Advertising as a Business Model

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  • 1. 6 — BM — Advertising From Code to Product gidgreen.com/course
  • 2. Million Dollar HomepageFrom Code to Product Lecture 6 — BM — Advertising— Slide 2 gidgreen.com/course
  • 3. Aversion therapyFrom Code to Product Lecture 6 — BM — Advertising— Slide 3 gidgreen.com/course
  • 4. Tempted?From Code to Product Lecture 6 — BM — Advertising— Slide 4 gidgreen.com/course
  • 5. Lecture 6•  Introduction•  Types of targeting•  Price models•  Ad formats•  Ethical issues•  Web SudokuFrom Code to Product Lecture 6 — BM — Advertising— Slide 5 gidgreen.com/course
  • 6. Traditional advertising•  Mass media –  Newspapers, magazines, TV, radio, outdoor –  Local or national, not global•  Big one-time purchase•  One message to all recipients –  No filtering or personalization•  Success measured indirectly –  Did sales increase this month?From Code to Product Lecture 6 — BM — Advertising— Slide 6 gidgreen.com/course
  • 7. Digital advertising•  Digital media –  Web, mobile, email, desktop –  Global in scope•  Pay as you go, small increments•  Messages targeted by recipient –  Filtering, personalization•  Success measured directly –  Views, clicks, actionsFrom Code to Product Lecture 6 — BM — Advertising— Slide 7 gidgreen.com/course
  • 8. Underlining the difference“Half the money I spend on advertising iswasted; the trouble is I dont know whichhalf.” — John Wanamaker, store owner“Ninety-nine percent of advertising doesntsell much of anything..” — David Ogilvy, advertising executiveFrom Code to Product Lecture 6 — BM — Advertising— Slide 8 gidgreen.com/course
  • 9. US ad spending (+projected)$70B Web$60B Mobile$50B$40B (world totals approximately double)$30B$20B$10B 0 1996 2001 2006 2011 2016From Code to Product Lecture 6 — BM — Advertising— Slide 9 gidgreen.com/course
  • 10. Media and advertisingFrom Code to Product Lecture 6 — BM — Advertising— Slide 10 gidgreen.com/course
  • 11. !"#$%& #(") )*$+,- -#.,) ., /.$)* &#0/ +/ 1233 ! "#$%& $( %#)$*+#, -# .#$,*+/ 01%)$- (*+&# 23345 $6*+/ (-%1+/ (#78#+-*$. /%19- -%18/ -# :#%*1, ,#:*&-#,; <0-#% .1(*+/ (1)# 10 *-( 16#%$.. ($%# *+ 23=3 -1 >*(:.$?@A$++#%(5 "#$%& *+&%#$(#, *-( )$%B#- ($%# *+ -# 0*%(- $.0 10 23== -1 CDE 10 $,6#%-*(*+/ %#6#+8#(; ! Online ad breakdown F# :$(- (*G ?#$%( $6# (##+ H.$((*0*#, $,6#%-*(*+/ .1(*+/ )1%# -$+ $.0 10 *-( )$%B#- ($%# 10 %#6#+8#(5 9*- ($%: ,#&.*+#( 16#% -# :$(- 0*6# ?#$%(; H.$((*0*#, %#6#+8#( (-$I*.*J#, *+ 23=3 I8- $6# ,#&.*+#, *+ 23==5 9*- $ )$%B#- ($%# 10 KE5 ,19+ 0%1) -# =KE 10 $,6#%-*(*+/ %#6#+8#( -# 01%)$- &1))$+,#, *+ 2334; 456"$*.).,- /+$#* )&#$" 78 +/ *+*#0 $"6",9":; IAB Internet Advertising Revenue Report, Sept 2011 60% 2006 2007 2008 2009 2010 HY 2011 50% 40% 30% 20% 10% 0% Search Display/ Classifieds Rich Media & Lead Sponsorships Banners Digital Video Generation L M1%)$- ,#0*+*-*1+( )$? $6# &$+/#, 16#% -# -*)# :#%*1, ,#:*&-#,5 I1- 9*-*+ -# (8%6#? :%1&#(( $+, ,#0*+*-*1+$..? I? (8%6#? %#(:1+,#+-(;From Code to Product Lecture 6 — BM — Advertising— Slide 11 gidgreen.com/course
  • 12. How it works•  Direct sales –  Hard to find advertisers –  Transaction cost vs volume•  Ad networks –  Aggregate 1000s of publishers + advertisers –  Copy-paste code snippet –  Take 20%—50% of revenue•  Big sites use bothFrom Code to Product Lecture 6 — BM — Advertising— Slide 12 gidgreen.com/course
  • 13. Top US online ad networksFrom Code to Product Lecture 6 — BM — Advertising— Slide 13 gidgreen.com/course
  • 14. Top US mobile ad networks AdMob (Google) Other 24% 44% iAd (Apple) 15% Millennial Media 17% 2011 figures from IDCFrom Code to Product Lecture 6 — BM — Advertising— Slide 14 gidgreen.com/course
  • 15. Lecture 6•  Introduction•  Types of targeting•  Price models•  Ad formats•  Ethical issues•  Web SudokuFrom Code to Product Lecture 6 — BM — Advertising— Slide 15 gidgreen.com/course
  • 16. GeographyFrom Code to Product Lecture 6 — BM — Advertising— Slide 16 gidgreen.com/course
  • 17. DemographicsFrom Code to Product Lecture 6 — BM — Advertising— Slide 17 gidgreen.com/course
  • 18. Traffic sourceFrom Code to Product Lecture 6 — BM — Advertising— Slide 18 gidgreen.com/course
  • 19. ContextualFrom Code to Product Lecture 6 — BM — Advertising— Slide 19 gidgreen.com/course
  • 20. ContextualFrom Code to Product Lecture 6 — BM — Advertising— Slide 20 gidgreen.com/course
  • 21. BehavioralFrom Code to Product Lecture 6 — BM — Advertising— Slide 21 gidgreen.com/course
  • 22. BehavioralFrom Code to Product Lecture 6 — BM — Advertising— Slide 22 gidgreen.com/course
  • 23. Affiliate advertising •  Direct sales –  But no transaction costs •  Payment on sale only –  Open to allFrom Code to Product Lecture 6 — BM — Advertising— Slide 23 gidgreen.com/course
  • 24. Affiliate advertisingFrom Code to Product Lecture 6 — BM — Advertising— Slide 24 gidgreen.com/course
  • 25. Real-time bidding (RTB)•  Most online ads bought in advance –  Volumes and targeting predefined•  RTB ads bought in real-time –  User visits page with RTB ad –  Impression auctioned to buyers –  Highest bid wins•  Works like an ad network•  10% of display ads, projected 27% in 2015From Code to Product Lecture 6 — BM — Advertising— Slide 25 gidgreen.com/course
  • 26. Lecture 6•  Introduction•  Types of targeting•  Price models•  Ad formats•  Ethical issues•  Web SudokuFrom Code to Product Lecture 6 — BM — Advertising— Slide 26 gidgreen.com/course
  • 27. Fixed price•  Predefine: –  Where ads will show –  Proportion of time –  Time period (week/month)•  Direct sales only•  No tracking required –  Advertiser can monitor performance•  Money left on table?From Code to Product Lecture 6 — BM — Advertising— Slide 27 gidgreen.com/course
  • 28. Cost per impression•  Priced in CPM = cost per mille (1000)•  Advertiser sets: –  CPM rate –  “Above the fold”? –  Limits per day, per user•  Popular for display advertising –  Viewing ad builds brand recognition•  Impression trackingFrom Code to Product Lecture 6 — BM — Advertising— Slide 28 gidgreen.com/course
  • 29. Pay per click•  Priced in CPC = cost per click•  Advertiser more flexible –  Click = user intent•  Popular for search advertising –  Auction between advertisers•  Impression and click tracking –  CTR = click-through rateFrom Code to Product Lecture 6 — BM — Advertising— Slide 29 gidgreen.com/course
  • 30. Pay per action•  Priced in CPA = cost per action (sale)•  Suits advertiser perfectly –  Only pay if you get paid•  Popular for affiliate advertising –  Any publisher will do•  Impression, click and conversion tracking –  CR = conversion rate –  Publisher forced to trust advertiserFrom Code to Product Lecture 6 — BM — Advertising— Slide 30 gidgreen.com/course
  • 31. Total revenue Revenue = Fixed price Impressions × CPM/1000 Impressions × CTR × CPCImpressions × CTR × CR × CPAFrom Code to Product Lecture 6 — BM — Advertising— Slide 31 gidgreen.com/course
  • 32. Total revenue Revenue = $1,000 500k × $2/1000 500k × 2.5% × $0.08 500k × 2.5% × 2% × $4From Code to Product Lecture 6 — BM — Advertising— Slide 32 gidgreen.com/course
  • 33. Defaults and thresholds•  Defaults –  What to show if there’s no ad•  eCPM = equivalent CPM –  All you really care about•  Threshold –  Minimum required eCPM•  Fill rate•  Check the definitions!From Code to Product Lecture 6 — BM — Advertising— Slide 33 gidgreen.com/course
  • 34. Ad network exampleFrom Code to Product Lecture 6 — BM — Advertising— Slide 34 gidgreen.com/course
  • 35. AdSense exampleFrom Code to Product Lecture 6 — BM — Advertising— Slide 35 gidgreen.com/course
  • 36. Real-world eCPMs Type of site Example 300x250 eCPM Forum $0.25 Gaming $1.50 Fashion $4.00 Real estate $8.00 Local newspaper $10.00 Technology $15.00 Travel $20.00 Investments $40.00From Code to Product Lecture 6 — BM — Advertising— Slide 36 gidgreen.com/course
  • 37. Lecture 6•  Introduction•  Types of targeting•  Price models•  Ad formats•  Ethical issues•  Web SudokuFrom Code to Product Lecture 6 — BM — Advertising— Slide 37 gidgreen.com/course
  • 38. Online banner sizes (IAB) Full banner 468 x 60 Leaderboard 728 x 90 Wide sky- scraper 160 x 600 Medium rectangle 300 x 250From Code to Product Lecture 6 — BM — Advertising— Slide 38 gidgreen.com/course
  • 39. Banner ad code<!-- Casale Media: 336x280, 300x250 (Rectangle) --><script type="text/javascript">var CasaleArgs = new Object();CasaleArgs.version = 2;CasaleArgs.adUnits = "6,4";CasaleArgs.casaleID = 76546;</script><script type="text/javascript" src="http://js.casalemedia.com/casaleJTag.js"></script><!-- DO NOT MODIFY -->From Code to Product Lecture 6 — BM — Advertising— Slide 39 gidgreen.com/course
  • 40. Size vs CTR (AdSense)Click-through rate Banner area From Code to Product Lecture 6 — BM — Advertising— Slide 40 gidgreen.com/course
  • 41. InterstitialsFrom Code to Product Lecture 6 — BM — Advertising— Slide 41 gidgreen.com/course
  • 42. Pop-up ads •  Hated by users •  Pop-up blockers common •  Also: pop- underFrom Code to Product Lecture 6 — BM — Advertising— Slide 42 gidgreen.com/course
  • 43. Other online formats•  Floating ads•  Mouseover ads –  Expanding –  Audio•  In-video –  Pre, mid, post-roll•  In-map•  AdvertorialsFrom Code to Product Lecture 6 — BM — Advertising— Slide 43 gidgreen.com/course
  • 44. In-app ad formats Mobile banner 320 (or 300) x 50 Full screen (or almost) 320 x 480 (or 440)From Code to Product Lecture 6 — BM — Advertising— Slide 44 gidgreen.com/course
  • 45. In-app state of play•  Many other ad sizes –  320x250, 320x320, 320x350, …•  Landscape getting started –  480x50, 480x60, 480x70, …•  iPad/tablets to use web ad sizes? –  728x90, 300x250•  Retina display scales x2From Code to Product Lecture 6 — BM — Advertising— Slide 45 gidgreen.com/course
  • 46. Ads in email •  Past: text •  Now: images –  Not always displayed •  Direct sales •  Some small networksFrom Code to Product Lecture 6 — BM — Advertising— Slide 46 gidgreen.com/course
  • 47. Lecture 6•  Introduction•  Types of targeting•  Price models•  Ad formats•  Ethical issues•  Web SudokuFrom Code to Product Lecture 6 — BM — Advertising— Slide 47 gidgreen.com/course
  • 48. Core problems•  Ceding control of user experience –  Weakens brand/message –  Bad ads and bad sites•  Users don’t like ads –  Can harm word of mouth•  An effective ad is clicked –  User gone elsewhere –  To competitor?From Code to Product Lecture 6 — BM — Advertising— Slide 48 gidgreen.com/course
  • 49. Privacy and cookies•  Ad networks and cookies –  Track users within sites –  Worse: across sites –  Enables behavioral targeting•  User’s identity not revealed –  But: IP address –  Google searchesFrom Code to Product Lecture 6 — BM — Advertising— Slide 49 gidgreen.com/course
  • 50. Bad ads: UglyFrom Code to Product Lecture 6 — BM — Advertising— Slide 50 gidgreen.com/course
  • 51. Bad ads: OffensiveFrom Code to Product Lecture 6 — BM — Advertising— Slide 51 gidgreen.com/course
  • 52. Bad ads: MisleadingFrom Code to Product Lecture 6 — BM — Advertising— Slide 52 gidgreen.com/course
  • 53. Bad sites: SpywareFrom Code to Product Lecture 6 — BM — Advertising— Slide 53 gidgreen.com/course
  • 54. Bad sites: GamblingFrom Code to Product Lecture 6 — BM — Advertising— Slide 54 gidgreen.com/course
  • 55. Bad sites: ScamsFrom Code to Product Lecture 6 — BM — Advertising— Slide 55 gidgreen.com/course
  • 56. User complaints“Your advertisement in support ofRick Santorum is enough to causeme to use some other website forthis game. I will avoid cominghere again!”“Why do you accept advertisingfrom nomorerack? They are an outand out scam. Read the feedback.”From Code to Product Lecture 6 — BM — Advertising— Slide 56 gidgreen.com/course
  • 57. Ad network filtersFrom Code to Product Lecture 6 — BM — Advertising— Slide 57 gidgreen.com/course
  • 58. Lecture 6•  Introduction•  Types of targeting•  Price models•  Ad formats•  Ethical issues•  Web SudokuFrom Code to Product Lecture 6 — BM — Advertising— Slide 58 gidgreen.com/course
  • 59. Amazon adsFrom Code to Product Lecture 6 — BM — Advertising— Slide 59 gidgreen.com/course
  • 60. Direct ad dealsFrom Code to Product Lecture 6 — BM — Advertising— Slide 60 gidgreen.com/course
  • 61. AdSense + our own productsFrom Code to Product Lecture 6 — BM — Advertising— Slide 61 gidgreen.com/course
  • 62. Banners on puzzle page +4% Bright static banners +2% Quiet static banners +0% -2% -4% -6% Moving banners -8% 7 Aug 7 Sep 8 Oct 8 NovFrom Code to Product Lecture 6 — BM — Advertising— Slide 62 gidgreen.com/course
  • 63. The big breakFrom Code to Product Lecture 6 — BM — Advertising— Slide 63 gidgreen.com/course
  • 64. AdSense + new affiliationFrom Code to Product Lecture 6 — BM — Advertising— Slide 64 gidgreen.com/course
  • 65. Very highly targetedFrom Code to Product Lecture 6 — BM — Advertising— Slide 65 gidgreen.com/course
  • 66. Where we are today•  Ads are biggest source of revenue –  Display ads after puzzle –  AdSense above puzzle –  Direct deals•  3 big display ad networks –  Monitor performance weekly –  Rebalance in response –  Ad quality a constant challengeFrom Code to Product Lecture 6 — BM — Advertising— Slide 66 gidgreen.com/course