Here's the pitch: put Micronotes Inc.'s widget in your online banking site, and you can both improve your cross-selling and pull in up to $1 million a year in incremental revenue.
That's how much the Cambridge, Mass., vendor predicts banks could make from hosting its merchant-funded online marketing system, which is designed to make highly targeted offers to customers based on their online shopping habits. That by itself is not a new idea, but part of Micronotes' spin is giving banks the chance to add their own product pitches as responses to earlier advertisements — if a consumer clicks through an ad for a car dealership, for example, the next ad that comes up might tout the bank's auto loans.
Consumers would be paid 25 cents to a dollar to answer questions within the ads, which help target the ad further; for example, a local bookstore whose ad appears in response to a customer's spending on Amazon.com could first determine whether that customer prefers mysteries or biographies.
The incentive is paid by the merchant, which also pays a fee to Micronotes that is shared with the bank hosting the offer. The $1 million estimate is the annual revenue the system would generate for a bank with 50,000 active respondents (those that respond to four ads a month).
"You get a revenue share and a killer cross-selling engine," Devon Kinkead, Micronotes' founder and chief executive, said.
Micronotes' system is being presented as a widget within Yodlee Inc.'s FinApp system. FinApps are movable components that banks can add to their online banking sites and consumers can move around or replace as the bank allows. Other FinApps include H&R Block Inc.'s TaxCenter, which uses transaction data to help consumers with their taxes and will be available next year.
Kinkead said that the price for banks to advertise within Micronotes' system will depend on the positioning of the FinApp: if a bank or credit union makes it the default application, they would not have to pay to put in their own ads (though they would still have to pay the small incentive amount the consumer would get for viewing the ad). If it is not the default app, banks would have to pay just like any other advertiser.
Kinkead said that in tests, advertisers that "really got it" and use the extra data Micronotes' app provides to better target their ads have had a 20% conversion rate. Those that do not use that added data and simply present a one-size-fits-all ad have a 1% conversion rate.
Though merchants have long relied on less-targeted ads when trying to speak to a larger audience, "brands aren't stupid … they just don't have enough information to get the right deals to the right place at the right time," Kinkead said. Micronotes solves that by providing transaction history through the bank. "Having transaction history is an important part of doing targeting," he said.
Several advertisers, including multiple departments within Sears Holdings Corp., have already agreed to use the system. No banks or credit unions have signed on with Micronotes just yet, but several are interested based on what they have seen in Micronotes' testing. Micronotes plans to generate more interest through a presentation scheduled for Tuesday at the Finovate show in New York.
Nicole Sturgill, the research director for delivery channels at TowerGroup, said Micronotes' system sounds "fantastic — if it can work."
Like any new system, it still has to prove itself, she said. Other companies are already exploring ways to use transaction data to make targeted offers, and part of Micronotes' challenge is convincing banks that its system is the right one to choose. Cardlytics Inc. can put merchants' ads among the transactions banks present online, and Geezeo Inc. can help banks use transaction data to improve their own pitches.
Banks are interested in better targeting ads and in a system that their customers would find useful enough to keep drawing them back to the online banking site, Sturgill said, but there is always a risk that such a system could come off as heavy-handed.
"Am I putting this out there because it's a customer service … or am I putting it out there in hopes that I'm trying to get information?" she said. If it comes off as nothing more than a grab for marketing data, that can be "a real turnoff," she said.
"What banks have to be careful about is making sure they don't look just like online shopping," Sturgill said.
BillShrink, which analyzes consumer spending to suggest alternative merchants, announced Monday at Finovate that it has adapted its system to work within online banking sites as either a FinApp or a stand-alone product. It also allows banks to pitch products such as auto loans based on customers' transaction history.
