Posted on July 12, 2007
Filed Under Web 2.0 Kool Aid |
I’d like to invite you to a tailgating party today at the deadpool. is a new online advertising startup that has Duncan Riley interested in banner advertising again. The company has created the “tranner,” a transactional banner that enables customers to make purchases directly through the advertisement without having to leave the site they’re on. It’s essentially an ecommerce widget. Tailgate’s value proposition is that tanners better facilitate impulse purchases. See a product in a tranner that you want to purchase? Buy it on the spot without leaving the page. Tailgate believes this will lead to higher ROI.
Personally, I think Tailgate is more likely to fail than it is to succeed, and the “large VC firms” that are apparently doing due diligence on it might want to consider the following:
- Banner ads are ignored (or blocked) by many customers. Tranners, in and of themselves, don’t make the banner ads any more interesting.
- Internet users are more concerned than ever about security. Making a purchase through a tranner (which obviously requires entering credit card details) is likely to make a considerable number of users weary. How do users know it’s not a phishing attempt? How can they verify the identity of the company behind the tranner and that it’s a legitimate operation? Warren Miller, the lead developer for Tailgate, counters that “The tailgate system is secure as it uses SSL between the flash banner and the Tailgate server.” That’s great, but try conveying that to consumers. Note to startups and VCs trying to educate consumers or change their behavior: this is an expensive proposition.
- Studies have shown that impulse buying is not as common online as it is offline. A ScanAlert report entitled “A New Era of Digital Window Shopping: From Shopping Cart Abandonment to Purchase” from back in 2005 came to the following conclusions:
Online consumers aren’t in any rush to pull the trigger and actually click the buy button on web sites. Instead, they spend days digitally window-shopping before buying, abandoning shopping carts with an ease that frustrates and often confuses online retailers.
Based on aggregate totals from these studies, the average time delay between a consumer’s first visit to a web site and their first purchase was over just over 19 hours. About one-third (35%) of shoppers took more than 12 hours to make a buy decision. 21% took more than three days, with 14% of these “cautious shoppers” taking more than one week to decide where to buy.
The length of time from initial visit to actual purchase measure during these A/B split tests shows that consumers do a great deal of shopping research before deciding where to buy. The length of this delay varies from site to site depending on customer demographics, brand recognition, the number of competitors online, and average product price. In particular, the data suggests that shopping cart abandonment is actually a habitual part of many consumers’ shopping behavior prior to purchasing and that the shoppers spending the longest time shopping are also the most concerned about the safety of the sites where they shop.
The data further shows that among those who comparison shop the most, trust factors act as strong motivators when present. And conversely, they can also be strong barriers when absent.
The report notes that the trend of window shopping was driven in part because of online consumers’ increasing sophistication. Thus, this is a trend that we can logically expect has only increased since the report was released in 2005.
Given both the logical flaws in Tailgate’s model and the quantitative data that exists on online shopping habits, it appears that Tailgate has come up with a solution that just isn’t likely to achieve what the company obviously thinks it will. Maybe we’ll all be surprised, however I think that because the real-world data is fairly conclusive, it’s naive of Tailgate to expect that its product or service is going to somehow face a different reality. For the VCs apparently looking at investing in the company, I personally think this is one tailgating party they’d be wise to pass on.Print This Post