pinstorm
home
blog

It was nice to read about advertising firms cautiously moving to pay-for-performance advertising in The Economist.

At Pinstorm, we started out just over 5 years ago, on May 1, 2004 as a pure pay-for-performance advertising firm. Today, we’re probably the leading practitioner of the craft, with 8 offices across the US, Europe, India, Singapore, Malaysia and China. And we’ve worked  with HSBC, Jet, HP, Dell and other global brands.

We think there is simply no option to an advertising firm offering pay-for-performance. The other models are broken.

The Economist article talking of pay for performanceIf an advertising agency charges a commission on a media spend, you know they have an incentive to get you to spend as much as possible. So they can earn as much as possible. But today, brands are built by outsmarting, not outspending. So you’re not likely to be the winner in this relationship.

But, hey, you say, we pay our guys a retainer. We’re not sure that’s any better. Paying a team a fixed price for their time, regardless of what they do with it is just as big a recipe for disaster. You’ll end up with with an agency that tries to just keep you happy, so it can retain the retainer. There’s no reward for great work that moves the needle, so to speak – and no penalty if an agency’s asleep at the wheel. This can’t be an inspiration to either party.

Pay-for-performance is the answer – one that many agency heads have fought for decades. Quoting from the article: "Some agency executives are sceptical about being paid for value, because it is so subjective. They interpret talk about value as code for cost-cutting." We completely disagree.

When asked to present credentials, most firms will talk about how much value they add – but when asked to measure that very value, you hear the bugles of retreat. And we don’t think it’s about cost-cutting – but quite the opposite, but more on that later. More importantly, marketers don’t have subjective measures of effectiveness. Their jobs are on the line if they aren’t able to convince their bosses and their boards that they’re objectively, measurably adding value.

The problem is different: with agencies fighting furiously to get business, commissions have dropped from the 15% level to about 1.5% today. And retainers aren’t going up – they went down in many cases in this downturn. With all this, the advertising persuasion has become an even more terrible business to be in. It’s not strange that after all these decades, there are no advertising billionaires, no ad agencies in the Fortune 500 – and because there’s really so little money in the business, it’s crazy difficult to attract great talent.

Pay-for-performance can change all that – it can bring MORE money into the business, not less. For starters, it helps advertising spend go from a fixed marketing budget to part of a variable cost-of-sale. And when that happens, the spends get uncorked. One look at why people have thronged to spend money on clicks from Google is because marketers love to pay for advertising performance of any sort on a variable basis.

More so, pay-for-performance lets you break away from creative straightjackets – your client isn’t likely to interfere with your ads as much, as long as you’re on brand, if you’re being paid for how your ad works. And you’re less likely to think first of what will impress the judges at Cannes, and more of what will impress your consumer, on pain of not getting your salary and bonus. Of course, sometimes, you might end up doing both, which is a fine thing.

Three, to repeat the point, it’s not subjective. All of us in the digital world have learned to live and die on the sword of how our ads perform. You may claim that you don’t have that power of objective measurement on TV or Print. We think you’re somewhat right here – but not for long. Soon all TV and all print – not to mention all radio, outdoor and other media will be delivered digitally, and there’ll be mechanisms to measure effectiveness in each of these – if there aren’t already.

And it’s not just about clicks, leads and sales. There are sufficient measures already to measure all these supposed intangibles when it comes to brand awareness, strength and perception. And for ad firms  to be paid according to these.

Comes the final argument – "Oh, we’re okay to take some part of our compensation as a variable, but hey we can’t walk away from our fixed income". Why so? This is probably more about your confidence in your art and craft than anything else.

At Pinstorm we’ve been 100% pure pay for performance from day 1, and we’ve managed to fund our own growth around the world over these years based on the monies we’ve earned. We go to more insane lengths than most agencies can imagine – we even pay for all of the media spend from our own pockets – and we bet every single day that our media investments combined with our strategy and our creative – all paid for by us, if you please – will make money for our clients and for us. And truth be told, often it does, though sometimes it doesn’t.

(We’re big believers in bundling, not unbundling media from creative. But that’s perhaps a different article, a different blog post.)

We’ll end this with an analogy – the traditional world of media commissions is like the world of stock brokerages – a commodity offering where growth comes from buying market share by offering lower fees. The creative side of agencies, paid on a flat-fee basis are the stock-recommendation analysts, on salary with no responsibility for the success or failure of their recommendations. Both these segments are but a small part of today’s financial landscape. Right for some investors, but not all.

In that vein, we’re probably the mutual funds, the portfolio managers, the hedge funds or even the venture capitalists of this world, if you will. And I posit that it’ll be firms like ours or those after us that can open up this landscape and bring a lot more growth, vibrancy and innovation into the world of advertising and marketing. Yes, we will have our market crashes; yes, we will have our boom and bust cycles. But marketing and advertising are far too important activities to be left to some combination of media commissions and flat fees.

Of course, I’m curious now how the people at The Economist think they’ll charge for advertising now and in the future. :-)

Mahesh Murthy
Founder, Pinstorm.

When Mahesh Murthy of Pinstorm was speaking at the OMCAR 2009 event, we noticed the talk was getting quite a few positive reviews in the Twitter and FaceBook back-channel from the audience present there.

The talk was about how Integrated Digital Marketing can help businesses in these tough times. We thought it would be a good idea to embed it here for your benefit:

 

This is a summary of his talk there (thanks to the OMShare blog for live blogging it):

Mahesh Murthy started by clarifying that he is not politically aligned and suggested an analysis of the BJP and Congress online campaign. This triggered some muffled laughter among the audience.

He said that analysis showed the composition of the BJP in the age groups of above 60 or 18-20. The composition of Congress was mostly the working class population. The focus of the BJP message was always a strong and decisive government. However, most of the working class population do not see the current government as indecisive and weak.

Mahesh says that he has worked with many media in his life. He says that one media does not necessarily kill another and that one should communicate on all the media platforms where consumers are listening. He then spoke of how the pace of change is increasing among those platforms.

He threw light on the importance of integration of the media channels for advertising by showcasing Coke. According to him, the company has a presence in over 20 countries and it uses different media in all these places. Now, if there were specialised advertising agencies for each media and it would be very difficult for Coke to manage them.

He said that every specialist becomes obsolete. Now however scary, this is a true. Also, the TV became obsolete when internet came along and so on and so forth. So it is important not to hold on to just one medium. He rightly pointed out that though the internet is a ‘niche media’ and not a mass media, it has the users with a purchasing power.

Mahesh also said that before devising a digital marketing strategy one has to answer a few basic questions:

Where are my consumers? How many are on the digital medium and how much time do they spend on the digital medium? What is their behaviour?

He says there are 4 stages of marketing, namely:

Creating awareness 
Generating interest 
Generating desire 
Action

Mahesh also mentioned that it is important to understand how the digital medium fits in any advertising campaign. It is important that a mix of media is used. Here are some insights for digital campaigns, according to him:

For awareness – CPI and not CPM, Contextual, Social, SEO, ORM
For generating interest – CPUV not CPC, Contextual, CPUV display, Mobile, ORM.
On increasing Desire – landing pages, micro sites, CPQL, social, review sites and mobile web.
Action – CPLV/CPA, SMS, Call, Chat,Call centre, Analytics

Mahesh went on to share a very interesting example on how they increased the conversion rate for Yatra. If anybody searched for a Nagpur – Mumbai flight and for every travel site the user is taken to the home page where the user again has to enter the details. For Yatra, they created 15,000 landing pages, a separate landing page for Nagpur – Mumbai, a separate for Mumbai – Nagpur and so on. Their conversion rates went up by 70%.

He gives another example of a bus service, Redbus – it increased sales many folds within 2 years ago. How did they do it – they advertised by integrating two medias – website and phone. He made a very important point by saying:

Focus on the audience and the message and not on the media.

He shared anther quick case study on when Pinstorm had to sell a student travel package for Jet Airlines with some benefits such as 10 kg extra luggage. Pinstorm advertised this package on websites for overseas education. Every time anybody asked a related question online, Pinstorm answered it with the relevant contextual information. Goes without saying that the sales picked up. He also spoke about when Pinstorm needed two interns, they tweeted about it and got 11 applications, without spending any money!

clip_image001

Going straight to the news, the Pinstorm team of Reshma Nayak and Mahesh Murthy placed second in the Media Quiz 2009, ‘Media Quotient – what’s your MQ?’ after winning the Bombay round against 45 teams.

The finale of this pan-India quiz event was held in Mumbai on May 22. This first of its kind quizzing initiative from exchange4media, covered all aspects of the Media discipline – people, places, stories of origin, research, the business and its connection with Indian and global media.

While the team can’t stop talking of the midnight oil they burnt in preparation, no one on this side is believing the stories, all thanks to:

image

You can read more about the win here.

We created a questionnaire to find out about users views about the mobile phone operators in India. We wanted to find out what according to the users were the strengths, shortcomings, and opportunity areas for each operator.

We posted the survey on Twitter and were glad to receive 151 responses. We believe the responses are a fair indicator of the questions asked in the survey.

What we found surprising was that 46.6% would keep the current phone number but change the operator if they could!

As promised, here are the unedited results of the survey, ‘Indian Mobile Phone operators: Your views ’. Click on the images for a larger graph:

image

1

2

3

4

clip_image002[13]

clip_image002[15]

Also, thanks to the following people for helping us spread the survey on Twitter: @Maheshmurthy, @Netra, @Asfaq, @Digimouth, @sandiipporwal, @premsankar, @crucifire, @rajamanohar, @Sumeet, @pujamadan, @shefaly, @sachinuppal, @PixTV, @tanushreebaruah, and @rahulvarshneya. You can follow us here on Twitter: @Pinstormer.

For more details, feel free to write to us at info@pinstorm.com.

*While the data from 151 entries suggests that half of them will switch to a different provider when Mobile Number Portability is introduced,  the data cannot be extrapolated.

[Link]

by Mahesh Murthy

For weeks before the elections, the online world was abuzz with reports of BJP ads turning up everywhere.

Bloggers saw these ads placed on their pages, visitors to even Pakistani websites saw these ads appear. There virtually wasn’t a single site where you did not come across an image of LK Advani with some message that positioned the 81-year old as a “strong and decisive leader”.

The Congress ran a muted campaign online, in contrast to BJP’s multi-crore extravaganza. There were occasional ads with the hand symbol that turned up on Yahoo and other sites, along with the usual Bollywood-style cut-outs of all the main leaders.

Come the results, and a lot of pundits were extraordinarily surprised at the whitewash by the Congress. And the questions were raised, fast and furious, about the efficacy of online advertising, or whether it was useless in India and such.

Here’s what we think. We had an early sniff of the Congress landslide, when we did a limited straw poll on our clients’ site MyIdea.co.in back in early March 2009. The results then, across a little less than 1,000 respondents, pointed to a UPA win by a little more than a 5:3 ratio. Perhaps it’s not just a coincidence that the final seat tally ended up in quite the same ratio.

We also took a look at the traffic to LK Advani’s site that the ads were directed to (lkadvani.in) and also to the Congress site (aicc.org.in). We used Google Trends and Vizisense data to see who was visiting each of these places — and how many of them were doing so. We did this before the results were announced.

One surprising result, considering BJP’s early start and massive online presence, was that it only showed about 25% more traffic (around 2,50,000 visitors a month) than the Congress site (with 2,00,000 visitors a month), which had relatively far less advertising.
Data also showed that the Congress site had caught up with the BJPs by the end of the election.

But looking deeper, we saw truly interesting patterns. The visitors to Advani’s site had a much-greater-than-normal propensity to be either over 60 years in age — and hence retired — or between 18 and 22 years and hence in college. Taking our mind back to the advertising of Advani as a “strong, decisive leader”, we wondered who it could have been aimed at.

The “strong man” premise has historically been one aimed at idealists, who believed a country was weak and needed a jolt of muscle at the top. Not surprisingly, to our mind, the age groups that resonated best with this message were the students and the retired folks — idealists in each sense, who were not “made pragmatic” by the pressures of working life.

In contrast, most working people, even the more affluent among this group, didn’t seem to have any such perception that the country was weak. Perhaps they had other issues, relating to the economy or stability — and the Congress tapped into those.

The site visit analysis to the AICC site showed exactly such trends. The bulk of the traffic reflected the Indian mainstream working class, with a bump towards the more affluent.

Anybody with even a rudimentary grasp of numbers can tell you that you cannot win an election by aiming at the under-22s and the over-60s. There are far too few of these people in this demographic to start with, and though they may be influential, they have relatively little economic power. To be a mainstream party, you have to aim for the big segments.

The Congress didn’t goof up here. They didn’t do anything remarkable — but they didn’t get it completely wrong either.

What this tells us is that this is not a failure of the online medium — but a failure of the creative minds behind the online advertising in the case of the BJP. The medium was right, but the strategy and creative were dead wrong. The Congress did both reasonably fairly, if not splashily.

People online are looking for solutions to economic problems, to save their jobs in the downturn and more. Putting an old man as the face of your campaign and rattling sabres did the opposite of what it was intended to do. The BJP campaign polarised the target audience. Some of the young bought the “strong man” theory. To the rest of us, it wasn’t a solution to any of our problems — and indeed it turned quite few of us off. We wanted economic problems solved — not someone who could likely take us to war with Pakistan over Kashmir, or Article 370.

What could the BJP have done right? Well, for starters, they had a formidable economic promise — fewer taxes, better business. They ignored this completely. They had a far-signed open source-centric IT manifesto. They ignored this too. By focusing on an irrelevancy (the alleged strength and decisiveness of an 81-year old man) they got the online eyeballs — but turned them off.

Doing an online campaign doesn’t mean you ignore the three key sides of communication. Media is only one component — getting the strategy and creative right are essential too. Better luck to the BJP the next time!

Next Page »