This online marketing strategy is changing the face of DR. Part One of this two-part

By Anthony Sziklai

If you were asked to categorize the world of electronic entertainment, you might begin by dividing it along the lines of “passive” versus “active.” In the “passive” bucket would be television, radio, movies and other forms of lean-back entertainment. In the “active” bucket would be web browsing, online shopping, gaming and other forms of participatory, lean-forward entertainment.

There is a long-held belief that-almost considered customary in the world of direct response television-you can’t generate the same numbers from Internet surfers and gamers (the lean forwarders) that you can from television couch potatoes (the lean backers). To the DRTV marketer, this is less about demographics or generation gaps than about the cost and effectiveness of online media. To put it bluntly, DRTV marketers view online media as expensive, better suited for brand advertising, limited in availability, and simply not engaging enough to get consumers to buy on impulse. In a world where a key measure of success is how long people view your infomercial, flickering little banners with marginal entertainment value just don’t seem to cut it-or so you might think.

The truth is that online media, specifically banner advertising, can deliver DRTV-scale sales if done correctly. There are savvy DRTV marketers who already know this and are running some of the largest direct response campaigns on the Internet. Some have been doing it for years, capitalizing on what is arguably one of the best-kept secrets in mass marketing.

Following is Part One of a two-part series designed to help even the most technologically challenged marketers get their heads around banner advertising. The Internet banner mega-blitz, my term for today’s large-scale, high-frequency banner campaign, is something that all direct response marketers need to understand, if not embrace. However before marketers can leverage the full power of this type of online marketing, they must first learn the basics, as well as do their homework.

THE INTERNET BANNER MEGA-BLITZ
Online banner advertising has been around for little more than 15 years, which if you think about it is not a long time for a major form of advertising. While online ads can be traced back to the early 1990s and walled garden services such as AOL and Prodigy, the first website to sell serious inventory to large corporate advertisers was pioneering web magazine, HotWired, in 1994. HotWired is also credited with coining the term “banner ad” and providing some of the first tracking metrics for online advertising.

Even to this day, most banner advertising is used to build brand identification and brand loyalty. Why is this? One often cited statistic is that the national click-through rate for banners is less than 1 percent-not good for direct response. For some DR marketers, the only way to make money on banner advertising is when the online advertising market tanks, as it did after the dot-com bubble burst in 2000. The conventional wisdom being that when impressions are cheap, low click-through rates are tolerable.

For others-the savvy DR marketers mentioned earlier-there is a scientific method for making banner advertising pay off, no matter what the national click-through rate is or how much online advertising the big brands are buying. These marketers are the ones who have cracked the proverbial code. The Internet banner mega-blitz is both a mindset and a methodology for buying large amounts of impressions, clicks and/or actions and turning them into direct response sales. Like DRTV advertising, it is something you have to learn, struggle with and sometimes fail at in order to master.

Few know this better than Alena Internet Corporation in Culver City, Calif. Alena was the online product marketing division of Intermix Media (creators of MySpace), and responsible for marketing products such as Hydroderm, BodyShape and HD Clear. Hydroderm has been an especially successful product line for Alena and is legendary in the direct response world for its large-scale online campaigns. According to Joshua McCleary, Alena’s chief marketing officer, “the mega-blitz approach to online media has been integral to our success.

As an industry leader in the health and beauty space, we rely on buying large volumes of media to effectively run our targeting and optimization methodology. We regularly serve over 2 billion ads per month across all ad types, targets and channels, utilizing an in-house ad-serving solution and house-generated creative.”

McCleary adds that “these kinds of billion-ad blitzes are not cheap. Be prepared to lose money in the short term, for success in the future.” This is where the mindset comes in. You will need to get comfortable spending hundreds of thousands of dollars on online advertising per month, if not per week. While you can start testing in the low tens of thousands, the mega-blitz is a black-chip game involving serious adult money. It is also very probable that you will lose money in the process of learning what publishers and placements work best for you. If you can accept this, you are ready to learn the methodology.

BASIC CONCEPTS AND TERMINOLOGY
If just the term “Internet banner mega-blitz” sounds intimidating, don’t worry. You are not alone. The truth is that many traditional DR marketers are intimidated by online advertising. The endless acronyms, technical jargon, software platforms, and ever-changing landscape of publishers and networks can be daunting. The following list of banner advertising concepts and terminology are intended to provide a basic foundation before we jump into the playbook:

Publishers and ad networks. In the simplest of terms, publishers are the websites (e.g., portals, search engines, community sites, etc.) that create and sell ad space. Websites like Yahoo, Oprah.com and Gizmodo are examples of publishers. Ad networks are resellers of ad space. They buy ad inventory in bulk from publishers and then resell it to ad agencies and advertisers. Examples of large ad networks include Advertising.com (owned by AOL), ValueClick Networks and Tribal Fusion. Ad networks add value by providing a single source for buying smaller publishers, by aggregating unsold inventory and by providing special targeting, reporting and optimization tools.

Ad units and placements. The term “ad unit” describes a particular ad type and size. The Interactive Advertising Bureau (IAB) provides a list of standardized ad units that are widely accepted by publishers and advertisers alike (visit www. iab.net to learn more). Examples include the 728 x 90 pixel leaderboard; the 160 x 600 wide skyscraper; the 180 x 150 pixel rectangle and the 300 x 250 pixel wide rectangle.

Traditional banner ads are simple GIF, JPEG or PNG files that are displayed alongside content on a web page. They can also be subtly embedded within content, or delivered outside or in between content pages. A placement is the exact position on a site that an ad is displayed. Placement is critical in banner advertising and is full of considerations. For example, a home page placement may get the most viewers on a particular site, but a sub-section placement may get more targeted traffic and consequently a better conversion ratio.

Above the fold. This is an important term in online advertising that refers to the section at the top of the home page (or other key page) of a website that gets the most eyeballs. Note that “the fold” can be different from publisher to publisher, and it is not uncommon for advertisers to get duped into buying above-the-fold impressions that are, for all practical purposes, below the fold.

24-hour placements, roadblocks and sequenced ads. A 24-hour placement is a premium placement that has 24-hour exclusivity. A roadblock is another type of exclusive arrangement where an advertiser buys all of the ads on a primary page, such as the home page. In some cases, a roadblock can be a single, large ad that dominates the page. 24-hour placements and roadblocks traditionally involve a flat fee with a minimum impression commitment. Sequenced advertising is where a user is shown a series of related ads on one or several pages of a site.

Impressions, clicks, click-throughs, CTR and CR. An ad impression is a single viewing of an ad by a single user. It is the most basic unit of online advertising and is what is most commonly sold in the banner world. A click is when someone interacts with an ad by clicking on it with his or her mouse. If the click takes the user to a website or landing page, it is called a click-through. Click-through-rate (CTR) is the percentage of click-throughs to impressions. Conversion rate (CR) is the percentage of actual sales or leads to click-throughs.

Pricing models: CPM, CPC, CPL, CPA and revenue share. As noted above, banner advertising is most commonly sold as impressions. CPM or cost-per-thousand impressions is the pricing model you will encounter the most. Other pricing models include cost per click (CPC), cost per lead (CPL) and cost per action (CPA), e.g., you only pay if there is a sale. From a direct response marketer’s point of view, CPA is a desirable pricing model, though few large publishers offer it. Some ad networks buy inventory from publishers on a CPM basis, and then sell it on a CPA basis to advertisers. Revenue share is a pricing model similar to CPA that is used mostly in affiliate marketing, where the advertiser pays a percentage of each sale. The product has to be in high demand and the offer good for this to work at all.

Ad inventory and ad rotation. In the world of banner advertising, ad inventory is often defined as the total number of impressions that a publisher can sell during a given time period (e.g., a month). It is based on the number of page impressions offered by the site multiplied by the average number of ads that are run per page. Ad rotation is the sharing of a placement with other advertisers whose ads are rotated with yours. The result is that when users click around on a page or return to a prior page, they see different ads.

Premium versus remnant inventory. Premium inventory is publisher inventory that gets the most viewers, such as above-the-fold placements on the home page. Ad agencies or large advertisers often purchase it in advance. Remnant inventory is inventory that has not sold. Often consisting of less desirable placements, remnant inventory is aggregated and re-sold by ad networks at discounted prices.

ROS, RON and ROC. When buying advertising, you will be presented with a few different buy types. Run of site (ROS) means that instead of pre-selected pages, sections or placements on a site, the advertiser’s ads are run anywhere on the site, across all of its banner real estate. Run of network (RON) is the same as ROS, except multiple properties are involved. Run of category (ROC) is when ads are run anywhere within a specific content category (typically a sub section within a site). While often discounted, ROS, RON and ROC are more suited for product awareness and branding campaigns than direct response. Direct response marketers are better off buying specific placements and targeting options. With that said, one benefit of ROS/RON/ROC is having a benchmark to ensure that the additional cost of a more targeted ad buy is justified.

Targeting: Behavioral, daypart, demographic, geo and contextual. Targeting involves delivering ads to users based on pre-defined criteria, such as their buying or browsing habits. Targeting employs cookies and scripts to narrowcast ads to a specific audience, ostensibly to get more click-throughs and conversions, not to mention a better overall stick rate. Behavioral targeting is the process of displaying ads to consumers based on the sites they visit, or what they have recently purchased (their “clickstream”). Daypart targeting or day-parting involves displaying ads during certain times of the day only. Demographic targeting involves displaying ads based on a user’s age, gender and/or ethnicity. Geo targeting involves displaying ads only to users in certain geographies based on their IP address. Contextual targeting involves displaying ads only on pages or sections that are germane to the content of the banner.

Share of Voice (SOV). This is a metric that tells you the total percentage you have of an audience or category that you are targeting. When buying online media, this becomes a key negotiating point, especially when you are competing with other direct response marketers or brands for the same properties/placements.

Reach, frequency and frequency capping. As with television media, online campaigns are also concerned with reach and frequency. For those who are unfamiliar with these terms, reach stands for the total number of people who are exposed to your ad. Frequency stands for the total number of times each person is exposed to your ad. Each property that you advertise on should be able to provide you with this information. Frequency capping involves limiting the amount of times an ad is shown to a user during a given visit or time period.

The Workflow: Media plan, RFP, media proposal, insertion order, ad trafficking and ad flight. The first step in the online advertising workflow is a media plan, where the advertiser (or their agency) defines a media strategy, including goals, target audience, budget and media that will be used. The RFP or request for proposal is a document that is submitted to an agency, publisher or ad network requesting placement and pricing information for a specific ad campaign. The media proposal is what the agency, publisher or ad network submits back to the advertiser. This document contains specific information on proposed placements, ad specs, impressions, rates and discounts. An insertion order is a formal, typically signed document authorizing the agency, publisher or ad network to run a given ad campaign. Ad trafficking is the process of quality checking creative for compliance with technical specs, testing it on different browsers, setting it up on an ad server and ensuring that all of the necessary links and third-party tags are in place for a successful flight. Ad flight is a fancy term for the period during which an ad is run. Traffickers also monitor each flight to make sure that delivery matches booked inventory, as well as analyze and optimize campaigns for maximum effectiveness.

Ad servers and cookies. Ad servers are programs that deliver, rotate, track and count ads on websites. Some publishers have their own ad servers, while many use third-party servers. Examples of popular third-party ad servers include Doubleclick Dart (now owned by Google) and Atlas (owned by Microsoft). Cookies are small text files that are downloaded on to a user’s computer to help a website determine who they are, what they have purchased and how often they have viewed a particular ad.

Rich media, including online video. Rich media is a term used to describe more advanced ads that incorporate animation, sound, video, and/or interactivity for increased brand/message impact. Rich media ads utilize technologies such as Flash, Shockwave, Javascript, DHTML and streaming video. Examples of rich media ad formats include interactive banners, expandable ads, floating ads, full-page overlays, in-concert roadblock ads, video banners, pre-roll and in-stream video ads. Examples of rich media vendors (i.e., companies that develop and serve rich media ad units) include DoubleClick Rich Media, Eyeblaster, Eyewonder, PointRoll and Klipmart. If you want to know more about rich media, I once again suggest visiting iab.net and checking out its rich media and digital video guidelines.

Social ads. A form of targeted advertising, social ads allow advertisers to reach audiences on social networking sites such as Facebook and MySpace. Social ads are unique in that they can be personalized (think product testimonial) and promoted virally across a network of friends.

INTERACTIVE AGENCIES VERSUS BUYING DIRECTLY
Buying large amounts of ad space across a multitude of properties is not for the faint of heart. It requires knowledge, experience, clout and confidence. If you are jumping into online advertising for the first time, there are three types of entities that can help you get there:

Interactive agencies are advertising agencies that specialize in online media buying. If you are looking for clout and access to premium inventory, the agency route is the best way to go. While many of the large Madison-Avenue ad firms have excellent interactive divisions, it is better to work with an agency that specializes in direct response.

Rick Fisher of Santa Barbara, Calif.-based Permilia believes that agencies can definitely help in the beginning. “Clearly, agencies leverage the buying power of multiple campaigns to get you preferable pricing on lower volume commitments. In the banner-blitz game, there are really only three ways to move the dial: optimization, scale and price. Each of our buyers recites the mantra, ‘there is no such thing as a bad ad, just a bad price.’ With banner click-throughs what they are, you need to be ultra-aggressive about price.”

According to Jeff O’Connor of Digital Target Marketing in Merrillville, Ind., agencies are a smart bet for inexperienced online marketers because they know where the bones are buried. “They know what placements often do not sell out and have the most remnant inventory to work with and where to find near 97-percent clearance inventory,” he notes. “One of the reasons we are seeing Google’s Content Network ads everywhere today is because publishers are doing a poor job of selling out their inventory themselves. Instead of wasting the impressions they can’t sell they are willing to sell off to an ad network.” O’Connor continues, “Good agencies know exactly what a publisher is making from a profit-share arrangement from an ad network and can often cut direct deals that are close to matching ad network rates without the added markup.”

Most interactive agencies that buy large quantities of banner inventory tend to charge on a commission basis (e.g., 15 percent of gross). These firms may also charge management fees and often make extra money by marking up discounted inventory. Some agencies charge on a pay-per-performance basis for each sale and upsell that they generate. While appealing to the advertiser, this model puts a disproportionate amount of risk on the agency and rarely works for mega-blitz advertising. It is more suited for an affiliate marketing or pay-per-click campaign that is run in concert with a large-scale television campaign.

If you don’t want to go the agency route, you can hire internal media planners/buyers to manage your campaigns for you. You can often start with one person, preferably someone who has agency experience, as well as existing relationships within the large portals and ad networks. You should understand that competence comes with a price. If you want someone who can successfully manage large-scale DR mega-blitz campaigns, you will pay six figures.

Another route that you can take is to work directly with the large publisher’s internal media planning groups. Working through a sales rep, you provide them with your requirements and they in turn come up with a media proposal for their properties. The basic premise is that they know better than anyone what placements and targeting options work best. The downside is that you are only working with one publisher at a time and will probably pay close to rate card in the beginning.

FINDING THE RIGHT PUBLISHERS AND NETWORKS TO ADVERTISE ON
Planning a large-scale banner mega-blitz requires research. Even if you are using one or more agencies to do your planning for you, it helps to understand what properties are out there and how they perform.

The large publishers – Yahoo, MSN, AOL, Fox Interactive Media, eBay and Amazon are examples of large publishers. They aggregate the most traffic and tend to charge the highest rates. Some own a variety of destination sites, including e-mail, online game, blog and social networking sites. All have minimum buy requirements. Some offer special direct response test packages that run in the vicinity of $25,000.

Ad networks – AOL’s Platform-A and Advertising.com, Yahoo Network, Google Ad Network, Specific Media, ValueClick Networks, Tribal Fusion, Casale Media Network, DRIVEpm, Adconian Media Group, interCLICK, Traffic Marketplace, Collective Media, 24/7 Real Media, ADSDAQ, Burst Media and AdBrite are among the largest ad networks. They aggregate hundreds, sometimes thousands of publishers and reach millions of online consumers.

Online e-mail services and instant messenger clients – Yahoo Mail, Microsoft Live Hotmail, Google Gmail and AOL Mail are examples of popular online e-mail services. Yahoo Messenger, Microsoft Live Messenger, AOL Instant Messenger, Google Talk and Skype are popular instant messenger clients. Most of these services can be purchased in a package deal. Note that some of them only support limited, mostly text-based advertising.

Online game sites – IGN.com, Gamespot, Gamespy, Cheat Code Central, GamesRadar, UGO, Kotaku, Yahoo Games, GameTap and GameZone are some of the most popular game sites on the Internet. Not suitable for all product categories, game sites attract a surprisingly diverse audience and should not be overlooked. Online gaming and Internet-connected game consoles may, in fact, dominate the entertainment world in the near future.

Blog sites – Blogger, WordPress.com, TypePad, TMZ.com, TheHuffington Post.com, LiveJournal, Engadget, Xanga.com and Gizmodo are examples of popular blog sites. According to blog directory, Technorati, “a blog (short for web log) is a regularly updated journal published on the web. Some blogs are intended for a small audience, while others vie for readership with national newspapers.” At press time, Technorati reported 112.8 million blogs. A large percentage of them support banner and/or text-based advertising.

Social networking sites – Facebook, MySpace, Classmates Online, LinkedIn, Windows Live Spaces, Reunion.com, AOL Hometown, AOL Community, Club Penguin, Buzznet.com, Bebo and Hi5 are among the largest social networking sites. These sites offer conventional banner advertising, as well as “social ads” that incorporate users into the ad for more personalized endorsements. Advertisers can create these ads directly on the social networking sites, or enlist the help of social ad networks such as SocialMedia.

“Endemic” publishers – The term endemic advertising refers to ads placed on category-targeting websites, or next to content that is germane to the product being advertised. A good example of this is an ad for a turkey fryer placed next to a Thanksgiving turkey recipes article on a food site. A cheap and easy way to look up sites that are relevant to your product category is to use Alexa.com, which ranks sites within certain categories based on their user traffic.

When researching publishers and networks, always bear in mind who you are targeting. According to Nancy Duitch, CEO of Vertical Branding Inc. in Encino, Calif., “you need to understand your target demographic prior to spending recklessly online, as you do not want your product advertised on a teenage social network if you are targeting a 35+ female, a mistake many companies make in their excitement to advertise online.”

There are several excellent services that you can use to help you with your research, including Nielsen/NetRatings and comScore. Some of them give you deep insight into which pages, sections and placements perform the best.

According to Digital Target Marketing’s O’Connor, “you need to know the publishing sites as intimately as possible to understand their traffic numbers, as well as their terms for banner rotation. Some sites now update their ads while the user is still on the exact same page. If they are rotating like this, you may not be getting the full value of the impression and chance to engage the consumer.”

Armed with this kind of knowledge, you will be better able to understand or challenge your agency’s decisions, as well as develop your own media plans and campaigns. Having said that, don’t make the classic mistake of “analysis paralysis.” Get your feet wet with a direct response test. Buy lower-cost remnant inventory and experiment with different creative or targeting options.

According to Sandy Schultz of Oldsmar, Fla.-based Advanced Interactive Sciences, “remnant inventory will not guarantee when or how often your ads will run, but it is often a cost-effective way to test targeted ad placements which are more expensive otherwise. The major portals understand the challenges of an advertiser driving toward a select CPA rate and have created online programs designed to support these advertisers.”

O’Connor recommends that you “sneak into large portals through ad networks and remnant space to get your feet wet with the sites’ metrics. Remember, at least 30 percent of most publishers’ space is never sold directly by the publishers themselves, which creates a huge aftermarket that is golden for direct response.”

By going through the back door, through either Google or one of many ad networks, you can often bypass the capital that is often required to work directly with the large publishers. “These tests will be a good indication of conversion rates on the site and lifetime value of the customers. The click-through rates, however, are often below what you will get from the premium placements you will be buying into later,” O’Connor says.

Next month, marketers will learn how to develop their own media and creative strategies, negotiate and purchase media and, finally, how to optimize the campaign.

Anthony Sziklai is president of Moulton Logistics Management in Van Nuys, Calif. He can be reached at (818) 997-1800, or via e-mail at [email protected].