had only been offering its services - loyalty programs by which a website can
offer incentive points to its users for any behavior from completing a survey
to reading an e-mail - for six weeks when ad network 24/7 (NASDAQ: TFSM) made
them an offer they couldn't resist. 24/7 now owns AwardTrack after an exchange
of stock valued at $75 million.
AwardTrack's attractions was that it allows surfers to switch their points between
different programs. So, if you don't have enough points in the airline miles
program you can roll in points earned in some other program. This lets the site
using AwardTrack's programs brand their loyalty programs however they want but
gives surfers the flexibility of combining points from different programs.
immediate effect is to allow 24/7 to attract and keep more affiliates and advertisers.
24/7 will probably offer the AwardTrack services to its affiliates at a discount,
and is likely to build a variety of special loyalty programs for use by its
affiliates. We'd expect to see these used to build some degree of stickiness
to a particular vertical or demographically defined family of 24/7 clients.
Later on, we'll see even more integration between loyalty programs and advertising.
For example, an ad served by 24/7 could offer points for visiting the advertiser's
is a natural move for an ad agency, and we expect to see other agencies follow
suit. In the short run we think it more likely that Engage (NASDAQ: ENGA), with
its strong targeting and vertical programs will go this route than will DoubleClick
(NASDAQ: DCLK). The reason is that there is a hidden zinger to such an alliance,
and it is one to which DoubleClick will be particularly sensitive.
order to participate in a loyalty program a surfer has to provide some personal
information - how else does one cash in the points for that airplane ticket
or toaster oven? So, we now have the spectre of an ad agency being able to combine
information that identifies individuals with information about their web surfing
behavior. DoubleClick is still sore from allegations along these lines and is
unlikely to want to take another bite from the same candy bar. We predict that
24/7 will be getting its name in the news with similar problems as a result
of this acquisition. But, as they say, ultimately all publicity is good advertising.
Both advertisers and web site publishers are bound to see the advantages of
this arrangement. Loyalty programs are fairly cheap (AwardTrack charges two
cents per point award and rebates three quarters of that to the website once
the points are redeemed), but they provide an extra measure of stickiness for
a site. If 24/7 crafts loyalty programs that apply to a number of its clients,
the stickiness may spread to the group but in the long run will be no less advantageous.
In fact, it will probably enable synergistic partnerships between 24/7 clients
who might otherwise have nothing to say to each other.
about web surfers? They should become aware of the implications of joining loyalty
programs. Perhaps media feeding frenzies like the one that DoubleClick has been
going through will begin the education process. Some people will welcome both
the something-for-nothing arrangement of a loyalty points program and the ability
to see relevant advertising, which is the most probable use of the information
that 24/7 or others will make of this information. The less likely but hardly
impossible uses, such as denying health insurance to people who visit tobacco
company websites or look up diseases on health sites, should be of concern to
surfers and advertising agencies should seek regulations that prevent such uses
and laws that provide severe sanctions for any violations. Should the consuming
public begin to believe that loss of privacy via the internet could seriously
harm them - much more than the $50 limit in case a credit card number is stolen
- E-commerce could be set back significantly.