Interactive Marketing: The Tempo Slows

It’s kind of strange to be talking in critical terms about a segment that grew 15.4 percent to $1.5 billion. But when the Internet is the segment in question, it’s downright appropriate.

The surrealistic crash of the dot-com world, which occurred in the second half of 2000 turned into harsh reality in 2001: The market had been over-valued and under-evaluated, and Wall Street wasn’t going to take it anymore.

The wave of dot-com companies going out of business affected online promotion spending in two ways. First and foremost, there were a lot fewer online brands with marketing dollars to spend — a fact that deeply hurt all media. Secondly, the list of shuttered companies included some promotional services suppliers (among them Save.com, Netcentives.com, and Flooz.com).

The return to reality had a bright side, because it quickly doused all the hype about the Internet making all other communication vehicles obsolete. The more realistic theory now is that the medium provides an excellent way to reach consumers directly, deeply, and efficiently — when effectively integrated with the rest of the marketing plan.

“Promotions for the sake of promotions don’t work,” says Larry Burns, ceo of Startsampling.com, Carol Stream, IL, one of the few online promotion operations to make it through the crash with its cash flow — and its reputation — intact.

The upshot is that nearly all national promotions now come with an Internet overlay (with online sweeps entry and prize redemption especially in vogue.) And numerous local or targeted campaigns that would have been too expensive to run through other channels are getting the green light.

“Companies see the Internet not as an independent channel, but as a medium to better target their best customers and maintain a cost-effective relationship,” says John Hopper, ceo of promotions supplier RealTime Media, Wynnewood, PA.

Part of that new view has been a move away from promotion “destinations” offering sweepstakes, coupons, samples, or continuity programs from numerous companies to brand-specific activity on dedicated sites.

With many of the leading dot-com marketers now a distant memory, “traditional marketers are the ones pushing the envelope now, and they expect accountability and a stronger ROI,” says Steve Krein, ceo of New York City-based Promotions.com (whose revenues sank from $26 million in 2000 to about $11 million last year. The company was acquired in early 2002 by iVillage.com).

And those traditional marketers are forging alliances with online leaders to help get them up to speed. Santa Clara, CA-based Yahoo has been a favorite partner for companies seeking technology infrastructure, such as Pepsi-Cola for PepsiStuff or Kellogg for eet and ern. But America Online has been the most sought-after chum, because it brings not only 32 million worldwide subscribers but the vast resources of Time Warner as well. Kraft Foods, Unilever, Motorola, and Burger King are just some of the leading brand builders who’ve signed long-term deals.

“We’re solving problems in the marketing mix they can’t solve elsewhere” such as cost-efficient targeting of teens, says Mark Hosbein, Dulles, VA-based AOL’s vp-interactive marketing. “Traditional marketers know their business better than anyone, so we’re learning a lot from them, too.”

Phone Is Fine

Spending on phonecards and telephone-based promotions stayed flat at about $500 million in 2001.

While phonecards are rarely the core of a campaign anymore, they are still a strong premium with high perceived value, especially in the free 20- and 30-minute varieties that have become more popular.

Meanwhile, the use of toll-free numbers in sweepstakes and contests continues despite the rise of Internet-based fulfillment, partly because cell phones are gradually becoming a popular delivery vehicle and partly because there has been a surge in the use of celebrity voices to record messages.

SNAPSHOT

• The explosive spending on Web promotions stablized.
• The Internet landscape now presents a more realistic environment.
• Spending on telepromotions and phonecards was flat.