Trends Report: Desktop Publishing, a Conversation with 180 Solutions

The desktop space has been a battleground between advertisers, publishers and affiliates in the online marketing industry for years. However, this sector only shows signs of growth. Major players continue to raise both capital investment and move towards public offerings. Last week, Claria announced their intent to file for an initial public offering to raise $150 million. At the end of March, 180solutions landed $40 million in venture capital investment from Spectrum Equity Investments in hopes of hiring 150 employees. 180solutions plans to top $50 million in sales this year. This large amount of money flowing into the space directly contradicts the wishes of affiliates angry and displeased with the practices of these publishers and privacy-rights advocates interested in making these models and their performance unprofitable.

Within the desktop publishing space, there are two actual sets of models at the present. One model is incorporated into full applications that the consumer receives for free with the permission to receive advertisements. Instead of paying for a piece of software, users can download and agree to view advertisements from bundled partners.

The recognized leader in this space is Cydoor Media. They provide the network of adware that allows consumers to download popular programs such as KaZaa. We asked Cydoor’s Bob Regular about the feedback that they receive from advertisers,

“Most of our advertisers are focused on achieving ROI and utilizing the younger demographic found on our network. The feedback is very positive, but we find the hardest part is getting advertisers to customize their campaigns to our large audience.”

When asked about advertiser and consumer retention rates, Regular answered;

“Retention would improve even more if there were more resources dedicated to audience customization. There’s a tendency to believe that the shoe fits all feet, and in our case it doesn’t. Our audience is very savvy, transient and youthful…they won’t tolerate blah unfocused ads.”

Apart from these desktop publishers such as Cydoor are the ones which have no applications associated. The model is based on the consumer giving their permission to have certain programs on their computers which serve ads, but there is no direct content involved. In this way, the value proposition is not the content or software downloaded but the ads which are served. In order to provide a value proposition, these companies such as 180solutions and Claria, offer ads that provide alternatives to consumers while browsing.

While Claria had no response, we did chat with Todd Sawicki of 180solutions on the issues of their company’s growth, their place within online marketing, feedback/retention from advertisers, consumer value and the complaints that some affiliates are lodging against them;

DM CONFIDENTIAL: What has been your company’s experience in the market over the last three years? Consolidation or Growth?

180SOLUTIONS : Given our own results over the last few years where we grew over 7x from 2002 to 2003 and we are on a strong pace again for 2004, we clearly feel that our market is in a strong growth phase. The contextual and search marketing space has clearly crossed the chasm where we are seeing broad-based acceptance from thousands of advertisers. Our MetricsDirect group for instance has over 6,000 advertisers currently. Consolidation usually occurs when growth has slowed significantly across the industry and I think our growth is representative of the overall space we’re in.

DM CONFIDENTIAL: Do you see yourself as a leader in the industry/sector?

180 SOLUTIONS : We think we are leaders in developing innovative online marketing platforms especially with our unique ability to deliver online users right to an advertisers websites. Our model is based on the idea of showing an advertiser’s website to a user at the point in time they are most interested in seeing what the advertiser has to offer. That has led to some of the best ROIs and lowest cost of sales in the contextual and search marketing space.

DM CONFIDENTIAL: What has been the feedback from advertisers participating? Is there a high retention/satisfaction rate?

180SOLUTIONS : We have learned a few important things about online advertisers that are key for our own growth and really for any other online advertising solution. First, advertisers today are very smart – they want measurable results and a proven ROI. Literally they want to see $2 dollars in return for every one dollar they spend with you. Once you prove that then what they want is a high level of account support. As a result, we actually have a written service level agreement which guarantees a certain response time in hours to any question or new campaign that an advertiser needs assistance with. Lastly, once you take care of those two issues, then advertisers want scale – more users, more inventory. For instance we have been able to scale our reach from 10 million users in the beginning of 2003 to more then 32 million this past quarter. As a result, we have been able to achieve a 90% retention rate.

DM CONFIDENTIAL: What do you see as the core values that you provide for consumers?

180SOLUTIONS : We provide a pretty clear value to consumers – our applications like Zango keep the Internet free. In effect, we are creating a new and improved version of the basic model that has long powered TV, radio and print publications – free content supported by advertising. Users every month are getting access to premium websites and applications as a result of our ability to deliver users 2 to 3 targeted websites a day. As a result, users are getting free content that is worth millions of dollars every month based on the amount of money we provide to online publishers.

DM CONFIDENTIAL: How do you feel about the affiliate publishers’ claims of taking commissions from them, etc?

180SOLUTIONS : Every new successful advertising model has caused some controversy going back to the days of television. Most people are not aware of the fact that when broadcast TV introduced 30 second commercials there was as much debate as there is today about various internet advertising models. We feel our unique model has inspired a similar debate. At the end of the day, the affiliate networks themselves control and manage the commission process. We comply with and have always complied with all codes of conduct of any network we have been associated with and respect the networks’ right to decide who deserves a commission. We show websites to users and the fact that users respond to the websites we show demonstrates that our solution not only provides value to the users, but successfully presents the advertiser when users want to and are willing to respond. It is really a win-win for users and advertisers and we believe the affiliate marketing community will come to see that as well.

How will consumers continue to receive these models as more consumers become aware of them? Does this model have a promising future of acceptance, like the 30 second commercial? As investor money continues to flow into this space and more companies file for IPO’s, 2004 seems to be a period of growth for this sector. How will that play with the rest of the industry, particularly the affiliate marketing sphere? We heartily encourage you to send your comments and insight to [email protected] as we continue to spotlight this issue in future issues of the Digital Moses Confidential.

Sam Harrelson is the Co-Editor of the Digital Moses Confidential. Send comments and questions to [email protected]