Trends Report – Look Internaly
Traditionally, this section of the DM Confidential looks externally at the market. Topics range from capital markets activity to insights gleaned from watching Yahoo and Google indirectly and directly compete for dominance. This week’s article takes a step back by focusing not on the world at large and its implications on our space, but by looking at our space.
Most of the readers feel at some intuitive level that our space occupies a distinct niche in the online advertising space and doesn’t fit into the predefined box of other online advertising categories. That our activities might differ and qualify as something slightly new is both good and perfectly normal. Taking a step back even further, almost all things evolve – from animals to organizations. Even the venerable Standard Industrial Classification system was replaced in order to accommodate the increased number of categories not handled by original SIC system. The same applies for Internet advertising. While still a relatively nascent industry, it has evolved enough where the initial classifications for the type of activity online do not appear to cover all types of work online. Predictably, aspects of what we do will still fall into existing models, but much of our work fundamentally differs.
None of the above helps explain exactly what we do, but it does set the framework for looking at our work slightly apart from the mainstream business of interactive marketing, i.e. exploring the fundamental differences. One place to begin, and it’s often the easiest place when one attempts to describe something new, is to look at who we are not. One thing we are not is interactive agencies. Traditional agencies work on a service model, billing for time spent and not for performance. We share more in common with a retail store than an agency; we get paid per transaction when, and only when, an end-user “buys.” Neither are we technology companies. Almost all of us use technology extensively and rely on it for our success, but we rely on it only to assist with our marketing needs and not as the reason for being in business. Similarly, we know that we do not fall into the search engine services group either. If any, we appear most a part of affiliate marketing.
While tempting to include us in this category, our work does not mirror that of traditional affiliate marketing. Like affiliate marketing, we specialize in offers on a performance basis, but grouping us in the affiliate marketing space would not accurately describe what we do. Again, like affiliate marketing, the major players are the advertiser, the traffic source, and the networks that assist in bringing the two together. Two main differentiators exist between us and affiliate marketing. The first revolves around our marketing method. The second expands on the first and enables it. Regarding the first point, one thing defining our space is the active nature of the marketing. We do not wait passively for traffic – a high level of competition exists. The good from the bad get separated quickly with the bad not getting any traffic at all. Simply having an offer does not insure delivery.
The second major distinction between our world and the affiliate world plays on the active nature. We are risk takers, literally. This means that we do not necessarily pay out to traffic on the same metric in which we get paid. For example, if we make money on sales, we do not necessarily pay out only on percentage of sale. The same holds true for lead based campaigns; if the metric for success is CPA, we do not pay out only a CPA. We will purchase CPC inventory for CPA ads and CPM space for CPA ads. Similar to affiliate marketing, what we promote has a distinct measurable component. It is still direct marketing. Unlike affiliate marketing, our growth relies almost solely on our ability to exploit opportunity. And in order to exploit this opportunity, we must constantly stay on our toes and monitor performance closely – being ready to change and adapt at any point in time. Unfortunately, what this implies is the weakness to our space. Opportunities are not proprietary. What we do has many transparencies. Others can glean what offers one runs and often where. The barrier to entry is still relatively low – it takes less time and resources for a new competitor to enter our space than many others. That is both the beauty and the pain of being opportunity specialists… arbitrage alchemists.
All of which leads us in a way to the new DM Confidential. Several companies in our space have achieved enviable and laudable scale, both validating our space and increasing the once imperceptible entry barriers. With their growth, the ease with which others can nip at their heels decreases as suppliers on all fronts begin to pare down the number of relationships they maintain. Additionally, working with the new giants often means no longer being able to IM the co-founder. We’ll look back to the day when we were able to ask a now multi-multimillionaire to give a slightly higher rate. In many ways, it is like getting to play little league basketball with a Tim Duncan and remembering back to the day when he was just Tim the really good player. The barriers to interacting with him, as is the case with entering the space and getting in touch with your former IM buddies, have grown.
This newsletter too has evolved. It attempts to serve as a hub for those in our space, not just as a source of articles but information sharing. Our business works by having access to information and finding answers on topics that help us make better decisions. As such, we look for the DM Confidential to not just explain what we feel about the industry but to act as a resource for those involved. We may no longer have the ability to chat with the co-founder on IM but we can still hear from him by checking his company’s blog pages on the DM Confidential. We actively invite others to participate not just on the site but also in contributing articles. We take pride in this publication representing more than what a few think, but ideas from a cross-section of successful people and companies in our space. That is why in many ways this is both a solicitation and a sign of appreciation. We operate in a unique space that needs its own resources. We hope the DM Confidential will continue to expound upon the topics that concern us, but we equally want for it to also help you in your endeavors.
