The X10 Question: Traffic Without Dollars?

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.

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.”

17 Comments

  • X10 loses $4.3 million lawsuit
    for stealing technology, for failure to pay, and for bullying
    YORBA LINDA, California, CNN, Oct 21, 2003 — On October 7, three brothers, owners of Advertisement Banners.com,were awarded $4.3 million — after accusing X10 Wireless Technology of trying to bully them out of business, and stealing their technology.
    The three brothers stand to win much more in punitive damages, which are set for hearing on November 18 .
    "These were young guys who had a dream to start a successful company, but X10 looked at their youth and thought they could wipe them out," said Michael Fitzgerald, a lawyer for the brothers.
    X10’s Chairman, a Singapore resident,
    is the bully in Escape from Paradise.
    In fact, most of Escape from Paradise is about Chung & X10
    The owner of X10 is none other than Chung Hin Chew, JR Ewing wannabe, and the bully in our book, Escape from Paradise. What Mr. Chung attempted to do to the three brothers is consistent with his behavior in Escape from Paradise. It is a validation of our book.
    X10 declares bankruptcy!
    The lawsuit against X10 was, however, only the tip of the iceberg. Immediately after losing the $4.3 million lawsuit, X10 filed for bankruptcy under Chapter 11 of the Bankruptcy Code in U.S. Bankruptcy Court in Seattle.
    The filing reveals some financial details of a company that had made itself known throughout the Web for its ubiquitous pop-under campaign and yet remained secretive about its operations.
    X10 owes its creditors between $10 and $50 million. Other creditors include some of the Internet’s best-known names, including Yahoo!, $346,000; Google Inc., $68,000; America Online Inc., $55,000; eBay Inc., $49,000; and Microsoft, about $459,000. X10 even owes $667,412 to its own lawyers, Sheppard Mullin Richter & Hampton of Los Angeles.
    But where are X10’s financial records?
    In Hong Kong? In Bermuda?
    X10 filed what the bankruptcy court termed a "deficient" filing, meaning that it lacked a statement of its financial affairs. The court set a 15-day deadline for the completion of the filing, or X10 risks a dismissal.
    Will X10’s creditors ever see their money?
    Chungco Bermuda, Ltd…
    In Escape from Paradise, we explained CLEARLY what X10 was doing. X10 was generating losses in the US, and shifting over their profits to the parent company in Hong Kong. The profits most likely wind in the tax-free haven of Bermuda, at Chungco Bermuda Ltd, the holding company of X10 in Hong Kong. X10’s creditors have a long way to go to catch up with the elusive Hin Chew Chung.

    • from a business perspective the cynics AM ongst us would question the business ethics behind x-com’s strategy. pre IPO, and attempting to fraudulently inflate the site visitor statistics…..mmmmmm!!?

      no doubt these statistics will apperar in bold in the prospectus. would you really buy stock in this company???

      * these comments are of personal opinion only and are not designed or expected to be used to form a judgement on the validity of the company*

      • Hey, gang; it’s really easy to get rid of those little boogers:

        1. If you have any form of Java or JavaScript

        running, TURN IT OFF NOW.

        2. If you have cookies enabled in _any_ fashion,

        TURN THEM OFF NOW.

        3. Learn how to use a “hosts” file to firewall

        traffic from commonly-used major ad servers

        such as akamai or TroubleClick… uh,

        DoubleClick.

        4. In the “Preferences” section of your browser,

        there should be a box where you list things

        like your server name, email address and

        such. Make your email address bogus.

        While I won’t argue that the X10 ad campaign is some of the most obnoxious crap ever, there are some very easy and simple things that regular old Joe and Jane User can do to rid their lives of that vile crap, and better protect their privacy at that.

        • I agree with ‘subterfuge’ – at the end of the day, if X-10.com’s adverts are not very good, at the product is equally bad, *and* they have employed improper business techniques, then it’s unlikely people are going to want to buy their stock.

          I think, however, that the question of companies now being able to do this is more prevalent. Apart from a few of us who complain about this form of advertising, as someone said earlier, in fact it is no different from spam! I don’t think it’ll be too long before web sites are made aware of this and stop selling pop-up ads. It’s only due to the slow advertising market that they’re allowing it to go on, anyway.

          So in fact, perhaps we can’t have a free Internet without putting up with ridiculous pop-up ads. How prepared are we to have subscription only content rather than suffer commercials?

          As for inflated figures: who cares about the charts?! Hits is one thing, sales is another!

          • As bad as those X10 ads are, they are not nearly as bad as making an innocent operator cry. What’s worse is that you seem proud of your achievement.

          • Hmm. I hate eggplant, but when I walked into the supermarket the other day, a clerk handed me a coupon advertising an eggplant sale. I had to throw it in a nearby trash can. What a waste of time!

            If I followed your example, Goober, I’d have screamed at the person handing out the coupons until he cried.

            I would have told him he should not work for a chain that engages in such obnoxious marketing practices. What’s that about needing to pay the rent? Excuses, excuses. He deserves to cry. The whole scheme is obviously his idea.

            Yeah. Right.

          • Uh… did the clerk barge uninvited into your living room to hand you the coupon? Didn’t think so.

            Perhaps with my system, X10 management will get a hint. Because there is no other way to address the annoyance they force upon me… and you!

            BTW… I actually did call the company… I was stern but not rude… she wasn’t really crying… (really!) I was using dramatic license there… just like they do on TV. I really love cats and dogs and I’m not a complete person without the wife kids around. (honest.)

          • I’m not sure why nobody has mentioned the fact that what this x10 popup ad is promoting is illegal (or about to be illegal because the use of spy video recorders is a new issue for the legal system. Audio taping someone without their knowledge is illegal now and spying on people in person is illegal now.)

            I also called the company and tried to speak to the woman in charge of advertising but for some reason 🙂 she didn’t want to speak with me. So I also ended up speaking with a very sweet sounding, church lady type secretary who was stating that their company would never! promote anything illegal.

            The fact that they are promoting these things is far more aggravating to me than the fact that the advertising technique is cheap.

          • I have been a user of x10 products for many years and I AM rather dismayed at the pop-ups since they are not only annoying but (I think) in rather bad taste.
            That said, I think the cameras are one of the most useful tools for certain applications. Although I would never point a camera at an unsuspecting visitor, I have several cameras in my home to monitor activity, and there is a large sign at the entrance to the property warning visitors of that fact. If you have kids or elders that need constant attention, these little wonders can provide invaluable service at a modest price. Just go price the alternative sources for video surveillance!

          • Todd Ulise, (from trafficmarketplace.com) (used to be x10’s biggest marketer)

            I think x10 totally overpromotes themself and that their ad has been viewed so many times that anyone who wants to buy the camera already has.

            My advice, let people who want to buy the camera buy it, no need to waste your time getting visitors upset over your overrun ad.

  • x-10 promotional endeavors are “on the money”

    Our site’s hits “http://5url.com/” has gone up 300% in the month that we have been using the same promotional technique, and the length of time viewers have stayed on the page is impressive.

    Hits are nothing if they are not motivated to explore the site.

    The University of Pheonix has stated a similar campaign

  • I agree with the earlier poster that it is useless to talk about hits to web sites. If we have learnt anything at all during the last year while the NASDAQ drops 50% it’s that hits are a meaningless statistic. We need to get back to the old fashioned business figures: REVENUES – EXPENSES = PROFIT. If x10 corp. can show that they are making a ton of money selling their little gizmos then I will be impressed. If they are not making any money then I don’t care at all how many hits they had. One can list plenty of now bankrupt firms that had lots of hits!

    Furthermore I looked around their site and it looks really cheesy. It’s very difficult to tell what exactly the products do and the uses they suggest seem stupid. Really, can you imagine video taping your sand box 24 hours a day so that you can produce a video of a cat pooing to present to it’s owner??? If you do this you must have a great deal of spare time on your hands to watch hours and hours of video tape. This would only make you look like a geek and alienate your neighbour. Besides what would the cat owner do about future problems – follow the cat around with a pooper-scooper?

    Another crazy use they suggest is using a camera to monitor your refrigerator so that you can complain to any fat people in your family who are snacking! Can you imagine a more hopeless method of dealing with weight problems?! Perhaps the money to be spent on spy equipment would be better spent on carrot sticks and other low cal food items!!

  • I really think that people should stop focusing on traffic, and realize that x10 is a business that wants to make money. The people who right the articles do not create news, the report them, and this “traffic without dollars” is one person’s (who really should do their research) interpretation.

  • Last time I got the x-10 pop-up, I spent a little long distance money and called the company and flamed-out the secretary that answered the phone. I told her she shouldn’t work for some jerk who would make her take all the angry phone calls from people who are constantly wasting their time deleting the useless x-10 commercials from their home computer screens. She was crying by the time I hung up! (The X-10 people are probably reading this and saying… wow… it must work, he remembered the name of our company… hey, there’s no such thing as bad PR!)

  • These X-10 yaboos are fooling people into thinking that because they pop up their window in my browser I’m a visitor to their site?

    I close those stupid pop-ups instantly. If they want to count me as a hit then they’re lying to themselves and their investors.

    MESSAGE TO ALL MARKETERS:

    Pop-ups are a bad and stupid way to attempt to do business. If you are selling a legitimate piece of hardware (and no I’m not referring to herbal viagra) then market it the right way. Not by forcing me to close your stupid windows.

    MESSAGE TO BROWSER COMPANIES:

    How about an means to turn off these rude bastards when they try to force pop ups into my windows? Opera? Please? It’d make my life that much easier. Or maybe a pop-up filter to weed out the really irritating ones?

  • What a farce. I noticed these obnoxious pop-up ads from X10 a few weeks ago. Not only

    do I immediately close that new browser window, I would absolutely refuse to purchase

    anything from a company that employs such sleazy tactics. How is this different

    than SPAM? I AM using MY computer resources, and bandwidth that I AM paying for, to view

    an unsolicited commercial advertisement for an UNWANTED product. This is the stuff that

    causes the dot coms to fail. Hot air and press, but no dollars.

  • I log onto myfamily.com multiple times per day and that pop up window pops up numerous times as I navigate the site. I close the window each time and continue on my way, but I guess that means I get counted as a new visitor each time…sounds like there’s no need to believe the hype (numbers).

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