Advice from a Digital Pioneer

September 15, 2009

BY MICHAEL KRAUSS

What technology trends should CMOs watch?

“Cross-channel marketing, social media, mobile marketing and search marketing analytics,” says James “Jamie” Crouthamel, principal of Old Town Capital, a Chicago-based early-stage technology investment firm, “I’m interested in ‘performance-based marketing.’ ”

Crouthamel made his career and his fortune identifying tools and technologies that make marketers more effective in the Internet age. In 1998, he founded Performics with the idea of helping traditional marketers capitalize on e-mail marketing, online affiliate marketing and then search marketing. Crouthamel sold Performics to DoubleClick for $65 million in June 2004.

Today, he describes himself as an “operating investor” and sees plenty of opportunity in helping marketers respond to Internet and technology trends.

“I’m involved with Adgooroo.com,” Crouthamel says. “[Its] a search engine analytics and competitive analysis tool for search engine marketing. They tell you how you stack up against competition in search, your search advertising share of voice and ways to optimize spend to increase your ROI.”

Social media are high on Crouthamel’s agenda.

“People are spreading all around the Internet. They start at search, but there are a lot of social media applications out there that are untapped by marketers. You have to stay focused on social media,” Crouthamel says. “That’s where the audience is moving, though ad formats are still shaking themselves out.”

Crouthamel keeps a focused eye on the versatility of mobile platforms for marketers.

“Mobile can be a customer-acquisition tool, a relationship-building tool and a cost-saving tool rolled into one. Customers might use FedEx because they have a phone ad, but a mobile application on your handheld will solidify a relationship with FedEx while cutting costs. You no longer have to call FedEx to pick up a package. It becomes self service, lowering the cost of customer service.”

A priority for Crouthamel is tools that help marketers evaluate online and offline behaviors.

“The key is to understand how search is working with cross-channel activities,” Crouthamel says. “Customers search online and then go into a store to buy. They may be influenced by a TV advertisement. Understanding and tracking that process is where a lot of effort is being placed,” Crouthamel adds.

Matt McCall, a partner with New World and Draper Fisher Jurvetson Portage Ventures, has backed several of Crouthamel’s ventures. “Jamie is very good at pulling out trends and seeing needs,” McCall says. “He filters out solutions to address what is realistically addressable. He keeps things simple and straightforward. Does it produce results or generate cash? It’s all about performance.”

“There is no one in Silicon Valley who is a successful online marketer that does not know Jamie,” McCall adds.

Still, Crouthamel’s success in building tools, solutions and companies to serve the emerging needs of marketers are not well known, and Crouthamel prefers it that way. He doesn’t seek the spotlight. He’s a builder and innovator.

Crouthamel received his undergraduate degree in mechanical engineering from Drexel University in Philadelphia. He earned both an M.B.A. from the Kellogg School at Northwestern University and a master’s in advanced manufacturing.

“I got into the Internet in 1996 with a B-to-B online exchange call FastParts,” Crouthamel says. “It was a butterfly model where we were trying to put together buyers and sellers like an industrial eBay. We were selling semiconductors. We had over a million SKU’s but there were always people out there looking for SKUs we didn’t have. It was a tough model to get going.”

Crouthamel migrated from butterfly models to what he describes as funnel models. He saw the opportunity to provide software tools and services to traditional marketers who sought to build their sales funnel through the Internet.

“I formed Performics in 1998 and went after the bricks and mortar marketers,” Crouthamel says. Amazon popularized the concept of affiliate marketing where a Web site channels traffic to Amazon and receives a percentage of the final sale (anywhere from 3% to 15%, according to Crouthamel). At the time, traditional marketers lacked the technology and trained staff to build and operate affiliate programs. Crouthamel provided both to companies like L. L. Bean, Eddie Bauer, Spiegel and J. C. Whitney. His innovation was to take his fee only if he generated a sale for his client. It was a true performance-based model.

Crouthamel carefully followed Goto.com, which offered advertisers the opportunity to bid for the position they would appear at as a result of a search. Goto was renamed Overture, was bought by Yahoo and cut deals with Microsoft. Then Google debuted AdWords and search marketing took off.

As the popularity of search soared with the arrival of Google in the space, Performics had a base of customers that wanted to sell online and market through search. As with affiliate marketing, Crouthamel was positioned with technology and people and a customer base in need of knowledge to optimize this new technology.

“We quickly became one of the largest third-party providers in search marketing,” Crouthamel adds. “Our business really flourished in the [dot-com] downturn, because advertisers wanted to put their money on techniques that were performance-based.”

“Within a year, spending on search went from very little to almost one third of total online marketing spending,” Crouthamel adds. “One third of the marketing dollars that were flowing through banner ads that DoubleClick was serving disappeared. DoubleClick didn’t have a search marketing product. They turned to Performics and bought us.”

Says McCall: “From the start, Jamie said, ‘Online marketing needs a strong performance element.’ He was smart and observant. He saw the wave coming. He was well positioned when the Google surge came through.”

Given Crouthamel’s track record, today’s marketers would be wise to focus on cross channel marketing, social media, mobile marketing and search marketing analytics.

Michael Krauss is president of Market Strategy Group, based in Chicago, and can be reached at Michael.Krauss@Mkt-strat.com or news@ama.org.