Digital Thoughts – A Tale of Two Pixels

The incentive promotion space drives an inordinate amount of users into registration paths. The absolute breadth of the promotions and the speed to market with new incentive promotions has no peers in mainstream advertising. Everybody creating and running incentive promotion sites lives, eats, and breathes either thinking up potential new promotions or how to squeeze that extra nickel out of an email or zip. Five or ten cents may not sound like much, but in an industry that has quickly become commoditized, a nickel or dime might mean the difference between success and failure. What if, despite all your efforts, you simply couldn’t find that extra nickel? What do you do? One industry knows these challenges much too well, the adult industry.

If you’re looking for that next big marketing technique, don’t look outside the Internet industry…look to the adult space. If you think that we invented the dollar email address, think again. Not only did the adult space first offer dollar email campaigns, but they did so beginning in 2003. The same is true with the basic incentive promotion platform. The adult space doesn’t necessarily run any incentive promotion offers of its own, but they were the first to use the underlying principle, namely a unified platform by which hundreds, if not thousands, of front-end wrappers can be applied. It’s an amazing and necessary feat to be able to offer a free PSP one day and an XBOX360 the same day, only moments after its being announced at E3.

The synergies between the adult space and the mainstream direct marketing space are not lost on those who operate in the former. Many of the successful mainstream affiliates come from the adult space and/or still operate adult sites. The desktop space provides a classic example. Before those in our arena started creating and promoting desktop applications, those in the adult industry realized that they could prompt people to download software onto their machine by having the user believe they needed the software in order to access the website. Those in the adult space have pushed, and continue to push, the limits of what users will do in order to access free content. Similarly, they continue to experiment with new ways to convert that free user into a paid user. That is to say their lives too revolve around the equivalent of converting the email address into the highest aggregate yield or increasing the conversion rate between the payout page, page one, and the revenue page, page two.

In many ways, the adult industry sees our space as the greener grass; an open pasture that doesn’t currently have thousands of cows grazing, each looking for that bit of green still left or just sprouting. In their eyes conquering mainstream direct marketing should be easy. They have experience competing in ultra-competitive landscapes, relying on internal promotions, and making money only when users perform an action. Where this gets tricky though is when those in the mainstream direct marketing space start to become a little too familiar with the adult way of doing business. Take for example a situation where you as an incentive promotion advertiser need to hit $1.XX per email but despite all efforts cannot. What do you do? It’s no secret what those in the adult space have done. They will offer $1.XX and say no charge backs and that payout occurs on raw email address. What they will not tell you is that they only count seven out of every ten raw email addresses.

Those in the adult space refer to the practice of not counting all leads as shaving, and it’s a slippery slope to go down, one that tends to occur the more a product becomes commoditized. Publishers have too many choices, and not enough time or desire to test one versus the other to see which truly performs best. Instead they pick the one with the highest payout. This is not to say that other factors don’t come into play, but even they can only buy a small difference in payout. When it comes to buying soft drinks, for example, it doesn’t take too much before a person will buy Pepsi across the street instead of Coke from you because they offer it for 20% less. Publishers’ costs keep rising so they constantly look for more money.

In a market like ours, and I imagine in the adult space too, shaving didn’t occur by design. It happened by necessity. Announcing payouts up to X based on quality simply doesn’t attract a publisher base. Yet, all traffic performs differently. It’s almost impossible to payout X across the board to every publisher. Rather than decrease the price though, those running the offer most likely felt it more important to maintain price integrity. Shave enough and the publisher starts to get clued in, wondering why performance on an offer varies so widely to the same audience. The reason shaving is a slippery slope is that once you go down that path it’s hard to turn back. Once too many companies start doing the same, the integrity of our industry starts being questioned, and it becomes harder to convince not just publishers but high quality advertisers and/or even potential investors of our legitimacy.

The adult space can get away with shaving. That’s one of the few luxuries of their space, and regardless of its size, the mainstream advertising world will always look at the adult space as fringe activity. There aren’t the same controls, the same checks and balances. They can push the envelope more than we ever should. Our promotions play on consumer demand. Theirs play on basic instincts, ones that people don’t want to publicly acknowledge, which means that short of credit card fraud the average user will put up with ten times more than they will from our space. As much as I think we can learn from the adult space, I worry that we might indiscriminately assume what works there also works here. This is not to say, ignore the lessons that can be learned from the adult space. This is more to say, keep in mind where you want your company to be and to make sure actions today reflect that long-term position.