How will the growth of broadband video advertising impact direct marketing? Will it lead to cuts in direct mail and telemarketing? Will it encourage direct marketers to transform their marketing strategies for the broadband world? To answer these questions, iSPOT spoke with Eric Schmitt, executive vice president at The Allant Group, Naperville, IL, a leading direct marketing data acquisition company.
iSPOT: What impact will broadband video advertising have on direct marketing?
Schmitt: I think broadband video is fertile ground for direct marketers. The compelling thing about online broadband video is every viewing session is like a transaction. The company dishing up the content knows something about the person who’s viewing the content. If they registered, they might have their name and email address and postal address. Presumably the ads are click through, which is a call to response. That’s what direct marketers are after, a call to action, an opportunity to have the consumer respond on the spot. If I can make the advertising relevant to the programming first and to the viewer, I can increase mathematically the number of people who will click through on the ad. I can accomplish whatever I’m trying to accomplish that much faster.
iSPOT: Do you think the popularity of broadband video advertising is going to impact traditional forms of direct marketing, including direct mail and telemarketing?
Schmitt: Well, I think the Internet is already having an impact on direct marketing and the industry hasn’t necessarily adjusted to what they’re doing as much as they need to. The impact is there. Look at credit card applications, a quarter of them are happening online, along with sign ups for broadband and television services, 15 percent are online. A high percentage is happening online. There’s clearly an impact. I think younger consumers are the most appealing, because they’re most comfortable online and do things like watch the most streaming video. It’s only logical that a smart marketer will start to shift some of their traditional spending.
iSPOT: So you think there will be a shift in spending?Schmitt: There’s a lot going on. TV is the most at risk, you have ad skipping and what’s fundamentally an un-measurable business objective. Most of the ads are for awareness. It’s much easier to measure if someone calls an 1-800 number. Most television ads are not measurable for awareness. Today, most growth in online dollars is coming out of TV. Direct mail has been insulated from the downward effect because it is measurable and a very tried and true medium, but I think there’s disagreement here. I think direct mail is overvalued. It takes time for the market to adjust to consumer behavior, but there’s no shortage of conversation at the major catalogers. Major credit card issuers are by far the biggest mailers and they’re talking about this. They’re asking the question, is the $150 cost of acquisition worth it to me because I have to mail out 410 pieces for every one that responds? Mail has scale and they need hundreds of thousands of sign ups, so even if the performance of another medium is better, if it only delivers 5,000 subscribers or customers, it starts to look not as attractive.
iSPOT: So broadband isn’t attractive because it hasn’t scaled yet?
Schmitt: It’s a scarce supply and the adoption by consumers, while the trend line is encouraging, in absolute numbers it isn’t there yet.
iPSOT: The marketing strategies of direct and broadband are fundamentally different. Direct marketing relies on lists and push type efforts while broadband is pull. How do companies become accustomed to new strategies to attract customers?
Schmitt: You’re getting at the biggest tension in the world of marketing, the tension between brand and mass advertising culture and the direct or quantitative culture. Depending on the business you’re in, the tension may be big or small. Telecom and financial services, most dollars go to direct marketing. In consumer goods, it doesn’t do much good to send mail to buy more Velveeta, they rely on brand advertising. TV budgets are huge. Most TV is awareness oriented with no hard quantifiable success metrics other than the number of impressions and recall studies. Those dollars are most under pressure, but also because they’re the least accountable. They have the flexibility to go to new places. For car manufacturers, the tension between brand and direct is enormous. They’re spending massive amounts, a huge part is branding and a huge part is direct marketing. They’re always releasing new products and the open question is what is the biggest model and best mix in terms of media and brand versus direct. It hasn’t been resolved yet. Auto companies are taking TV dollars out and pushing them online. Brand and mass media spending can be the most flexible. Now the industries that spend big on mass advertising — entertainment, film, auto, packaged goods, they’re all big spenders on TV and those are the dollars least rigidly accounted for that can be shifted online; they follow the eyeballs.
iSPOT: Is your company involved in broadband video advertising?Schmitt: We’re an analytical marketing services company. We help companies build customer databases and maximize their marketing results. We don’t care what channel they use and we don’t do media buys, but we have the expertise to help companies understand which are the most likely media formats to be most profitable and allocate their marketing dollars there. Once companies have the information, they spend money in certain ways to reach customers.
iSPOT: So companies can use the data to try broadband advertising?
Schmitt: Yes, they could do something along those lines. If YouTube had a database of its registered users, it could identify the folks who view video most often and look at what ads they’re prone to click through. If they click on car ads, I might want to show more car ads so they can charge car manufacturers more money. YouTube can get higher advertising dollars for the inventory they have and advertisers can get much better value. If there’s near certainty that a person is in the market for a vehicle, they’ll invest more against you. If they have to pay more for the spot, they’ll do it because they have the chance of getting you as a customer. YouTube probably doesn’t have a customer database because they don’t have the scale to warrant it. If they tell Toyota they can find 50 people a day who are looking for a vehicle, they won’t care. But if they can say they can find 5,000 they have their attention.
