Stuck in the Middle
I was trying to explain the current state of Return Path’s Postmaster Network online advertising business (email lists, lead gen, RSS) to someone from outside the industry the other day, when it occurred to me that many online marketing vehicles are still split between running on the offline paradigm and running on the online paradigm. I don’t have a lot of detailed stats on all of this at my fingertips, but bear with my observations.
To me, the offline paradigm has always been characterized by big agency buys, driven by thematic/brand oriented creative campaigns that cost a fortune to develop. This is even true to a large extent for direct marketing, although the mechanics are different. It’s relied on lots of third party intermediaries to connect the audience (or more specifically, estimates of the audience) to the marketer. It has paid all of these people on a percentage of the media spend, which is so massive that a 10% override on it can keep you in business and be dissociated from effort expended or value created. Many of the original forms of online media — banners, lists — still operate partially in this world. This part of the online ad market is growing, but more slowly than others.
Contrast this with the online paradigm that has been characterized by automated buying, rapid testing cycles, small up-front dollar outlays, and an “always on” marketing that’s not necessarily tied to a big campaign. It’s been much more marketplace, aggregator, and bid-driven and frequently has marketers connecting straight to their audience, or at least to the media vehicle that their audience is on. Fees are success-based or labor-based. This is the part of the market that’s exploding in popularity.
So why are some parts of online marketing stuck in the middle today? It seems to me that the things that are related to the offline paradigm in some way are still living in that paradigm, while things that are truly new in the last 5+ years are freed from those shackles. So some things, like email list rental and banner buys, go through an agency or a broker (or sometimes both), because, well, that’s how clients have always rented mailing lists or bought column inches in magazines. But anyone with a credit card can start bidding for keywords on Google or Yahoo, or post offers to an affiliate network, trying out their own creative and optimizing it within minutes or hours.
The thing I find so interesting about this is that all of these different online marketing tactics, whether old school or new school, are trying to do the same things — generate more sales/leads/customers, and build brand. But the legacy machinery of old world marketing and advertising still lingers in the background while the new machinery of search and automated marketing/bidding engines are gaining steam.
It will be interesting to see how this all shakes out over time, but I’d be surprised if there’s a lot of the purchasing of high value online real estate that continues to be in the control of old-style agencies and brokers for too much longer. It’s just getting too easy for marketers to control their own destiny. What I think is even more fascinating is the possibility that these new technologies and techniques might move upstream to influence how “old media” is bought as well over time, as seen in both Yahoo’s and Google’s recent deals with offline media brokers (and even, one could argue, the YouTube acquisition). There’s no logical reason why marketers shouldn’t be able to bid on 30-second TV commercials across the major networks and cable stations and not be held to big up-front commitments and markups. Oh, right, and come back to the network afterwards and ask for a make good if the ad doesn’t drive enough sales on the back-end.
Maybe agencies and brokers will change…maybe some courageous traditional media vehicles will change…or maybe a little of both, but old school online customer acquisition marketing won’t be stuck in the middle forever. The scale and ROI will guarantee it.
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About Matt Blumberg
Matt Blumberg founded Return Path in 1999 because he believed the world needed email to work better. Matt is passionate about enhancing the online relationship between email subscribers and marketers so that both sides of the equation benefit. It is with great pride that he has watched this initial creation grow to a company of more than 400 employees with the market leading brand, innovative products, and the email industry’s most renowned experts. Before Return Path, Matt ran marketing, product management, and the internet group for MovieFone, Inc. (later acquired by AOL). Prior to that he served as an associate with private equity firm General Atlantic Partners and was a consultant with Mercer Management Consulting. He holds a B.A. from Princeton University. You can learn much more about Matt by reading his email marketing and entrepreneurship blog Only Once – one of the first CEO blogs on the Internet. Last year he wrote a book, Startup CEO: A Field Guide to Scaling Up Your Business.