The first half of the newsletter version of “A Crash Course in the Vendor Landscape” covered the display ad network space and three areas that overlapped with it – ad serving, contextual / behavioral ad providers, and adware. We also covered ad rep firms and a subset of ad serving, the rich media ad servers. In Part 2 of this week’s Digital Thoughts, running in place of this week’s Trends Report, we look at two other areas that overlap with display ad networks and the four segments that overlap with them. These six segments comprise the most relevant segments to our industry, direct marketing online, and include – content networks, affiliate marketing, co-registration, email, lead generation, and incentive promotion companies. The Venn diagram contained within the actual presentation will help paint a visual picture of the company and category segmentation and can be downloaded here (5 MB).
Content networks, an ad network overlap and the first segment we cover here, appear at first glance the least relevant to those operating in the direct response world. Unlike Yahoo, CNN, or ESPN, content networks consist of some Tier 1 but many Tier 2 sites, especially with respect to brand. Among the best examples is Intermix. While known now for their run in with Spitzer, they initially gained a following off of their sticky fun-page sites. As opposed to the other segments such as lead generation, much of the traffic for content sites comes from repeat users and their viral referrals. Intermix also owns 55% of the web’s 5th largest property in terms of page views and arguable the most buzz-worthy, MySpace. What makes content networks of interest is that, given their high repeat user base and often non-branded sites, they have a substantial amount of remnant inventory much of which direct response advertisers fill.
One thing the sticky sites of content networks help generate are large email lists. Email provides a great format for these sites to deliver additional content or the same content broken up into single servings. Other segments that we cover also generate a high volume of email addresses. These include the upcoming lead generation and incentive promotion segments. With email deliverability at seemingly all time lows and the nuances that go into being both legally compliant and white listed, many of the companies that once managed their own email lists now turn to third parties. Companies that specialize in email hosting have existed for quite some time, but Datran Media helped invent an entirely new form, the outsourced email hosting and monetization service. Their strength in delivery, targeting, and ad sales allows them to earn many types of list owners more than managing their monetization in-house.
Before email as channel and before lead generation, co-reg, and incentive promotion commanded their own segment, even before display ad networks took off, many advertisers and publishers turned to affiliate networks for their internet advertising needs. Affiliate networks enabled merchants to have an outside sales force promoting their product and service, the affiliate. And companies such as Commission Junction helped many such merchants become affiliate-enabled not to mention providing a means by which merchants could, without programming, accept or deny affiliates, see stats, and make one payment with the network handling the individual payouts. What affiliate networks didn’t do, though, was provide guaranteed access to traffic, and many had set up fees along with monthly minimums. That opened the door for the display ad networks and to our final categories – lead generation, co-registration, and incentive promotion.
Direct response marketers realized quickly the potential that Internet advertising offered them, unfortunately, finding inventory that worked for them generally proved difficult especially in the early years of internet advertising when inventory was scarce and prices inflated. In 2001 a few individual advertisers and several ad networks, primarily those focusing on email found success with lead generation offers. During the next several years, the best of these companies, Azoogle, Ateractive, and Quinstreet began thinking outside of email and becoming what we now refer to as the arbitragers, media agnostic buyers and sellers of internet traffic. They were paid on a CPA basis and would buy media on any price structure so long as it converted. These companies created vertically focused pages that captured user data and was then sold off to participating buyers. The buyers focused on closing the leads while the marketers focused on traffic and conversion.
In their search of internet traffic opportunities, one area that the arbitrageurs, especially Azoogle and Adteractive found room for growth was in the incentive promotion and co-reg spaces. Companies such as Colonize helped invent and popularize co-registration and registration paths, but it wasn’t until this user flow method merged with the incentive model that both really picked up steam. The incentive space began with Netflip who offered internet surfers the opportunity to earn cash for participating in specific offers. They also offered other websites the opportunity to private label the technology. One company that saw the potential with the incentive space was YF Direct, now Netblue. They made it big with their YourFreeDVDs.com offer where users could earn movie titles of their choice. It was AdDrive that took the incentive offer to the next level by using a higher value premium than had typically been done and inserting a co-registration path. TheUseful.com, as they typically do, followed suit and went full bore with the incentive promotion offer, becoming a top five advertiser in many ad networks.
Companies like TheUseful and Netblue also fall into the category of arbitrageurs as they make their money by taking a user and having them convert on other Internet offers. They rely on the returns being greater than the cost of the media or in the case of affiliate deals, the cost of the email address to acquire them. The incentive area became so specialized that companies couldn’t often focus on all four areas – the promotion, the traffic, the registration, and the incentive fulfillment. As a result many outsourced portions of it such as the co-registration flow and media agnostic companies like Azoogle and Adteractive were there to help, offering solutions for the most complex – the co-registration path and incentive back-end. Datran Media, mentioned above would often come in to help with the collected emails.
In the end, understanding the vendor landscape is really about mapping the current state of Internet traffic as that dictates how the companies that monetize it operate. By looking at the segments and their evolution, we see how the overlap came to be, and by understanding the skill sets required for success in each we can start to wrap our heads around why it is, that certain companies operate in the segments they do. We can also understand why some companies might have difficulty starting in a new segment or competing as the segments evolve. Additionally, we can start to understand the often confusing relationships between companies who are both the advertiser and the publisher for another company. While we have only scratched the surface, we will continue to update the landscape and continue our effort to explain it, one column at a time.
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