Dicing Up Directories - Journal Entries

Media & Technology Strategies

Volume Three, Number Three
November 1998

Greg Stuart, vice president of marketing for Classified Ventures' Cars.com, recently told Forrester: "As a marketing guy I should know our message. We're more than just classified ads for cars, but what we do is hard to describe. Our competitors are Auto-By-Tel and CarPoint -- would you call them classifieds?" We would not because we think "classifieds" is an outmoded term. Consumer services is a more accurate description of these sites that add content and tools to help buyers evaluate and close a purchase. As these sites expand to handle both pre- and post-buy services, any linkages to traditional classifieds will disappear.

Hidden behind the headlines of the $90-million, five-year advertising deal between First USA and MSN was the news that MSN issued a Request for Proposal to potential advertisers. In all other media the process is reversed -- advertisers issue RFPs to publishers. How can MSN turn the tables on advertisers like this in an environment of banner inventory oversupply? Charlotte Guyman, Microsoft's on-line marketing director, tells us that exclusivity was a driving force behind the First USA deal. By definition, exclusives are scarce commodities and the publishers are able to take control of the ad sales process, pitting buyers against one another to bid up prices. We think that these big deals are a transitory phenomenon for the portal sites. As traffic continues to diffuse across the Internet and syndicated selling proliferates, advertisers will begin to pull their dollars from these bidding wars.

Speaking of big deals between portals and banks, they seem to be making all the news these days in the wake of Citibank's deal with Netcenter and Bank One's $125-million deal with Excite. The dirty little secret: Nearly all of the money in these deals is performance-based. Of the $125 million in the Excite deal, only $8 million is guaranteed. Every dollar Citibank pays will be based on performance. We have entered an era of battling press releases, where every portal is structuring ad deals to get the largest PR impact and create an impression that massive advertising dollars are flowing their way.

At a recent lunch, a newspaper executive told Forrester about placing phantom classified ads for homes and cars on competing sites to judge consumer response. His biggest surprise: Within 24 hours of placing an ad on CarPoint, Microsoft called to check on his experience. "They asked great questions and seemed genuinely interested in what I had to say about improving the process of placing an ad. There is no way we will ever provide that level of customer service." The points Microsoft won here were quickly lost, however, when another lunch guest reported on a recent tangle with Expedia. When he had to change a flight, he tried for three days to contact the site with no response. He finally ended up calling the airline directly. As Microsoft begins to pull all its services under the MSN umbrella, it will have its hands full making sure customers get a consistent experience across all its brands.

Peter Corbett, CEO of interactive architect IllusionFusion!, came by Forrester to demonstrate Extempo. Extempo creates on-line characters backed up with artificial intelligence to guide consumers around virtual showrooms and answer questions. "Companies can build their brand's personality into an interactive experience for the user," Corbett boasts. But based on our interviews with consumers, we don't believe that this is the experience users want on the Web. The avatar is an obstacle between the user and the desired information, requiring users to type in questions and wait for preprogrammed answers. We think that marketers should forego the virtual pitch person in favor of a good navigation system, decision support tools, and a speedy site.

Chat is becoming a good environment for advertising, according to Kristen Asleson, vice president of strategic marketing for Mpath, the on-line game and communication technologies company. "We are beginning to see real-life social groups like families, prayer groups, and karaoke clubs coming together on the Web when they can't meet physically. People are socializing and in a positive frame of mind. We think brands benefit by being associated with these communities." We think Mpath is swimming against the current. With Procter & Gamble trying to put its agencies on results-based payments and Coke and IBM pulling back from NFL and Olympic sponsorships, we think that sites will have a hard time pitching marketers on warm and fuzzy brand benefits. Sites with a more bottom-line appeal will be the ones attracting the advertising.

Neil Monnens, vice president of marketing for Web ad sales rep firm 2Can Media, reports that the diversity of niche content Web sites continues to blossom. During the recent @dTech conference in New York, Monnens told Forrester, "I turn down 92% of the sites that come to me because their audience is so small I can't make any money even if I could sell every ad. I just turned down a wedding site targeted to men." With the low cost of publishing on the Web, kitchen table entrepreneurs with a dream and some knowledge of HTML will continue to pop up, which is why we like LinkExchange's business model. By setting up a cooperative ban ner exchange, LinkExchange has been able to knit together 400,000 of these micro-sites into a network that rivals Yahoo!'s reach and to convince Microsoft that it brings $250 million of value to the table.

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