Articles

Tap into performance based Internet advertising to increase sales at your fixed cost

Response Magazine Guest Editorial

With retail eCommerce sales at $52 billion in 2002_[1] projected to be $118b by 2005, and DRTV industry leaders like Thane pulling in $30 million_[2] in sales from their internet activities, it's no longer a question of can the Internet make advertisers money, but how can they tap into growing goldmine where 68% of the US will be online by 2005._[3]

The best news to DRTV advertisers is that 71% of online ad spending will be performance-based (read PI or CPA) by 2005, according to Forrester, an online research firm.

The wide variety of methods to secure sales from the internet include not only the traditional banner ad campaigns (a .5% conversion might look good to direct mail marketers), but search engine optimization (SEO), used by 79% of US Internet site visitors, controversial pop-up and email ads as well as affiliate programs which allow management of campaign offers, their payouts, creative materials, and realtime tracking of results (yes, it's all instantaneous on the 'net).

On average, for advertisers who employ all these services, 25% of sales usually come from affiliate programs,_[4] 10-20% from SEO, another 10-20% from permission email_[5] and the remainder from shopping & auction sites and a variety of "traffic" placement, which can be banners, coregistration, textlinks, sponsorships, and the like.

Exceptions abound:

• Some advertisers may use only email advertising for exceptional conversions ranging from 20-30%, with results in the 30-80% range when done well. 
• SEO will only be appropriate if the costs for the keywords and phrases are low enough and conversion is good.  For others, SEO may be ridiculously expensive or the appropriate keywords too vague and complicated to recover media expenses.
• Affiliate programs benefit advertisers with many products, but even a single-product advertiser can have the benefits of 24/7 realtime results tracking and creative serving at a reasonable cost.

Conversion is the key to all Internet advertising. Many web sites accept Cost Per Acquisition (CPA) advertising, which is akin to Per Inquiry (PI), where the payment to the web site is based on sales performance at a pre-arranged cost per order.  Like PI in other media, web sites run CPA when demand is low. 

Advertisers with CPM and Cost-per-click (CPC) campaigns will almost always get inventory before CPA offers.  CPM and CPC offer web site accounting departments the benefit of projecting sales as each site knows how many impressions they will devote to each CPM campaign and the average percentage of their visitors that click-through. 

While CPM and CPC campaigns have some risk to them in that the advertiser pays for impressions served or visitor actions to click, but not for each consumer purchase, these methods are the best ways to gain access to the largest and best quality sites and therefore, significant Internet breadth of exposure.  Testing, just as in all other direct response campaigns, minimizes all risk.  With test amounts averaging $1000/web site, using only sites with a minimum of 1 mm visitors per month and hundreds of thousands of sites available to choose from, an advertiser can learn quickly what conversion to expect after web site visitors have clicked on creative.

The variety of creatives and formats for testing are endless as is the focus towards obtaining the best conversion and overall lifetime value of the consumer.  As the advertiser collects information supplied by their consumer, a dialogue begins, whereby the advertiser continues to feed information to the consumer with their permission through email, honing the message to increase sales to their base.  86% of consumers have requested to be on email lists or have made a purchase from email marketing. It's paying off, as repeat purchases online make up 53% of Internet revenues, up from 40% in 2000._[6]

The Internet: the consumers are there and growing; campaign costs are low; and the speed of results is nearly instantaneous.  The ability to strengthen the consumer relationship, increasing retention and revenues justifies adding Internet to enhance the sales of any direct response advertising campaign.

1 Jupiter Internet Population Model, 9/00 US only

2 Marty Fahncke, Thane Inc., ERA 2002 Internet panel

3 Jupiter Internet Population Model, 4/00 US only

4 comScore/Jupiter

5 DMA State of the Industry Report 2001-2002

6 Study by Digital Impact