Start-Up HotSocket Prepares to Enter Europe Following Claritas Alliance

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NEW YORK/LONDON - Hot Socket, an e-commerce star-tup with proprietary software to test offers in real time, concluded a strategic alliance last month with Claritas Europe that will allow the US firm to sell on the European market.


Claritas is a subsidiary of VNU, the $2.3 billion Dutch publishing giant that owns Billboard and Nielson in the US among other properties in Europe and America. UK-based Claritas is active in eleven European countries and has an annual turnover of $100 million.


Money will eventually flow west, Mark Patron, the Executive VP of Claritas, said, "but that is still under discussion. Terms have not yet been set. Once up and running there will be money to carve up."


Interest in the new technology among Claritas' European clients is keen, Patron reported. "Customers we spoke to would like something yesterday," he said, adding, however, it would take six to 12 months to ready the program.


Hot Socket describes itself as a "direct marketing company that uses the Web to sell" with patent-pending technology called SMART -Sales-driver Measurement Analyzed in Real Time. It calls the method D-Commerce, "a data-driven and accountable way of selling on the Web."


It sells products and services on behalf of outside merchants and is paid for delivering actual sales or customers, not click-through rates. Clients in the US include magazine publishers -Business Week is one - financial services companies and continuity marketers.


Patron believes that HotSocket "is really a new channel. Any online advertisers today typically use a banner ad and they can spend a lot of energy targeting those ads to the right consumer.


"What HotSocket does is optimize not only targeting but the whole sales process - price, premium and offer, indeed, all the facets within the customer acquisition process on line.


"HotSocket allows you to learn in five days what it took Readers Digest 50 years and the reason is because you can do that online. Offline your improvement cycle from past campaigns can take three to six months.


"Online your improvement cycle can be instantaneous, hence the ability to learn in five days what it takes 5 to 6 years in direct mail to learn. This is the ultimate multivaried analysis by testing every variable in real time and doing it simultaneously."


HotSocket is direct marketing oriented, CEO Dev Bhatia insists. "DM isn't about banners or e-mails but is a closed loop from the beginning to the end of the process. Focusing just on banners is the equivalent of getting people to open their envelopes.


"I've seen a lot of business models that don't reflect direct marketing but catalogs, malls, building and retailing. But true DM is accountable and data driven, destination models are not.


"First thing you do on the Web is build a site, next you get media to attract people to the site and what you have effectively done is create a retail model designed to bring people to that single place. That is not necessarily DM."


As for the rationale of a move into Europe a bare year after launching the company - with the help of Zero Stage Capital, a venture capital firm in Cambridge, MA - Bhatia said "we need to be there because after telco deregulation Europe is the next big market.


The fit with Claritas - and by extension with VNU - is a natural, Bhatia said. "We have a unique service. They have the relationships. We know we need to be in Europe and VNU is the right partner.


"The next logical step for us is to have people selling in Europe. You get people into London and then approach markets individually. We're thinking about building a German website. Not doing this is simply not an option for us."


Claritas is a lifestyle database that over the years has had three out of four British household return detailed questionnaires with hundreds of questions on them.


It is a major source of European demographic information, which, Patron pointed out, is not as detailed as in the US because legal restrictions on use of such data are tougher in Europe.


"We are going to sell their program," he said. "There will be slight differences and changes but fundamentally the HotSocket program will be brought to Europe pretty much as it is in the US.


"Clients in Europe would be consumer online advertisers, particularly those who have a relatively high cost of customer acquisitions - continuity programs, telcos, financial services, any consumer direct response business."


The program will not be sold on the web in Europe, Patron said, but by Claritas' sales force. "You can do a lot of different types of sales and marketing but at the end of the day it is the local sales people who close and get the business.


"We would envisage using dedicated sales people for the HotSocket Europe program, starting with our own people in say Germany but very rapidly have local people for that market."


No decision has yet been reached, he said, on whether to launch first in Germany or in the UK with the launch 6 to 12 months off.
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