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The X10 Question: Traffic Without Dollars?

By Keith Regan
Jun 14, 2001 10:55 PM PT

Since starting a massive pop-up and pop-under advertising campaign early this year that brings Web traffic to its site automatically, e-tailer X10.com has gone from a relatively unknown seller of home networking and security devices to a leader in the quest for Internet clicks.

The X10 Question: Traffic Without Dollars?

However, analysts have their doubts about whether all the traffic is translating into sales for the privately held company, which still hopes to make a Wall Street debut via an IPO.

"Most of [X10's] traffic is not voluntary," Media Metrix analyst Max Kalehoff told the E-Commerce Times. "But it's still legitimate traffic. It still represents people experiencing their site."

Kalehoff said that the impressiveness of X10's traffic level is tempered by the fact that even those Web surfers who immediately close the new browser window featuring the X10 advertisement without reading it are counted as visitors.

In fact, 95 percent of the traffic to X10 during May came from the pop-up and pop-under ads. Kalehoff said it is nearly impossible to judge from the outside how many people actually browsed through the site or bought anything online after seeing the company's ads.

"It's working as far as traffic goes," Kalehoff said. "Sales are another question."

Bombs Away

X10 first appeared on the Media Metrix Top 50 in March, debuting at No. 30 with 8.4 million visitors. A month later, it cracked the Top 15 with just over 15 million users.

In May, the site jumped into the Top 5, beating the traffic numbers of such e-commerce giants as Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY) by capturing 28 million unique users via the pop-up and pop-unders windows that count as site traffic for the company.

"It's nothing that's going to be lasting or generate the revenue they want," Gartner e-CRM analyst Adam Sarner told the E-Commerce Times. "They're blasting the entire Internet. They're throwing it on the wall and seeing what sticks. And in the long run, it won't be much."

According to Sarner, Web advertising with relevance to the site it appears on, as well as relevant content in the pop-up window itself, are the type of marketing efforts that are more likely to translate to sales.

Spears on Target

"If an ad popped up with some compelling content, that might be a different story," the analyst said.

For example, Sarner cited an experimental advertisement on Yahoo! (Nasdaq: YHOO) featuring Britney Spears. The ad offered Web surfers an online shopping spree that let them buy what Britney buys.

"A pop-up ad by itself? That's nothing," Sarner said. "A pop-up ad aimed at teens featuring Britney Spears? Now you're talking."

Quiet Period

Specific information on the success of X10's campaign in terms of sales is hard to come by. The Seattle, Washington-based company would not comment on the ad campaign or whether the traffic is translating into sales.

According to its most recent U.S. Securities and Exchange Commission (SEC) filing, X10 recorded sales of US$8.9 million and posted a loss of approximately $1.5 million for the third quarter of 2000.

X10 spokesperson Robin L. Champion said that the firm has been on file with the SEC since August for a planned initial public offering and is in the legally mandated pre-IPO quiet period. No date has been set for the IPO.

Champion referred reporter's questions to X10 president Alex Peder, who did not respond to e-mail inquiries.

Risks, Rewards

Analysts say the massive pop-up ad campaign poses both opportunities and risks for X10.

They note that X10 is benefiting from a depressed advertising market that has made it possible for a relatively small company to buy ad space on some of the busiest and best-known sites on the Web, including MSNBC.com to Weather.com.

The slow advertising market may have allowed X10 to negotiate favorable terms for its campaign, under which it pays only when customers click through to the X10 home page or actually make a purchase.

Because X10's products target a fairly narrow audience of sophisticated home technology users, and are sold at prices ranging from $50 to several hundred dollars, analysts say the percentage of visitors making a purchase is likely much smaller than the usual results for pop-up ads.

More to Come

One thing seems certain, however: More ad campaigns like X10's are on the way.

"Advertisers need to find a way to make their ads stand out and grab the attention of users," Forrester Research analyst Charlene Li said.

"There is definitely a lot of buzz," said Kalehoff. "Everybody is watching to see how this story turns out."

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