When all businesses demand advertising performance

After her first 100 days on the job, Microsoft’s corporate vice president of global ad sales Carolyn Everson has reached this conclusion: banner ads stink.

Adweek: Microsoft looks to Reinvent Display Ads 10/19/2010

From now on, business will demand performance based returns for their advertising dollar. Banner ads, commercials and ad media can deliver eyeballs, but can’t guarantee quantifiable returns. Daily deals systems employ an “eat what you kill” approach to loss leader advertising models.

Yipit blog: Groupon reveals its future lies in Self Serve 10/23/10

groupon_storesGroupon is testing self service advertising. They will expand beyond their full service business model by offering a second tier level for local merchants who would rather build their own ads. Merchants will be able to place ads not only on their websites, but syndicate through the local coupon / Daily Deal syndication networks now being developed, Groupon included. Local media resources and networks will thrive from the aggregation of self service coupons as ad distribution media.

Beyond Groupon and banner ads: when advertising performance isn’t based on a “Buy” button

Many industries, including business-to-business, high ticket items like real estate and cars, and professional services, use advertising for lead generation but can’t easily “Groupon” their services or products into a simple deep discount package. Businesses that deal in arenas with high financial or business risk traditionally rely on personal referrals for leads. Performance based advertising needs to deliver leads who are comfortable with the proxy “referral” the advertising has generated. Performance criteria include:

  • Target: Are the leads qualified for closing? What is the closing rate?
  • Scale: Will the advertising campaign help expand the reach of potential clients for the advertiser?
  • Efficacy: Will the advertising stimulate referrals? Will it create viral marketing opportunities?

Can “group buying” work for, say, real estate? The new performance based advertising might do the following:

  • Target: Identify all prospective home buyers in a locality. The most common method is simply offering up current home listings  that attract home buyers who proffer their contact info and become leads.
  • Scale: Once home buyers are targeted, the new coupon system could offer attractive “group buying” discounts by a team of Realtors (or a brokerage office). The incentive could be fee reimbursement, a first time buyer’s discount, closing cost reimbursement, free appraisals, etc. Different “deals” can rotate weekly or seasonally. It’s also important that all Realtors involved interfacing with home buyers have solid online reviews, or the group buying incentives look fishy or desperate.
  • Efficacy: When leads are closed, offer new clients further incentives for referrals. Viral marketing is essentially another word for “referrals”.

Coupons and Daily Deals have proven to expand reach into the community. Right now, social commerce companies like Groupon focus on higher revenue generating mass markets over verticals. We don’t see Groupon entering the space of group buying coupons for the real estate industry, but we’re watching and offering advice to social commerce startups developing niche coupon systems for verticals.

About Pat Kitano

Patrick Kitano works with brands in developing hyperlocal engagement solutions and is administrator of the Breaking News Network, a national hyperlocal network devoted to community service. He is the author of The Local Network on Street Fight, and is reachable via Twitter @pkitano and email pkitano@gmail.com.