Direct Response In A Behavioral Marketing World

If Google is the king of search, then MySpace is the king of the impression. Analysts, journalists, and all other sorts of “ists” have for years closely tracked the percentage of queries that each of the major search engines receives, but with the advent of MySpace, the “ists” have started to treat the percentage of ad impressions by site as more than just a passing statistic. For MySpace, what was a 10% share of the ad impression market at the beginning of this year has jumped to a 17% share of the market, and it’s a trend that doesn’t look to slow.

The top sites online have always accounted for the majority of ad impressions, but just how many is almost mind-numbing. Assuming the Nielsen//NetRatings AdRelevance numbers reflect somewhat accurately the actual landscape, Yahoo Mail and Hotmail account for more than 45% of all ad impressions, with Yahoo owning a whopping 38% in May 2006 and Hotmail 8% during that same time period. MySpace during that month had a little more than 14%, but the landscape continued to shift again in June 2006 with MySpace up to 17% and Yahoo down almost three percentage points and Microsoft losing one.

MySpace’s growth and its impact on Yahoo and Hotmail among other sites tells only part of the story. The other part of the story deals with addressing the increased flak the social networking giant attracts as its share rises. This has nothing to do with its content and everything to do with revenue. Critics and living room referees everywhere keep calling MySpace an ad dud because of its incredible portions of remnant inventory that attract only low dollar CPMs. The missives come even with the company steadily increasing its ad revenue which several have pegged to hit $200 million this year.

Two hundred million is a nice chunk of change, and compared to its 200 or so employees even implies decent efficiency. It’s only because of the sites share of users and impressions that others feel it should do better. The question is, should it? I’m not so sure that it should. Like MySpace, Yahoo Mail also has a relatively low CPM, especially when compared to other places on Yahoo, and there is a reason that Yahoo Mail and MySpace rank numbers one and two. Both are communication destinations. It took me a while to realize this and someone smarter than I suggesting it, but I’ve bought in to the theory. MySpace has grown so much and has taken away share from Yahoo Mail because it improves upon how people communicate online. It’s not about social networking but interacting with your network.

Unfortunately for direct marketers though, aside from a select few incentivized promotion ones, MySpace inventory does not convert. And despite the abundance of mortgage and education offers running on Yahoo Mail, a company cannot simply put up one of those ads and have it work. The same is doubly true of MySpace, as its younger audience often means that you won’t find it adorned with LowerMyBills ads. So, for all its clout, the site remains in many ways off limits to most direct marketers. And, unfortunately, it doesn’t seem like that will change. In fact, many sites have got their 1999 going on and seek to woo the brand marketers.

Even Google with its latest landing page change seems to have sent a not so subtle “you’re expendable” message to direct marketers. As someone on Webmasterworld pointed out, Google has in many cases more demand than they do supply. Except for people in the space, nobody is really looking four pages deep just for the ads. And they too have potentially conflicting interests. They want the brand marketers, but they also want to see their own CPA advertisers do well. There is, however, some light at the end of the brand and run of network tunnel, behavioral marketing.

To date, talk of behavioral marketing has primarily focused on the brand marketers. Companies like Revenue Science have sophisticated tools for brand heavy web sites such as the Wall Street Journal that allows them to find high value users elsewhere on their site and show them a higher paying ad instead of a lower paying one. Helping sites make more from their own advertiser base is only one of the benefits of behavioral targeting. Another big advantage comes by helping add context to users as they visit non-relevant sites. Many of the larger behavioral targeting companies and networks with such targeting partake in this making sense of the web activity. They place tracking pixels across content sites so that they can show more relevant ads when they see a user on a less relevant site.

Direct response fits into the behavioral equation because by adding that layer of understanding prior to showing the ad, advertisers see increased conversion rates, and that is good news. Brand might be the low hanging fruit for behavioral marketing, but a company that can act as a platform for those in the direct marketing space could end up owning the tail of the big sites’ impressions, and with behavioral targeting added, direct marketers could stay competitive in many inventory situations. It will be a win-win as brand marketers will only buy so many impressions, and direct response marketers will look for new ways to reach the “remnant” as they no longer can afford to blanket the Internet by going direct to the big sites. Behavioral targeting and a behavioral targeting firm could end up being the Google for banners ads – being the marketplace and the gateway for users.