On the evening of June 9, 2014, Eric Cantor, the Majority Leader in the House of Representatives and arguably the sixth most powerful man in American politics, went to bed safe in the knowledge that his re-election team’s internal polling had him 24 points ahead of his opponent in the Republican primary for Virginia’s 7th District. Indeed, Cantor was so confident of victory that the following day, he didn’t even bother to show up in his District, choosing instead to remain in Washington to tend to his duties there. So that evening, one can only imagine his surprise and dismay when he discovered that his opponent had won in a landslide, ending one of the most promising careers in the current political pantheon (Cantor had been repeatedly mentioned as a potential Vice Presidential candidate for the 2016 elections), and making Dave Brat, a previously unknown Economics professor at Randolph-Macon College, an instant national star.
During the next several days, every possible cause for Cantor’s loss was analyzed and dissected by media pundits in an attempt to understand how one of the most surprising upsets in political history had taken place. And while many of the factors listed by media experts doubtless had an effect, the fact remains that Cantor’s loss is direct evidence of the extraordinary impact of a new advertising weapon used by his opponent that will now change everything in the digital advertising world: IP Targeting.
In order to explain IP Targeting, it might be helpful to take you through a quick primer on Internet advertising. Recognize that in recent years, billions of dollars have been spent on something called “Reflective” banner advertising placements. You have probably seen and recognized this form of advertising yourself, but if not, let me share a couple of anecdotes.
One of my favorite hobbies is astronomy, and last spring I made the decision to upgrade to an extremely large aperture telescope so I could start doing some Deep Space Astrophotography. To that end, I spent quite a few hours online doing research, visiting a number of telescope retailer websites. For the next several weeks, any time I was on the Internet, I noticed a consistent barrage of banner ads featuring a wide assortment of telescopes, such that wherever I went online, I was continuously targeted. Then early in the summer, I started researching the purchase of a Cadillac Escalade. Again, I was besieged by banner ads mysteriously featuring special offers on the purchase of large luxury SUVs.
In each case, as I was doing consumer research online, the retail sites I visited had placed “cookies” on my computer, such that as I visited other websites, the presence of those cookies triggered “reflective” ads, as retailers who knew I had a specific interest in their products attempted to close the sale. These retailers were paying somewhere between 2 and 5 cents to have their banner ads posted on my computer, because their advertising ROI algorithms predicted that my prior interest in the products they were selling made me a worthwhile target for posting banner advertising messages.
This may sound complicated, but the mathematics of cookie-based reflective advertising is extremely well understood, so if you’ve ever wondered why the banner ads that you see when you’re online seem to address your specific interests, now you know. But recent changes in consumer behavior, combined with changes in the way computer manufacturers set the defaults on new computers, are destroying the whole cookie-based advertising model.
You see, consumers (especially Millennials) who don’t like the fact that websites invade their privacy by placing cookies on their computers are purposely turning the cookie functionality off. And even more devastating to the cookie-based advertising model, computer manufacturers are now universally shipping new products with the cookie functionality turned off as a default. These two facts will render cookie-based reflection advertising obsolete and online retailers are now frantically searching for new ways to replace what has historically been an incredibly effective advertising methodology. Which leads me to the fascinating new Internet advertising strategy known as IP Targeting.
In order for you to access the Internet, your computer needs something called an IP (Internet Protocol) address. This ‘address’ (not a physical location, but rather an Internet code that is specific to your computer) is unique, and as long as you use the same Internet provider from your home, your IP address will generally remain fixed. And here’s where some amazingly stealthy technology comes into play. Because a tech company that specializes in Internet fraud prevention accidently discovered a way of determining IP addresses associated with fixed physical addresses. So when I provide them with a consumer’s physical mailing address, they can then determine the IP address of computers used in that household. Which means that if you as a retailer want to communicate to consumers in that specific household, you can now do so, without cookies or any other help. All you need is the physical mailing address where the computer is located.
This opens up an amazing world of advertising opportunities. Let’s say, for example, that you’re running a special event, and you want to communicate to your customers (whose physical addresses you have in your customer database) the nature of the event. Or let’s say that you can define the demographic and psychographic characteristics of a target audience, such that you can obtain a list of residences of consumers who share those characteristics. IP targeting will allow you to blitz your targeted audience with banner ads, at a cost of just two cents each.
Pretty amazing, isn’t it? But the acid test, of course, is whether this form of advertising actually works. The company we’ve partnered with that possesses this incredible technology has been using it for two years now, primarily in the political arena, with what appear to be amazing results. In local political contests, they have successfully created polling shifts in voter preference as high as 37 percent. And in the past six months, they’ve turned their Internet advertising weapon into a proven selling machine for companies as diverse as Comcast and Volkswagen. But what encourages me most are the off-the-charts results we’re getting in early tests of their IP targeting functionality in the jewelry sphere.
One recent test has me especially excited. In a large scale blind test, in which we directed postcards featuring a special offer to a statistically significant sampling of consumers from the database of one of our customers, we measured a ninety percent increase in response rate in the group who received postcards plus IP targeted Internet banner ads, versus a control group that received postcards alone. The cost of the banner ads? Less than 750 dollars. The resulting sales revenues? Over fifty thousand dollars in additional sales, in just one day!
This is a very big deal. Our tests during the recent Holiday season confirmed the value of this methodology, in some cases beyond our most optimistic expectations. And we’re now applying the datametrics to build some potentially very valuable bridal promotions targeting unmarried female consumers possessing attributes that make them likely engagement ring purchasers.
Eric Cantor failed to properly anticipate the extraordinary potential power of IP Targeted advertising. If you’re lucky, so will your competitors.
Class Dismissed!
George Prout is Vice President of Sales and Marketing for Gems One Corporation, and can be reached via e-mail at info@gemsone.com , or at Gems One’s New York office at (800) 436-7787.
