Editorial: Bridging the Gap Between MIT and ROI

Why does all the wacky online ad technology seem to come out of Cambridge, MA?

Now comes news that a company called Predictive Networks in that city has developed technology that it claims can identify individual computer users in a household by their mouse-clicking and keystroke patterns for ad customization purposes.

Hmmm. These are no doubt smart people, and their technology is certainly interesting, maybe even worth paying whatever they plan to charge for it.

Thing is, during the past several years, we’ve seen online ads served every which way but the one that really counts: according to people’s purchase history, the Internet being a direct marketing medium and all.

But serving ads based on affinity is better than nothing, especially with transactional data used for ad serving purposes being so controversial.

But will the lift in response this stuff generates be worth the premium Predictive Networks charges? Let’s hope so.

If not, Predictive Networks’ fallback argument will be, of course, that its product boosts the ads’ branding ability by helping serve them to the right household member at the right time. Fair enough. But, rightly or wrongly, the argument that even non-clicked online ads have branding value is falling on too many deaf ears.

As long as advertisers can measure interaction with their online ads, they will. And fairly or unfairly, ad buyers armed with low click-through and conversion data will be less likely to be swayed by the branding argument — even if the low numbers are their own fault.

Internet advertising has always had unique hurdles. Now, so too does Predictive Networks.

Meanwhile, on a more mundane note, the Direct Marketing Association reported last week at the 18th Annual Catalog Conference in Boston that the Internet generated 13 percent of all catalog sales last year, an increase from 9 percent in 1999. Not the hockey-stick growth curve that so many in Netland were led to believe was a necessity to avoid being trampled by so-called e-revolutionaries, but respectable, this-medium-ain’t-going-away numbers nonetheless.

What’s more, Brian Rainey, president of DoubleClick’s co-op database concern Abacus Direct, Broomfield, CO, reported at the show that two well-known catalogers/retailers are getting 50 percent of their remote sales online.

And bridging the gap between the experimental and the traditional marketing schools of thought comes news from a research arm of Seattle online ad services firm AvenueA that it has begun to measure ads’ performance based on a so-called Cost Per Revenue, or CPR, basis.

According to literature on the company’s Web site, “CPR takes into account the actual revenue generated from particular sites and channels, allowing advertisers to consider both the number of transactions and the dollar size of the transactions” an ad buy delivers.

All sales are not equal, the literature continues.

“Some site populations efficiently produce a high number of sales, but with low average order sizes. Conversely, we see cases of sites that produced few sales but resulted in high total sales revenue.”

Measuring online ads on a CPR basis sounds suspiciously like old direct marketing principles gussied up in a cute abbreviation (Get it? CPR for online advertising? Ugh.). According to a direct marketing buddy of mine, it has been known for years that customers acquired cheaply are often less valuable than those who cost a little more.

However, the development bodes well for Internet advertising. And to give credit where it’s due, while so many others were still doing little more than paying lip service to ROI, AvenueA was striving to build a reputation for living it.

“This is good news,” said my direct marketing colleague of AvenueA’s CPR measurement. “Maybe a whole new generation of people will be turned on to traditional direct marketing principles.”

Hey, maybe direct marketing will finally become cool. Think of it. DMers might no longer be thought of automatically as part of the Ginsu Knives crowd. They’ll be able to hold their heads up at cocktail parties and say, “Did you see my latest customer acquisition campaign? Just check out the conversion rates from this baby!”

On second thought, nah.

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