Word-of-mouth pitches mutate into new forms on the Internet

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Viral marketing, the Internet version of word-of-mouth marketing, is mutating as companies recruit customers to be sales agents.

The term--coined in Net usage to describe free e-mail provider Hotmail's growth to 12 million users in 18 months--is now being adopted by conference organizers and companies trying to turn the viral craze into a viable marketing industry.

"Now is the time for viral marketing," said Jennifer Kaplan, VP-business development at San Francisco-based viral marketing company Gazooba and chairwoman for Strategic Research Institute's "Viral Marketing" conference, opening today in San Francisco. "You'd be hard-pressed to find a marketer out there that doesn't have viral marketing on their list of 2000 initiatives."

VIRAL ATTACK

Marketers from giant Dell Computer Corp. to fledgling FogDog.com are spreading viruses.

So are serial killers: Lions Gate Films stoked the April 14 opening of "American Psycho" by sending 16,000 people 30 days of e-mail from the film's main character, a serial killer. ElectricArtists, E-Mail Shows and Pseudo.com, all New York, worked on the viral attack.

But with incentives of free clothing, discounts and even cash for promoting products, marketers sometimes find themselves turning off the customers they expect to attract.

Swedish furniture retailer Ikea recently removed an e-mail postcard promotion from its San Francisco-area store's Web site after a handful of recipients equated it with spam.

The promotion for the April 12 store opening allowed visitors to earn discounts by e-mailing a virtual postcard to friends with a coupon offer from Ikea. Ikea did not collect the e-mail addresses, but also did not clearly explain the point on its site, said Rich D'Amico, manager-new business development for Ikea North America.

"Most of the complaints came from the press," said Mr. D'Amico, who said more than 60,000 coupons were sent before Ikea changed the Web site. "We're not in this business to annoy people or create controversy, so we said, 'Let's back away.'"

SPAM-CONSCIOUS

While the Internet might be an ideal petri dish in which to grow viral marketing campaigns, Ian Oxman, president of ChooseYourMail.com, said companies need to pay attention to how customers promote their products.

"Viral marketing can be a clear invitation to spam because you've got a large company who is providing the product and asking people to be their marketing agent," he said.

When Steven Jurvetson and his partners at the venture capital firm Draper Fisher Jurvetson coined the phrase "viral marketing" in 1997 for the Net, they were describing Hotmail's growth through a message at the bottom of every e-mail.

"The definition keeps evolving," said Mr. Jurvetson, whose firm helped bankroll Hotmail. "It's like an adaptive virus. We defined it initially as network-enhanced word-of-mouth. You turn every one of your customers into an involuntary salesperson for your company."

Incentive programs have changed the formula since then.

MORE LIKE A PYRAMID SCHEME

With incentives, viral messages are still delivered by friends, but the recipient understands there is money or something material involved in the sales pitch, Mr. Jurvetson said. "Once you've gotten 10 of these AllAdvantage messages, you would think of [incentive programs] as much weaker and, I might argue, not viral, but more like a spam-your-friends or a pyramid scheme."

AllAdvantage.com, in a quiet period before its initial public stock offering, declined comment. It offers consumers cash to surf the Web while watching a pop-up box of rotating ads. Members who refer friends to the program also collect commissions based on how long their referrals spend online. The company, formed in March 1999, had 5.3 million registered users as of February.

While Mr. Jurvetson said incentive programs can be extremely successful, he describes the technique as "delegated spam."

"The [cash incentive] gives people a reason to send messages to all the weak links in their address book. Why would you hold back?"

AllAdvantage kicks out members caught spamming and donates cash in the closed accounts to anti-spam groups.

Addressing privacy and possible spam issues up front might be the key to operating successful viral marketing campaigns.

FogDog didn't back away from its recent Draft-a-Friend program after media criticism of the online sporting goods site for allowing members to e-mail $10 gift certificates to up to 25 friends. The site clearly stated the addresses of

e-mail recipients weren't being collected for use by the company.

The program, which launched in February, offered free FogDog products to members who had at least two friends use the certificates.

Before the offer was removed last week after reaching its budget limit, FogDog had given free items to 5,000 members. Less than five people called to complain about receiving the e-mails, said John Mousseau, director of sponsorship and promotions.

AWARENESS BUILDER

It is no surprise that online marketing lends itself so well to word-of-mouth marketing techniques, said Shailendra Jain, an assistant professor of marketing at the University of Rochester. "Applied to an online context where there are millions of millions of sites out there and the research effort to go through the product is huge, word-of-mouth is a good way for consumers to become aware."

Two types of companies tend to be most interested in viral techniques: early stage dot-coms that need to attract customers to get more venture capital and traditional companies launching on the Web, said Andy Raskin, CEO of Gazooba.

"We define viral marketing as a very special type of co-branding because [when] individuals [look] at their e-mail inbox, the return address of a friend has become a brand that we trust," Mr. Raskin said. "Viral marketing is asking people to essentially stand up for you with their brand."

Viral marketing campaigns run the cost gamut from $10,000 to $300,000, he said. On average, people who recommend sites to others tell five or six friends.

Viral campaigns play into marketers' efforts to personalize communications and tap into consumers' desire to connect with their favorite products. Advertisers such as Dell, Sony Electronics and Toys "R" Us are working with companies such as Favemail and SuperSigs to let consumers include graphics, some with discount and incentive offers, in outgoing e-mail.

Until recently most viral marketing success stories have been anecdotal and campaigns have been organized by companies without outside help, said Jim Nail, a senior analyst at Forrester Research.

"Now there are people trying to put a little bit of discipline and structure around this, which sort of goes against the grain of, 'I love this product. I want to tell the world about it,'" Mr. Nail said.

The question is whether a virus loses some of its strength when even the sender may not fully believe the pitch.

Copyright April 2000, Crain Communications Inc.

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