STRAIGHT TALK on GAY DM

Companies target the market too good to resist When Sean Strub sold Metamorphics Media LLC, the gay and lesbian list brokerage and consultancy he founded some 15 years ago, it symbolized that the market that dared not speak its name had become the market that marketers dare not ignore.

“I feel it’s a strong market focus for direct marketers,” explains Stephen Dunn, president of Mal Dunn Associates Inc., which bought Metamorphics Media.

Dunn might have added that it’s a market that has come of age, one heavily sought after by Fortune 500 companies. Amazon.com, America Online, American Express, Johnson & Johnson, SmithKline Beecham, Subaru and Travelocity.com are but a handful of the firms targeting lesbians and gay men.

And with good reason: Gay and lesbian consumers are classic Sinks (single income, no kids), and Dinks (double income, no kids). They have higher than average incomes, spend more of their disposable funds, go online more and buy more when they’re there.

Research conducted by Greenfield Online indicates that 78% of lesbian and gay e-shoppers prefer to buy from companies that advertise directly to them. Their favorite sites are Amazon, eBay Auction Classified, Travelocity, Barnesandnoble.com and CDNow. Typical purchases are books, CDs and videos.

Online or offline, direct marketers should customize their offers for gays and lesbians, experts say. They also have to find the right vehicle, and try to become part of the community, says Kevin Ray, vice president of marketing at gsociety, the Los Angeles-based parent company of GayWired.com. Gsociety practices what it preaches. Ray described his firm as a multimedia company; GayWired is its 5-year-old lesbian and gay Internet portal. Besides news and entertainment content that changes daily – Ray likens the site to a “Gay USA Today” – there are a variety of advertising and e-commerce components. The entertainment industry, for example, can offer trailers and tickets.

As Ray points out, “We’re the only top site that offers in-house warehouse products.” In addition, visitors can choose products through affiliate programs. “Fifty percent of our revenue comes from the retail parts of our site,” he says.

Among the more popular e-commerce products are health-related items as well as CDs and DVDs. “Visitors read a story or a review about a new release and can pop a link and purchase it,” Ray explains.

The site racks up over half a million visitors a month. One out of 10 become members of GayWired, and 48% turn into customers. The portal promotes itself through ads and the regular sponsorship of gay and lesbian events across the country.

While the database is not for rent, GayWired does e-mailings for clients and partners as well as to promote its own special products and offers.

More than half of GayWired’s visitors are college-educated. Some 36% earn between $30,000 and $59,000 a year, with 11% topping $100,000. Visitors tend to be between 30 and 34 years old, and four out of five are male.

Howard Buford, president and chief executive officer of Prime Access Inc., claims the lesbian and gay market consists of roughly 12 million ethnically diverse consumers who spend as much as $350 billion a year. He also suggests that the gay discretionary income may be as much as 10% above that of the general population. He adds that this niche spends four times the national average online.

Buford, whose consultancy has Fortune 500 clients, not only warns against assuming that the market is entirely white males under 25, but also assuming that a wink is going to work.

“It looks closeted, if not cowardly,” he says, adding that if any group outside of the mainstream does not see itself consistently portrayed in advertising, it assumes it’s not welcome.

He also suggests that companies “don’t try lesbian and gay marketing at home,” but defer to an expert.

Expertise and “one-stop-shop marketing” is what PlanetOut offers. With a mix of mergers and acquisitions, the PlanetOut empire includes Out, The Advocate, Triangle Marketing, and Out and About, among other properties that use direct marketing or offer DM opportunities. With third-round financing to the tune of $10 million and such investors and partners as America Online, BMG Entertainment, and Creative Artists Agency, it’s little wonder The Wall Street Journal published an article speculating on whether PlanetOut would be the first gay and lesbian company to manage an initial public offering in this country.

E superscript *Trade, for example, has recently partnered with PlanetOut to provide portal members a financial newsletter as well as the opportunity to trade online. E superscript *Trade sees lesbian and gay consumers with average incomes better than $60,000 as being three times more likely to have a mutual fund or money market fund.

The PlanetOut portal has 1.6 million unique visitors a month and 750,000 members. While space and banner ads are used to attract visitors and members, event marketing (sponsorships) is seen as the primary method of attracting audiences. The support is “in-kind trade or financial,” explains PlanetOut’s Susan Schuman, executive vice president and chief executive officer.

PlanetOut’s reach is extended by providing content to AOL and Yahoo!, among other sites, as well as a new affiliate program through which the San Francisco-based company will provide content to nonprofit and not-for-profit Web sites.

While PlanetOut itself does not use direct marketing, both Out and The Advocate use direct mail to solicit subscribers. The Advocate’s parent company, Liberation Publishing, also owns Triangle Marketing, a gay and lesbian list brokerage. Out and About, of course, has its own newsletters and mailing lists. As a result, Schuman claims her company owns 80% of the lesbian and gay ad market.

While some analysts see a trend toward nationalization of the marketing media as a reflection of what’s happening in the mainstream and as a reflection of the greater acceptance of the lesbian and gay market, there are still some small “pop and pop” operations running. One example is Sam Francis, the founder and publisher of Hero, a magazine for gay men who are more interested in a relationship than in a lifestyle.

The publication began as a Web site, but turned into a print product. Despite its origins, banner ads have not worked for Francis to acquire subscribers. Instead he uses a mix of rented mailing lists, inserts in gay-male specific catalogs, and such Web-based subscription services as enews.com. His own site can also accept subscriptions, which he sees as an important gateway to the market.

A 200,000-piece mailing gets a 2% response, with a special “Gay Wedding Guide for Men” issue providing a 60% response spike. While his current subscriber base is 14,000, Francis believes his marketing mix can bring the base up to 100,000 in 2001, which he says will make it the gay magazine with the largest circulation in the country.

But people like Buford question the continued effectiveness of print in reaching the market. Noting that Out and The Advocate only reach 100,000 or so subscribers each – compared with, say, Ebony, which has over 2 million subscribers – the portals can reach millions of lesbian and gay consumers as they log on.