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Drop Dialling
UK-Netmarketing Weekly Round-up - March 16, 2001

Never heard of it? You will be soon. Drop dialling is a technique for generating revenues by persuading a web surfer using a modem to drop their current connection and re-connect via a premium rate line. With ad revenues still on the decline, perhaps this is a golden goose? You won't be surprised to hear that this latest innovation has been widely used by the online porn industry for some time now.

Perhaps the reason this is big news now, is Celebrity Big Brother. The connection? Drop dialling was used for online voters, meaning that Comic Relief could get donations from those voting online as well as viewers phoning in. Although successful, there were some problems, as Matt Bacon discovered:

"...can anyone confirm this for me? I just tried to vote online for a Celebrity Big Brother eviction, and got a page saying "You are not running Windows 95, 98 or 2000 on a PC. This feature is not supported". The 'feature'? Apparently, clicking on the vote link (and that's ALL I needed to do) was going to close my current dial-up connection, and open a new one through a premium-rate phone line, with the money going to Comic Relief. Is this possible?"

Tom Loosemore replied, "several fortunes already made using your plan - the best (worst) ones seamlessly dialled a number in the Caribbean that cost many dollars per minute... i think the FBI caught some of them...". Tom continued, "very silly way for Comic Relief to raise money, IMO, given that the potential for abuse and complaints is huge (dad: 'i never dial this number!?!' kids: 'erm...')

Ben Thompson added, "Slightly incorrect. The Caribbean lot were offering free trials for porn sites (3 day free trial starting charging the card after those three days). From memory once they had the numbers they continued to charge swapping merchant accounts, company names and merchant providers as and when required. The FTC fined one of the larger porn sites late last year/early this year for using web dialler software. I think the complaint was that the prices were not detailed and due to the location of the provider of the diallers, they went after the people advertising the diallers not the provider of them."

He continued, "This was the stated reason for the FTC fine (it was a large sum in the millions but I can't remember what it was). However my dislike is that the vast majority of the profits does not go to the site advertising the service but to the provider of the phone line (even on the comic relief calls someone is making 5p (25p-VAT(say 4.5p) -15.5p) on each call or £60,000 already from the two votes so far)."

Alex Chudnovsky highlighted some of the potential security problems, "[It is] possible if they use ActiveX (MS IE only) or any form of dangerous client side executable code which can hang up your current dial up connection and redial on more expensive number. Normally you would receive warning of executing dangerous code. Now the funny bit is --- this technique was first used by scammers on the Net tricking people into downloading AND running EXEcutable files, which would make hidden changes to route your calls through some 3rd world country which would incur a major bill for you... Common trick used to deceive people was a promise of explicit pictures - porn industry was/is (as always) ahead. P.S. All references to porn sites are purely educations, not that I ever visited these sleaze websites..."

Ken Cowley addressed some of the concerns raised, "We run this service. The service has to be run within ICSTIS guidelines which specify that you are warned and warned again) what rate you will be paying before you connect. The software additionally has a facility whereby on first install you can add a PIN to prevent the service being used by other members of the family.

To make it work invisibly, the user would have to be dumb enough not to notice the various clicks and whirs, skip past 'run from current location?' alerts and tolerate a strangely long time between clicking on a link and seeing the content. Our dialler is approximately ten-second download followed by the usual time to dial and connect (plus, in our case, the warning and 'are you sure' screens).

Someone in the states did manage to con a few people by having their software turn off modem sound during this whole operation, but it still requires an unusually stupid customer not to work out what's going on, and in our case it's impossible as you have to scroll to the bottom of the warning text before you can even click the 'OK' button.

[Global Internet Billing] connects about 2.5m minutes a month worldwide and receives a handful of complaints... The majority even of these appear to be users coming up with a line after the wife sees the phone bill for connection to an adult site. Anyone wanting to charge for content should actively consider this route as there's no credit risk. Our network proxies forbid browsing on premium rate outside of the domain of the merchant involved, and as the premium rate licensees, we are liable for the content being legal decent honest and truthful. Content currently being charged for in this way includes not only voting, but also weather, sports news, competitions, horoscopes and dating. Incidentally, a Mac dialler is in development - more anon."

The pressure on content owners to find new revenue streams makes it seem likely that these types of service will proliferate as they did when premium rate telephone numbers were first launched. It'll be interesting to see how many other porn-industry techniques will be adopted into the mainstream.

Cost-per-Acquisition Pricing

The explosion in the number of affiliate marketing schemes has led many companies, particularly retailers, to look at CPA (cost per acquisition) rates for their advertising. Unsurprisingly this is a hot potato amongst publishers, who argue that this negates any branding and makes them reliant on the quality of the creative.

Neil Durrant put the case for CPA, "Most commonly the reason cited is that the publisher is 'starved of revenue' and will 'put content publishers out of business'. In fact this couldn't be further from the truth. Firstly let's not forget the advertiser has the choice - if they don't like the deal they don't have to run with it. Ad sales are soft, how many publishers have a fully sold ad inventory? What choices do they have - run a house ad, reduce their CPM rates or maybe place free ad's for preferred advertisers. Either way this equates to zero income.

Lost revenues from unsold ad's aside, CPA deals correctly targeted can actually generate a higher CPM equivalent. Yes, the emphasis is now on the publisher to ensure they select the right offer with the right product for their audience, have tested proven creative, sufficient tracking from the advertiser and direct traffic to an advertiser capable of converting traffic to the payable action.

But if done correctly both the advertiser and publisher win. Of course CPA does not and should not revolve purely around banner ad's, content publishers especially have the opportunity to monetise their audience with relevant offers in their newsletters or present product reviews in context with their content. CPA deals can also present additional back end profits for merchants - a travel booking company can fulfil their order and then recommend xyz companies travel insurance and abc's travel map store."

John Handelaar wasn't impressed, writing, "Screw that. CPA is unattractive to site owners because:

It occupies inventory
If the ad is rubbish the only party to suffer is the site owner

If a buyer's ad's any damned good, the buyer should put her money where her mouth is. I don't see More O'Farrell accepting billboard posters on a pay-on-response basis: site owners shouldn't either. [Relying on banners, however, isn't wise.]"

Robin Edwards added, "What I've found interesting in the discussion is that those who are against CPA say it does not generate enough revenue for the media owner. They then say that CPM is better for the media owner because they make more money. So if CPA, at a rate that both parties would accept, makes less money than CPM then clearly this means that the retailer is getting shafted on a CPM deal, if they actually lose their senses and sign up for one.

Or, more to the point, that there seems to be some advocacy of shafting retailers while you can still get away with it. If someone is using advertising to generate direct sales and is paying more per sale than they are making they will stop. Completely. Probably go out of business too. So no more revenue from that advertiser to the media owner. At all. Ever. This goes way way back to when I used to say that CPM models are a very very expensive way of making direct new sales. Nothing seems to be persuading me otherwise. Perhaps there is no happy medium?"

Ray Taylor summed up his thoughts on the debate, emailing, "Lots of people get hot under the collar about this one. Certainly there are problems with CPA, including those mentioned by John. But isn't the whole point to make the payment model appropriate to the needs of the advertiser, client, campaign, user, etc?

There is no one method of payment that works better than any other method of payment. If the creative is crap (and an awful lot of banner creative _is_) then all payment models fall down. Advertiser desire for CPC and CPA comes from the frustration caused by poorly performing campaigns. Concentrate on solving this problem first. It is as much the job of media owners and their representatives to solve the problem as it is advertisers. But don't waste your time trying to tell that to DoubleClick.

Magazine ad sales people often phone me up to flog me ad space. I always ask them if they can guarantee producing sales leads. They always say no. If they could, the only limit on the amount of money I would spend on advertising would come from being able to cope with the demand. They never bother to find a way to make their medium (print) more accountable because they know there is always some schmuck who will pay £2,000+ for a pretty colour ad, regardless of any results it might produce.

That's why currently all of eyeconomy's advertising spend is online. That's because the medium is accountable, or at least can be made to be if you know what you are doing. It don't matter what the payment model is, if we don't get the results, we put the campaign elsewhere. The results are measured by the degree of brand recognition achieved, the amount of traffic generated, the number of sales leads produced, and other things too. CPM, CPC, CPA? Who cares? The whole point is that advertisers are demanding accountable media, accountable agencies, and campaigns that produce quantifiable results. CPC/CPA mania is just a product of this demand."

LINKS OF NOTE:
A quick round up of interesting, funny, useful and other links gleaned from the uk-netmarketing list, office gossip and other nefarious sources...we take no responsibility should you chose to click...basically, it's not our fault. Enjoy:

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