The following post was written by Jeffrey Zwelling who is the CEO and founder of Convertro.com
I really recommend anyone who is interested in Online-Marketing to read it as it explains the market of displayed advertising and the "Re-Targeting" concepts very well.
http://zwelling.convertro.com/2010/06/what-does-gsi-commerce-acquisition-of-fetchback-portend-for-retargeting-companies/
On June 1, 2010, GSI Commerce, the 800-pound gorilla of outsourced ecommerce, announced that it had acquired Fetchback. TechCrunch reported that the purchase price was $40 million. FetchBack was one of the first companies to sell retargeting and had reached many of the ecommerce clients. In the beginning, they sold on a CPM basis, often as high as $10, but eventually retained some of their defecting clients by offering CPA and CPC deals. In the meantime, competitors like Dotomi, Acerno and ReTargeter challenged Fetchback with better technology, better reporting and sometimes better targeting. Most recently, Google and Yahoo entered the market.
For those who aren’t familiar with retargeting or behavioral display marketing, let me explain. A consumer comes to a website, typically e-commerce, and browses around. While they are on the site, a javascript drops a cookie. In Fetchback’s case, they actually used an iframe (think a little webpage inside of the ecommerce site) that drops several cookies. When the consumer leaves the ecommerce website and travels around the greater Internet, he or she receives banner ads for the merchant’s website. Fetchback accomplishes this by “registering” those cookies with brokers of display advertising who are given maximum bid amounts to pay publishers to market against those users. When the user arrives on a site like Yahoo mail, ESPN news and the like, nearly instantaneously the publisher notifies the broker site that he or she has arrived and “auctions” off that advertising space to the highest bidder. An ad is displayed, Fetchback records that event and bills the merchant accordingly. The average price paid for that ad is 42 cents per thousand impressions, meaning that Fetchback’s gross margin on this deal is north of 90% given a $10 CPM.
It’s great money for Fetchback if you can get it, but of course the merchants want proof that this type of marketing works– 99% of the time, the consumer doesn’t click through the ad but merely “views” it, and ecommerce merchants are highly skeptical of the impact of this so-called “viewthrough.” Fetchback (and Dotomi) developed a system for demonstrating the incremental impact of these viewthrough ads: people eligible to receive the ad because of browsing history were separated into different groups – the standard group receiving the merchant’s ad, and a control group shown a public service announcement with no reference to the merchant. Fetchback compared the difference in conversions between the two groups and claimed the difference to be the result of the viewthrough effect.
To be honest, to early customers this was very compelling, albeit somewhat unprofitable. Fetchback was smart enough to price as high as they could since they were one of the first to offer the channel. However, in doing so, they created not only a tension with their customers but also opportunity for others to enter the market.
At first there were two ways to compete with the basic Fetchback model apart from price. One was to optimize the ad itself by dynamically creating an ad based on the product that the visitors had looked at or put into their shopping cart. The other was to take some risk out of the media buy by only getting paid a cut of the sale if the retargeter’s cookie was present at the time of checkout. Both approaches had problems but retargeting continued to grow.
The big change came about a year ago when Google started offering retargeting to a select group of beta customers. Google’s pitch was the same as Fetchback’s with one very obvious difference: Google’s CPM’s were 50 cents, or essentially wholesale to the public.
Our company started seeing clients working with more than one retargeter at a time. Some had three or four retargeters running concurrently. And of course we measured the conversion rate, average order value and general ROI for all of them. (We were also able to determine if having multiple retargeting companies created some duplication – it does. This means that customers were paying twice or more for the same same due to duplication of credit.) What we saw was Google trouncing the competition in every metric.
This didn’t bode well for FetchBack or retargeting companies in general. While there were some benefits to keeping Fetchback alive to maximize reach, it was obvious that the massively different ROI did not mean that our clients were long for Fetchback. In addition, retargeting became almost commoditized at the same time, with multiple companies adding the same functionality to their keyword bid management software (Efficient Frontier), product recommendation tools (Rich Relevance) or even comparison shopping engine feed managers (Channel Advisor).
Indeed, my own company added retargeting to our product offering, although with a different angle: we could use it to leverage our advanced visitor scoring analyses. We believe that it’s more important to determine who is worth retargeting rather than what or where you retarget them. Adding retargeting to our platform wasn’t hard to do and we don’t see it as a profit center, but rather an accessible means to help our clients make customer insights actionable.
We were impressed with Fetchback’s solid sales team which combined a very tactical inside sales team with a large salesforce. They seemed to reach every potential buyer and they showed up regularly on our client’s dashboards. But as a service, they didn’t have the technology or pricing to compete. So in the end, they took the best deal they could get, which by our accounts doesn’t look like they believed they had a future as a stand-alone business.
Read more here:
http://techcrunch.com/2010/06/01/fetchback-40-million-gsi-commerce/
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