's not a problem, says BlueTie VP of product management, Jeremy Hunter.
"We never scan your incoming e-mail. And you can turn off a particular vendor at any given time," he said.