Digital Matters - Issue 30

These two capabilities lead to a conclusion: If you can track a customer's preferences through an ISP, and if you can collaboratively filter that knowledge through the preferences of hundreds of thousands of other customers -- while delivering highly targeted advertising to each one of those customers -- then it makes a ton of sense to set yourself up as an ISP.

And that's the punch line for Predictive Networks: It allows corporations and associations the opportunity to make a very smart trade. By setting themselves up as ISPs, they can offer free Internet access in exchange for powerful and useful insights into their customers' buying habits. Smart companies will make this trade -- free Internet access in exchange for rich customer data -- in a nanosecond.

Why wouldn't they? So-called best customers have fled to the Web in such overwhelming numbers that the traditional broadcast-advertising model now borders on irrelevance for them. Soon the only television programming worth advertising during (if you want to reach high-end customers) will be live events, such as awards ceremonies or televised sports, and news. Everything else will pass through a personal television-recording system that will zap the ads. Smart companies know that they need a new advertising-distribution model.

What will advertising on television look like in the near future? The short answer is: "back to the future." TV ads will look much as they did in television's infancy, with the addition of interactivity. Sole sponsorships -- remember The GE Theatre? -- will reemerge. Product placements will become as important on television as they are in movies. Within programming, there will be lots of interactivity.

But the future of advertising to best customers will come in the downloading of "cached rich media content" (a term that only terminally inarticulate Internet people could have dreamed up). Cached rich media content is essentially advertising (such as a trailer for a movie) that is downloaded onto your computer as you do whatever it is you're doing on the Internet. Using data that you make available to your IRM that day ("I'm thinking of going snorkeling during my vacation, but I'd like to ski as well. Is there any hope of doing both?"), Internet technology would sort through your options and make them available to you in the form of an interactive advertising package.

This offers the opportunity for advertising agencies to develop extraordinarily creative work. At last, advertising would genuinely be able to say that great creativity would engender its own enthusiasm and thus spike up sales. The big problem with advertising today is that it begins with the assumption that no one wants to watch it, that there is far too much of it, and that it is all but impossible to get noticed amid the cacophony of cheap production and bad execution. But what if the advertising were directed at someone who actually wanted to see it? How much fun would it be to describe the pleasure of playing golf in Ireland to someone who loved the game but had never played there?

By far, the biggest change wrought by the IRM revolution will be that one-to-one marketing will become a reality for major companies. It will take them too long to figure this out, but eventually they will. All they really have to do is offer free Internet access, and they're three-quarters of the way home.

Take American Express, a company that is getting better and better as it gets more and more knowledgeable about Internet technology. American Express has about 28.7 million U.S. customers -- which is to say that 28.7 million people have an American Express card in their wallet or purse. Once a year, Amex charges each of those customers between $55 and $300 to use its card. As a result, the company brings in more than $1.5 billion each year in card-membership fees.

If the company were to spend half that sum to provide anyone who holds an American Express card (or anyone who signs up for that "privilege") with free Internet access for the remainder of the year, then it would essentially become a cable network -- and hence a gatekeeper for an audience of 28.7 million (relatively) rich people. The only thing that customers might have to do is use americanexpress.com as their home page. If the company were smart, it wouldn't even insist on that requirement.

Any interest that you expressed about travel, leisure, shopping, financial services, or whatever else you might think of would become known to American Express immediately. Amex could then provide its own cached rich media content to you directly, or sell the right to do so to another company. As long as Amex protected your privacy and engaged in permission marketing, it would have you on its team for as long as it remained competitive with Fidelity Investments, Charles Schwab, Yahoo!, Goldman Sachs, Visa, and the many other companies that will follow suit. Access to the American Express customer base has a value well beyond $1.5 billion in cash.