In a world where people rely on machines to do what they are supposed to, it is pricing transparency and automation that really count, as Dealgroupmedia discovered to its cost
This thought crossed my mind in recent days as I watched a replay of the dot-com boom and bust. Well, maybe not exactly, but if you follow share prices that is exactly how it looked.
Dealgroupmedia (dgm) is a leading player in the UK’s burgeoning affiliate marketing sector. For those to whom the phrase is still foreign, affiliate marketing is where an online retail website lets an online publishing website link to it in order to drive traffic and, hopefully, sales. The publisher gets a commission for his efforts. This relationship is eased and enhanced by the existence of a middleman – a company that manages a network of online vendors and publishers. The leading network operators in the UK are dgm, Tradedoubler, ValueClick and AffiliateFuture.
Dgm has just announced that its expected profits will be substantially reduced, partly as a result of renegotiated terms with a client that accounts for 30 per cent of its income. The mystery client has not been revealed, but industry sources suggest it is Dial-a-Phone.
Dgm had to slash the amount it charges this client for managing its relationship with publishers. Two things came as a shock to industry observers (and to dgm’s investors, who saw the value of the shares fall by two-thirds almost overnight). First, dgm relied heavily on a single client; second (perhaps a more important point for the industry as a whole), dgm appears not to have had sufficient transparency in its pricing. It seems to have acted more like a pre-internet marketing agency, where relationships did not come with a fixed price-tag but were subject to a degree of smoke and mirrors.
In today’s Google-led world, it is pricing transparency and automation that really count. Having a good working relationship, person to person, is a nice plus, but it is no longer the meat and veg.
It is significant that, just before issuing its profits warning, dgm had also admitted to teething troubles with its major technology upgrade – a software management tool called dgmPro. In the post-Google online marketing environment, you simply cannot afford to treat technology as an add-on. It is 99 per cent of your entire product offering. It’s no good investing in relationships with senior personnel at your client company if the poor sods further down the food-chain are unable to do what they need to do.
Dgm may yet bounce back from its current woes. But the speed of its fall is another sign of just how quickly things move these days. The affiliate marketing industry is booming, but the Darwinian laws of survival may kick in sooner than expected.
v The inexorable march of technology and automation is also changing consumer behaviour in profound ways, as noted here before. Marketers really must stop trying to define consumers in ways that perpetuate the imbalance of power so evident in 20th-century marketing.
An example of this is the word “prosumer”, which has been reduced to meaning simply another selling opportunity. But “prosumer” would be better served describing consumers who are jumping at all sorts of opportunities to make money from the internet – or rather, I should say, from the creative destruction of traditional intermediaries. Yes, new intermediaries are springing up in their place, but their role is radically redefined.
Ebay is the most obvious example of this trend, but a more recent and local example is Zopa, set up by the founders of online bank Cahoot. Its aim is simply to connect lenders with borrowers, giving itself a small supporting role and thus achieving better rates for both parties. I’m not overwhelmed by its success so far, but it is still very early days.
Another example of the prosumer is blogs. Joe and Joanne Public can set up their blog free of charge, add a site meter free (telling them how many people are viewing their offering) then slap on a few ads – most easily by using Google’s technology – again all free. Moreover, we are seeing the creation of, effectively, powerful new media owners via the collation on one website of blogs that have proven individually popular. (It’s worth keeping an eye on PajamasMedia.com.)
What does that consumer become? Why, a prosumer of course – a hybrid creature between passive consumer of yore and active minipreneur of tomorrow. Sorry, did I say minipreneur and pretend to pass off that cute neologism as my own? Well, that’s what happens when you subscribe to too many e-mail lists. In this case, I must refer you to the visionary folks at Trendwatching.com, who have much to say about this marketing metamorphosis (see www.trendwatching.com/newsletter/newsletter.html)