Data is Free

Bill McCabe at A. Eicoff published an article at Advertising Age that I completely agree with. The basic premise is that, in ten years, we'll see far more direct response commercials.

This evolution will be driven, he contends, by new technology (convergence) and the traditional advantages that television commercials have always had in terms of being kinetic and driving telemarketing.

Bill is 100% right. Direct Response gets a bad rap because the commercials are cheesy and the products can be odd. Yet, imagine a future where the production values and the products themselves are high quality.

Imagine commercials where Ford is marketing their cars with the offer of calling right then to arrange a visit with a dealer, and that visit would include a $100 gift card to the restaurant of your choice. Suddenly the Ford dealers will be flooded with potential customers, and the Ford CMO knows exactly how much revenue his DR commercial drove.

Neat.

This acquisition boils down to one thing: data. The ability to understand and predict consumer purchases is the new coin of the realm. Microsoft valued Ciao's 26.5 million monthly uniques at $18.34 each.

To put that into some perspective let's look at what wireless providers have paid for subscribers (and the monthly cash they spin out).

• In July 2007, Verizon paid $2.67 billion for Rural Cellular's 700,000 subs: $3,800 per sub
  
• In August 2007, T-Mobile paid $2.4 billion for SunCom's 1.1 million subs: $2,100 per sub
  
• In November 2008, ATT Wireless paid $944 million for Centennial's 1.1 million subs: $858 per sub

In my next post we'll look at the value of these subs given some fairly reasonable assumptions regarding churn, lifetime customer value, and the operating margin of the businesses. The goal is to see who made the better deal.

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• Google's value proposition - to bring measurement to television adverstising - works in theory.
• Through Project Canoe the cable and satellite operators who own the inventory are already working on a competing product.
• Google has adopted its model from measuring clicks to tracking which ads were viewed and which ones skipped - the mouse has been replaced by the remote. This means the value of the ad is - for now - reduced to knowing if the ad is being watched or not
• Google plans to ultimately combine additional data to track purchase behavior back to an ad.
  

Regardless of who ultimately prevails in the race to own TV advertising the system that emerges will pose interesting problems for marketers.

• Though TV advertising does need to be tracked, if we are measuring value only by tracking who is watching and who isn't then the pressure to develop "entertaining" ads will only grow. A likely outcome is that commercials will gravitate towards much longer formats. We'll see 2 minute commercials that tell a story, or even commercials that run like a series. Think about a 13-week series of commercials that run every week, and debut on a particular show.

• The other issue is that the pressure on marketers to develop commercials that sell will only grow. If I were running marketing for a big consumer company I would seriously consider 2 minute commercials that feature a 1-800 number. Think Nike doing two minute spots during the Olympics, with a 1-800 number at the end encouraging people to call in to buy shoes and get a special offer to join a Nike sponsored running club in their area.
  

So, build the brand and prove to the CEO the direct connection between buying an ad and registering a sale.