Jay Weintraub’s been on a tear lately – with a great blog post on incentive promotions and a terrific article on lead markets.
Quickly – see Jay for more detail – incentive promotions pay people to complete offers, typically requiring a credit card and often for recurring monthly membership programs. They’re usually strenuous to complete – either you have to do several to receive the high-value item or you have to get a number of other people to receive the high-value item. Advertisers pay for these incentivized leads because at the right price, they’re profitable – in theory, if you’re presented with a choice of a dozen offers to complete, you’ll pick the one you were most interested in anyway, and therefore have a reasonable chance of sticking with it. Incentive promotions rely on ‘breakage’ to make money – the bulk of their users will complete some but not all the required offers. The best known incentive marketer is probably Freepay, best known for their ‘free iPod’ program. Complete an offer, get six of your friends to do the same, and you’ll get one.
I’ve gotten a lot of stuff from Freepay, including my first Mac, so I can happily tell you the programs work. As a consequence, incentive marketing’s users have created an entire cottage industry around completing offers and avoiding ending up in the ‘breakage’ category – which I find a lot more interesting than the offers themselves. Elaborate content sites advise on the best way to complete offers. People set up ‘conga lines’, where they place their name at the bottom of a list and complete an offer for the name at the top – great for the first in, bad for the last in. Some individuals buy AdWords. And – best of all – some will offer cash for completed offers. Completely rational behavior – at $5 per lead that’s still an iPod for $30. Of course, the incentive marketers dislike all of the above behavior. It reduces ‘breakage’, increases the amount of incentives they have to ship, and generally puts pressure on the bottom line. I wish I could find the link – a few months ago I read a forum posting from a second-tier incentive marketer that was going out of business, and was blaming it on the high percentage of ‘professional incentive seekers’ using his service. All the regular joes (read: the easily exploited) were using Freepay, but he was stuck with the sharks…
Since free iPod offers are traded for cash in a one-off fashion, I have to wonder – why isn’t there a centralized marketplace for this? People looking to buy leads could make a bid, people looking to sell leads could set an asking price, and when the two matched in the middle the lead would be exchanged for the cash. Totally doable – here’s how it’d work:
- Buyers and sellers alike sign up for an account at the marketplace. Both are required to provide their account information at the incentivized service (including the password – for verification).
- Buyers of completed offers set the amount they’re willing to pay; sellers of completed offers – i.e. the guys actually completing the offer – set the amount they want for their efforts.
- All bids and asks are clearly shown. A buyer who wants a lead completed immediately simply pays the price of the cheapest seller. A seller who wants to be paid immediately simply asks for the price of the most-expensive buyer. Pretty similar to BetFair, actually.
- When a match is made, the buyer automatically makes the payment to the service. The seller is told to complete the offer. Until that offer’s completed, the service holds the cash in escrow.
- Periodically the service logs into the buyer’s account to check to see if the seller has completed the offer. If so, the buyer’s payment is transferred to the seller.
- If the offer is not completed after a certain period of time – say two weeks – the buyer gets his money refunded by the service.
- If the buyer changes his password or otherwise prevents the service from logging in to verify the completion of the lead, the seller automatically gets the buyer’s money.
And that’s it, pie simple. The service just charges to recoup the transaction costs (+ a vig if they want it). It’s not at all a sustainable business – since it makes it easier for people to complete their offer set, it could drastically decrease breakage and crush the incentive marketers’ profits, and they’re not about to allow that to happen. As soon as it caught on, they’d just disallow use of the market in their TOS and introduce a CAPTCHA at login, breaking the automated verification. But I still wish a coder would set this up – before it’s shut down, I could use it to learn the cost the market puts on having to deal with marketers. In theory, if it takes seven offers to receive an iPod the cost of each offer should max out at one-seventh of the cost of an iPod, minus the offer cost. The difference between that theoretical maximum and the actual cost is the true price of delayed gratification (FreePay is glacial) and marketing-related hassle. I suspect that price is significant.
{ 4 comments… read them below or add one }
not quite the same, but see what the Leadpoint guys are doing in LA.
great intel. more info:
As you’ll note, as a user, you just enter in credit card info. Google then will make the payment to the seller. Unclear what Google’s fee structure is on the seller side – I guess we won’t know that for a little bit.
You’ll also note that, once you’ve got an account (w/ credit card info already inputted), you can just sign in to your account and confirm the order. No credit card info is needed, just your account info.
Finally, there’s this:
“Your credit card will be charged by Google and your billing information will be kept private. To process your order, m. will have access to your shipping information and email address. “GOOGLE * m.” will appear by the charge on your credit card statement”
You could probably get a coder on Rent-A-Coder to code this up for you! How many buyers and sellers do you think you could get? LeadPoint does this for actual leads… but this is really for the buyers and sellers who are looking for the free products, right? Interesting concept.
That’s a very interesting thought. However, I think the free iPod trick works for most people. Most internet users don’t really think through the validity of an offer before they click on it. It’s the simplicity of the whole deal that attracts passive consumers. “All you have to do is click the monkey,” for instance. Unfortunately, I think you’ll have even more competition from this new site with an even better offer: onemillionpages.com is giving away a free iPod Nano to the first person who finds it on the site. The only catch is that the iPod is hidden on one of 1,000,000 pages and you have to find it before someone else does. That’s a heck of a lot better than referring 5 friends and subscribing to AOL for 18 years.