Flycast Communications Corp. is quietly testing relationships with two companies on opposite coasts — one a start-up expected to launch next week — that specialize in brokering Internet ad campaigns priced on a cost-per-action basis, DM News has learned.
The relationships would further entrench the San Francisco-based online ad network in turf opposite that of its two biggest competitors, 24/7 and DoubleClick. The test also is a shot across the bow of cost-per-click ad broker ValueClick, Santa Barbara, CA, though Flycast says differently.
“We don't think of this in terms of competition,” said Lyn Chitow Oakes, vice president of marketing at Flycast. “We simply see an opportunity in the marketplace.”
Where 24/7 and DoubleClick generally are associated with image advertising and higher cost-per-thousand impression rates, Flycast recommends that its advertisers test run-of-network advertising, which goes for $6 CPM on the 600-plus-site network, before testing targeted advertising at $15 CPM to gauge which is the most efficient ad buy. For comparison, DoubleClick's published CPM rate for general rotation advertising on search engine AltaVista, www.altavista.com, is $40. Flycast is a secondary sales agent for the first-tier sites in its network to avoid competing with their sales forces and a primary sales agent for second- and third-tier sites.
Next week, online agency ORB Digital Direct, New York, and start-up Nothing but Net Results, Corona del Mar, CA, will begin brokering CPA-based advertising campaigns to be run on the Flycast network. Flycast is relying on ORB and Nothing but Net to filter out unprofitable CPA deals.
“We're testing these relationships with a limited inventory,” Oakes said, stressing that Flycast is not taking all comers.
When Nothing but Net launches next week, it will target old-school direct marketers with experience in CPA advertising in print and on television, said its president, Jerry Klein.
“We're [using] well-proven concepts that have been done for years in print, TV and radio and have yielded responses for the direct response community,” he said. “We're not selling advertising. We're generating leads.”
Klein would not name all of his clients, but said one is online media placement firm Avenue A Media, Seattle, working on behalf of Sprint. The company also says it has a staff of direct marketing creative professionals who will help clients execute campaigns as part of the lead-generation arrangement.
“If you've got an offer that works well in TV or print, let us help you migrate it to the Web,” he said. “We'll do the creative [because] we only make money if the advertising works and, candidly, that's the kind of help these people [traditional direct marketers] need to make that transition.”
Klein said the cost per lead to advertisers will vary widely, but as a benchmark offered that catalog requests generally will cost between $1 and $3 each.
Flycast's East Coast partner, ORB, has been brokering and implementing cost-per-action campaigns online since January 1996.
“We've always been focused on the Internet as a direct marketing vehicle that should be paid for on a per-response basis,” said Laura Berland, executive vice president and co-founder of ORB. “Most sites have an enormous amount of excess inventory that if it's not sold on a CPM basis, it should be sold on some basis.”
Jay Schwedelson, corporate vice president of Internet media placement firm WebConnect, said that he understands why Flycast is testing CPA deals but that the CPM model will dominate online ad buying in the end. WebConnect's parent company is list firm Worldata, Boca Raton, FL
“There's a general frustration with the CPM model right now because click-throughs [responses] are dropping and CPM costs are still very high,” he said. “[But] as more people go onto the Internet and [ad] inventory grows, site owners will have more impressions to sell and they'll be able to lower their overall CPMs, which will lead to a lower cost of response. Everyone's a little scared right now so CPA and revenue-sharing deals are popping up all over the place, but those are temporary solutions to a problem that's going to solve itself.”