Thursday, February 09, 2006

Advertising, Consumers, and A New Business Model Appearing on the Radar

I just saw Thomas Hawk's blog entry on Yahoo! asking a question while proposing an offer to people to use their search engine versus Google and receive a potential discount to use Netflix as a reward.

In my household, we have not tried Netflix yet although we have received literature and coupons from them within the mail.

But Yahoo's approach strongly reminds me of my recent blog entry on the autosurf industry.

I saw on yesterday's afternoon news an irresponsible segment done by consumer advocate Clark Howard which made me question his research into autosurf companies individually and collectively since he trashed 12 Daily Pro in yesterday's segment (probably nationwide at a minimum) without mercy.  He did not even mention StormPay whatsoever.

The business model that Yahoo! is proposing has been executed as well by other companies and it is the same identical business model that 12 Daily Pro and other autosurf companies are using.  This same business model is clearly going to grow worldwide and become accepted by consumers and product and service providers worldwide.


Because this new, global, business model lowers the cost the obtaining, acquiring, and keeping a customer by allowing the customer to identify themselves as being a candidate to use the company's products and services.  The business model also lowers the cost of advertising since it focuses the advertising budget directly to those significantly interested within the advertisers' industry (and products and services) versus spending irrationally (on advertising) without knowing whether the right targets were ever reached.

The business model also has a direct implication for customer service issues because it will rapidly identify which customers are no longer customers and provide companies a fast-response mechanism to find out what has displeased the customer and whether there is temporary or long-term issue that needs to be addressed.

The new business model that I am referring to is the transfer of payments (direct and/or indirect, financial or barter) from product and service providers to consumers.

To a certain extent, this model has already been in existence wherever consumers have been asked to send proof-of-purchases to companies in exchange for rebates, discounts, or any other free offers.

Yahoo! is willing to pay Netflix to send free or discounted DVD rentals to identifiable customers in exchange for the customers using Yahoo! as a search engine.

Why is Yahoo! willing to part with their financial capital in this way?

Because Yahoo! clearly plans to resell access to the customers who accept the offer and in some cases, Yahoo! might even sell its ability to undoubtedly identify such customers.

As a result of this new business model, it will not be Yahoo! who ultimately directly funds or pays the customers or Netflix, but the advertisers that have paid Yahoo! to advertise their products or services.

The autosurf industry does the very same thing but since its usage of the internet is still primarily not mainstream yet, attorney generals of various states and consumer advocates such as Clark Howard are more than willing to improperly classify such companies as fraudulent, illegal, and/or unethical within their operations through their own vested interest of "protecting the public".

There are other companies who have directly or indirectly used the same business model and these companies consist of any company that has used an affiliate or referral based program online as well as any company that has paid someone somewhere directly or indirectly for advertising.

Does this new business model have a name yet?  I do not exactly know and in lack of a clearly, identifiable name, I will call this new business model the PAID CUSTOMER or PAID EVANGELIST or PAID VIRUS or COMPENSATED CONSUMER method.  Take your pick of the various names and let me know which one sounds most accurate.

Within a conversation with my wife Wyteria after Howard's television segment, she used the quote, "If it walks like a duck, talks like a duck..."  To this I simply replied, " This is indeed a different animal because of the presence of the advertisers".

Without the presence of the advertisers (or traditionally the higher parties on the food chain), then the rushed judgments would be absolutely correct.

The upgrade of members simply works to qualify which participants are short-term users (the free, unpaid surfers) or dedicated, long-term participants within the industry regardless of the products or services advertised.

The companies (including the autosurf industry) using the new business model will have to be able to charge their advertisers a high enough advertising rate while delivering to the advertisers the needed reviewers of the company's products and services and have enough funds left over in order to directly or indirectly compensate the customers for their participation within the process.

One interesting aspect of such a business model is that it does require some effort on part of the participating consumers to know which companies are indeed interested in staying open for business for a very, long time versus those companies within the intent of getting rich quick.

Another aspect of the business model which eventually will entice the major financial services to participate within the new business model is that the payment processor or treasurer within the process has to be full of integrity, able to process large volumes of multiple transactions easily, and the ability to keep its doors open regardless of other events going on within the world.

Once these components are in place, you will begin to see compensated consumer business model more rapidly adopted worldwide.  The benefits to each party are clearly visible and attainable while each party must be committed to staying at the table for life.

I am going to participate within this new industry and here is one page that I have created already.  With the power of the internet, the compensated consumer business model experiences less friction than other business models have experienced offline.


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