Online Advertising

Online Advertising

Speaker: Jerry Gao Ph.D.

San Jose State Universityemail: jerrygao@email.sjsu.edu

URL: http://www.engr.sjsu.edu/gaojerry

Dec., 2000

Introduction to Web Advertising

• Introduction to Advertising• Introduction to Web Advertising• Web Advertising Methods• Web Advertising Business Models• Web Advertising Technologies• Web Advertising Tools• Web Advertising Business Companies• Samples of Business Financial Information

Introduction to Advertising

Definition of advertising:

- Advertising is a form of mass communication, it is also nonpersonal.

- Advertising is paid nonpersonal communication from an identified sponsor using mass media to persuade or influence an audience.

- Advertising is one of the four marketing techniques (advertising, sales promotion, public relations, personal selling)

Types of Advertising:

Brand advertising Retail advertisingPolitical advertising Directory advertisingDirect-response advertisingBusiness-to-business advertisingInstitutional advertisingPublic service advertising

Introduction to Advertising

Types of advertising:

- Brand Advertising: (Irrand advertising)- The most visible type of advertising is national consumer advertising.- It focuses on the development of a long-term brand identity and image.

- Retail Advertising: - It is local and focuses on the store where a variety of products can be purchased or where a service is offered. Retail advertising emphasizes price, availability, location, and hours of operation.

- Political Advertising:- It is used by politicians to persuade people to vote for them and therefore is an important part of the political process in democratic countries.

- Directory advertising: (such as yellow pages)- It is used to help people to find out how (where) to buy a product or service.

Introduction to Advertising

Types of advertising:

- Direct-response advertising:- It can use any advertising medium, including direct mail, but the message is different from that of national and retail advertising in that it tries to simulate a sale directly.

- Business-to-business advertising:- It includes messages directed at retailers, wholesalers, and distributors, aswell as industrial purchasers and professionals such as lawyers and physicians.

- Institutional advertising: (corporate advertising)- It focuses on establishing a corporate identity or winning the public over to the organization’s point of view.

- Public service advertising (PSA):- PSA communicates a message on behalf of some good cause.- These advertisements are created for free by advertising professionals, and the space and time are donated by the media.

Four Major Roles of Advertising:

•Marketing Role- target market, marketing communication

•Communication Role- a form of mass communication. It transmits different types of market information to match buyers and sellers in the marketplace.

•Economic Role- two major schools of thought concerning the effects of advertising on the economy: a) market power, b) market competition.- market power school

“as a persuasive communication tool to distract consumers’ attention from the price of product.”- market competition school

“ as a source of information that increases consumers’ price sensitivity and stimulates competition.”

•Societal Role- inform us about new improved products- teach us how to use these innovations- help us compare products and features- make informed consumer decisions.

Introduction to Advertising

Functions of Advertising:

•Direct action versus indirect action- Direct-action advertising is intended to produce a quick response.Such as, coupon with an expiration date, or a sale with expiration date, 800 number, a mail-in-order. - Indirect-action advertising is designed to stimulate demand over a longer period of time.

•Primary versus selective- Primary advertising aims to promote demand for a generic product.- Selective advertising attempts to create demand for a particular brand.

•Commercial versus noncommercial- Commercial advertising promotes a product with the intent of making a profit.- Noncommercial advertising tends to be sponsored by organizations that are not in business to make money.

Introduction to Advertising

The Four Major Players on Advertising:•The advertiser - the individual or organization that usually initiates the advertising process. He/She makes the final decisions on:

- where, whom the Ad will be directed to- the used media- the budget, size and location- the Ad schedule and duration

•The advertising agency•The media•The vendor

Introduction to Advertising

The Types of Advertisers:

•Manufactures - product makers•Resellers - wholesalers or retailers•Individuals - individual advertisers •Institutions - institutions, government agencies, and social

groups.

Introduction to Advertising

The Four Major Players on Advertising:•The advertiser - the individual or organization that usually initiates the advertising process. He/She makes the final decisions on:

- where, whom the Ad will be directed to- the used media- the budget, size and location- the Ad schedule and duration

•The advertising agency•The media•The vendor

• Forester Research, Inc. estimates $1.5 billion was spent on Internet advertising worldwide in 1998. $5.5 billion will be spent in 2002, and that amount will increase to $22 billion in 2004.

0

5

10

15

20

25

1998 2002 2004

billion

The Web Advertising Industry

Introduction to Web Advertising

Size W(pixels)

H(pixels)

Name

468*60 468 60 Full Banner392*72 392 72 Full Banner/Vertical navigation Bar234*60 234 60 Half Banner125*125 125 125 Square Button120*240 120 240 Vertical Banner120*90 120 90 Button #1120*60 120 60 Button #288*31 88 31 Micro Button

Standard Banner Size for Web Advertising

468 * 60 pixelsFull Banner

397 * 72 pixelsFull Banner / Vertical Navigation Bar

234 * 60 pixelsHalf Banner

120 * 240 pixels

VerticalBanner

120 * 90 pixelsButton #1

125 * 125 pixelsSquare Button

120 * 60 pixelsButton #288 * 31

Standard Banner Size for Web Advertising

Web Advertising Methods

•AD Email•AD Banner•Directed AD•Dynamic AD•Promotional Programs•Push ADs

•Membership•Search Engine or Portal•Rich Media AD•Superstitial AD•Transitional•Multi-player Games

Web Advertising Business Models

Ad Serving:

- Providing a systematic process and services for businesses to publish advertisements on the web

Ad Networking:

-Ad Networks are third parties that take a portion of the advertising inventory and sell it monthly to appropriate sites.

Web Advertising Business Models

Classified AD:

- Providing a systematic process and services for businesses to publish their advertisements on the web in web sites.

Ad Exchange:

- An AD brokerage marketplace is set to support AD space exchanges and service over the Internet between different web sites.

Media Auction Sites:

- Providing online trading service for businesses to offer the remaining advertising inventory to the highest bidder over the Internet

Web Advertising Solutions

For Businesses:

•Advertising Process Management:•AD Inventory Management•AD Process Management•AD Planing & Scheduling•AD Tracking & Reporting•AD Performance Analysis

•Advertising Services:•AD generation service•AD campaign and placement service•AD delivery, monitor, and tracking

Web Advertising Solutions

For Publishers:

•AD Space Management:•AD Inventory Management•AD Space Process Management•AD Space Planing & Scheduling•AD Space Tracking & Reporting

•AD Space Trading:•AD Space for Sell and for Rental•AD Space Campaign•AD Space Auction &Negotiation

Web Advertising Solutions

For Advertising Agency:

•AD Marketing Process Management:•AD Marketing Plan•Advertising Process Management

•Advertising Community Support:•Search or AD Space Search •AD Service Business Search•Advertising Yellow Page•AD Business Association Support

•AD/AD Space Brokerage:•AD or AD Space Champing•AD or AD Space Auction

Web Advertising Technologies

•Internet-Based Technology:•HTML-Based Banners•JavaScript-Based Dynamic Graphics •Image-Based Static/Dynamic Banners•VML-Based Graphics•Email•SVG

•Rich Media:•Voice, Video, Text

Type of Ad Size Cost Effectiveness BandwidthBanners - Static Various

standardsizes

Inexpensive LessResponse. Low

Banners -Animated

Variousstandardsizes

Moreexpensivethan staticbanner

Betterresponse. Low

Banners – HTML Varied Inexpensive Higherresponse thananimated

Low

Banners – Richmedia

Varied MoreExpensive

Highresponse High

Button Small Inexpensive Effective infreedownloads

Low

E-mail N/A Inexpensive Reaches apreciselytargetedaudience

Low

Text Links N/A Inexpensive Moderatelyeffective Low

Interstitials(pop windows)

Varioussizes

Moderate Not veryeffective Medium

Interstitials –Rich media

Varied MostExpensive

VeryEffectiveHighresponse

High

Comparison of Web Advertising Methods

Type ofAdvertisement

WebAdvertisement

PrintAdvertisement

TV / Radio

Selectivity Very High High Low

Targetability High High Very High

Feedback High Low Very Low

Cost$1-$2 per click,

$4-$7 perimpression

Expensive More Expensive

Cost MethodCPMCPC

Depend on thepage size and

publisher

Depend onchannel and time

Trackability Easy tracking Difficult Difficult

MeasurementMethod

Impressions/ permonth

Volume of copiesper issue

Time (Sec)

Flexibility24 hours a day, 7days a week, 365days a year, canchange ad many

times

can’t change ad,Limited issues

can change adbut expensive

Comparison of Web and Traditional Media

Billing Methods

Models High LowCost-per-impression >$70 5Cost-per-click $1.00 $0.13Pay-per-sales 20% of sales 2% of salesPay-per period 20,000 5,000

A. Cost Per Impression (CPM) BannerB. Cost Per Click (CPC) BannerC. Pay Per Sales (Affiliate Web Sites)D. Pay Per Period (Online Sponsorship)

Sample Ad Rate Guide-Sample rates as of June, 2000

Impression Rate Impression 1 Month Run of Site 1 Month

500,000 $40/CPM 1,000,000+ 14/CPM 1-249,000 $29/CPM

860,000 $35/CPM 750k-999k $18/CPM 250-499k $28/CPM

2,000,000 $30/CPM 500k-749k $22/CPM 500-999k $27/CPM

4,000,000 $25/CPM 250k-499k $26/CPM 1.0-1.9 mil $24/CPM

8,500,000 $20/CPM 249k or less $30/CPM 2-2.9 mil $22/CPM

3-4.9 mil $20/CPM

5 mil+ $18/CPM

Nat’l Newspaper Site E-Mail Newsletters Search Engine/Portal

Major Players in Web Advertising

AD Networking Players:•24/7 Media•AdForce•AdKnowledge•DoubleClick•Flycast•MatchLogic

AD Serving Players:•Accipiter•AdForce•AdKnowledge•DoubleClick•Net Gravity•Real Media’s Open AdStream

Media Auction Site Players:•AdAuction•AdOutlet

Company 3 Month Period Ended in 4/00 V.S.DoubleClick 240% increaseEngage 1,188% increase24/7 Media 287% increaseVaueClick400% increase

Company 3 Month Period Ended in 4/00 V.S.DoubleClick 179% increaseEngage 1,033% increase24/7 Media 229% increaseVaueClick450% increase

Company 3 Month Period Ended in 4/00 V.S.DoubleClick 171% increaseEngage 1,330% increase24/7 Media 372% increaseVaueClick665% increase

Operating Expenses

Cost of Revenue

Revenue

Financial Status of Web AD Companies

Web Advertising - Problems and Issues

Problems:• How to measure of effectiveness of online advertising?

- Evaluation formula and metrics.

• How to track, measure, and analyze the AD viewers?- AD targeting- Measurement and analysis of AD viewers

• Standardization of web advertising:- Standardization of web advertising protocols- Standardization of web advertising management processes- Standardization of web AD in different technologies

• New technologies and methods to support web advertising in:- AD display and presentation- AD tracking and analysis- AD management and control