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Digital Matters – Issue 30

In My Humble Opinion: “That sound — the sound of advertising being allowed in is the sound of the future being born.”

At the Ryder Cup golf match, held at the Country Club in Brookline, Massachusetts, the PGA sold $12 radios that enabled spectators to listen to the audio portion of USA Network and NBC telecasts of the event. The radios were great: They allowed you to keep up with breaking developments all over the course. But what was really great was that during commercial breaks, there were no ads. Instead, the radio played music.

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Today, you can buy high-tech radios, digital television-recording systems, and software diskettes that replicate the experience of that $12 PGA radio — except that you don’t have to be on a golf course to enjoy it. You can block out advertising in your home, in your car, and on your laptop.

Soon enough, these relatively unsophisticated devices and technologies will be enhanced by sophisticated speech-recognition technology. Three or four years from now, individual consumers will quite possibly be able to use simple voice commands to banish all advertising that they choose not to see or hear. And when that happens, we will have arrived at the beginning of the end of the broadcast-advertising era.

That is one reason why Viacom’s acquisition of CBS is known in some circles as “Sumner’s Folly” (after Viacom CEO Sumner Redstone). The broadcast-television model is almost entirely dependent on advertising revenues. If ever-larger numbers of people have the ability to block out advertising, the traditional model will become simply one more victim of digital technology, and Broadcast Row and Madison Avenue will come crashing down with it.

So what takes its place? How do marketers and advertisers get their messages out? Some will continue to rely on the old model, which will remain functional for a time — because the majority of consumers will be late adapters to the new technology. But at the high end of the market, where you find the “best customers” (those with the most money), the old model won’t work at all. These best customers will be armed to the teeth with the new speech-activated technologies, and they’ll make sure that the only advertising that gets through is advertising that they really want to hear. That sound — the sound of advertising being allowed in — is the sound of the future being born.

Of course, that future involves the application of the next batch of technology to solve the challenge posed by the first batch of technology. To reach best customers, marketers and advertisers will have to use what Forrester Research calls IRMs — “interactive relationship managers.” IRMs are “infomediaries,” devices that collect user data based on the surfing habits of ISP customers and then make appropriate suggestions as to what else those customers might like or need.

Amazon.com is one example of an IRM. If you bought Joseph Kanon’s novel “Los Alamos,” Amazon would email you the names of other books about the Manhattan Project (some fiction, some nonfiction). If you bought Faith Hill’s latest CD, Amazon would prompt you to check out Shania Twain and the Dixie Chicks.

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But a true IRM looks at the bigger picture, one that encompasses the entire range of consumer needs and wants. For the moment, no one is doing that — which is why there is suddenly a great deal of interest in a small Boston-based firm called Predictive Networks Inc.

Predictive Networks offers technology that is capable of doing three things. First, it enables profiling of individual ISP customers, as well as users of large-area networks (LAN/WAN), according to individual surfing habits. Second, it enables intelligent content delivery to those same individuals. Third, it enables virtually any company to create an ISP for its customers.

Take them one at a time. Don Peppers, Martha Rogers, and others have written reams of copy on the coming of one-to-one marketing. Truly direct marketing has been elusive, however, because companies have been unable to track customers from one place to the next. The “New York Times” knows what you’re doing inside its site, but it doesn’t know what you’re doing inside the “Wall Street Journal” site. The Gap knows what you’re buying for your kids in its stores, but not what you’re buying at Sneaker Depot.

Predictive Networks allows marketers to see how individual consumers behave in every site by tracking their behavior via their ISP or LAN/WAN. That makes possible a much more complete profile of the individual user (who is privacy-protected because his or her name is irrelevant; only his or her data and browsing patterns are of use). All of which allows more effective one-to-one marketing.

Once you know what a MindSpring customer is interested in or looking for, the next step is to offer that customer some choices. If she’s interested in antiques in upstate New York, give her advertisements for the six or eight best antique shops or venues. These ads need to be downloaded as she stalks (on the Web) that perfect armoire. Predictive Networks’s technology offers this capability, even over copper wires.

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.

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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.

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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.

This is the kicker of the IRM revolution: It makes everybody a marketer. Very soon, we will see the merger of traditional companies with advertising agencies, advertising agencies with consulting firms, consulting firms with Internet-technology companies. Predictive Networks’s technology may or may not deliver on its promise. But something very much like it certainly will. And that, in turn, will make one-to-one marketing a reality, at least at the high end of the market — which will change advertising forever. Judging from the ads that are now being shown on television, that won’t happen a moment too soon.

John Ellis (jellis@fastcompany.com) is a writer and consultant based in New York City. You can visit Predictive Networks Inc. on the Web (www.predictivenetworks.com).

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