Retailers shift their ad spending from TV, radio and print ads to digital ads.
When executives at Cooking.com began to talk last year about how they would draw consumers to their new Web store-a comprehensive shop aimed at people who love spending time in the kitchen-they settled on a well-worn marketing path: striking deals with portals to advertise the site.
Signing contracts with Yahoo! Inc., America Online Inc., Infoseek Corp. and other top portals was the company's first marketing mission. The idea was to get Cooking.com listed on the portals, where millions of potential customers would be just a click away from visiting the site.
But unlike start-up firms of a few years ago, many of which leaped at the chance to partner with portals without demanding concrete and measurable results in return, Santa Monica, Calif.-based Cooking.com carefully scrutinized each deal. The company focused on strong return on investment opportunities, or a good ratio of cost per acquired sale, and tried to stick with deals that placed it specifically in portals' shopping areas for the categories it covers.
That kind of take-charge attitude is what retailers need when they negotiate with portals today, consultants say. New research shows that portals, which drive less than a fifth of overall Internet sales, aren't the be-all, end-all advertising medium retailers once believed. Merchants have to be careful about what they sign on for, realistic about what they expect from such arrangements, and savvy enough to invest in a wide range of marketing initiatives that include portal deals rather than depend on them.
"We went into this wanting to sign good deals that put us in very qualified areas, because we learned from other retailers what delivers the best return on investment," says Tracy Randall, general manager and vice president of commerce at Cooking.com. "Most new companies go to the portals and pay too much for too little. The portals try to sell a lot of untargeted space for branding."
At the same time that merchants are getting smarter about these deals, portal companies are working to secure their relevance in the e-commerce world. Portal companies are redesigning and improving their shopping channels and offering retailers new opportunities for featured spaces.
For more about the future of portals, turn to the July/August issue of Internet Retailer.