MetaReward. Dropping the Rewards.

In Internet Advertising 2006 – The Year That Will Be, I said, “Incentive marketing will change. Users love free iPods, and the aggregate of remnant inventory will still be incredibly large, but the day of the email / zip offer will come to a close…” I also said, “Experian Interactive will challenge and overtake Valueclick.” The two I thought were unrelated, but the following email sent on Monday, April 10, 2006 by Experian Interactive’s MetaReward unit suggests otherwise. The email reads, “MetaReward today announced that we have decided to exit the incentive marketing business…” The story of MetaReward is part history and part state of the incentive promotion industry. It’s also the topic of this week’s Digital Thoughts.

MetaReward began life under the Netflip brand, a site run by friends Erik Lason and Shawn Mendelovich with Shawn’s brother Maurry also receiving Founder credit. They offered a different twist to incentive marketing, a more straightforward approach than that featured by the existing incentive incumbent MyPoints. Similar to MyPoints, Netflip’s primary platform was rewarding users for interacting with marketing offers. The key difference between the two was that with Netflip users received a cash reward for their participation, an amount which varied by offer and equated to a percentage of the cost per acquisition. MyPoints, as the name implied, gave users points, and they allowed users to redeem points not just for cash but discounts at a stable of well-known offline brands, e.g. The Gap. MyPoints filed to go public in August, 1999 whereas Netflip, which began in 1999 stayed private until it sold to Experian Interactive in December 2003. Ironically, on that same day as the MetaReward email announcing its departure from incentive marketing, MyPoints announced its acquisition by Classmates parent United Online for $56 million in cash. This was the second time MyPoints was purchased, since going public, the first being to UAL, the parent company of United Air Lines, in June 2001 for $112 million.

The reason we focus on Netflip is that while it wasn’t the first incentive site, the methodology they developed is what incentive promotion marketers still use today, almost six years later. Netflip built a platform that empowered people to become the equivalent of publishers. Each had an account, and upon hitting a certain threshold, they received payment from the company. The founders wisely built Netflip on top of the platform; thus, much like the auto industry where a wide variety of cars come from one single chassis, the founders could create any number of sites without having to modify the underlying tracking infrastructure. Showing their b-school roots, but mixed with Internet sensibilities, the team decided to open up the platform to others so that any who wanted could create their own incentive site. They called this platform MetaReward and it gave not just user tracking but came ready made with the incentive offers. Netflip, by all accounts, they viewed simply as the first publisher/affiliate of MetaReward. Other companies recognized the opportunity and built their own incentive backend, but it was Netflip that pioneered the incentive CPA to cash/product model that dominates the incentive promotion landscape today.

As I mentioned in Incentive Promotion 2.0, the threshold for rewards hovered around $25 for several years. I credit AdDrive with starting the beginning of the end. At the time in 2004, Memolink offered the highest consumer bounty at the time, a $300 gift card, AdDrive, though, was the first to market a high dollar value premium instead of the low value gift card or product. In their case, it was a Kodak digital camera, and the world of incentive promotion has not looked back since. MetaReward even got into this game with their TopFreeGifts and FastRewards brands that offered everything from laptops to flat screen TVs. And, as we’ll see later, there isn’t much left to offer – unless you get really creative and promote a week in Hawaii or perhaps the chance to own a home in Banglore.

A company in the incentive space might exist for several reasons, one of which revolves around the competitiveness of the incentive promotion business. The space is brutal and cutthroat. Those in the business have a warped view of the world. They look at every product as a potential offer, obsess over news to think of fresh “surveys,” and have to continuously tweak every single facet of the process in order to maintain sticky offers and high payouts. Not only is the incentive promotion space competitive amongst itself, but the overall media market in which they compete has also begun to squeeze them. In 2004, email, search, and web all had huge inventory gaps that the incentive promotion players could leverage. Today, many of the gaps no longer exist and/or are shrinking rapidly. What this means is that building a better mousetrap doesn’t necessarily insure them that mice even exist.

Perhaps most damaging of all to the incentive promotion industry, aside from its competitiveness and shrinking returns to due media pressures, are the offers themselves. As mentioned earlier, the incentive promotion industry has hit a ceiling with respect to what it can offer consumers. Users can technically earn a digital camera, an iPod, and perhaps even a laptop. The problem is that it’s not particularly easy to do so, especially with the four-figure dollar value items, nor is it a particularly rewarding experience. What results is in essence the online equivalent to licking envelopes. People just want to get through the task at hand, i.e. earn their reward; they aren’t becoming good customers.

Marketers that rely on incentive promotion channels already see lower quality customers from this channel. That makes sense. A person who signs up for a credit card in order to earn a prize has less intent than one signing up after doing a search for credit cards. If a user only has to complete one offer then the back-end marketer (i.e. the one accepting the incentivized customer) has a chance at receiving a decent lead as the user had to at least choose which offer to complete. Once the user has to complete more, though, you reduce the quality even further as the person no longer chooses, but instead just sees what it will take. Having friends complete offers (an option in some promotions) helps but, again, they too have low intent. The volume of incentive promotion has thus been the saving grace. Marketers will tolerate the reduced quality because of the sheer volume of leads. As the gifts rise though, this balance becomes strained. And, as users walk away from the experience with less and less satisfaction during the process, the backend offer providers, who have real brands to worry about, are the only ones who suffer. Users equate the experience with the brand, a situation only exacerbated by incentive promotion companies that create landing pages suggesting participation in that particular promotion by the back-end brands.

In some ways it is hard to believe that the company that in many respects helped enable the current incentive promotion market has decided to exit it. Then again, MetaReward helped start the trend, so their departure could be seen as sign of continued forward thinking on behalf of their owners, Experian Interactive and not a failure. Confirmation comes from the remainder of the email that was sent to MetaReward affiliates that read, “Your MetaReward account will not be affected as we will continue to focus on our non-incentive credit card marketing business. In fact, we will be introducing several new credit card products and technologies in the very near future that are targeted to credit card marketers.” That might not sound like much, but Experian Interactive has the technology assets and the distribution channels expertise. I don’t think it will take them long until they create the next LowerMyBills / PriceGrabber for the credit card business…or even just a successful credit card divisions of each of those two.