How to Compete as Online Media Costs Rise

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Conventional wisdom says that as more brand marketers come online, they will drive up the cost of online media, making it more expensive for direct marketers to buy inventory. Given the relationship between media costs and profitability for DMers, understanding this trend in a meaningful way is critical.

Very little hard data exist to back up the common belief that brand dollars are displacing direct marketing dollars. There are all sorts of anecdotal stories in the business press about Pepsi, Kraft, Ford and others increasing their spending. But it is tough to know whether those dollars are being spent on pure branding objectives or whether they are being held to traditional direct response metrics such as cost per lead or cost per unit moved.

Let's entertain the idea that there are indeed more brand advertisers coming online. And let's also assume that they are buying much of the same inventory once sold to advertisers whose objectives were geared more toward direct response. Is this really what is driving revenue and growth of interactive advertising?

Perhaps partly, but I would suggest the larger driver is the increasing sophistication of bigger direct marketers. Just look at TNS' list of the 10 top advertisers online in April - not a brand marketer among them.

Interactive advertising is increasingly a world where only the fittest survive. Between keyword auctions for search and CPA ad networks that are driven by yield, you compete not only against your "category" competitors, but also against your other direct marketing brethren in unrelated fields for much of the same inventory.

Companies like Netflix, eDiets, Classmates and LowerMyBills are among the largest advertisers online, all in very different businesses. Yet they all compete for the same "run of network" inventory.

So in many ways, your challenge is not just optimizing targeting, creative and landing pages. It's optimizing your business model to go up against every other company competing for the same inventory.

To the extent that Netflix figures out how to retain subscribers for longer, or eDiets better upsells its customers to more offerings or LowerMyBills generates higher-quality leads for its financial services customers, they all will be able to spend more to keep pace with rising media costs - and you will need to as well.

The good news is that nearly every day brings new ways to optimize your campaigns and even re-engineer your entire business to win the battle for media inventory.

You need to think beyond the banner and keyword game to other forms of inventory such as lead generation and e-mail. You need to think of creative ways to shape your message for different audiences and then package it in a way that helps you broaden the number of sites and media sources you can work with.

In this increasingly competitive media market, direct marketers need to ensure that they have a world-class testing team and technology platform that let them test creative, copy and landing pages. But they also need to have the organizational influence to create and package new offerings that address the needs of different types of consumers whom they might be losing or not attracting today.

This means that the acquisition team will need strong links to the research team, the merchandising team and the customer retention team to let all involved optimize the entire customer lifecycle, all for the purpose of competing for inventory.

Amid rising media costs, those who are responsible for "acquisition" will find that their influence and ability to lead will need to extend across the entire organization in order to compete.

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