Billion Dollar Email Submits
The other day, we had the chance to meet one of our idols. Unlike most normal human beings this idol works in the online advertising space. They aren’t famous. They do have lots of money, but their wealth has nothing to do with what makes them special. Calling them a true inspiration is also not far off. It’s a very literal interpretation for their work inspired not only me but another company that has a long, and at times colorful, history – TheUseful. They inspired TheUseful the same way the TheUseful has inspired many others in the performance marketing space, by creating a relative transparent blueprint for online monetization.
If we think about TheUseful from a decade ago along with companies that followed a similar model, YFDirect (Your Free DVDs), Webclients, and later on Modern Ad Media, they all share something in common. We could joke and say it’s they all knew how to trick users, and while there is an element of truth there, it takes away from the fact that each company especially TheUseful and Modern Ad, being the largest, perfected a model that has shown unexpected staying power – display to email arbitrage. The performance marketing industry knows them as something else – email submits, and their ubiquity overshadows that early innovation.
Even today, email submit offers are still the staple of any major network. They have become more productized than in year’s past, but what it means to be in this space has changed little. Dangle a carrot in front a user and then beat them with a stick, which in application means a product that has a high perceived value and use it to lure users into a path. Very little has changed in the past almost decade that these types of acquisition systems have been in place. Like bottling soda, behind the scenes a lot has improved to bottle it faster and cheaper, but again, the product itself, the incentive promotion offer, remains the same.
The race to the bottom that occurred in the email submit business didn’t take away any money from the space, but it did tarnish the perception of the players in the broader advertising world. What we can’t help but notice are the similarities between those businesses and some of the biggest spenders online – Groupon and LivingSocial. It’s doubtful that anyone at Groupon would think of themselves as an evolution of TheUseful, unless of course they came from TheUseful. From a traffic acquisition standpoint though, they are very very similar. The scale for both came from display to email arbitrage. It’s such a simple concept yet so amazingly powerful.
What TheUseful figured out almost a decade ago is that they could afford to buy banner impressions on a cpm basis in order to generate an email sign-up. Ten years ago, display was going through a crash and the inbox was untouched. The company could generate enormous quantities for just over a quarter per sign-up. If someone signed up on the reg path that was great, but the email address alone was profitable enough. Buying on display to monetize through email. That’s the premise behind the model.
As the inbox became more crowded and coveted, companies like TheUseful had to become more aggressive at monetizing users. The rising cost of media didn’t help either. The companies got better, but they didn’t do so by adding more value, just more traps to fall into as a user. When comparing them to Groupon, we can see why. Both start the same way – with catchy ads and media bought on a pure run of network basis. The action is also the same, an email sign-up. And, the main channel for further communication is also email. They buy anywhere they can and back into that CPA. They assign a value that is a percentage of lifetime value and take the risk of buying names before making a dime. Both saw impressive growth and amazing top line revenues, but one topped out before reaching $200 million. The other will have a month at $200 million.
TheUseful and Groupon have the same basic customer acquisition strategies, but Groupon accidentally uncovered a much more effective monetization, one that doesn’t require reg paths. No paths. No call centers. No multiple lists. All because they figured out how to do what TheUseful and other incentive promotion companies couldn’t, create compelling, money making content in email. They send what are in essence ads, but their ads don’t go into the spam folder. While they are ads, they aren’t ads. They are content – part coupon and part city guide. And Groupon has hundreds of thousands of them. That is among their biggest strengths. The other reason that incentive promotion companies must rely on the path so much and on upfront monetization is that they don’t have as much to send to users. That was always the issue. The universe of offers was only so big, the universe of decent offers being even smaller.
It’s not like Groupon set out to make a better version of the incentive promotion business just as the incentive promotion space probably didn’t anticipate its user acquisition would pave the way for a multi-billion dollar industry. Despite their strength in acquisition, we won’t see any in the incentive space going big in the deal space. They focused so heavily on one side – the path – that they don’t have the operational expertise at running massive sales organizations. It might be too late even if they figured it out now. They will just need to bide their time until the next evolution of the email submit.
