ORB: PAYS TO PLAY

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There's not much that Andrew Pakula isn't willing to stake in order to get results for a client. His i-shop, Orb, which handles online media buying and customer acquisition campaigns for Sony Electronics, Cendant Corp. and others, has built almost its entire revenue model on performance. Aside from a few situations where the company charges a nominal fee for creative development or research, revenue is based on the performance of the online marketing it does for clients. And Mr. Pakula has been running his business that way-profitably- since 1996. "We are completely incentivized by the performance," said Mr. Pakula, Orb's president-CEO. "The more revenues we derive for our client, the more dollars we receive."

For new client Cendant, Orb is charged with signing up members to Cendant's various membership services. Each new member translates into a bounty fee for Orb.

"This is a true pay-for-performance model," said Nathaniel Lipman, Cendant exec VP-business development and strategic marketing. "We're not even paying to see what kinds of impressions or callers we get. We're asking them to deliver us a bona fide member in return for receiving a fee."

For Sony, a client since August, Orb is developing online marketing to drive sales of electronics such as the Vaio computer and Clie handheld device.

"We need to demonstrate the viability of the direct sales channel and demonstrate the ways in which online marketing can enhance that capability," said Michael Tive, VP-marketing for Sony Electronics e-Solutions Co. "The digital media marketplace has to ... demonstrate some level of performance."

Being paid on performance is probably easier for a company like Orb, because it is entirely focused on campaigns that have the capability of delivering measurable results, rather than providing other services such as Web site design or e-business consulting. Mr. Pakula acknowledged by keeping the business small (it had revenue of $12 million in 2000) and focused on measurable services, Orb is in a better position to gauge performance than interactive agencies that provide other services.

Still, he said he believes that any i-shop should be willing to take on some risk for its clients. He also contests the belief that pay-for-performance is dangerous.

"The approach is less risky and [more] accountable, especially since many clients have had bad experiences on the Net," Mr. Pakula said. "They respect us more because we have as much on the line as they do."

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