MARKET PROFILE - Avenue A

At the Seattle-based interactive media agency Avenue A, data is king—but in a highly democratic way. Unlike most fiefdoms, and most organizations, for that matter, the three-year-old company believes that power well spread strengthens all players. Its policy of collecting, mining, applying and disseminating hard-won information clearly works: in first-quarter 2000, Avenue A won 26 new clients (including Best Buy and Flooz.com), driving revenues to $46.8 million, a 1,804 percent increase over the year-ago period and 31 percent higher than fourth-quarter 1999.

The company’s name, an offhand nod to New York City funk, places it high among listings in phonebooks and the like, and its predilection for order doesn’t stop there. Avenue A media buyers rate websites on a roster of 11 performance expectations ranging from inventory availability, delivery, pricing, issues resolution, all the way to cancellation clause. A dedicated division called the Supplier Development Group works to educate and train suppliers to toe the line in that regard.

“When making buys, we look at how suppliers perform and what they’re willing to do in those areas of excellence, in addition to traditional elements like demographics, psychographics and other factors like ROI and historical information about conversion status,” says Maggie Boyer, Avenue A’s director of media. “Let’s say a client is having a Father’s Day campaign and needs to be able to deliver the impressions exactly at the end of a certain period of time. A supplier ranked as Tier 4 in delivery is more likely to get that deal than a Tier 1. So it’s a key way we mitigate risk when buying and a really open way to communicate to our suppliers what they need to do to maximize the potential of their spend.”

Boyer migrated to Avenue A in January 1999 from the New York online buying and planning agency Iballs, now a wholly owned subsidiary of the firm. “Just like Avenue A, Iballs had figured out there are inherent flaws in third-party ad serving solutions that are not in-house, like DoubleClick’s Dart,” Boyer recalls. Avenue A had already begun working to redress that through the development of Axis, its proprietary ad serving solution, which collects data as it redirects clicks and serves up advertisements, allowing the company and its suppliers and clients to track how users are interacting with the ads.

For Boyer, a major advantage of the proprietary technology is its proximity. “These guys are right down the hall, and so for our clients there’s a huge benefit in our saying, ‘This is a technology we built and we customize, so you don’t have to wait for the next 5.0 to roll off the shelf,’” she says. “Instead we can rapidly, internally react to our client’s needs.”

That capability gave rise to Avenue A’s Strategic Partnership Program, or, as it’s called around the company, SPP. “I wish the initials didn’t sound so boring and serious,” Boyer says with a laugh. “Awhile ago we were experiencing a lot of clients showing up at the back door saying, ‘We did this huge deal on the net and I’m freaked out because I just spent 90 percent of my budget and I think it might be failing—please help me not lose my job.’ SPP gets involved from the outset to help build strategy into all contractual elements that require flexibility because they are long term. Ultimately it’s about getting back to the ROI focus—not to discount the importance of competitive blocking and halo and branding, but to marry them successfully to actually sell the product or get the registration or whatever metric matters. We wanted to bring that piece, that value, back into long-terms deals where it had somehow managed to fly out the window.”

In mid-April, Avenue A began assembling a team and a buy for a new client called Lucy.com, a Portland-based one-stop shop for women’s athletic gear launched late last year. As Avenue A manager for the account, Erika Nagy cast her net wide in the first three months. “Lucy was a textbook example of how you want to start out a campaign, which is testing a variety of sites to see if general broad targeting or supertargeted inventory—like going to a women’s fashion magazine supposedly screaming Lucy’s demographic—works better than just run-of-network, tagged and untagged. Sometimes you find that the cost doesn’t back out, even if the click-through rate and conversion rate is higher, because you’re paying such a high CPM.”

The question mark, at least as far as Lucy.com’s online marketing manager, Liz Valentine, was concerned, was the “blind” network Advertising.com, which offers lower-priced, untagged inventory in the form of impressions distributed across a mix of channels identifiable only to itself. “They can see which sites it’s running on, but we don’t know, because we’re purchasing it at a discounted price,” Nagy explains. “It’s a little bit of a shot in the dark.” Advertising.com’s demographic is roughly 50/50 men and women, so Valentine was hard-pressed to see the logic. And for Nagy, an untagged buy with a less-than-resourceful publisher can be a bargain that backfires.

“We’re huge on optimization,” Nagy says. “If I buy within a network and break it out, in our reporting, I can see how we’re doing across several channels—say women’s, travel, entertainment. We base everything on an index of 1,000, which our publishers get to see. So if they’re at 1,000 they’re meeting our client’s cost-per-action objective; if they’re below, they’re missing it, and we can shift impressions accordingly.” With a blind network, she can’t do that; but using Avenue A’s SPP methodology, the network can—and, in this case, did.

Advertising.com was not performing at the start of the campaign, and everybody knew it, including them. “We were about ready to cancel,” Nagy says. But with the feedback from Avenue A’s program, with its indexed, clearly defined client goals, the supplier was able to redirect distribution of Lucy.com inventory, “pushing impressions in those areas where they knew they were converting—sales, registered users, whatever it happened to be—by monitoring them within our system,” Nagy notes. “With the optimization they were able to do on their end, they turned the campaign around to be the best performing supplier on our buy, dropping Lucy.com’s cost per sale 50 percent literally within a week.”

Lucy.com remains well pleased. “I trusted Nagy with something I couldn’t have been convinced of two minutes before I walked in that door,” says Valentine, “and it paid off.”