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Are Paid Advertising Models All They're Cracked Up To Be?

Consumers are bombarded with commercials for products they'll never buy. And it's no wonder why people become irritated and scarce marketing dollars are lost in the process. So here's a solution to this inefficiency: Display ads only to consumers with a potential to buy, thus pleasing both consumers and marketers.

Paid advertising models were going to be "the way" to do this. The idea was to get lists of consumers interested in viewing ads for certain product classes. In exchange for viewing these ads, the consumers would actually get paid; hence, an incentive to watch the message. At the same time, since firms would achieve better targeting, they would also realize a reduction in promotional spending, leading to higher efficiencies.

A number of Internet companies are based on this model. Some examples include Cybergold, Free-PC and MyPoints (which now includes Bonus Mail).

So, why is this not a panacea?

First, consumers are asked to opt-in to broad categories such as entertainment or consumer electronics. The problem with this is that I may be interested in a small sub-category only. Hence, I will be shown ads for a Sony TV when all I care about are stereo systems. In addition, when it comes to TVs, I may be a loyal Magnavox user and may, in fact, dislike Sony. Showing me ads for a brand I may not care about brings us back to consumer irritation over ad viewership.

So, why not ask consumers for more specific information? This takes us to the big "p" word - privacy. Consumers will not like Sony learning about their lives in great detail. However, they would not mind Sony getting some sort of average information. Hence, the level of precision targeting will never be great.

Second, consumers opt-in to these categories only once. I have been a member of Bonus Mail for months, and they have never asked me to revisit my opt-in scheme. Basing ad targeting on such old data is bound to be ineffectual. This is especially true for high-involvement products that people buy once every few years. I may have been interested in Sony TV ads six months ago when I was in the market for a TV. Now, since I've bought that TV, I may just not care.

So, why not go back and ask people to revise their scheme every month? Once again, consumers might be upset if you intrude into their private lives too often. Then you're bound to see an attrition in the number of people who respond if you do this. Also, people may start giving you information that is junk.

Third, many of the paid ad models do not pay right away. MyPoints requires that you accumulate points, redeemable only after you've watched what seems like thousands of ads. People are bound to lose interest if they have to wait too long since this is a new way of doing things. Consumers may question whether the company will ever pay.

Fourth, given the nature of the medium, the models based on streaming media ads in the corners of the monitor (e.g., Free-PC) cannot outperform media such as print, radio or TV. Many consumers may be viewing such ads on small monitors, and it's not clear whether some consumers try to avoid them altogether. In fact, I think simple banners may out-perform such advertising.

Finally, given the tasks involved (e.g., filling out information, viewing ad after ad after ad), it is unlikely that such schemes will lead to consumers with good demographics (e.g., highly educated professionals with high income). Rather, it is likely that these models will attract groups such as college students and teenagers who are not exactly on everybody's wish list.

So, will these new advertising models ever work? I think they have potential. We just need to refine the model a little:

1. Obtain precise information.

The more precise the information we obtain, the more likely the original promise of targeting will be met more accurately. Consumers must be provided monetary incentives for updating the information on a regular basis. Advertisers are going to be drawn into this medium solely based on how effective the targeting mechanism is. We must also find a way to do this and reduce the psychological burden of participation at the same time.

2. Provide an immediate incentive.

Consumers must be able to see an immediate incentive for their participation. This may be a coupon that they can print out and use today or points that can be applied to a purchase immediately after viewing the ad. Individuals can be offered special deals such as "Watch five ads and you get a one-day subscription to site XYZ" or "Watch five ads and we mail you a trinket today." In general, the behavior is going to get reinforced better if the incentive is provided immediately.

3. Experiment with new ad models.

I don't think we have yet discovered "the" model. As is natural in Internet marketing and advertising, continuous innovation is the key. Models in which consumers come to a site to view ads instead of being reminded to view ads must be given serious thought.


Sandeep Krishnamurthy, With author's permission, ClickZ Network

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