Some direct mail experts are frankly astonished at how many Web sites bemoan the state of online advertising, the slow growth of pay models, or the inefficacy of ecommerce affiliate programs, yet miss one of the most lucrative revenue streams available to them—renting their database of users. "This is a huge untapped source of potential revenue," says Ruth P. Stevens, president of eMarketing Strategy (www.ruthstevens. com). "Only a miniscule number of sites are selling lists." Fears about online spam and privacy violations continue to keep many publishers from exploring this route. But as we demonstrated in last month's column, there are some simple ways to maintain your subscribers' privacy, get them to opt-in, and even provide a welcome service—all while pulling in an appreciable revenue stream.
As if to prove my point, tech publisher IDG recently announced plans to market its massive databases of 3 million mail addresses and 1 million email addresses in partnership with direct mail manager American List Counsel. In this case, the email addresses are actually more valuable than the snail mail lists. IDG List Services will rent what it calls its Corporate Email Database for $275 per thousand names and the Corporate Postal Database for $140 per thousand.
Kid, You Need a Manager
Like a lot of print publishers, IDG is a veteran at list management. That huge database gets sliced and diced in a lot of different ways for a list marketplace that the company knows well. But what does a fledgling Web publisher have to do to get into this game? Well, things get a little Byzantine in the realm of lists, so rather than trying to sell your database on your own, Stevens strongly recommends that you find a list manager. Managers are to lists what agents are to actors, the people who have the contacts and know who is looking for what kind of product. These are also the people best able to advise you on optimizing your list and creating a "data card" for your site, which contains basic data about the size, scope, and characteristics of your list.
While there are some agencies that specialize in the online industries, the general direct mail sector has become very email-savvy, and leading companies like Direct Media, Inc. (www.directmedia.com) and American List Counsel (www.amlist.com) handle the email marketplaces as well. The larger direct mail houses work both for publishers renting lists and clients buying them. The "list broker" works the other side of the fence. He is the person who scopes the available data cards to find the right publication for his client to rent. It is your list manager's job to know the relevant brokers in your market segment and to make sure those brokers know about your list. Most importantly, he knows how to price your list fairly for you and the market.
"Look for companies that specialize in your niche," says Larry Chase, editor/ publisher of Web Digest for Marketers (www. wdfm.com), who rents his list several times a month now through Direct Media. "You need to educate yourself," he adds. It is critical that you find a list manager who knows your content and advertising segment well. Stevens suggests reconnoitering the competition and finding out who sells lists for the big players in your category. "If a Web site is about sports, go to ESPN or Sports Illustrated, and theirs is very likely the list manager for you. That manager will know the market for those lists and already has clients who will be clamoring to test it," she says.
At first, it is important to give the list manager as much information about your site, its audience, and what ads you are and aren't prepared to push to them. Unlike the offline direct mail world, where names and addresses actually are transferred to the renter for a single use, Chase and Stevens recommend that online publishers protect their users from possible spam attacks by retaining control of the lists and pushing the sponsor's message to the audience themselves. Publishers always have rights of refusal. They can turn down sponsors whose message is inappropriate to the readership, and the manager needs to know up front which kinds of sponsors are acceptable to the publisher.
Nuts and Bolts
"Testing the list," often is where the direct email dance starts between publisher and buyer. Before committing to renting the entire list, a client will sample a percentage of the full database. This is a very results-oriented business that abhors waste—quite different from the world of brand ad buys. Many of Chase's clients try out various sample messages to only 10,000 of his members to discover whether they get a good return rate and on which pitches. Only then do they commit to a full rental of his 40,000 subscribers.
Whatever you charge per thousand names, be ready to split the kitty with both manager and broker. According to Stevens, the owner typically gets 70% of the price, his manager 10% and the client's broker 20%. This also seems to be an excellent opportunity for publishers to dip their beaks into the custom publishing stream a bit more as well. Since you are blasting the email anyway, why not offer to do the HTML design work on the promotion or take development of a dedicated marketing page, hosted by you, of course, for that email campaign?
The Power of Guilt
It's tough to restate this simple maxim of the online publishing business, yet it continues to be ignored by so many content providers that we will try barking it once again loudly. You have to get your visitors registered and opted in. Plead, cajole, tease out their guilt, bribe them with prizes—do anything—just get their permission for you to market to them. Stevens feels the "guilt approach" is working well lately, since most users understand the sorry state of many Web business models.
But one of the points of a good direct mail list is its freshness and the breadth of its profiles. Publishers need to get in the habit of going back to their users for more information, to fill in more fields, and to offer more of what the DMs call "selects." For instance, in addition to basic demographics (gender, age), knowing that a household has children can make a list enormously more rentable. Whether your users are making purchases online is indispensable because ultimately direct marketers want to pitch to buyers. A ZIP Code, even better, a street address, can be a gold mine for a number of reasons. First, as more local advertising comes online, some publishers will want to target and offer lists by region. Better still, the state of population databases is so advanced that marketers can infer a wealth of other more granular data points from a simple street address or ZIP: likely income and marital status, race, home size, and even the sorts of cars one drives. Scary, but true.
Many online publishers wonder how they will get their users to opt-in when it is tough enough just nabbing email addresses, let alone how in the world they are going to get deeper profiles of their user base. I suggest that they take a lesson from old media on that one. Meredith, publishers of Better Homes & Gardens, Ladies Home Journal, and a run of B2B trade pubs, has a consumer database of over 60 million names with varying degrees of additional data points. On longtime subscribers, they have nearly a lifetime of their buying habits on file, and the company has succeeded for decades in marketing into that database, using it to launch new magazine ventures and sell its own books. When Meredith came online, it brought that same marketing-savvy to the Internet, knowing that asking for readers' identities and other profiling information was a necessary part of any viable publishing business model. The smart part is that Meredith does this unobtrusively by asking visitors for information incrementally. Rather than fill out a long, tedious profile at the first registration gate, usually a deal-killer for many visitors, Meredith asks for minimal information up front, but comes back to that visitor as she penetrates the site more deeply on return visits. Want to get into the recipe database? Fine, but first tell us a bit more about your preferences? In a short time, the site begins to assemble a dense portrait of its audience and creates a database that can be sliced in multiple ways for new ad segments.
The Internet didn't invent anything entirely new to publishing. In fact, in some respects, online content providers are only just beginning to catch on to the traditional ways of making money while using emerging content distribution mediums.