Two Thumbs Up: DVD Dealer Does the Right Thing

There’s a lot of talk about the accountability of Internet advertising but we fear that, in practice, it’s just that: talk. Throwing banners all across the Web and hoping for the best doesn’t make much sense, but we’re willing to bet that’s what most marketers do.

One company not taking that route is DVD Express (www.dvd. com), the largest online video retailer, which (as its name implies) traffics only in digital video disks, selling over 1,900 movies.

Until October, the company’s online advertising clocked in at about 1.5 million banner impressions per month-mild for an Internet-only operation. DVD Express, which is based in Los Angeles (on Hollywood Boulevard, appropriately enough) and which launched its site in spring 1997, decided that it needed to get aggressive. Toward that end, it has signed a number of multimillion-dollar, two- and three-year deals with portals, including America Online, Microsoft Network, Infoseek, AltaVista, Yahoo and Excite. The three-year, $6.6-million AltaVista agreement reached in August makes DVD Express the exclusive DVD video merchant in AltaVista’s movie and entertainment areas. The three-year, $15-million AOL pact from September gives the company featured positioning in six of AOL’s channels. (DVD estimates its 1998 sales at $16 million.)

But there’s a problem. With its soft launch begun in November, DVD Express is jumping from those 1.5 million impressions a month to about 22 million to 26 million. The company wanted to know what, in that vast forest of digital ads, was working and what wasn’t. “We needed to evaluate what we were doing,” says Susan Daniher, vice president of marketing. “It’s important to maximize the use of these impressions.” Less than 1% of households have a DVD player.

So the company started using the tracking system of San Francisco-based Internet advertising network Flycast Communications Inc.

“It sheds a lot of light on the kind of customer we’re getting,” Daniher says of the system, called ValuTrak. ValuTrak analyzes across sites whatever the user wants-registrations or downloads, say-but DVD Express uses it for purchases. (Flycast claims the system can reduce the cost of acquisition by as much as 60%.) Daniher says her company is already learning that some of the sites get high click-throughs but low sales. The most interesting finding, she says, is that different portals have different audiences. “So we can quickly look and see if something is not effective and tweak the message,” she says.

In addition to knowing a site’s demographics from the site itself and consumer information from surveys filled out at its own site, DVD Express learns from how much people spend. “The purchase information says a lot,” Daniher says. “If someone is spending an average of $60 and someone from another site is spending $100, it tells you a lot about personal income.”

For example, AOL and Gateway have a more mainstream, less affluent audience that spends less per transaction (Gateway surfers spend $20 under DVD Express’ average purchase of $80), while AltaVista has a higher-income audience (average purchase is $20 over DVD Express’ $80 average). So for AOL and Gateway, the message is about saving money, while AltaVista visitors get messages about the product.

DVD Express is getting click-throughs from 5% to 15% (compared to the Internet-wide average of about 1%), which it attributes to the tracking system pointing it in the right direction. “We’re seeing some over 20%,” Daniher offers.

DVD Express also uses ValuTrak to analyze its offline campaigns. The company bundles its brochures offering special deals in the boxes of Gateway DVD-equipped PCs and Toshiba DVD players, among others. It also distributes coupons. These materials have codes that the consumer punches into a page at DVD Express’ site so the company knows where they came from. Daniher says the print promotions get a 3% to 5% redemption rate.