Like so many other animals, we’re social creatures. We not only like the company of others, but we rely on others for key parts of our lives. Others’ experiences help us prepare for the future and validate our own assumptions. That is why when at a conference at ad:tech, the social part of us seeks out the company of others for fun and the survival part of us looks to learn from them to see how we compare. That helps explain why when at shows like ad:tech, people frequently want to know how others’ businesses are doing. If yours is doing well, you care less, but if yours is struggling, you really want to know if others are struggling too. That said, we do not like to shows signs of weakness, so we don’t always like to let others in on our misery. Enough people opened up at the show, though, that we discovered, the pickings are for lack of a better word slim.
To those who have lived in the space for any appreciable amount of times, they have become acquainted with the boom and bust cycles. It’s what we talked about a few weeks ago – the challenges with differentiation, the often vicious cycle, and the hits driven ecosystem among the reasons for the boom and bust. Some, though, wonder whether we are starting to see something different this time around. In the past periods of softness, there has generally been an offer or a traffic source, but generally both, right around the corner. This time around, we face both traffic and offer headwinds. Facebook and Google have both recoiled from broad based acceptance of offers, as for the offers that do exist, no longer does one type of offer support an entire network.
What’s our value add?
Now is the time where we have to ask ourselves some serious questions. It used to be enough that the performance marketing space worked on performance. As an offer owner, the thought of having an outsourced sales force that you pay solely on an action basis, is great. And, unlike radio or tv, which both offer some levels of performance-based pricing, doing so online was very accessible. All you had to worry about was, at most, price control, but the more people who had the offer the merrier. That is simply not enough today. It’s still a powerful sell, but as the saying goes, you can fool some of the people some of the time but not all of the people all of the time. The slash and burn activity has caught up to the broader performance marketing ecosystem. People no longer want conversions. They want the right conversions.
Getting to yes
When it came to offers, the big question was whether the conversion required some form of payment , e.g. credit card or mobile pin submit, or if simply required data which could include everything from a typical lead generation offer to an email / zip submit offer. The challenge is arbitrage. So much of the revenue of the past few years has come from the equivalent of media day trading. That in and of itself isn’t a problem, but effective arbitrage has thus far required some sizzle. Plain offers don’t convert. An ad on Facebook offering the chance to save on auto insurance doesn’t back out, but the ones that did back out, an ad showing Family Guy’s Peter Griffin on a license offering $13/month auto insurance does poorly for the end buyer. That causes the offer to be pulled from a network, and this cycle of advertisers being quasi-burnt has left us with the equivalent of a lot of cattle but very little feed.
What’s old is new
From a network / offer perspective, email and other forms of direct traffic have not seen this level of interest in years. If you hear about a good offer and contact the offer owner, you will very likely hear something like this, "Sorry, but we’re looking for non-network traffic. If you have your own email list, let us know as it’s doing really well on email. " It helps explain why two of the most recent waves of consolidation focused on email inventory. This doesn’t mean email overall has seen a complete resurgence. Delivery is as tough as ever, but with more and more offers focusing on email list owners, yields will continue to rise. Dedicated email lists are the new "in" thing. The most successful arbitrage today focuses on email list generation, but unlike the email / zip submit offers which look for almost immediate payback and rely on breakage, the new email relies on life time value and the opposite of breakage – transactions.
Cut the schlock
The important thing is that arbitrage is not dead, but b.s. arbitrage is not the way to make money. Plenty of people are still making money the b.s. way, but b.s. is still b.s. It will always exist, but it will keep getting to the fringe. We haven’t entered of a world of no shenanigans, but we might be getting closer. Yes, it sucks that it’s harder to make money, and that the four hour work week isn’t the name of the game going forward. There are still plenty of opportunities to make money, but they will be slower going with larger payouts in the end. The performance marketing world’s challenge now is to prove that it can make money in a world without the quick buck, one that is in tune with the end advertiser – a world less reliant on immediate arbitrage on undifferentiated mass market items. Easier said than done of course, which means it won’t get done any time soon, but it will get done.
Network
