True That

Imagine yourself three years ago looking for a market to explore. Yes, 2004, in a world before MySpace and Facebook, a time when New Century still bought leads. You had money, a solid leadership team, and a desire to enter into the Internet space. In 2004, especially after the Google IPO, you might have thought about building an engine, a fraction of Google would have amounted to quite a lot. While you have money, you didn’t get that money by throwing good money at an expensive and anything but likely opportunity. Then again, in 2004, you probably wouldn’t have thought about entering the dating vertical either. It didn’t quite have the cost barrier to entry that search has, but with several established leaders who had multi-million user bases, taking on Citysearch could have looked equally attractive or unattractive of an opportunity. Yet, True.com did just that. They took on Match.com, AmericanSingles.com, and Yahoo Personals among others, and in many respects, won. Even if they didn’t win, they won a lot of respect, and now occupy a leadership role in the world of online dating.

As quickly as True burst on the scene, they could slip from their throne. In 2004, a time when dating leads paid out a maximum of $4 per lead, True offered $20. I remember when I first saw it. I thought the network had made an error. The site didn’t look radically different than any other. It didn’t appear to have a different pitch to users. As a user, you signed up for a free profile, just as you could do at any other site. True would then try to convert you to a paid membership once you wanted to connect with any specific user. Again, no different from any other site. If a "regular" site could pay $4 maybe $5, how could True offer the networks and affiliate marketers four to five-times more? They couldn’t. They lost their shirts on these deals, but unlike some dumb 1.0 company, they knew this in advance. They planned on this.

Having entered into the market later than most, True understood they had a huge gap to fill with respect to growing their user base. They knew, though, that user base growth didn’t come from having a nice domain name and/or a pretty site. The leaders at the time got their users the old fashioned way; they paid for them. And the really savvy leaders, bought their users the new,old fashioned way, on a CPA basis. This is where we have to give True some immense credit and respect for their chutzpah. They could have come to market at a price that matched the leaders of the day, say $5. They could have assumed that affiliate marketers / ad networks might want a fresh brand to try, and by matching the current top payout, these marketers would give them a try. They would have been right. But, they didn’t want to just be right and play it safe. They wanted to dominate. And, what better way than to create a frenzy, and in the process win the hearts and minds of the marketers.

Create a frenzy they did, and their offer made the lives of some affiliates and even some ad networks. You might not have read about this deal in their recent NY Times article, but any in the affiliate space will remember those days. The real question though deals with whether those days count for anything these days. True, as one expected, didn’t keep their $20 payout for long. While astronomical for any mature company, it probably turned out to be a cost effective way for the then startup to hit critical mass. Once they did, they brought their rate back down to market and played the more conventional product route – trying to offer competitive features for users while keeping their marketing tactics fresh and cutting edge, to keep the mindshare of marketers. And, up until this week, True has kept that number one position in the minds of marketers. Oh what a difference a dollar can make.

This week, True payouts went down across the board. And, if ever we wanted a case study in just how commoditized and price sensitive the direct response world has become, True inadvertently gave it to us. Ad networks that thought they had loyal publishers found out just how much loyalty those publishers actually had. Like an ant hill that got stepped on, those running true went scampering to see who, if any, had the highest payout. And, in fitting with human nature across any industry, people looked for any opportunity to continue running the deal and keep their traffic. Everyone got cut back on their CPA, but True had two different CPA’s, one for email traffic and one for search. Think those with the offer, or those who have pulled the offer, haven’t tried to slip some of one type of traffic into the higher paying offer meant for another type of traffic? Especially for search marketers, a one dollar difference can cause a logarithmic jump or decline in traffic.

Not that the human drama of the True price change (who goes where, who offers what, who loses their margin) doesn’t make for a compelling tale, perhaps the most interesting affect of this comes in the form of how the competition will respond. For the first time in a while, all those who occupied second place (on search comparison pages, in email rotations, etc.) have a real chance to dethrone True and keep the momentum they could capture. Unlike True though, the others haven’t tried to make their products as compelling. If True grew at 1, they grew at 5. They might pay more now, but they have a long way to go before that translates into a higher effective yield for marketers. Normally, that might mean the death of them, but not now; not in this market. Instead of having to rely on their already less than stellar skills, they have the indirect benefit of True. They have smart marketers who have learned from True’s success, hungry to return to their prior level of earnings, ready to not just teach the other companies but make their product better for them. It’s only been a few days, but True doesn’t look like it will come back up in the next month or so, giving others the chance they need. When True comes back, let’s see if they will need to go over the top like they did in the beginning to win back the affiliates and networks, who by then may have found their next, stable offer.