Paid Per View

Forget about putting up those flashy Web page banners or mailing slick envelopes promising huge prize opportunities within. Advertisers who want Dave Gambrill’s attention will have to pay him for it.

Gambrill, a self-employed salesman, is among the Internet-savvy consumers reaping cash and prizes from marketers in exchange for doing little more than looking at ads.

The idea of rewarding customers isn’t new. For years, marketers have been offering frequent-flier miles, free phone calls or dollar bills in subscription envelopes. What is different today is where the freebies are cropping up. Walt Disney’s ABC recently offered viewers 350 miles on American Airlines if they watched the new fall TV pilots and filled out a survey answering trivia questions about the shows.

“Rewards in general are becoming a fundamental part of marketing, and five years ago people would have said it’s a fad,” said Harold Brierley, president of Brierley & Partners and a pioneer in the development of customer loyalty programs.

Today the rewards are being taken to a new level on the Internet. Whereas marketers traditionally used them to spur loyalty or encourage sampling, they’re now waving incentives in front of consumers merely to grab their attention. Each time junk mail lands in his digital mailbox, Gambrill receives an instant reward.

The 25-year-old Greenville, N.C., resident has signed up with BonusMail, the latest entry in the burgeoning electronic commerce game. Launched in June by San Francisco-based Intellipost, the service rewards consumers for receiving targeted advertisements via e-mail.

Unlike with unsolicited e-mail ads, which are derisively referred to as “spam,” consumers elect to receive the BonusMail pitches by completing a demographic survey. In exchange, they receive credits called Rew@rds, good toward frequent-flier miles, discounts and gift certificates on everything from T-shirts and CDs to flowers and pizza.

Big-name advertisers participating in BonusMail include Barnes & Noble, Foot Locker, United Airlines, MCI and Newsweek. BonusMail serves as a middleman, sending the solicitations to the customers itself rather than selling or renting the demographic data to advertisers, as some services do. It finds prospective users through partnerships with Internet service providers and free-mail servers, among others.

Every time an e-mail arrives in their box, participants get 25 credits. They earn an additional 50 for reading the e-mail and finding a “secret word” buried in the message. But where they rack up the most credits--500 to 10,000--is by actually accepting an advertiser’s offer--downloading a game or subscribing online to a magazine, for example. It takes 5,000 credits to earn a $10 gift certificate on a book; 7,500 for 1,000 air miles.

“Anything I will benefit from I’ll try out,” Gambrill said. “You’re going to get ads thrown at you anyway, so why not get things you’re interested in?”

A review of sample BonusMail ads showed a variety of pitches, ranging from a staid invitation from Forbes magazine and the Scotch Malt Whisky Assn. to attend a cigar and whiskey tasting at the Biltmore Hotel in Los Angeles, to a graphics-filled ad hawking a new 3DO computer game.

Intellipost says participants might receive up to three pitches a day. But some participants grumble that they are getting only two a month from the fledgling service--not enough to quickly build credits for prizes. Intellipost said the pitches will increase as it attracts advertisers.

Intellipost’s board of directors and advisors reads like a Who’s Who of direct-marketing heavyweights, including Brierley; Lester Wunderman, chairman of Wunderman Cato Johnson; Steve Carbone and George Wiedemann of Grey Direct; and Steven Dapper, chief executive of Rapp Collins Worldwide.

“Intellipost seems to be proving, though it’s early on, that when people agree to read advertisements, they are better prospects than those that haven’t been asked,” said Wunderman, who is one of Intellipost’s advisors. “It’s an absolutely pioneering effort, and I think its progress will tell us a lot about advertising and the Internet.”

Brierley, who, along with the Long Island Venture Fund and Dai Nippon Printing Co. of Japan, is funding Intellipost and who serves on its board, agreed.

“I believe that many companies will follow with similar strategies of paying the consumer to receive advertising,” he said. “If the consumer starts to react and say, ‘I’m not going to take my time to accept a telephone solicitation call without being paid for my time,’ that would totally change the telemarketing industry.”

Although other companies, such as Brooklyn-based NetCreations, provide advertisers with lists of consumers who have agreed to receive e-mail solicitations, Intellipost Chief Executive Steve Markowitz, 27, says his company is the only one offering consumers a reward for doing so. Intellipost, like many of its competitors, is not yet profitable, but executives said that revenue is strong and that the company should be in the black within two years. Markowitz declined to reveal sales figures for the privately held company.

“We’re bringing mainstream, respected consumer brands to e-mail marketing,” said Markowitz, who developed his business plan while studying for his MBA at UC Berkeley.

During a recent interview at the company’s spartan offices in San Francisco, Markowitz could barely contain his enthusiasm for his business. In the rapid-fire, jargon-filled parlance of so many young high-tech entrepreneurs, the financial-journalist-turned-businessman said he is already scheming on a print version of BonusMail. And Markowitz, who is fluent in Japanese, said he plans to launch the service online in Japan within 18 months. To that end, Intellipost recently bought 5% of Excite Japan, a Web directory that the company hopes will be a gold mine for future customers.

Markowitz boasts that the response rate for Intellipost pitches is anywhere from two to eight times higher than for traditional direct mail. In addition, he said, his costs to advertisers are far lower. Advertisers pay 31 cents per e-mail, compared with about $1 for printing and postage on a traditional mailed advertisement. Intellipost benefits further if the consumer follows through with the solicitation: The advertiser then pays the company another $1 per response.

“We can do much better targeting because we can get the consumer to volunteer this profile,” Markowitz said. “We can send very relevant offers, and we have this rewards component that traditional mail doesn’t.”

Evan Neufeld, senior analyst for online advertising at Jupiter Communications in New York, said Internet advertising is exploding, with a growth rate of 300% or more a year. By 2002, Jupiter predicts, advertisers will be spending more than $7 billion annually on online advertising--some portion of which will be e-mail pitches. Still, the numbers are small compared with a worldwide advertising market that Neufeld pegged at upward of $160 billion last year.

Neufeld said banner advertising on the Net has been good for branding but that its effectiveness in getting consumers to buy is limited. For that reason, he predicts incentive programs will multiply on the Internet, where consumers have come to expect a higher degree of interactivity.

But he also said advertisers have reason to remain cautious, in part because most of the current programs tend to be time-intensive and the payoffs still relatively small.

“It’s good if your marketer wants to reach teens with lots of time on their hands, but it does get into the question of how much time will people engage in [for] these frequent-flier programs,” Neufeld said. “If you are going to [reach] a wider demographic, no one’s made a compelling case that you’ll do that.”

Newsweek magazine, one of Intellipost’s first advertisers, said early response from the BonusMail campaign was a little better than expected. (People who signed up for 27 weeks of the magazine and wrote a check for $15.97 received 500 BonusMail points.)

Markowitz says he’s convinced BonusMail will work in reaching the kind of consumers advertisers salivate for. Although a third of participants are typical Internet users--between the ages of 18 and 24--the program has its share of older “affluent consumers interested in receiving rewards,” Markowitz said.

In addition to Intellipost, there is a host of other companies offering consumers ways to earn points for interacting with advertisers online. Berkeley-based CyberGold has a program that provides cash bonuses for visiting certain Web sites, filling out surveys or buying products. CyberGold recently teamed up with Visa to offer Web surfers a way to accumulate points that can be used to pay off their credit cards.

Another company, Netcentives in San Francisco, has raised $10 million in second-round financing and is preparing to launch ClickRewards, a service offering points redeemable for air miles and merchandise.

“Both on the Internet and elsewhere in society, people will understand that attention is a valuable commodity and expect some kind of reward,” said Nat Goldhaber, CEO of CyberGold. “I don’t think it’s going to be restricted to the Internet; it will be a culture-wide phenomenon.

For their part, executives at ABC are looking at the rewards model for future marketing campaigns. The network wouldn’t reveal numbers, but Dan Longest, vice president of promotion marketing, said viewer response to the frequent-flier offer exceeded expectations.

“This is all about being new and different and having fun,” Longest said. “Americans are more savvy about marketing programs, and people are a little more conditioned to participate in these programs.”