Robert Glazer - Moving to Outcomes: Why Partnerships are the Future of Marketing

What is a cynic? A man who knows the price of everything and the value of nothing.

Oscar Wilde

In early 2000, a former New York Magazine writer named Dany Levy found herself in a transitory period of unemployment as she prepared to apply to business school. She began to spend hours surfing the internet, still in its early stage, and realized that many users were simply overwhelmed by the scale of the World Wide Web. Like any good entrepreneur, Levy turned this probleman overwhelmingly vast internet landscapeinto an opportunity. She pulled seven hundred contacts from her personal Rolodex and sent a newsletter in March 2000. It was called DailyCandy .

DailyCandy was defined by its simplicity and brevity. Each installment featured a single product, broadcast to a list of engaged, well-targeted subscriberspredominantly city-dwelling, professional young women. DailyCandy grew quickly to 285,000 subscribers by 2003 and to 1.2 million by 2008.

Potential sponsors soon discovered that DailyCandy was a brand multiplier; a mention in the newsletter could help jump-start a product, even a company, to success. Several well-known brands, including the blow-dry salon Drybar and the clothing retailer Nasty Gal, benefited from an appearance in DailyCandy .

Soon, the word spread about the power of this newsletter, and brands targeting young, city-dwelling women competed to be featured. Levy was able to charge increasingly higher prices for advertising, because brands began to believe they had to get into DailyCandy at any cost necessary. They were willing to pay large up-front placement fees just to get featured.

Over time, however, the cost of advertising in DailyCandy became prohibitive for many brands. Brands that managed to get their products promoted in DailyCandy early in its existence benefited from being early adopters and took advantage of cost-effective advertising that drove meaningful results for their businesses. Those who learned about it at the height of its popularity paid hefty fees that did more for DailyCandy s profit than their own businesses.

It wasnt that DailyCandy was either universally effective or ineffective for advertisers. Instead, there were two issues. First, DailyCandy s high price made the newsletter cost prohibitive for many brands, pricing out a large number of prospective advertisers. Second, the high price became difficult for even large brands to justify without a commensurate return on investment (ROI). While brands were willing to take a risk and invest in DailyCandy up to a certain price point, the price eventually became too high for most brands.

DailyCandy s fall came quickly. Comcast purchased the company for $120 million in 2008 and then ultimately shut the newsletter down a few years after merging with NBCUniversal.

Its difficult for a channel to stay relevant when brands can no longer be confident that an investment will yield the desired outcome, and as a result of its success, DailyCandy priced itself out of the market. An all too familiar sequence of events was complete.

A Broken Cycle

The rise and fall of DailyCandy is emblematic of a dysfunctional cycle that most marketers will find familiar:

• A new marketing channel opens and gains significant traction; a few early adopters who are willing to take a risk reap outsize rewards.
• As awareness of the channel expands, creating more potential exposure, the price of the channel escalates as well.
• Eventually, the channel becomes inefficiently expensive for all but the most sophisticated players and those willing to trade volume for margin, pushing many businesses to search for a new channel.

This cycle can make it feel as if marketing, especially digital marketing, has become a giant game of whack-a-mole.

The very largest brands, with billion-dollar marketing budgets, can often afford to hang around longer as a maturing channels prices increase, even though their actual ROI might not justify the spend. The majority of brands, however, need exceptionally good timing to extract sustainable profit from many of these channels and cycles.

Heres the thing, though: this cycle applies to more than just the hot new marketing channel. Brands also eventually become frustrated with the ROI from investing with the Goliaths of the digital marketing world: Google, Facebook, and, to an increasing degree, Amazon (together, the Triopoly). Many businesses today are overly reliant on a concentrated set of marketing tactics such as paid social, paid search, and programmatic display, the fancy new term for digital banner ads. And each year, these standard digital tactics become less profitable as demand grows faster than supply in what is essentially a giant auction.

While this dynamic has been developing for many years, things are even more challenging now due to transformational shifts in the way we market, sell, and shop. Not only do marketers have to stay ahead of rapid changes pushed by the rise of brands with direct-to-consumer (DTC) business models, but they also have to simultaneously compete against e-commerce giants like Amazon for awareness and customers. And they have to do it in a world where changing attitudes toward privacy are making customer targeting increasingly more difficult.