AdMediation: Emergence of Mediated E-MailAdvertising


AdMediation : Emergence of Mediated E-MailAdvertising

The business model of admediation derives its roots from the well-established concept of intermediation and creates value through incentive-based approaches that match interested buyers and sellers (Gopal et al., 2001). Figure 2-1 provides the framework for Admediation. The fundamental role played by the admediary is as the 'go-between' for buyers and sellers. Consumers provide, to the admediary, their e-mail addresses, buying preferences, and consent to receive e-mail for categories identified in exchange for useful product and pricing information, and monetary incentives. The admediary normally guarantees that the individual personal information will be safeguarded. From this perspective, the admediary provides a realization of a reverse marketplace by bringing products and services from the sellers in the market to a consumer's door.

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Figure 2-1: Framework for AdMediation

Sellers subscribe to the admediary in order to solicit potential customers. In return, the sellers compensate the admediary. When requested by the seller, the admediary composes the e-mail list for a seller's advertisement from consulting the customer database, and e- mails the solicitations. The responses are forwarded to the seller, and archived to generate detailed analysis reports on the success of the e-mail advertising campaign. Besides the targeted list of consumers, the sellers may also be drawn to using the admediary because this mode of advertising is perfectly legal under all legislative schemes under consideration and is acceptable to the public. This is because the e-mail itself originates from the admediary, who has an explicit consent from the subscribed consumers, even though the content of e-mail may originate from sellers that wish to make first contact with consumers.

A number of advertisers are beginning to offer e-mail services that are based on the concept of admediation. A Business Week article (Hof, 2000) highlights the unique advantages of their business model. Consumers base their decisions on their own criterion and thus wield complete control over the process. Also, unlike auctions, consumers don't have to compete with other buyers and thus avoid the problem of 'winner's curse.' The popularity of these sites appears to be growing and is evidenced by the fact that many of these sites have a large subscriber base and very high response rates of their e-mail lists. Properly implemented, this business model of business-to- buyer interactions can prove to be the most potent in the marketing arsenal.

Table 2-1 provides an illustration of a few representative companies and the key characteristics of their e-mail offerings. These companies have undertaken a number of important steps to prevent abuse of their subscribers' personal information and privacy requirements. As a part of the overall trust building effort, all adhere to strict privacy policies that prevent them from sharing, distributing or selling subscriber information to any third party. Further, they limit the volume of e-mails that are forwarded to the subscribers, and offer the option to consumers to opt-out of the subscriber lists. Interestingly, the compensation schemes offered to consumers for consent and reading e-mails from sellers do vary amongst the admediaries. Compensation varies from zero to as high as $0.08 per e-mail that is sent to a consumer.

Table 2-1: A list of companies offering advertising via e-mail

Name of companies offering advertising via e-mail

Compensation for Reading E-mails

Limits Volume of E-mails (per day)

Response Rates

PaidBizOpmail.com*

Yes

Yes

U

Hits4Pay.com*

Yes

U

50%

Cash-a-Day*

Yes

Yes

50%

E-Mail Pays U*

Yes

U

50%

DoubleClick*

No

U

U

*: All the companies follow strict privacy policies for consumer data and give option to opt-out from their mailing lists. U: Not explicitly listed on the Web site.

The possibility of compensation for simply reading e-mail advertising messages, and the purely voluntary and incentive-based subscription decisions raise the specter of moral hazard and adverse selection problems. The moral hazard arises from the inability of normal contracts to achieve an efficient allocation (Baron & Besanko, 1987; Marshal, 1976). The moral hazard in this case arises from the possibility of subscribers joining e- mail lists for the sole purpose of receiving compensation offered by admediary, with no ensuing interest in the product or service offered by the originating seller. Most of the companies that offer monetary compensation for e-mail advertisements place limitations on the volume and frequency of e-mails they send to individuals. As a result, the incentive for individuals to subscribe purely to extract compensation is mitigated.

The adverse selection problem is rooted in asymmetric information and can create serious misallocations, and raises the possibility of complete market breakdown (Akerlof, 1970). In the case of admediation, the adverse selection problem leads to the question of the quality and desirability of the prospects on the subscriber lists, from the viewpoint of the sellers. If potentially low-valued consumers dominate the subscriber lists, then such lists are of limited value to advertisers. Such a scenario can raise important questions on the long- term viability of this mode of advertising. However, the overall incentives offered by admediaries, when properly implemented, should attract both high- and lowvalued consumers. High-valued consumers are typically less price-sensitive and are less attracted by the low values of compensation (typically less than $0.1/email) for e-mail advertisements. The incentive for such consumers comes primarily from savings in the time and effort expended to search, evaluate and acquire products and services. Thus the subscriber lists can capture potential consumers across the value spectrum, and the high response rates reported by a number of admediaries provides credence to its effectiveness in addressing the adverse selection problem.




Contemporary Research in E-marketing (Vol. 1)
Agility and Discipline Made Easy: Practices from OpenUP and RUP
ISBN: B004V9MS42
EAN: 2147483647
Year: 2003
Pages: 164

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