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Mar 19, 2002
Case Study

TechTarget -- Print Newsletter Spin-Off Site Becomes Fastest Growing Ad-Based IT Media Site Online

SUMMARY: In 2001, when news sites targeting IT professionals were all losing ad sales, one site grew already-healthy revenues by 140%. We interviewed TechTarget's CEO to get the full details about how his team pulled it off.  He said his print newsletter background was what really made the difference. This is a fascinating Case Study for anyone who publishes an ad-based content site, and for marketers who are reaching out to IT professionals online.
CHALLENGE

Becoming a major ad-based media player was not part of the business plan when CEO Greg Strakosch launched TechTarget's first site in 1998.

Back then he headed up The 400 Group, a division of (print) subscription newsletter publishing powerhouse United Communications Group (UCG). Like most of the traditional newsletter publishing world, UCG specialized in creating content that served the needs of a small niche so well they would be willing to pay for it.

Strakosch simply hoped the initial site, Search400.com, would be an inexpensive marketing tool to sell more print subscriptions and ancillary products such as event tickets. However, pretty soon, potential advertisers began knocking on the door. "The whole Internet thing was going crazy." Strakosch began to wonder, was it possible to transition traditional niche newsletter content online and make so much money from advertising that he could forgo end-user subscriptions?

UCG agreed to take a chance and invested $12 million seed capital. Strakosch rounded up about $22 million more from outside investors. He was in business.

Now he just had to compete with loads of other IT-related free content sites that were springing up, and survive a nasty recession.

CAMPAIGN

Many of the competing sites were trying to be as broad-focused as possible in order to rev up pageviews to sell banners against. Others aggregated niche channels under a single home site, but hired inexpensive editorial staff whenever possible and spread them thin across multiple niches to keep content costs down.

Strakosch decided to go in the exact opposite direction. "With my UCG background, editorial quality is the whole ball of wax. Especially with email -- how do you deal with email fatigue? The answer is quality editorial. Our biggest department is our editorial department." About 70 full-time editors, most with extensive tech reporting backgrounds, staff TechTarget's various niche sites and email newsletters. Plus, an additional 150 experts, who are famous in their niches (if not consumer household names), are also under contract to write for TechTarget.

Instead of producing general-interest IT content, the team creates niche-interest sites and newsletters in traditional print newsletter style -- each unit brings in-depth unique content to a highly targeted tech sector that's underserved in the general media. For example, SearchHP.com serves IT pros responsible for running Hewlett-Packard enterprise systems.

This site, already more niche than most competitors, also serves sub-niches with a variety of even more targeted email newsletters, such as 'HP-UX Administrator Tips.'

TechTarget invested more than $15 million in marketing to drive qualified traffic to these sites and to gather opt-in email addresses. Again, Strakosch was inspired by the traditional print newsletter model which relies on super-niche marketing.

He explains, "Each of our markets has a separate marketing plan. We never say, 'Dear IT pro, come to TechTarget and try to figure out what you want.' We say, 'Dear storage pros, this is the storage site exactly for you.'" Although the marketing team has tested direct (postal) mail and fax broadcasting, the majority of campaigns have been via email to rented opt-in lists.

After testing a wide variety of lists, TechTarget's marketing team discovered something that would shock many other online marketers focusing on renting big lists at low cost … "The best lists are the small lists. A list with 700-1200 people may be the best list you'll ever find. We do a lot of digging for lists, list swaps with associations, media sponsorships with conference companies, finding the gold, working deals to find those small hidden lists. People willing to dig are the people who get really good results," says Strakosch.

Instead of selling these visitors and opt-ins its own products, 100% of TechTarget's revenues come from advertising and sponsorship sales at prices well above the industry average. Strakosch says, "I'm pretty sure we have the highest prices. Almost everything we sell is over $100 CPM. We have newsletter sponsorships at half a million a year. We have some newsletters as high as $500 CPM."

Two sales teams handle accounts. The national accounts team sells to giant national advertisers such as Compaq, generally coordinating with both the agency-side and client product managers. Sales reps hired for this team all have 10 years or more experience selling for magazines such as InformationWeek. Strakosch says, "We bought that expertise, we didn't train it."

The second team is comprised of sales reps dedicated to specific niche sites selling to small-medium-sized vendors in their highly targeted marketplace. "In that space we hire a lot of people with online ad experience such as people from Boston.com or Lycos. Not everyone we hire has experience. We can train them."

In all cases, sales reps focus on selling packages including a variety of ad units instead of just a bunch of banners. Products include:

#1. TargetROI - guaranteed sales lead generation.
In these recessionary times, all media buyers yearn for a sure thing -- so Strakosch decided to offer it to them.

Based on historic click data, TechTarget's sales reps will guarantee TargetROI buyers a certain number of sales leads over the period of time, such as six weeks. The buyer must agree to be led by their sales rep's judgment on what type of package will generate the best leads for them (for example they can not just buy banners which are good for branding but not direct response).

Buyers must also agree to follow guidelines about what their ad offers (for example, a white paper written by Gartner Group always draws great response). They must use a click through landing page created by TechTarget's experts. (Many B2B landing pages, elsewhere on the Web, are not created using tactics that maximize conversion from click to registration.)

#2. Email newsletter sponsorships
TechTarget sends out about 20 million email newsletter issues a month, all to "micro-targeted" audiences. Most are in text-only, although the Company has started launching HTML versions recently. Sponsorship prices average $100-$200 CPM.

Strakosch notes, "We sell HTML skyscrapers as well as text-links. Banners really help with branding, but nobody clicks on banners. They all click on the text-part."

#3. Opt-in email list rentals
About a year after the first site launched, TechTarget started a partnership with PostmasterDirect to collect and sell double-opt-in names collected from the site. Names are all hand-raisers who have specifically requested to receive marketing messages from advertisers in a niche topic. Later, the sites also started collecting single-opt-in names that they rent out, independent of the PostmasterDirect deal, at $400 CPM.

Strakosch notes that demand by far outweighs supply, and his team is being very careful NOT to take all the money and run. "We'll rent out the file a couple of times a month. Email is red hot, we get many requests every single day that we have to turn down. They want to hit it ten-times a month, or not with the right offers. We turn down a lot of business."

Why? "It's the right long term decision for us. It's hard when a guy's waving a big check, but we don't want to wear out our lists like that. It's stupid. We also don't do too many one-off deals. We mostly sell email list rentals as part of an integrated program. It's another safeguard -- we don't want the list to get worn out."

#4. Sponsored webcasts
"Webcasts are awesome!" says Strakosch. The Company currently produces five-to-nine webcasts on niche topics per month. Sponsorships cost $10,000 a pop, and they're usually sold as part of an overall advertising package.

The sponsor's Product Manager gets to give a 20-minute audio plus PowerPoint demonstration; then TechTarget's related expert editor grills the Manager for about 20 minutes; and, the remaining 20 minutes is given over to attendee Q&A.

TechTarget first emails its related opt-in lists about an upcoming webcast three-to-five days beforehand. They send an emailed reminder on the morning of the webcast, reminding folks that it will be at 2 P.M. ET. Finally, they send a follow-up email to the list two days after the webcast to let them know they can check it out in the site's webcast archives. This final email includes enticing bulleted content highlights.

Strakosch remarks, "They're all really easy to produce. All you need is a 20 minute PowerPoint presentation and a phone line anywhere in the world."

#5. Offline conferences
Unlike competitors who try to sell both tickets and booths at shows, TechTarget's events are free to attendees who have to qualify to attend (not always easy, often less than half of registered hopefuls make the cut based on their qualifications as a potential sales lead for sponsors) and cover their own travel expenses.

The content presented at the show is also of a much higher quality than is often seen in typical trade shows these days. Strakosch says, "At most conferences vendors give sales pitches disguised as content. Real high-level IT people don't usually go to conferences because of that. We promise no sales pitches. When we do have vendors speak, it has to be the CEO and they can't use PowerPoint. They have to have a live interview on the stage with our editor and take open mike questions from attendees. We've had very famous customers who don't like that, if they can't control the whole forum." But, it is the only way they can meet these unusually qualified sales prospects in a conference setting, so they grit their teeth and bear it.

#6 Banners
Most banners are sold as part of integrated sponsorship packages. TechTarget's sales team does not play the banner-impressions-as-a-cheap-commodity game.

The bigger customers who can invest in expensive creative have been eagerly testing bigger ad units such as boom boxes for the past six months. Although these have an unusually high click rate (1% on average), TechTarget only allows them on a small percentage of pages. The site also turns away all interruptive ads such as pop-unders and SUPERSTITIALS™.

Strakosch explains, "IT guys are sensitive about getting barraged with spam or banners. We're pretty conservative. A lot of advertisers wish we'd be more aggressive. They complain we're too user-friendly. I always laugh at that one. That's the reason we have the audience!"



RESULTS

TechTarget was the only IT media company to grow in 2001. Q4 2001 revenues increased 46% over the same quarter a year ago. 2001 overall revenues increased by 140%.

More numbers:

- More than 700 advertisers, including the IT biggies such as Microsoft, sponsor TechTarget products.

- 1.9 million IT professionals have opted in to receive various TechTarget emails in their areas of interest. The various sites publish more than 100 email newsletters.

- Conversion rates from ads on the TechTarget system tend to be three-to-four times higher than from ads on more general Web sites and newsletters. Which makes sense. An ad for storage systems will necessarily perform better on a storage-info site than on say Forbes.

- TechTarget's email newsletters perform above industry averages with an average open rate of 80%, less than 5% annual unsubscribe rates, and average click-on-ad rates of 1-2%. Readers who click on ads tend to convert into sales leads (by registering on a landing page) by about 30-50%.

- Sponsors who TechTarget allows to rent its email lists generally get 3-6% click through rates. (Bear in mind renters are handpicked.) About 100,000 new names elect to join the various sites' opt-in lists for marketing email each month.

- In 2001, more than 40,000 IT pros attended TechTarget webcasts. Strakosch notes, "If you get 50 people at the live one, another 500 will listen to the archive within the next 30 days or so."

Strakosch's team is in the midst of launching more products, including Web sites, email newsletters, an Internet radio show, and offline media such as magazines. He says, "The Web is real good for research and news. It's not a great vehicle to deliver strategic information, such as 3,000 word articles. We're not married to the vehicle. One big advantage we have is we started with the Web so we can say what it's good for or not. Whereas most of the existing weekly newsmagazine publishers are destroyed. People want news daily, hourly, by the minute."

He decides which niches to launch in based on "a bunch of stuff", including three critical factors:

1. There should already be some existing content in the field such as a magazine and/or conferences, although the content need is clearly not entirely filled.

2. There should be at least 100 active vendors or advertisers in the field, including two-four "big guys" such as IBM.

3. Potential advertiser's products must be high priced with high margins to support premium-priced ads.

Do subscription-based publishers have a chance selling content to users when folks like Strakosch are making money offering the same type of high-quality content for free?

He says, "There's always room for paid. We're raising the bar, making it a lot tougher. You had better have extremely high value, exclusive content if you are going to charge a lot of money for it." Or pick an information-hungry niche where there are not enough potential advertisers to support free content in.

http://www.techtarget.com

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