In 1987, G.M. O’Connell founded Modem Media, with a vision that digital communications would fundamentally change the way business is done. Under O’Connell's leadership, Modem Media has become one of the world's most successful interactive marketing strategy and services firms, widely recognized for the innovation and effectiveness of its work in digital channels.
As a pioneer in the interactive arena, O’Connell has been recognized as a visionary on digital communications and relationship marketing. He has been cited as one of the most influential executives in the interactive community by publications such as BusinessWeek, Forbes, Fortune, and The Wall Street Journal, and he was the first Internet professional inducted into the American Advertising Federation's Hall of Achievement.
O’Connell serves on the board of leading marketing technology companies such as CentrPort and Echomail and is an executive committee member and treasurer of the Direct Marketing Association.
Jaffe: As one of the founding fathers of this industry, you founded this company; you’ve seen it all – the inflated bubble, the bursting of the bubble…
O’Connell: …the “No” bubble. I was here before there even was a bubble; didn’t even know what a bubble was.
Jaffe: …and now this back draft of the current recession, which has sucked up whatever signs of life were left behind. Talk a little bit about the journey from then to now.
O’Connell: When we started Modem, we had a vision that digital communications and technology would fundamentally change the way things were done. And one of the things that they would alter was the way businesses would communicate with their customers; and served and supported them.
So it was pretty easy if you were paying attention back in the mid 80’s – which is when I got into this business – to see that there was a real destiny out there that was going to change and create a lot of opportunity for people who wanted to try and take advantage of it. We started the company, Doug Ahlers and I, and just to digress here for a minute, we’re going to have our 15th Anniversary and we’re creating a museum in our lobby of all the stuff we’ve done – a timeline of the company’s history, initial press release etc -- all the work – from building online shopping malls to voice response, 800 number promotions, interactive fax, and even the Keystone fishing hotline (which was an early audiotext service).
The early years were the scrappy years to make a long story short.
But it was during these years that we really started to get pretty good at understanding what customers wanted when they were utilizing interactive media and how they wanted to use it. And so we were one of the first companies to develop a customer-centric approach, and this is what really has carried us through.
Then in 1993, I saw the Web for the first time in the form of the Mosiac browser. We had been messing around with FTP sites back then, but when we saw the Web, we all knew that this would change everything. We did some of the earliest work on the Internet as you know, and then in ‘95/’96 really built our reputation. We started growing very rapidly through ‘96/’97 into the bubble years of ‘98/’99 and then in the first part of 2000 it began to pop.
For the last two years, Joe, what I think we’ve been able to do is survive with a purpose – that’s the best way to put it. And our purpose has remained true to what we originally set out to do; if there’s one thing we strived out to be, it was to be the best interactive marketing firm in the world, and to really harness that fundamental change that we were witnessing.
Jaffe: You call yourselves an interactive marketing firm. There are a lot of buzzwords out there, from new media to digital marketing or interactive marketing. What is your definition of interactive marketing?
O’Connell: Among our museum displays, we have an early picture of us at a trade show booth. In the picture you’ll see our logo, which was the first pixilated logo (there’s some message in that, I’m not sure what it is). In the early days (at that trade show), we called it electronic direct response/marketing. Interactive marketing has evolved – at its heart, it’s the ability for customers to do business in new ways with the companies they choose to do business with. And for companies that means opening yourself up to enable customers to get from you what they want, and if you’re lucky enough and smart enough, to be able to serve them better. That might be one definition.
Another might be that we’re going to use these interactive digital technologies to build better relationships between customers and brands. That’s the definition I generally use.
Then you can ask to what end; what does that mean: a better relationship. We break this into three phases: acquire customers, do more stuff with them, and do stuff more effectively with them (reduce marketing cost).
Jaffe: Perhaps there’s the connection with the pixels. What is old is new again. After all, great marketing is all about getting more people to buy more often and to spend more money in the process.
O’Connell: The only thing I would add to that -- in certain economic times -- is how to do that for less, more efficiently.
Jaffe: That’s good. Maybe the definition does need to be tweaked slightly.
O’Connell: Well, I’ll tell you what it’s not. And this is really important. It’s not messaging. Interactive is not a new way to do advertising in my opinion. It’s a fundamentally new way to build customer relationships; a new way to initiate relationships. While there is some confusion about the semantics of its meaning, it’s not advertising.
Jaffe: So is advertising dead?
O’Connell: No I don’t think it’s dead at all. I think the way in which customer relationships are established, built, maintained and progressed is fundamentally changing. I am always disappointed when I talk to traditional advertising people these days. When I ask them what’s their job? Usually with a bit of prodding they’ll default to “we’re stewards of the client’s brand.” If you want to be a steward of a brand, advertising is not sufficient. That’s important and it’s not understood.
Jaffe: I would agree with that.
Let’s talk about interactive media, which is still in limbo, and specifically as it relates to branding. There still hasn’t been a strong case that justifies this investment. With larger unit sizes, rich media, broadband adoption and more intrusive advertising in general, I’m curious as to how you see the future of interactive media.
O’Connell: You’ll have to come to my speech at @d:tech next week because I address this. There are four things that digitization and the Internet are fundamentally changing: one is product. The second is marketing communications – the way people decide to buy things; the way need is linked to preference is fundamentally changing. Number three is that the Internet and digitization enables companies to extend the scope of the relationship with their customers and therefore it enables brands to extend their positioning in their customers’ minds. And the last point is community – the whole dynamic of customers talking to each other about you as a marketer.
So what’s going on in communications? Look we did one of the first banner ads on the Internet with a click-through rate of 48%. The issue is that the industry decided to go louder, bigger and more intrusive…from a push perspective. But the problem here is that from a media or medium perspective (we refer to it as a channel), outside of maybe the telephone, it’s the only one in which “the advertising applications” (ads) generally compete with how people use it. We don’t watch the Internet; we use it.
All of a sudden, we have these intrusive messages blasted at us from all angles. Can you imagine what would happen if TV changed the way it served up ads. Instead of being complementary or neutral, it’s competitive.
Jaffe: In reference to your latter point, it’s what I call subsidized content on the back foot. It all was free, and then suddenly there was a price: your money or your time. As marketers, to what extent do we have to still move forward and accept that there is going to be a level of resistance at this early stage of adoption. Every other medium has had pushback in terms of the intrusiveness of messaging…
O’Connell: Yes and no. Don’t mistake what I just said as there not being a business case or requirement where people are going to pay for presence. That’s all advertising is from a media perspective – paid presence. What I’m saying is that the creative hasn’t worked for the most part. What we tend to do from an industry perspective is that we want to make it bigger, louder and more intrusive. Those are the wrong answers. The right answer is how we can make things more complementary to what someone is trying to get done. And once we figure that out, we’ll be in business. That’s the problem with “Advertising on the Internet”.
Jaffe: In other words, we’re still searching for a business model that works -- the best use and the smartest utilization of paid placement.
O’Connell: I don’t think it’s a business model, I think it’s a creative model. It might be the way in which that might happen. There are certainly different business models out there in terms of monetizing time and content. eBay for example is a great model. If you are a “media company”, you do need to figure out a balance between advertising and subscription, but if I’m a company thinking of using the Internet to reach people, attract and retain customers – and the NYTimes is a good example trying to figure out how the contact and creative model works – it’s the structure of building a relationship that has to change. The industry spent a year, hoping that the answer lay in the early efforts of pornography, with respect to pop-ups. The more intrusive you become, the more invisible you become. You can’t annoy someone into liking you. And I think we’re finding that out with all the latest backlash against pop-ups. And rightly so.
Jaffe: There’s a journey in terms of discovering best practices associated with leveraging intrusiveness. How do we find the balance or insert a level of control?
O’Connell: I think that’s the whole point. Advertisers have lost control. This is in the hands of customers. The answer lies in looking at how customers use the Internet. Customers are so far ahead of companies in terms of actually gaining benefit from the Internet. Take Google for example. Imagine if someone took Google away from you tomorrow. You can’t take baseball away from me and you couldn’t take Google away from me. Anything else in-between, maybe you can.
If you look at the purchase cycle: what customers tend to do, and how marketers spend their money against this, the two spending levels are totally out of whack.
Jaffe: What message would you give to the iMedia clients and agency folk out there that spend a good chunk of their time educating and trying to convince their traditional counterparts on the merits of the Internet?
O’Connell: They need the charts of doom that I’m going to give in my presentation on Monday. First of all, they need to have a way of measuring the impact that the Internet is having on their industry. Then they have to be able to say how this is impacting on their market share: good, bad or indifferent. Then they have to look at the impact on their market share at different stages of the consumer adoption process. And what they’re going to find out is that the Internet is having a large impact on specific stages of the purchase lifecycle, and then they’re going to have to measure that, and align their current spending accordingly.
That’s what the charts of doom show.
Jaffe: I love this idea. It suggests we should lead from strength, as opposed to defending or justifying what we do on the back foot.
O’Connell: What if your market share of the active category Internet users is significantly lower than your market share? You’re dead and you don’t even know it. It’s a boiling frog syndrome. That’s what I’m talking about and that’s what you need to pay attention to. It’s not about Gross Rating Points; the issue is whether you can do a better job distributing messages through the Internet than other channels.
And when you frame the discussion beyond coverage to talk about the impact on customer relationships, you elevate the conversation beyond merely advertising. And this is something CEOs are going to care about.
Jaffe: I always broke it down into three simple phases: Media (driving qualified traffic), Web Experience and Follow-up Communications.
O’Connell: This really gets to the role of advertising. You have to look at a Website as a library of services. We’ve found that advertising on the Web works when it’s put in the right places (no brainer), but also that it helps people get things done. We do work with Kraft, where 90% of our advertising isn’t advertising at all; it’s about recipe distribution. And all of a sudden, Kraft is the 5th largest recipe distributor on the Internet, not by accident. And they’ve extended the scope of their brand from cheese and pizza etc. to meal solutions and enabling Moms to get more stuff done with their time and spend more time with their kids.
That’s what brands are about. That’s what the Internet can help a company like Kraft do. Can you imagine what it could do for companies like GM or Delta Airlines; companies with direct relationships with their customers?!