Commentary

The Consumer: Online Price Wars

  • by August 23, 2006

For the last few months, I've applauded the traditional marketers that have moved into the world of nontraditional communications. I've been really pleased to see the online media market heat up and clients embrace new forms of viral and guerrilla marketing.

But I'm starting to worry that they're crashing a party that's been a lot of fun and ruining it for everyone.

I don't want to sound harsh, but it seems there's a clash brewing between marketing civilizations. The first signals of this were the meetings we had with smart, response-oriented online marketers who are exploring traditional communications because they are being priced out of online media.

It's ironic, really. These response-oriented companies have enjoyed and celebrated the ROI success of the online advertising model. But their model depends on the ability to buy cheap media, and there's nothing cheap about online media anymore.

What seems to have happened is that very large traditional marketers who have significantly less ability to track ROI have paid irrational amounts of money for online inventory. That in turn pumped up the price of online media to levels that are unsustainable for response-oriented brands.

The human motivations for this are clear. When the traditional advertising model broke, everyone looked around for something that was working. At that time, there were plenty of success stories attributable to online efforts. Keyword buys on Google were still affordable, and smart companies had signed up affiliate deals to get text links and the like on the Yahoo home page for very little money.

But those successes depended on driving high volumes of traffic with affordable media buys. The exuberance of the traditional marketers' rush into the online space has taken affordability out of the equation.

It's happening fastest in the search space. The genius of an auction-pricing model for media has unfortunately had a negative impact on the brands that could benefit most from search buys: response-driven businesses. They know how much a search term is worth to them, but they can't compete on price with a traditional marketer who wants to buy the same term simply because vanity demands it.

It's creating a clash between the response-driven and traditional worlds. And here's the ultimate twist: The response-driven companies are combating the price pressure in the online space by moving their marketing money into traditional media.

For a while there, everyone seemed to forget that there are two ways to guarantee a visible search result on Google. One of them is to buy keywords. That, of course, is really just a subversion of the natural process of search, a way to appear more popular than you actually are. The alternative is to make yourself more popular; which more traditional communication forms (advertising, public relations, and promotional activities) do quite well.

A case in point is our client Kayak, a new travel site that's competing with the likes of Travelocity, Expedia, and Orbitz. We've just launched a campaign for Kayak that's anchored by a national cable buy. The campaign objective is to drive traffic  just like search and affiliate marketing campaigns. But ironically, TV is much cheaper than search, and early results suggest that it's every bit as effective.

We've seen a related dynamic recently in the number of calls we're getting from more traditional marketers to create viral films. What's interesting about those discussions is that they inevitably turn to conversations about how the distribution of the film can be guaranteed. Of course, the only way you can guarantee that a viral film will be distributed is to make sure that it is new, provocative, distinctive, and most of all, entertaining. This makes many traditional marketers uncomfortable. They want to ensure that their brand is properly represented and that the film is politically correct  in other words, the last thing anyone wants to e-mail to their friends.

The message for these marketers is that if they want to come to the party, they should scan the room, get a sense of the atmosphere, and try to fit in. They should not start shouting about how great they are when everyone else is just trying to have a good time and a nice conversation. Otherwise they'll just spoil the party for everyone else  and in doing so, they'll ultimately spoil it for themselves.

Paul Parton is the brand-planning partner at The Brooklyn Brothers, a creative collective. (paul@thebrooklynbrothers.com)

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