The Current State of Incentive Marketing…Sort of

We at the Confidential have covered the incentive marketing space for almost three years. A lot has changed during that time. Had you taken a poll in 2004 asking those in the interactive space if they thought incentive promotion would not only survive but thrive, I suspect most would have given some form of an LSAT answer like, "cautiously optimistic." If we graphed the people’s confidence in that space year over year, I predict we’d get some form of downward curve, with as few as 25% to 35% of respondents believing that incentive marketing would even equal previous years’ volume. Consider Google dominating the news, both their and Yahoo’s less than welcoming environment for incentive marketers, ever increasing spam filtering, and MetaReward having exited the incentive space, you could easily think incentive promotion has its writing on the wall. I know I certainly felt that way.

Before continuing, let’s align everyone on what we mean by incentive promotion. When referencing incentive promotion, we refer to offers that use some reward to draw a user into entering a registration process, one where they must ultimately complete a certain number of offers to redeem / qualify for the incentive that drew their interest. More globally, the incentive promotion offers take user interest in one thing, the classic example being a free ipod, and turns that into conversions on other offers. Incentive promotions offers also go by the term email submit and/or zip submit, a reference to which piece of data they ask on the landing page. Circa 2002, the incentives used hovered around the value of one or two completed offers, e.g. a DVD. In 2004, this threshold changed as marketers started to experiment with higher ticket items; today you can find multi-thousand dollar items offered.

If you do not have your own email list to distribute offers and/or an incentive offer for others to run and/or happen to work at a company doing CPA media buying, you might think the way I and my hypothetical panel of others in the space do, that incentive promotion hobbles on its last legs. Put another way, if incentive promotion were a stock, it would most likely have a Hold rating at best and a Market Underperform more likely. Yet, if you surf MySpace, you can’t help but notice the almost unbelievable amount of impressions dedicated towards incentive marketing offers. (As I like to say MySpace display ads are for incentive. Yahoo / MSN are for lead gen.) Similarly, if you check your webmail inbox, you might find it replete with various incentive offers. Or, as I like to do, log in to the networks and see what they have to offer.

CPA ad networks reflect the market, so if you see few ads across all networks, you can surmise that incentive promotion ads do not compete effectively with other offers. Additionally, if you see ads but they smell like rotting food because the advertiser or network has not kept them fresh, you can take that as a sign of both the network’s attitude and perhaps even the global state of the market. For those who do not have logins and wonder what lies behind the curtain, a plethora offers do. Where once they only leveraged brands, e.g. Restaurant X gift cards, Store Y card, Company A gadget, today they span the gambit from brands to pop culture trivia to current events. In other words, from the affiliate and network perspective, the industry looks healthy.

Despite the signs against, the physical evidence – number of banner impression, number of offers, and relevance of offers – suggests that incentive promotion continues strong. While incentive marketing started as a series of ever-changing offers, incentive promotion has evolved into a powerful marketing platform for monetizing user interest. As interest / intent often revolves around the product and cultural landscape, the incentive offers continue to adapt, and for any new event or new product release you will continue to find. What we find today though, are the top companies in a position to take their process and apply it to almost any product out there. Incentive promotion has become truly scalable and not a one off marketing event. Yet again, the question remains, will it stay this way? It can, but this year it might be challenged from non-industry forces, and here is why. Offer complexity has risen; breakage too has risen to potentially dramatic levels. Reliance on these offers by companies in lead gen and other (including large public ones) continues to rise, too. All of which works against the stability and long-term success.

We called this piece, "The Current State of Incentive Marketing…Sort of," using the words "Sort of" because it turns out that the world of incentive promotion has a lot more going on than originally expected. It’s not some business fading into the sunset being replaced by newer, higher paying offers. Instead, for some company, it earned them a significant amount of their EBITDA at a time when ringtones made most of the headines. We’ll have a true Current State of Lead Generation as we wrap up some really cool and potentially eye-opening research. In the meantime, read the companion article to this piece, "Incentive Promotion Acting Badly?" for another, slightly different look at how incentive promotion stands today.