Could Keith Smith, the co-founder and CEO of 180solutions, be the most misunderstood man in Internet advertising?
It might appear that way, if you go by some of the discussion board chatter that has attempted to pigeonhole (in the past, at least) his search assistant technology as a rogue form of adware. The software, which delivers a Web visitor directly to an advertiser’s Webpage based on a search term entered into a search engine (“popping over,” not under, the search engine’s results page) is, by definition, disruptive.
But intrusive? Not once you consider how the latest version of the ad system, dubbed Zango, provides an express, non-stop path to a highly relevant marketing offer geared to what a searcher is looking for, much like an intuitive shopping companion. And clearly there is no apprehension in the investment community which has just witnessed Washington state’s largest ever, first-round funding of a tech company from a single investor — disbursing a whopping $40 million in venture capital dollars to 180 and putting Smith and company in the driver’s seat.
There may not be a harder working advertising team in the industry. The company’s ad agency division, called MetricsDirect, boasts over 6,000 advertisers which it serves through a rigorous Service Level Agreement labelled “2-4-1.” Within 2 hours, an account manager will return all phone calls and emails from 180solutions’ advertisers. In 4 hours the account manager will respond to every advertiser’s request for proposal. And in 1 business day, all new campaigns will be loaded and ready to go live.
Champions of new business ideas must be prepared to confront the resistance that technological change and market reaction provokes. As Smith points out, “Every consumer knows that when they sit down to watch Friends on Thursday night, they are going to watch 22 minutes of Friends and eight minutes of advertising — that’s the quid pro quo. But the first time that happened on TV, people were uncomfortable. Why are you interrupting my TV show to show me a commercial they might ask? We’re at that same stage right now.”
Clearly, the Zango Search Assistant and the MetricsDirect group behind it demand and deserve greater appreciation, or at least elucidation. Seattle24x7 was only too happy to foster such an understanding with this interview.
Seattle24x7: 180solutions has literally turned the business of Search Marketing around 180 degrees. Rather than compete on a cost-per-click basis among dozens of listings on a search results page, your software ushers users straight to your client’s Web page off of a Web search. Instead of a cost-per-click, you’re using a cost-per-visitor metric. That’s revolutionary!
Smith: It’s really a fundamental difference in the way we do things. Instead of showing an ad on a page and hoping that a user clicks on it, we are actually taking the user right to the site. At the end of the day, we are measured against how many transactions our method is providing to our advertisers. If the consumer finds our search results to be useful, they’re going to buy. If they don’t, then they are not going to buy. It’s that simple.
When you are in a cost-per-click model, you get compensated when the user clicks, not whether he or she buys. You just want to show as many ads as possible and hope that the user clicks. More ads equal more clicks. With our model, we remove that middle layer and take the user directly to what they’re looking for. As a result, we only touch the consumer 2-3 times per day with a very targeted marketing message. Other “adware”-type software applications might touch the consumer 20 to 30 times per day. That really drives up the annoyance factor. We think that’s the equivalent of watching eight minutes of Friends and 22 minutes worth of ads instead of the other way around. Less advertising that is more effective is a better trade-off for the consumer.
Seattle24x7: Introducing this kind of software into the marketplace must require an extraordinary educational and evangelical effort. Is it incumbent on you to educate the consumer and provide all of the disclosures as to what exactly is taking place in the user experience?
Smith: We think that has always been the case. Our distributors, by and large, have always done exactly what they said they were going to do and what they are contractually bound to do which is to make sure that consumers provide a clear and informed consent of the software they are going to install in their computer. They understand that Zango, or the predecessor of Zango, is sponsoring that free software application or that Web site.
Unfortunately, with the tremendous growth of the company, from only five employees 18 months ago to 114 today, we haven’t always had the resources to police those distributors. We’ve done spot checks and validations up front, and we’ve always had contracts in place that require that they do those things. But there have been a few cases that we’ve learned about after the fact, where they haven’t lived up to those established contracts. And we’ve terminated those contracts immediately when that happens. We now have a lot more resources to do full auditing and to hire outside auditors to verify that all of our distributors are doing exactly what we require them to do.
Seattle24x7: One of the criticisms leveled by your detractors involves affiliate marketing, and whether or not a product like Zango may be preemptive in intercepting the sale of an affiliate?
Smith: I wouldn’t use the word preemptive. We have no more competitive advantage to the consumer than any other Web site. The issue of stepping on a referral link is something that we’ve actually gone to great lengths to avoid in our technology.
The fact remains that if a consumer goes to PriceGrabber and follows a link from PriceGrabber to a particular advertiser who is advertising through an affiliate relationship, and then later in the day they go to a competitor of PriceGrabber’s, another competitive shopping engine who is also an affiliate, the last affiliate who referred the shopper is going to win. That’s the way the affiliate model works and has always worked. If you deliver the user to the point-of-sale and you’re the last one to do that, then you’re going to win. So, what we do is make sure that if a PriceGrabber comes along and sends a user to an affiliate advertiser that we won’t get in the way. But if the user is doing a search, and they’re looking for a particular affiliate, and that affiliate advertises on Overture and they also advertise through us, then the consumer is going to decide who to buy through and has a choice.
Seattle24x7: What do you think is driving any public miconceptions?
Smith: It’s primarily being driven by two things. One is the fact that there are some bad actors out there, who specifically write software to step on and hijack commissions from other affiliates. We think it’s a terrible way to do business. We don’t think it’s a long-term way to be successful.
The second reason there’s a misconception I think is because we are growing and growing faster than most of the other affiliates. Because we have a great value to consumers and to distributors and advertisers.
People don’t like it when we’re competing against them, and we’re winning. We happen to be doing really well, and that’s because were adding a lot of value for consumers.
Seattle24x7: You are always vulnerable to criticism when you are championing something different?
Smith: Well, having a user base that’s twice the size of AOL, there is periodically going to be a very small percentage of people who are unhappy with the software. The bigger you are, the louder that very small percentage becomes. You look at a company like Microsoft, and the number of lawsuits that they contend with every single day. It doesn’t mean that they have inferior software or that they are a bad company. It just means that they are out there in the marketplace and they have a wide swath.
We recognize that as we get bigger there are going to be some people that will be unhappy and have some misconceptions. We’ve taken it as our responsibility to clear up any misconceptions.
Seattle24x7: Google has recently announced Google Mail, and its plans to target advertising according to the content of email that is being received What’s your impression of it?
Smith: Unlike G-mail, we don’t collect any personally identifiable information at all. Most ISPs, unbeknownst to users, sell their click stream information. An ISP can also add personally identifiable information about that consumer. Web sites like Yahoo, that have a lot of registration information, combine that data with your search behavior. All these are things that people need to be aware of.
The consumer needs to be well-informed that in G-mail the value exchange is that they get to read your e-mail and target advertising to you and that you get an e-mail box that has no size limitations. We believe that as long as the user is well-informed, that people are smart enough to make those decisions for themselves. They should be free to do that.
Seattle24x7: Zango also has a revenue model built into it for content sites. It’s touted as a way for content sites to make money they may not earning from advertising or subscription revenues?
Smith: There’s a whole tier of web sites on the Internet that don’t rise to the level where someone is going to pull out a credit card and pay for a subscription to gain access to that site. They are not a WallStreet Journal.com
Additionally, if they are a content site, they are generally a site where a lot of users are in an entertainment — not in a payments-related — mode. The problem is, there is no valid monetization model for the providers of this content. They are stuck in a quandary where they have to show banner ads on a web site. They have to show pop-ups. They have to show skyscrapers. And they have to show more and more of these ads because consumers aren’t buying through those banner ads. They aren’t in a buying mode when they are there to be entertained. So as a result, the advertising price and the premium that was paid goes down. So now the web site operator has to show more and more advertising and it continues to dilute the online experience for the consumer.
We say get rid of all the advertising on your content-related web site. And instead “gateway” your Website with Zango. Essentially, allow Zango to sponsor your web site. So when the consumer comes to your web site, they don’t have to see banner ads all over the site. They can get access to all the premium content on that site, as well as a series of other web sites that are made available for free to consumers who agree to install Zango on their computer. The user gets access without constant advertising, without interfering with their experience. The Zango Search Assistant only works when the user is actually out there looking for something. Only when they are in a product buying mode will we go ahead and present them with a marketing offer.
Seattle24x7: Over time, there is additional income for the Website partner?
Smith: Exactly. So if I’m someone who has a great site, who gets a lot of users coming back to it, then the users are more likely to keep Zango installed on their computer so that they can continue to take advantage of the “Backstage Pass” to that website. They’re going to make more money over the long haul.
Seattle24x7: You believe you’ve landed on a better advertising formula? Smith: We think free content and software applications on the Internet are powerful things. It’s what consumers want, and it’s something that there is ample supply for. There’s a lot of developers of both content and software applications that want to be able to make their products available, and they need to figure out a way to be able to pay their bills. We figured out a way to be able to sponsor their Websites and, at the same time, we are a good citizen in working with all of the affiliate networks, and with all of the advertisers, to make sure that we provide real value so that we are delivering them a consumer who is specifically looking for their products. [24×7]
Larry Sivitz is the Managing Editor of Seattle24x7.
