by Dana Blankenhorn
Volume III, No. XX
For the Week of May 17, 1999

This Week's Clue: Why Banners Don't Work (And How They Can)

This Week's Clue: Why Banners Don't Work (And How They Can) 

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The Rest of Them

Deal of the Week

Clued-in, Clueless

Web banners are said to be as threatened as Siberian tigers. Clickthrough rates continue to decline. Officially they're .68%. I've heard estimates as low as .10%. 

Certainly more of us ignore banners, despite everything their creators can do. They've tried Java, they've tried animation, they've tried bargains, they've tried targeting, and still the clickthroughs go down. Why, they ask?

If you look at it from the point of view of the user, it's obvious. Most of the time I'm on the Web, I'm not thinking of buying anything. It doesn't matter if the advertiser knows me by name, by income, by age, by my role in the family or by the type of car I drive. If I'm not online in a buying mood, I'm not clicking on an ad. Neither are you. Why would anyone else be different? (Anyone worth selling to, that is.) So it is no surprise that Matchlogic targeting, which carries a 20% premium, doesn't get a rise from me. Most ads are simply branding vehicles. They show the flag (which can be important) but their impact is measured only by surveys of brand awareness. 

When I get into a buying mood, I look at content that matches what I'm thinking of buying. It's the editorial environment, in other words, that leads to the possibility I might click on an ad. That's probably the case with you as well. It's what makes ads at GeoCities, Xoom and The Mining Co. potentially powerful (but only potentially). It's also what makes ads in magazines I write for, like Boardwatch, NetMarketing or ClickZ, potentially powerful. It's what makes content sites powerful. Content is the best targeting vehicle you can get.

Now, when you're in that buying mood, when do you in fact click?

Obviously the product has to be relevant to your specific needs. Ads that work as buy buttons, therefore, are most apt to work close to important dates on my personal calendar - Mother's Day, Christmas, the kids' birthdays. Contests and clever creative are only going to work when I'm bored, and when I'm bored I'm a bad customer.

We constantly talk about Web buyers as "information buyers," especially in areas like cars and vacations. So why aren't more ads using this knowledge? There are unbiased reports available on all sorts of products. If you're well regarded, offer them via e-mail. Have users click for more info, insert their e-mail address, get them that report (which measures the ad's effectiveness) and include another trackable link in the e-mail. (No, don't call.) That trackable link should include some form of incentive, like a discount (in the case of a car, an appointment for a test drive where the dealer brings the car to you). With insurance, the e-mail should include a form that can result in a quote. The same thing can happen with a loan.

When an ad acts as the first link in a permission marketing chain, in other words, it doesn't really matter what its clickthrough rate is. Finding the customer and serving them is what matters. Delivering on your promises is what builds loyalty. When looking at an advertising campaign, in other words, keep your eye on the ball and look at everything through the customer's eyes.

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You can now get your Daily Clue at ClickZ, putting a "clued-in" spin on the day's news. I'm also continuing to do monthly columns for  NetMarketing, Boardwatch, and  Intellectual Capital. I'll also begin work soon with the IC folk on a book project concerning politics and the Internet, which will appear first on the Web. A-Clue.Com is also the Monday e-commerce column of Andover.News. Buy my book now. Subscription instructions are at the bottom of each issue.

Remember that it's still journalism -- checking the news, calling people, listening carefully and writing on deadline -- which keeps the Clues coming. If you're looking for excellent work, give me a call at 404-373-7634. Now back to the show...

The Rest of Them

At 68 million, today's Web-enabled population is still just one-fourth the total U.S. population. What's it going to take to bring the rest online, and will they be any different from those already online?

That's a key question. Today's incredible Internet stock valuations are based on the assumption that everyone will be on the Internet soon, and that they'll visit only the specific brands they're offered when they come online. The assumption is that these brands will become the trusted intermediaries on which people base all their purchases in the 21st century.

Those assumptions have kept companies like Yahoo and eBay trading at upwards of 1,000 times trailing year revenues. As the last quarter has shown solid growth, analysts see those values might be "just" 250 times next year's revenues, and they've kept their "buy" blinders on. But if that's the kind of flower you want, it's easy to grow and Wall Street can throw bouquets all day. So we had CBS Marketwatch , which had a blowout market opening. Even at last Monday's price of about $62/share, its market capitalization was still $758.7 million - not bad. Then we had TheStreet.Com, last week's big IPO success.

You see, General Electric Co. chairman Jack Welch is no one's fool. He watched the Lycos-USA Networks deal unravel because Barry Diller insisted that he get full value for the "real world" assets he brought to the table. He saw how the Walt Disney Co. failed to win big equity from its "Go Network" because it was so closely linked to real world assets. So he put together last week's Xoom deal to suit the new environment. Combine the second-place community site with NBC's lagging Snap.Com portal, add NBC.Com and its Videoseeker  site, throw in $100 million/year in house ads and voila! Instant Yahoo! Xoom co-founder Chris Kitze figures if Excite is worth $9 billion, his $1.322 billion market cap firm should be worth three times that in the new configuration.

That's not good enough for you. GE announced during the Xoom press conference (actually a segment on CNBC's "Squawk Box") it will launch a "CNBC.Com" later this year (competing directly with Marketwatch). MSNBC isn't part of this deal, either - that could prove a third tap of the equity market.

The point is this is just one set of maneuverings at one Clued-in boardroom. If the boom continues GE can create billions of dollars in market cap with no risk. Unlike Barry Diller, who had to throw in his Home Shopping Network channel to get Lycos' board to sign his deal, GE is putting nothing real into this. It's all second-rate Web sites and "promotional consideration." They'll be more of these deals, you can guarantee. Disney will find a way to spin-off "Go.Com," Viacom will spin out its "MTV.Com" and "Nick.Com," even Rupert Murdoch will find a way to profit .

Meanwhile, the market is changing again.

Computers are becoming very, very affordable, bringing millions more people online, using only the filters those families choose to use (as opposed to those of employers, colleges, or libraries). Last week iDot.Com joined the growing rush to the sub-$400 PC market with a fully-configurable $349 machine, based on a Cyrix chip. Sure, National Semiconductor announced the previous week it's cutting Cyrix loose but Mark Marlow, vice president of product marketing for iDOT, told me he's good until the end of the year, and then he can always switch to AMD. He also expects Intel's Celeron chips to go into this category very soon as well. (To make a sub-$400 PC, you need a CPU costing just $50-60.)

The new PCs will cause lots of ISPs to follow the lead of InterSquid.Com, which recently announced a $30/month bundle of a PC and Internet service. That's a cable TV price for a PC with unlimited Internet access. Even my poorest neighbors can afford that - those machines are too cheap to be worth stealing.

The question I want to close with is, will these new users stay with "trusted brand names" like GE, will they stay locked-into the URL these new sub-$400 makers have locked-down as their home page, or will they get a Clue and find sites that suit them best? You know what I think. A rising tide will raise all boats, but if you want a big share of this new growth, target the new users. That means find out what these people are like, and aim specifically at their interests. If the new audience isn't coming from Wall Street, don't expect Wall Street to win it.

Deal of the Week

Few people noticed last week that Art.Com , originally Artuframe, sold out to Getty Images for $202 million in cash and stock .

The deal gives Art.Com head Bill Lederer a hefty share in Getty, whose total market cap is about $840 million. Getty's co-founder, Jonathan Klein, celebrated by going to a Cubs' game.

Getty holds digital licenses on a host of images, including the Bettmann Archive, and Art.Com sells framed images - Lederer came out of the framing business. More important, Lederer has built his business using affiliates, with whom he spends enough time to generate significant sales.

Getty is said to compete with Bill Gates' Corbis, which also holds digital licensing rights, but the key to any such business is getting the product into peoples' hands, which a Web site linked to printing and framing services can do efficiently. Lederer has built an effective way to deliver anyone's images - including Corbis' - and now he'll have the capital (plus the upside, thanks to his stock) to push the brand. This deal isn't just a win for Lederer and Klein - it's a win for Gates as well.

Clued-in, Clueless

Clued-in is CNN's Scott Woelfel, who quietly staged a coup (although he's far to Clued-in to ever admit it) on Time Inc.'s Internet assets . The next step is to capitalize on it from within the corporate minefield he's already infiltrated. (His secret was to let the Cluelessness of Pathfinder fall of its own weight, then offer a viable alternative in the form of successful CNN sites run by people Time Inc. board members would trust.)

Clueless is Hugh Downs. The 78-year old broadcasting legend said he's leaving ABC's 20/20 to work on the Internet. "This fast-moving cybernetic age holds such challenge and opportunity that I now find it irresistible," he told the New York Post. This is spin that could make the bombing of the Chinese Embassy in Belgrade look like their fault. Make you a deal, Mr. Legend - you get me the chair next to Baba Wawa, I'll give you A-Clue.Com free and clear.

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