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.

If 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.

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:

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.

We created a questionnaire to find out more about the economic downturn in India and if it had affected your finances and thinking.

Those following us on Twitter will recall that we had promised to share results of the survey. We were glad to receive 112 responses. We believe the responses are a fair indicator of the questions asked in the survey.

Therefore, as promised, here are the unedited results of the survey, ‘Managing Finances Through The Downturn’. Click on the images for a larger graph:

(Click on the images to view a larger graph)

You can also view the HTML version of this report from here. Also, thanks to the following people for helping us spread the survey on Twitter: @Maheshmurthy, @Netra, @Asfaq, @Mekkanikal, @Jinadcruz, @amit3d, @viveksigh, @sumeet, @theanand, @fossiloflife, @just08in, @piyushgupta, @iqbalgandham, @dhempe, and @pujamadan. You can follow us here on Twitter: @Pinstormer.

Marketing through the recession:

is pay-for-performance advertising the silver bullet?

A Pinstorm-IAMAI Digital Marketing Roundtable

Pinstorm (and our partner, Lintas Media Group) along with IAMAI hosted their second event in a series of digital marketing roundtables titled - “Marketing through the recession: is pay-for-performance advertising the silver bullet?” on Wednesday, February 25, 2009, in Delhi.

This Digital Marketing Roundtable answered questions relating to the effectiveness of pay-for-performance advertising in these times of a slow-down.

Though Google started the trend of accountable search advertising, can it spread beyond that to all digital advertising, including banners? Should this be the model for TV and print? How do marketers see media spends in this era of unprecedented accountability? – These were some of the questions answered at the event.

This open-format discussion was led by prominent speakers like Hitesh Oberoi, Director & COO, Info Edge, Vineet Taneja, Head Marketing, Nokia India, Santosh Nair, Head, Strategic Marketing, NIIT, Parminder Singh, Business Head, Technology & Media, Google India, and Lynn de Souza, Chairperson and CEO, Lintas Media Group. The discussion will be moderated by Mahesh Murthy, CEO of Pinstorm.

During the digital marketing roundtable, the speakers talked about the various issues surrounding the advertising industry today, and how ‘pay-for-performance’ has emerged as a model of accountable advertising to give advertisers more bang for their buck in these times of a slow-down. Companies like Naukri have been continually increasing their digital advertising spends year-on-year to the point that their online spends are higher than their offline spending. The mood of the event indicated that digital advertising is going to take up a considerable amount of ad spend this year in India.

Vineet Taneja, Head Marketing, of Nokia India commented, “I think people search online, however, conversion to final purchase is offline. The theme that I am referring to is conversion at every stage of the market process. If we look at the first level of conversion, it is awareness to persuasion. At the second level, people go online, speak to their friends. In our category, people are experts, and word of mouth really counts, and this is the next stage of conversion.”

On the topic of using different advertising mediums, he went on to say that Nokia believed in exploring various mediums and making sure that those mediums deliver those conversions.

According to Santosh Nair, Head, Strategic Marketing, NIIT, any campaign that uses current news events for publicity must use information quickly and turn it around into results. “The shorter the gap between the advertisement, sales process, and turnaround, the better the results will be”, he said.

Lynn de Souza, Chairperson and CEO, Lintas Media Group talked of how the GoaFest of 2009 is concisely titled – ‘Don’t waste a good recession!’ She went on to say that there seems to be a mood versus a reality situation and we need to think about ways to combat – what we believe – is recession rather than sitting back.

She further stressed that the area of performance in online advertising needs to be looked at seriously in these times. “You have to focus on what you are delivering, challenge your current concepts of performance and only then can we debate on improving performance measures,” de Souza pointed out.

Parminder Singh, Business Head, Technology & Media, Google India observed that advertisers have started realising that the Internet is a multi-layered advertising and marketing medium, which one can experiment and mould. Different companies are exploring the medium in different ways – from user experience, to lead generation, and going all the way up to branding. According to him, “This will continue in the future, though there is fear of meltdown because the fact remains that the Internet is used by most consumers to do significant research.”
He further said, “In the last month, we saw 9 million searches just related to mobile phones and 6.5 lakh searches for DVD players in India.”

Hitesh Oberoi, Director & COO, Info Edge pointed out that on one side where television advertising brings visibility and credibility, the online medium is good for lead generation, transaction and inquiry.” He said that in 2005-06, they began spending almost half their marketing budget online. Print and TV had never really helped Info Edge get too many resumes, so they had to get aggressive on resume acquisition.

“We did a Rs. 5 crore annual deal with Rediff, which took a long time to negotiate. With that, our resume database suddenly went through the roof. The conversion rates were around 4%-5% of all traffic. It fundamentally changed the way we looked at advertising. Since then it has been at around 50% for the last three years.”

According to Mahesh Murthy, CEO of Pinstorm, one of Asia’s largest pay-for-performance digital advertising agencies said, “It seems pretty clear from the panel and the audience that pay-for-performance is here to stay. I am not sure how traditional agencies will take it, but change is upon us you can choose to evolve or be the dinosaur.”

The session was later made more interactive when the floor was later opened to the audience who participated in the roundtable discussion during the Q&A session. Sujata Datta, Senior VP, DLF Pramerica, Alok Bharathwaj, Senior VP, Canon, Mohit Heera, President, NIIT, and Cyril Mani of Sony were amongst the esteemed audience at the venue. The overall sentiment showed that buyers are looking at pay-for-performance seriously. The conference was well attended by CEOs and Marketing Heads with a mix of buyers and sellers.

The first roundtable, held in Mumbai on January 13, 2009 was led by Pradeep Shrivastava, CMO, Idea Cellular; Aekta Shyam, General Manager - Online Marketing and Technology, Taj Group; Rajiv Prabhakar, Vice President- Retail Business, Sharekhan; and Debadutta Upadhyaya, National Sales Head, Yahoo! India.

The press coverage for our earlier roundtable event held in Mumbai can be read on Afaqs!, Exchange4Media, Campaign India, AlooTechie or WatBlog. We have photographs and video too!

You may want to read more about the event on Exchange4Media or MediaNama or possibly view photographs of the event here or here.

Marketing through the recession:
is pay-for-performance advertising the silver bullet?

In these times we’re seeing ad budgets cut, agreements re-negotiated and the pressure to deliver increase on marketing, advertising and publisher teams.

Is pay-for-performance advertising the answer? Instead of paying for eyeballs or impressions, would you rather pay for sales or leads? Whither branding?

Google started this trend - can it spread beyond search to all digital advertising, including banners? Should this be the model for TV and print? Will we see the good old days of large allocations to branding again? How do marketers see media spends in this era of unprecedented accountability?

We (Pinstorm & our partner Lintas Media Group) along with the IAMAI are hosting a series of closed-door roundtables on these questions. The first one:

“Marketing through the recession: is pay-for-performance advertising the silver bullet?”

is on Tuesday, January 13, 2009, Mumbai - the first in a series of events to be conducted in Delhi, Bangalore and Mumbai.

This open-format discussion will be led by Pradeep Srivastava of Idea Cellular, Ronita Mitra of ICICI, Rajiv Prabhakar of Sharekhan, Debadutta Upadhyaya of Yahoo and Lynn de Souza of Lintas and moderated by Mahesh Murthy of Pinstorm.

This closed-door event will be beneficial to those who make marketing / advertising decisions for their brands.

For more details, contact:
Asfaq Tapia | asfaq@pinstorm.com | +91 989 211 3910