With businesses serving four areas of online marketing, ValueClick is positioned nicely for the future of the industry. John Ardis and Chad Miller provide some insight.

ValueClick, Inc. initially came to market in 1998 offering a new and unique Internet advertising model to clients – the performance-based cost-per-click (CPC) model. Since then, ValueClick has grown exponentially from being a one product company to a global company offering a variety of traditional and interactive marketing solutions with an enviable balance sheet and over $270 million in the bank. In short, ValueClick, Inc. has positioned itself as a global media and technology leader in the advertising realm.

Within ValueClick, Inc.’s media and technology solutions, there are four operating units:

ValueClick: With a potential reach of nine out of 10 Internet households in major global Internet markets, ValueClick Media works with advertisers and direct marketers to design, implement, and track programs that build brands, deliver visitors, generate leads, and drive sales.

Be Free: Provides online affiliate marketing solutions that are primarily focused on generating immediate sales. In addition to helping clients implement these affiliate marketing programs, Be Free also drives the conversion of online users to customers through its personalized merchandising technology.

Mediaplex: This division’s core offerings are in ad serving, CRM e-mail, and publisher-side ad management technology. Using Mediaplex’s MOJO™ Platform, marketers can create banner and e-mail campaigns that include dynamic creative content based on real-time business data, and can then track the ROI for all of their Web and e-mail campaigns in real-time — all in one report.

Adware: An applications service provider (ASP) that provides high-quality information management systems and services for the global offline marketing communications industry. With software modules for budgeting, media buying, production, client billing, vendor payment and financial reporting, Adware allows large marketing departments and agencies of all sizes to streamline their advertising processes across a wide variety of media such as magazines, newspapers, network TV, cable TV, outdoor and online. In addition, AdWare’s digital asset management software — Content Depot — gives companies the ability to efficiently and cost-effectively replace physical storage systems with digital storage, for all of their business documents and audio, video and graphic files.

iMedia Connection talked with John Ardis, VP Corporate Strategy and Digital Direct Marketing and Chad Miller (bio), VP of Sales for Mediaplex, about the state of the industry and other such issues.

iMedia Connection: How would you describe the current state of the industry?

Ardis: The industry is regrouping. I think we had a false start for a couple of years and everybody thought they had the answer and are finding out that it’s not quite that easy. Of course, with that false start has come a lot of confusion and a lot of disinformation which has ended up prematurely stunting the growth of the channel. Clients now are trying to figure out what works and what doesn’t and they’re looking at all these different promises and trying to sort through it all.

Miller: I also think that early on, when you had a lot of the dot-coms advertising online, what we ended up with was some poisoning of the click statistics. So a lot of the traditional brick-and-mortars were saying, “Well, nobody is responding, the click throughs are extremely low, etc.” Once that was all cleaned out, the “regrouping” — as John described it — is what’s happening because now companies are seeing the results of – and I’ll say this carefully -- real products and real services being sold or presented on the Internet vs. what you might call a phantom product or service or phantom entity. So I think it’s really good that we went through the big dot-com crash and now we’re seeing that the companies left are the brick-and-mortar companies actually taking a real hard look at the Internet and saying, “It does work if we use it with a great strategy in mind, and if we execute using solid technology.”

Ardis: Also, I think, anytime you introduce anything new, whether it’s a whole new medium as this has been, or even just a new technique into an existing medium, there always seems to be a cycle. It starts with extreme excitement because it’s something new and different, and it gets a lot of attention and a lot of response. Then the abuse comes. Take e-mail for instance. E-mail was a great thing; it was going to be the killer app. But then before it can come close to reaching its potential, a number of questionable e-mail list vendors out there began to inundate consumers with spam and the abuse part starts. The next phase is that marketers begin to sour a bit on that new approach. And finally you end up in the mature phase, where it takes its appropriate place in the overall media mix.

iMedia Connection: Where are we in the cycle right now?

Ardis: I think we’re just past the jaded, soured point of view, where some marketers feel like they have been burned, some of them believed in promises that didn’t come true, and they’re trying to sort through it. I think we’re just about at the reemergence, the beginning of the mature phase — it’s just that these evolutionary phases happen much more quickly in online media than they have in offline media. As Chad said, the people who are still with it, and the people who are coming on now, are coming in with a more pragmatic view of what it can and can’t do, and coming in as much more mature marketers. So we’re just starting to see the tip of the iceberg again, but I don’t think we’ll see such an explosive take-off again because people have learned from the past. Instead, we will see a solid but gradual growth at the point when the overall economy and overall advertising industry rebounds.

iMedia Connection: How do we get over the souring? How do we get past the bad feelings and move on? What does this industry need to do to overcome that?

Ardis: Good questions. I think part of it is taken care of just by virtue of the downturn and the overall economy, which fortunately has put most of the unscrupulous and poorly conceived companies out of business. Just through sheer survival of the fittest, it has allowed companies like ValueClick and a few others out there to survive and continue truly searching for the best ways to utilize the media for the accomplishment of advertiser objectives. As a result, we’ve positioned ourselves so when the eventual and inevitable turnaround does occur, we’ll be poised quite well to take advantage of it. Everything we’ve developed, everything we’ve added, ties in with the philosophy we had when the company was founded, which was accountability, and measurable performance — whether that’s branding, lead generation, conversion, or retention. If we’re not doing things that are working for advertisers, and we’re not doing things that are making money for our strategic publisher partners, we’re not going to be in business. What’s going to continue to get us over the jaded mentality is trustworthiness and reliability.

Miller: One thing I’d like to add: I’m seeing responsibility coming from players in the medium to clean it up. And I think with this self-cleansing of the Internet after the crash, everything is moving in a positive direction, and that’s what makes it so exciting.

iMedia Connection: What are some of the specific challenges that are barriers for growth?

Ardis: Cross-media measurement standards seems to be at least a barrier that people vocalize a lot. Whether it truly is a barrier or it’s an excuse, I don’t know, but it seems to be something everybody does latch onto so it’s important that we at least address it. If nothing else, at least eliminate the excuse, but hopefully it will actually provide some of that comfort and trustworthiness of the new medium we’ve been talking about.

Another really popular one that’s often voiced is the broader acceptance of broadband. My only concern about broadband and rich media and the focus on those things is traditional advertisers continuing to think: “How quickly can I make Internet like TV?” as opposed to making Internet better than TV or making TV better because of the Internet. When everybody has so many ingrained preconceived notions because of the way they’ve been doing business for decades, they tend to always want to force fit anything new into their current frame of reference.

Also, earlier we were talking about the abuse part of the cycle, and I anticipate that when broadband finally hits critical mass we’re going to be seeing a whole lot of TV-like commercials streaming all over the Web and it could result in an obnoxious visual experience -- like Times Square on your computer. And once response rates start going down and advertisers aren’t getting the impact they think they should get, then the fallout will begin, followed by it being used more responsibly. But I just think that’s the natural evolution these things go through.

Tying in online with offline is another barrier -- not just in marketing activities but also in the consumer experience. Some of the stores that are doing quite well now that are both online and bricks-and-mortar are ones that send you a catalog, you can go to the Web to order an item, you get the product in the mail, and if you want to return it, you go to the retail store. Or, you can order it on the Web and go pick it up from the store in minutes, thereby avoiding potential delays in the shopping experience, which will probably be very important during the busy holiday season. When companies make the process quite seamless for the consumer to interact in any different way and the company itself has it all integrated that will help a great deal. Right now there are a lot of disconnects — there are very few companies doing it well. In terms of multi-channel marketing, that’s something that we’re really trying to emphasize to our clients, understanding the role of online in the context of your overall mix. Sometimes it might be better to go out with direct mail, sometimes it might be better for telemarketing and sometimes you need to associate with the things you’re doing in broadcast or print. Whatever it is, it has to be an overall media plan and not looked at individually.

Another barrier is that there is still a focus on privacy concerns, the practice of placing cookies and some potentially misplaced fear about what cookies actually do.

Miller: True. If companies could make consumers understand what a cookie really is and what it does compared to what they think it does, I think the upper echelon of management at companies would move this medium more quickly. The problem is getting certain companies to understand that running an Internet campaign very effectively does not impede on someone’s privacy. How we do that, I don’t know -- I guess education, and continued acceptance of the Internet as a medium. Like anything else, as the medium matures and grows, things that aren’t true will die out and the things that are true will grow even more.

Ardis: I agree. Something else that’s important to remember on the privacy thing -- I do agree that it’s a barrier but I do think it’s a very misunderstood barrier. The fact is that the consumer is infinitely more protected online than they are offline. So I think that over time the furor will die down a little bit online and companies will act responsibly – the respectable marketers are already doing so. However, I also believe that because of this focus online, offline media will ultimately be held to a higher standard than it is today and, as a result, accepted privacy standards will fall somewhere in the middle (not as lax as currently offline and not as extreme as online) when this finally shakes out.

iMedia Connection: Where is your company experiencing the most growth?

Ardis: The media side still remains somewhat flat. It’s not suffering but we’re not seeing explosive growth yet either. But we have done a lot of very positive things – we’re offering all the pricing models and we’ve partnered with properties of all sizes, from portals to well-branded vertical sites to smaller niche sites – enabling us to provide true flexibility. That, combined with the fact that most of our former competitors have gone by the wayside, has poised us very well for when the rebound happens and the entire advertising industry picks up.

The technology side of our business, on the other hand, is really beginning to grow. MediaPlex has added a number of new clients, and there will be more in the not-too-distant future. That’s really indicative of marketers looking for efficiency — they’re looking at how to make sense out of all of their digital marketing activities, in order to use the medium to its best advantage. They’re all trying to both get better at what they’re doing and to understand it more. And our technology is helping them do that.

Another thing we’re seeing in our business that’s really catching on is the services side, the consulting side. In the Be Free business, for example, there’s a group called Outsource Program Management that offers management of an entire affiliate program from start to finish. The results of this program have been phenomenal. Clients who have taken advantage of this offering have seen 100% growth in four weeks, 200% growth in four weeks, 3-5 times revenue growth quarter-over-quarter, etc. This fits in with our overall mission, which is to utilize our unmatched body of knowledge in digital marketing to our clients’ advantage, and then to relentlessly track the results.

iMedia Connection: What about from advertisers themselves? What industries are advertising more?

Ardis: What we see is across the board and I think it’s mainly because of all of the different things we offer. If you look at it division by division, it does vary a bit. For instance, Be Free is very strong in retail clients -- apparel, books, anything that would be considered retail merchandise. They’re also very strong with catalog and travel clients. For MediaPlex, the markets that are growing are automotive and travel. And all of our divisions are very strong in financial services.

iMedia Connection: How is MediaPlex addressing the Reach/Frequency issue?

Miller: The medium needs standardization across the board, then we can build models that predict campaigns, then run the campaigns, evaluate how well that modeling predicted the actual outcome, and then make adjustments as needed.

From MediaPlex’s side of the issue, the approach we typically take is to segment and batch data in accordance with what the client wants to see from a campaign. We are very adept at doing customized reporting and batching and segmenting across all of our reporting suites, because it seems like each of our clients views reach and frequency slightly differently, and we want to accommodate their needs.

iMedia Connection: Related question: How essential is it for the industry to measure apples to apples?

Miller: It’s very important. We may find that after we standardize some of these things that they aren’t comparable. And I think that as companies are putting reach & frequency modeling out there, it’s inherently a little dangerous because I don’t think it’s data that you can really rely on. Some of the studies I’ve seen and some of the clients I’ve spoken with have told me they’ve done some modeling based on certain batches of data and then they run the campaign and the results are completely different. So I think there isn’t an answer to it at the moment. We’re going to get there and I think it’s an exciting thing to talk about, but I don’t think we can lean heavily on it right now because the uncertainty of the data going in leads to uncertain results.

Ardis: That’s why we’ve gone a path of, “why don’t we work with our system to design what you want specifically?” We have a lot of different ways in which we can go. In fact, Chad has been working with the development team to launch some further functionality to allow us even more customization capabilities. Because what we’ve found is, until there’s some industry-wide determination at some point in the future of what those apples will look like, we feel the clients will want to tweak it to meet their own needs, and we want to be there for them. That’s the route we’ve taken.

iMedia Connection: What is your perspective on the Internet being a branding tool vs. a direct marketing medium?

Ardis: My overall feeling is that when you break it all down, the only real difference between branding and direct response is timing. The only reason that you do branding is so the individual, when they’re of the mind to take advantage of a product or service, thinks of your company and interacts with it, whereas with direct response, you’re asking for an action now. But ultimately they’re both trying to do the exact same thing. So I think way too much is made out of whether the Internet is for branding or for direct response because it’s both. Number one, they’re ultimately after the same objective, and number two there are components of both in every campaign. But I do think there are different metrics to measure each.

iMedia Connection: What are most of your efforts focused on right now?

Ardis: The single biggest focus of ours is keeping our eye on the ball. We have to solve the problems of our clients and our strategic affiliate partners. If we don’t, nothing else matters. So we can do all the development we want, we can do all the bells and whistles that you want, but in the end, if we’re not solving their problems and moving the needle in the right direction for their business, we’re dead. Our main thing is, we’re all in a downturn, we all recognize it. But if we continue to deliver, if we continue to deliver on our promises to our clients, we will not only survive, but we will thrive in the long term.

iMedia Connection: What does the future hold for interactive marketing?

Ardis: We’re very bullish on the long-term viability of the channel. Regardless of ups and downs, anyone who has done any research has to agree with that. The number of people online continues to grow worldwide; e-commerce stats are going up and are predicted to be very strong for the next several years; time spent online is growing, and where it’s dipping with some segments it’s usually explained by the fact that people are getting much better at it and not wasting time online — so the time they are spending online is much more productive; and the Internet is impacting other media usage. And as it is still only commanding 2 – 3% of overall advertising budgets, it doesn’t take much of a shift to dramatically impact the size of this medium. All of those things, to me, point to the fact that this is a channel that will be around for a long, long time and that will only grow in its ability to answer marketers’ needs.