ABC’s of Brand AdvertisingOctober 20, 2009Shari Gunn, KaboodleOnline Advertising and Social Media Summit

What do you want to get out of today?

Today’s Agenda

Online Advertising Industry Snapshot Basics of Brand Advertising Online Lifecycle of a Brand Campaign Ad Networks and the Path to

Monetization Final Thoughts & Wrap-Up

Let’s Get Personal

Write down the 3 – 5 content sites that you visit on a regular basis

Name an advertiser or advertising campaign that you remember seeing on one of those sites

Online Advertising Industry Snapshot

Online Advertising Ecosystem

Full-service Media

planning/ buying

Creative Interactive Etc.

Advertiser

Media Outlets

Advertising

Agency

TV Print Radio Internet Outdoor Etc.

Single product/ brand

Multiple brands

Local National Etc.

The Changing Media World

Changing media landscape An industry in constant transition Evolving relationship with the consumer Consumers are in control of their media

consumption Growth in social media Economic pressures on both consumers and

advertisers Still a big discrepancy between consumers’

media consumption and where ad budgets are spent

Continued Growth in Spending, but at a Slower PaceUS Online Advertising Spending Growth (%)

Source: eMarketer, April 2009

Search Continues to Lead Online Ad Spending

2008 Internet Ad Revenues by Ad Format

Source: IAB / PwC, March 2009

Online Advertising Revenue is Highly Concentrated with a Few Publishers

Source: IAB / PwC, March 2009

The ten leading ad-selling companies account for nearly three-quarters of total revenues

Social Network Ad Spending Growth Forecast to Slow

US Online Social Network Advertising Spending (in millions and % change)

Source: eMarketer, December 2008

(33.8%)

(10.2%)

(3.1%)

(6.3%)

(6.7%)

(8.3%)

Advertising on Social Networking Sites:Trends and Implications Socnet sites generally have not done well

with ads

BUT 62% of Generation Y’ers have visited a fan page on a socnet and nearly half actually joined *

Advertisers want proof that increasing investment in will yield measurable benefits

Implications for publishers? * Source: Pace University Study, 2008

Back to the Basics

Meet the Interactive Advertising Bureau

More than 375 leading media and tech companies who are responsible for selling 86% of online advertising in the US

The IAB is dedicated to: The growth of the interactive advertising marketplace Evaluating and recommending standards and practices Fielding critical research on interactive advertising Creating a world-class medium that provides and

delivers the highest level of transparency and accountability

Educating marketers, agencies, media companies and the broader business community about the value of interactive advertising

The IAB Universal Ad Package

A set of four ad units that all compliant IAB member publishers have agreed to support

180x150300x250

728x90

160x600

Audience Dynamics & Media Consumption Site usage creates advertising impressions (availability or

“avails”)

Audience dynamics influence site traffic patterns Heavy users (39%) generate 73% of all page views Light users (36%) generate 6% of all page views

Challenge: Reach the light users AND avoid serving disproportionate

number of impressions to the heavy users (law of diminishing returns)

Defining inventory for advertisers Site-side measurement sources (Omniture, Google Analytics,

etc) Industry measurement services (comScore, Nielsen//NetRatings)

The Mechanics:Reach, Frequency and Pricing

Reach (%) Percent of individuals who visit a site compared to total

number of online individuals (during a given time period)

Frequency The number of ads an average person could be exposed

to in a given time period Pricing

CPM: cost per thousand (impressions) CPM = Total media value / (impressions/1000) Examples:

A $100,000 buy at a $12 CPM would yield 8.33 million impressions

12 million impressions at a $6.25 CPM would yield a total media buy of $75,000

More Mechanics:Sell-Through and Effectiveness

Sell-through % of ad inventory actually sold as opposed to traded

or bartered Varies by publisher, site section, ad format and

season

eCPM (Effective CPM) For a campaign: takes into account over-delivery,

bonus impressions etc. For a site: can also blend different pricing models

Revenue per Page Internal measure taking into account all ad

placements

Example:Using Media Assets to Lower eCPM Scenario:

Client has given you a budget of $65,000 They want a mix of placements on your site They also want an eCPM of between $7.00 and $7.50 You know that they won’t buy unless they get at

least half of the total impressions as 300x250 units Your rates are:

300x250: $10.00 CPM 728x90: $7.50 CPM

You also have some other media assets (other ad units, sponsorship placements, text links, etc.) at your disposal

Example:Using Media Assets to Lower eCPM

Ad Unit CPM Impressions

Media Value

300x250 $ 10.00 6.5 million $65,000eCPM = $10.00

Ad Unit CPM Impressions

Media Value

300x250 $ 10.00 5 million $50,000

728x90 $ 7.50 2 million $15,000

TOTAL 7 million $65,000eCPM = $65,000 = $9.28

(7 million / 1000)

Example:Using Media Assets to Lower eCPM

Ad Unit CPM # of Impressio

ns

Media Value

300x250 $ 10.00 5 million $50,000

728x90 $ 7.50 2 million $15,000

Text links $ 0 2 million $ 0

TOTAL 9 million $65,000

eCPM = $64,000 = $7.11(9 million / 1000)

Example:Revenue Per Page

Example Revenue Per Page Calculation:

Banner ($5 CPM) = $0.005 per pgRectangle ($10 CPM) = $0.010

per pgSkyscraper ($2 CPM) = $0.002

per pg2nd Rectangle ($1 CPM) = $0.001

per pg

Total revenue per page = $0.018

The Most Accountable of All Media:Measuring Success Advertisers’ perspective – it’s all about ROI

Click-through rate Relevant actions/engagement Post-click through activity Brand awareness

Publishers’ challenges Demonstrating that online exposure can lead to

delayed offline actions/behaviors Providing effective reach and contextual relevance How do we optimize and provide the greatest

value to our advertising partners (and the highest rates for us)?

Targeting

Not all ad impressions are created equal! “Run-of-site” or “run-of-network” versus

targeted placements Create “relevance” for the audience

and therefore, greater value for the advertiser

Command a higher CPM Help marketers make messages

more relevant

Types of Targeting

Demographic Age Gender Income Occupation Household size

Defined by overall site demos, survey feedback, user registration data

Types of Targeting

Geographic Site or customer

registration databases (for DMA, area codes, time zones etc.)

Can ask that visitors type in a zip code

IP addresses Incur additional

expense to set up

Types of Targeting

Contextual Placing ads on

web pages that have a relationship to the content of that page

Creates relevance Users in more

receptive frame of mind

Types of Targeting

Behavioral Show ads based

on what you know about that user’s behavior patterns

Contextual targeting can be expensive and inventory sells out fast

Types of Targeting

Daypart Consumers

choose and use media throughout the day

Workday routines shape online consumption (peaks in mornings, dinner and prime time hours)

Advanced Ad Formats:Rich Media

Ads with which users can interact (as opposed to solely animation)

Traditional banner placements as well as interstitials, take-overs, floating ads, etc.

Advanced Ad Formats:Rich Media (continued)

Advanced Ad Formats:Video

Video Traditional ad placements: Pre-roll, Mid-

roll, Post-roll High demand for premium video

inventory trading at 2-3x display CPMs (emphasis on “premium”)

Advanced Ad Formats:Online Games

Advergames Plot integration Pre-roll Inter-level advertising Dynamic in-game advertising Sponsorships Link in-game actions to real world

behavior

Gaming Example

Seventeen.com and Secret Deodorant

Gaming Example

Lifecycle of a Brand Campaign

Get to Know the Key Players

Full-service Media

planning/ buying

Creative Interactive Etc.

Advertiser

Media Outlets

Advertising

Agency

TV Print Radio Internet Outdoor Etc.

Single product/ brand

Multiple brands

Local National Etc.

Let’s Look at An Example…

Individual Brand Managers

Media Planning and Buying

Creative

Lifecycle of a Brand Advertising Campaign

Insertion Order

Insertion Order

Client Request

for Proposal

Client Request

for Proposal

Monitoring & Optimization

Campaign Execution

Reporting & Analysis

Review

Lifecycle of a Brand Advertising Campaign

Insertion Order

Insertion Order

Client Request

for Proposal

Client Request

for Proposal

Monitoring & Optimization

Campaign Execution

Reporting & Analysis

Review

Focus: The RFP Process

Agency issues RFP

Submit proposal

Agency reviews all proposals

Agency narrows down pool; asks for revisions

Submit revised proposal

Agency conducts client review

Agency makes recommendations to

client

Approval from client and verbal “yes” to publisher

Signed Insertion Order!

The Role of Ad Networks

Ad Networks:The Long Tail of Online Advertising The emergence of ad networks

Top 100 publishers sell only 40% of their inventory through direct means

Provide small and mid-sized publishers with more advertising revenues than would otherwise be possible

Aggregate traffic that was previously too difficult to buy or which was otherwise undesirable

Small publishers can’t afford their own sales force (and support) Advertisers (or their agencies) can’t manage individual

relationships with hundreds (or even dozens) of sites Brand advertisers need mass reach; someone needs to

aggregate

Growth and fragmentation 300 – 400 ad networks today (up from only 15 seven years ago) Use of ad networks has increased from 5% of sold inventory in

2006 to 30% in 2007 (Source: Bain & Company)

Types of Ad Networks

General (ex. Advertising.com) Geographic Contextual (ex. Google) Behavioral (ex. Tacoda, Revenue

Science) Vertical (ex. Glam, Jumpstart

Automotive) Pricing (CPM, CPC, CPA, CPE)

Let’s Look at an Example

865th most

trafficked site

(Quantcast)

Advertising from

McDonald’s via

DoubleClick ad network

Advertisers (or agencies) arrange a buy

with DCLK and may not know what site their

banner will run on

How Do Ad Networks Differ?

Points of differentiation Targeting, technology, types of inventory,

media type, etc.

Pricing/business models Representation Direct acquisition via revenue share Direct acquisition via arbitrage

“Blind” vs. transparent

Benefits & Challenges of Using Ad Networks

Monetization Access to large

advertisers Clear excess

inventory Choice and

flexibility No investment in

a salesforce

Low prices and price erosion

Sales channel conflicts

CPM arbitrage Managing pricing

and yield Relationship

management

Benefits Challenges

Why Do Advertisers (and Their Agencies) Use Ad Networks?

Extended reach (and targeted) Leverage residual impressions at

large publishers for a lower price Too difficult to screen and manage

relationships with large numbers of small sites

Pricing efficiencies; reduce total campaign costs

Implications for Publishers

Challenge of potential price erosion

Need to better support the value of premium inventory – through more innovative offerings and/or reducing units available

Can work with multiple networks for optimization, but requires resources

Need to actively manage secondary channels, both to maximize yield and to safeguard strategic position

Final Thoughts:What’s the Right Path to Monetization? Depends on your business, traffic, goals, audience,

reach, etc.

Experiment with Google AdSense No long-term commitment No transparency on revenue share Most flexibility and minimal resources required Get some baseline metrics Ties into Google Ad Manager (ad serving)

Look to ad networks for deeper support Test a few and optimize Exclusive vs. non-exclusive relationships; beware of

contract terms

Final Thoughts:When Do You Build a Direct Sales Force? Maybe never! Do the math

5 million ad impressions per month at a 40% sell-through at $8 CPM = $16,000

Resources Sales manager, marketing/sales solutions,

assistant sales manager/planner, ad trafficking/operations, reporting & analytics, billing

Payment cycles and the impact on your working capital

Final Thoughts:How to Get RFP’s from Agencies Agencies want and need options Reach out to MD’s, AMD’s and Media

Planners Make a connection between your

audience/content and the agency’s client Research and industry trends Leverage your “launch” period Be prepared to talk about aggressive

pricing, low minimums, custom opportunities and ad units

Your Homework Assignment

Who’s your customer? Who is your site, product, service

meant to serve? What is your unique value

proposition? How do you engage your customers

and how is that unique? What is the monetization strategy

now? What do you think it could be?

Useful Resources

Interactive Advertising Bureau (www.iab.net) Advertising Research Foundation (www.thearf.org) comScore (www.comscore.com) Nielsen//NetRatings (www.nielsen-online.com) Forrester Research (www.forrester.com) eMarketer (www.emarketer.com) ClickZ (www.clickz.com) MediaPost (www.mediapost.com) Word of Mouth Marketing Assoc. (www.womma.org)

Contact Information

Shari GunnVP Advertising & Business DevelopmentKaboodle, Inc.e: shari@kaboodle.comp: 408.328.7019