IContact looks to ad exchange to extend reach, lower cost

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IContact is a provider of e-mail marketing services to small businesses that send e-newsletters to their customers. Traditionally the company reaches out to prospective clients by advertising on a variety of online properties, paying rates based on both cost-per-click and cost-per-thousand impressions (CPM). But the Durham, N.C.-based service provider has faced the same difficulty confronting many other b-to-b companies: reaching a highly diverse audience of potential customers who follow their interests on many obscure—and potentially potent—media properties, such as Web sites, blogs, forums and e-newsletters. “We want to reach small-business entrepreneurs by showing our ads on the sites that generate the most conversion for us, but these sites are very disparate and hard to reach,” said iContact CEO Ryan Allis. Allis said that even when he could identify key online properties on which to advertise—sometimes hundreds of them—the cost of individually negotiating rates was prohibitive. “The problem we faced is that we could only negotiate deals with sites that had enough scale to make it worth our while. But even then the costs of acquiring customers were high,” he said. “We were having to pay $15 or $20 per thousand impressions, but with no negotiation leverage.” The result was an average cost of $3,000 to acquire each new client, quite a bit given that each iContact customer generates an average monthly revenue of only about $40. About six months ago, Allis turned to ContextWeb and its Adsdaq advertising exchange, which aggregates ad inventory from a wide array of publishers and ad networks. ContextWeb features a contextual text-mining component that reads online copy to determine which content pages are good matches for a particular advertiser's message. “We told them we wanted to acquire entrepreneurs and marketers, and to show our ads on the sites that generate the most conversions for us,” Allis said. Using its contextual analysis of online advertising vehicles, ContextWeb found a large number of sites that were reaching iContact's target audiences; Allis estimates these have totaled anywhere from 5,000 to 10,000 individual online properties. “I have no idea where I'm advertising, and I don't really care as long as the customer-acquisition cost is within our range,” Allis said, adding that he uses reports from DoubleClick to monitor ad performance, and property selection is continuously refined using a technology called pixel tracking (also called Web bug tracking) that monitors who is clicking on iContact's ads and on what sites. Allis said the payoff in savings has been strong. With an annual advertising budget of about $4.8 million, iContact's costs of acquiring each new customer went from $3,000 to just $400 today, an 87% savings. The company also is taking advantage of ContextWeb's prior negotiations with these myriad properties to reduce its ad rates. “The benefits come from both better rates as well as a technology that shows our ads on better sites,” Allis said. And those benefits represent more than cost-savings. “Over the course of a year, the process will generate an estimated $3 million in additional business for us,” Allis said.
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