by Dana Blankenhorn
Volume IV, No. XLIII
For the Week of October 23, 2000

This Week's Clue: Seeking an Edge

This Week's Clue: Seeking an Edge

SSP (Shameless Self Promotion)

Wallets and Their Limits

Sell Amazon, Buy eToys

The Future of Banners

Clued-in, Clueless

The Information Edge conference from Greenfield Online is held each October at a grand luxury hotel in the lower-left corner of California. Across the bay sits the U.S. Navy, in mourning for the Cole . Many at the conference were in mourning for the dot-com billions that have either gone to Money Heaven or remain buried in venture capitalists' bank accounts.

"Too many pitches and not enough content," said Greenfield Online CEO Rudy Nadillo (hoping next year's conference won't be at the Birmingham, Alabama Hilton.) But there was an exception. He came in wearing a yellow jumpsuit (faded from orange). His name was John Bates, he's co-founder and evangelist for BigWords.Com, and he explained the secrets of dot-com success as focus, immersion, and listening.

How immersed is he in his audience? "San Francisco is the city I almost live in," he said. "I travel 25 of 30 days a month, speaking to classes, talking to students in my jumpsuit and being attentive."

Bigwords started as a textbook retailer, but now considers itself a demographic and lifestyle destination for college students, offering everything from scented oils to free e-mail . "College is about the relationships you make," he said. (That's wisdom - read it again.) "We also have something called the Big Word, by the former west coast editor of Details and a former editor at large for Jane Magazine."

Bigwords is the Big Kahuna of online textbook retailing, but has one-fifth the budget of its rivals, Bates said. He used online and offline methods to gain that credibility.

Online promotions works only when you understand your audience. Today's college students resonate with humor, irony and the unvarnished truth. Thus an early Bigwords tag line was "We promise not to rip you off...as much." Bigwords also does well with an affiliate program that has branding value (so they don't drop poor performers) and e-mail, which all goes out with a double opt-in procedure. There are also cross-sponsorships with like-minded lifestyle sites (skiing, skateboarding) that bring in "a little more love" without costing a lot of money, and banners, which are only delivered in context with site content.

But it's the offline strategy that's the key to Bigwords. "Find college towns and get on the radio. Billboards establish the name. Buy print that is college student specific." Then the core, the secret sauce, is to get into the audience's face. "We have thousands of campus consultants who wear our jumpsuits (they're orange, because they haven't been washed as much as Bates') and go out with a huge blue bag of bouncy balls. They walk around campus and bounce them over to students, asking if they've heard of Bigwords.

"It's been stunning how well that works. We don't make them sign something, we bounce them a bouncy ball, and the child comes out, asking what we're doing. That's one of those things that goes with the Internet phenomenon - give something away, let them enjoy something of value to start the relationship, and keep that going." A "tell-a-friend" program , in which students get discounts for referring friends to Bigwords (who also get discounts) helps spread the word to other campuses.

Still, you ask, how did Bigwords create loyal customers? It asked them what they needed, and then gave it to them. "If you think people are upset over how much they pay for their books, wait until they sell them back for next to nothing. Here we thought the pain was the book-buying experience, at $80-120 per book. The true point of pain is selling the book back and feeling ripped off. So we gave people really good deals, aggressively better than the bookstore, and said if you take site credit we'll give you even more. So 80% take site credit. Now we've got the book, we can sell it again before we pay out at all, and we can look at the people who took site credit and know it's future sales."

So focus on a specific audience, immerse yourself in that lifestyle, and find ways to get in your reader's face so you can listen to what they need. "You have to engage your audience. You can learn so much from that you leave your competitors behind."

Bates' Clue is that marketing, which began as discussions in the village square and evolved into mass targeting of mass consumers, has again become a discussion, this time in a global village. But each discussion is a one-on-one encounter.

How do you deliver that? "The best piece of advice I can give is understand that your audience is good at ignoring everything you throw at them. In an age when location is being subsumed by a virtual space, my new word is passion, passion, passion. Have a passion for what you're doing and have a passion for your audience, because then you'll really care and your message won't bounce off."

SSP (Shameless Self-Promotion)

I'll be at ISPCon during early November  in San Jose, looking for clues to broadband access questions for my Boardwatch feature. I hope to see you there.

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Takes on the News

Wallets and Their Limits

Considering that the subject of the Greenfield Online conference was marketing, a surprising amount of time was taken by discussions of electronic wallets .

Wallets have been around since 1995. Companies as diverse as Cybercash and Microsoft have rolled snake-eyes with them. Yet still they come, and some are starting to stick.

Gator  is using a consumer model for distributing wallet, said vice president-marketing Scott Eagle. More than half of all shopping carts are abandoned because consumers are frustrated with sites' demands for their data. Gator positions itself as an infomediary, a personal agent that helps manage relationships.

The basic Gator wallet just holds the data sites demand - name, address, phone, credit card numbers, and site passwords. But the business model goes beyond that, as Gator delivers its advertisers offers in context. "When someone goes to Cooking.com, our customer Ourhouse.com can pop up a $15 coupon" through the Gator wallet, he explained. "That's a coupon you can't afford to give to everyone, but you can give it to the right person, a heavy buyer, in context, when they're going into the competitor's store." Clickthroughs on these offers average 15%. A site that knows through the wallet that it's dealing with a regular customer can also offer a special deal, to retain them.

Carl Stefanelli, vice president of the e-commerce division at MasterCard, also talked about wallets, in this case wallets that are offered by banks as "Internet credit cards." MasterCard has spent $13 million to raise awareness of these wallets, hoping to bridge the gap between the 59% of Americans who go online and the 31% who shop there.

MasterCard actually just re-sells customized versions of the Brodia wallet , and agreed "they can perform a lot of marketing and payment functions," automating rewards programs, loyalty programs, and creating shopping portals.

MasterCard also plans to increase the functions wallets perform and grab new niches. "We'll see wallets that can accommodate person to person payments. The market of Paypal can go into a wallet. The same is true of micro-payments, which should be a one click operation anyway. The same is true of gift certificates."

Security is also going into wallets through so-called pseudo number programs. "This is where the consumer has the opportunity to shop with a number that's not actually their number. It's a substitute number that can change with every transaction." Finally, MasterCard is working on chip card activation with wallets, to compete with AmEx' Blue card . "The consumer can have a reader and through the use of Digital ID can identify themselves and sign on." Banks also push wallets on their customers so they'll be the only online card used, or so they can at least get preferential placement.

What's wrong with wallets? Merchants don't support them in a uniform way, Stephanelli said. For instance they don't support the Electronic Commerce Markup Language (ECML), which has been out for 18 months and hasn't gone anywhere. (For that matter, he admitted, neither has SET. SET could have cut costs dramatically by making Internet transactions card-present transactions (the equivalent of a signed receipt) but merchants won't grab those savings.)

Stephanelli also had an answer for a question that has dogged me for years, namely why smart cards are so popular in Europe. "European merchants pay a lot for authorization calls," he explained, 25-50 cents vs. 3 cents here. "Putting in logic that reduces fraud has a great benefit to them, cutting their costs."

I also asked Stephanelli about recent MasterCard and Visa regulations requiring that merchants tell processors whether a card not present transaction came in via mail-order or online. This has caused a lot of angst among merchants, who fear their ability to transact business is at risk. Stephanelli put that one to rest. "I want to go on record with an interesting fact. With one exception charge-backs in ecommerce seem to be slightly lower than in mail-order telephone order. The exception is adult content."

Sell Amazon, Buy eToys

I am not a financial analyst. I'm just a reporter. But the message that came through loudest in a range of talks at the Greenfield Online conference was praise for eToys' Babycenter unit, and skepticism of Amazon's plans to become a full-line merchant.

"You can't have a sustainable business model without loyalty, said John Greenberg of Digital Idea, who based his data on Greenfield  panels. "Loyal customers are the best source of referrals. Loyal purchasers are three times more likely to purchase, they visit more often, and they spend more. Loyalty is not just bookmarking, or repeat visits, or rewards, or customer satisfaction. Loyalty is share of wallet, recommendations per user, and your rate of attrition."

So how do you win loyalty?

Narrowing the target is the key to good content, said Michelle Chaboudy, vice president of marketing for CBS Marketwatch, and Babycenter delivers that. Babycenter has the third-highest score for loyalty of any site on the Web, behind only Nascar.com and eBay, said Greenberg. Babycenter even has the highest loyalty score in the health category, outpacing health specialty sites like WebMD and Drkoop. Amazon, on the other hand, does poorly in loyalty outside its initial niche of books.

Every e-tailer has seen its stock tank during this year, and none are expected to make major advertising buys during this crucial Christmas season. But if a fan base among marketers means anything, eToys still has a chance.

The Future of Banners

Despite the tanking of stock in Doubleclick and Engage parent CMGI , online advertising companies still think the future is rosy. They note that they're getting one-fourth of consumer attention (in competition with TV and print) but just 5-10% of ad budgets, so there is room to grow. Execution and delivering the message in words traditional buyers understand (like 'ratings') should, over time, give online its rightful share of the pie.

Michael Moore of Engage Media told the Greenfield conference that integrating all online buys into a single solution should also help. Since he said Engage now reaches over 40 million unique visitors each month, half the Internet, and serves 3 million impressions per day, it's in a position to do that.

So what's happening? "You'll hear that the average clickthrough on banners is .4%, and average CPMs are $20-30. That's run of network on expensive sites. We'll release a banner for run of network, then look at the response on each creative and all sites. We can identify which messages are functioning and which sites among our 4,500 are driving the traffic. Then we reduce the buy to that solution. That translates to a rate of .8% on 2,000 campaigns."

A new Engage cookie technique called ECHO also helps increase results. "I install tags on pages, and on consumer purchases. In a matter of weeks we'll have 2-3 million individuals who have at least purchased once. The advertiser can then re-market to that list. When we encounter any of those cookies we can re-serve the advertisers' ads. That dramatically increases clickthroughs - sometimes 75-80% greater than run of network. With ECHO the clickthrough will also be more persistent - they'll stay on the site. An ECHO can result in eight times more purchases" than a conventional ad.

Engage divides its 36 million users in its log files into about 800 audience segments, without using any personally identifiable information. "We just infer things from their visits to a set of sites, which results in a preference for content or a subject area. We get a cache file with several hundred cookie lists, lists that can be 100,000 to several million cookies deep, all available as targets for marketers. We're now marrying this with the idea of optimization, so by Christmas you'll be able to buy run of audiences, not networks, and we'll be able to tell you how specific audiences are reacting." Engage is working with Greenfield's audience panels to validate those inferences from surveys.

"Those we classify as interested in autos are twice as likely to buy a car in 12 months than the normal network audience. That illustrates what you can do in the cookie dimension."

The cookie is not dead. Long live the cookie.

Clued-in, Clueless

Clued-in was John Bates of Bigwords, held by universal acclaim as the best speaker at the Greenfield Online conference. This includes yours truly, who gave a brief talk on the second day of the event.

Clueless was Bob Domenz, head of brand strategy at iXL . He had some good things to say at the Greenfield Online conference (design your site based on knowledge of your audience) but 20 minutes means 20 minutes. He ran closer to 40, and even the moderator looked like he was trying to get away before it was done.

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