Transactional vs Brand Advertising

by Russ Hill on March 7, 2010

In recent weeks I’ve spoken with an investor who is about to pump significant money into a new industry in his continual effort to diversify his holdings.

We spent some time talking about the business model for this new venture.  Being a guy who loves to talk marketing I naturally asked what the marketing plan for this business looked like.

“Google ads,” he said.

I replied, “ya, and…”

“No, that’s it,” he said.

I dug deeper and asked how he came up with such a simplified marketing answer.  And, he walked me through others in the industry he was about to pump money into who were having phenomenal success simply by buying key placement in Google searches.

This type of marketing approach is used by plenty of dot.com based businesses, but the industry we were talking about over lunch had nothing to do with dot.com.  It was far from it.  It wasn’t in the retail space either.

Alex Rampell, the CEO of TrialPay (the online payment and promotion site), has been preaching about the decline of “brand advertising” and the rise of a new so-called “transactional advertising” model.

The gist of it is this: there are very few brands that can now afford to spend large chunks of money building a brand.  Plus, that brand is becoming of limited value in many (not all) industries as the long-tail theory becomes reality and companies find new ways to locate and interact with potential customers.

Under “brand advertising” a company would pay tons of money to let a large audience know who they are in the hopes that some percentage of the audience would be affected in their purchase decisions.

Under “transactional advertising” businesses now pay to be as close to the point of sale as possible.  In a retail giant that means shelf or aisle position.  Online that means getting the attention of someone inquiring about your industry or product category in a search engine.

What does this mean for my friends in the media business?

Rampell said, “‘brand’ advertising money can be better spent, thereby imperiling expensively produced, freely distributed content.”  In other words, TV or radio stations that don’t charge consumers of their products are increasingly in trouble as the traditional advertising supported model weakens.  It won’t fail.  But, it won’t grow at the needed rate to sustain talent.

Traditional media brands offer some “transactional advertising.”  Someone considering what to have for dinner tonight might hear the McDonald’s commercial on KTAR-FM in Phoenix, AZ.  But, how much effort do you think McDonald’s is putting into finding a way to get greater ROI through utilizing “transactional advertising?”

Traditional media outlets aren’t shut out from getting  a piece of “transactional” dollars, but the question will be how many of them will invest the dollars and restructure with some “non radio-only” thinkers in high level positions so they can build a system to capture this revenue?

It’s not too late.

And, for companies seeking to move products or sell services, your choice is clear.

“Transactional advertising” is where you should allocate your budget.

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