Open Secrets of the Internet

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Are you as stunned as I am by the ceaseless Internet hype? Those of us who are, in Andy Grove's terms, "professionally paranoid," try to find nuggets of news or practical intelligence from the infinite flow of words and images touting, selling, celebrating, speculating or pontificating on or about the Internet.


So much blab is spoken and written about the Internet that even a dedicated Talmud scholar would get a permanent migraine trying to make sense of it all. Yet despite the ceaseless turgid commentary, unending superficial analysis and relentless somber, probative analysis of the commentary, a few open secrets never seem to be mentioned.


These ideas probably have not reached the level of truths, but they represent practical realities that we work around but don't talk about much. Allow me to articulate a few of these for your consideration and debate.


CRM means everything and nothing. CRM, originally customer relationship management, was a term of art that labeled an evolving direct marketing discipline of managing customer data to devise effective and efficient means of building customer-centric product offerings, motivating incentives and repeat purchases leading to increased lifetime customer value. Since the grand old days of CRM, circa 1995, the term has become a buzzword and a faux rationale for just about anything.


CRM is used to tout an endless array of software products, a million points schemes and inventive programs, suites of interlocking ASPs, servers and a broad variety of direct marketing pitches aimed at salvaging flailing e-tailers or calming anxious venture capitalists. And while CRM has a cache-of-the-moment flavor sufficient to attract funding, we see very few Web sites, retailers or even business-to-business players really using this discipline to grow their businesses.


We do hear CRM tossed around casually by people who can't launch a browser. We do read about CRM as the next phase in Internet marketing. We do hear about firms buying CRM systems that become battlegrounds between marketing and IT departments. We do hear about CRM installations and implementations that tax relationships and occasionally end in litigation.


What's missing are good case studies of marketers using Web technology to devise smarter contact strategies, e-tailers using purchase data to craft compelling sales messages or BTB players following professionals through their careers and building loyal customer bases. And while there is no doubt that somebody is doing some of this right, nobody is sharing the lessons learned.


We've cooked our own goose regarding online data. Hardly anyone has the ability to effectively track customers' online behavior, monitor site visits, measure time-spent-per-page and then craft communications to intercept customers in the act and/or alter their behavior. Blind profiling is a commercial chimera that leaves marketers blind. It promises profits to those selling it.


Similarly, I don't know of anyone who has married online behavioral data with customer profiles or purchase histories in ways that either could shape communications or predict behavior. Ironically, I know lots of players doing this with great effect offline through the mail, using catalogs and telemarketing.


What we have done is scare consumers, provoke too many ham-fisted politicians to ride the privacy issue and effectively reduce our downrange options. As legislators and regulators overreact to the overblown privacy threat, our sources of data will shrink and our ability to dice and slice what we have will be restricted by the specter of Big Brother. We've been slapped long before we've actually gotten into the cookie jar. It's not fair. There oughta be a law!


Few e-commerce players are making money. If you look at the financial pages, punctuated by daily dot-com crashes, this sounds like a no-brainer. But as it turns out, the early Web promise of speed, convenience and better pricing costs an awful lot to pull off correctly, especially when you add fulfillment and shipping into the mix.


And if you are selling low value items, you have to sell zillions to break even. The Web is easy to use. But it's not so easy to realize profits from online business-to-consumer commerce.


It's no surprise that after a very slow start, the bricks-and-mortar (BAM) boys are catching up. In some cases, the BAMers are marrying with pure-play e-tailers to try to make the numbers work. The early thinking that first-movers with strong brand images will win has been rejected and abandoned, eToys.com not withstanding. We are watching early pure-play dot-coms creating catalogs, doing mail and leasing real estate in attempts to survive. Few will.


The open secret is that the Web can be one of several integrated commercial channels. But each marketer must find the right mix of technology and marketing to suit its existing base and most-likely-to-buy future customers.


Experimentation will continue this holiday season. Several big players will run headlong into channel conflict with key suppliers or partners. Expect several manufacturers to adopt the Levi's strategy and bail out of online selling. Expect others to fold their sites and slink away in mid-January when the cash and the bills get reconciled.


Online ads are still a conundrum. Nobody has figured out how best to target or create compelling online advertising. No doubt there are specific banners, Interstitials and rich media thing-a-ma-bobs that work. But I'm unaware of any sustaining creative technique that consistently produces favorable results. In contrast, I am aware of formats, techniques and even templates that are sure-fire performers in media like TV, radio, print, mail, catalogs and point-of-sale.


It is amazing how quickly banner response rates have dropped from double digits, during the early novelty stage, to hardly anything today. No one I know will forecast banner click-throughs above 0.2 percent, unless they are really, really desperate for your business.


This has set off a frenzy of creative activity using an array of new technologies that allow consumers to receive a complex array of images and ideas, manipulate objects, do research and even buy stuff without leaving the banner. The effect can be mesmerizing. The "hang time" stats can be impressive. Unfortunately, the lift in response and sell-through rarely justifies the incremental expense.


More significant, from the perspective of direct marketing, is the lack of reliable targeting data. Finding the right people and the right time to present the right offer is very difficult online. Our targeting data and our targeting techniques are generations behind our abilities in traditional media. Unfortunately, faster processors can't make up for the absence of data sets and behavioral modeling.


And while there are many systems in place to do dynamic serving and personalization, there is little compelling evidence to convince me that the accuracy or persuasiveness of personalization is worth the down stroke costs. In too many cases, dynamic serving can't finesse inconsistent online behavior nor can it identify the 40-year-old geek pretending to be a pre-teen girl.


Similarly, there is little evidence that addressing me by name adds items or value to my shopping cart, brings me back more frequently or makes me a better referral source.


We've got light but no heat. Advertising is about emotion; the strong, magical, unexplainable link between customers and their favorite brands that drives demand for products and services. We talk a lot about a passion for technology. But little of it comes through the screen.


The Web feels like a cool medium in McLuhan's terms, even though we interact with it substantially. The payoff is the stuff you get, learn or do, not the experience of being online itself.


Think about it. The most emotion I've gotten from the Web is the instant maelstrom of anger and frustration that cascades over me when my PC freezes or crashes during a download or a transaction. I haven't shown off a cool new Web site in more than a year. And the more I hammer away at the keyboard in the office, the less inclined I am to surf the Web at night.


Despite color, sound and motion, few sites draw us in, surprise us, entangle our emotions or connect with our psyches. The Web is an antiseptic medium whose utility is obvious but whose appeal is transitory.


As we see more data on Web surfing at work, we see down swings in online activity at home. In no time we'll be able to make generalizations about Web audiences by daypart, the way we do with TV and cable audiences. Perhaps wider broadband access will change this as TV and movie-like messages get delivered to desktops.


More likely is the promise of a ubiquitous, wireless Web highly customized to serve each individual, which will bleed attention from the Web as we know it today. Wireless connectivity will transform the Web from a destination to a carry-along tool used to get information, make micro-payments, purchase merchandise and reach out to others using text or voice.


The heat will be in the ultimate benefits to the user rather than in the experience of accessing the network or its connected devices.


• Danny Flamberg is a senior vice president, managing director, at Digitas Inc., New York. His opinions are his alone. Reach him at dflamberg@digitas.com.
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