Bronte Media

Jay Weintraub has a thoughtful analysis on incentive promotion based online marketing. If you have seen the “Free iPod for filling out a survey” that’s incentive promotion based online marketing. You get the iPod if you sign up for a credit card or a broadband account with one of the affiliate partners.

It’s another fascinating pocket of online advertising that has sprouted up in the last 1-2 years.

But like all lead generation businesses, differentiation is the key challenge.

Incentives seem more like a trading strategy than a segment of the industry. That is, one way to improve the conversion metric. But the input (media buying) still remains constant.

The incentives essentially place further pressure on the economics of the lead generation business as Jay points out. But there is still money sloshing around and the margins are presently fantastic.

Online advertising is becoming essentially a trading market where smarter people buy up cheap inventory, sprinkle it with things like incentives, strip out the acquisition risk and sell it to dumber (well, let’s just say risk-adverse) people who actually service the customer (in this case, credit card companies or broadband providers).

The even dumber, the publishers whose inventory is originally bought by the incentive based promotions firms, are leaving a lot of money on the table.

But by its very definition, arbitrage disappears over time.