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Interactive Ads presentation for MIT Sloan project for CISCO Systems
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Interactive Ads presentation for MIT Sloan project for CISCO Systems Presentation Transcript

  • 1. New Business Model in Professional Sports enabled by Interactive and Targeted Advertising Ranning Li Grace Montesano Mikhail Turilin 1
  • 2. How much value can interactive/ targeted advertising bring to sport venues? 2
  • 3. Stadiums donʼt capture the value of in-stadium advertising Ads assets Revenue Naming rights Naming rights Sponsorship contracts In-stadium ads In-stadium advertising Banners visible on TV Banners visible on TV “The most important part of stadium Effective advertising deals is banners visible on TV. Other types are not so important...” Brands want Targeted “We are looking for ways to increase revenue from in-stadium advertising.” Measurable Fenway Park 3
  • 4. Interactive video ads are 3x more effective than regular TV ads Dedicated advertiser location (DAL) Research Question: Do interactors with interactive TV ads exhibit a level of ad recall equal to or greater than the level of ad recall associated with three exposures to a regular TV ad? Recall rate 90% 80% Explore BMW 78% 79% 70% 60% 50% 40% 30% 20% 10% 0% DAL video ads 3 exposures of regular TV ads * Please see appendix slides for more information on ad format. Comparison of three interactive television ad formats, Steven Bellman, Anika Schweda, & Duane Varan, Journal of Interactive Advertising, Vol 10 No 1 (Fall 2009), pp. 14 34. 4
  • 5. Static image ad spending is decreasing while interactive media spending is increasing by 17% annually Forecast: US Interactive Marketing Spend, Forecast: US Display Advertising Spend, 2009 To 2014 2009 To 2014 $ millions Chart 2 CAGR $ millions Chart 1 $60,000 34% $20,000 11% 27% $45,000 $15,000 17% $30,000 $10,000 15% $15,000 $5,000 $0 $0 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Social media Online video Email marketing Rich media (excl. video) Mobile marketing Static image Display advertising Contextual ads Search marketing Source: March 2009 US Interactive Marketing Forecast Source: Forrester's Online Advertising And Classifieds Online Survey Forecast, 4/09 (US only) 5
  • 6. Traditional stadium sponsors will increase interactive media spending by 14%–22% annually US Interactive Marketing Forecast, 2009 To 2014 Traditional Stadium Sponsors Emerging brands $ millions CAGR $ millions CAGR $20,000 $20,000 15% 19% $15,000 22% $15,000 19% 12% $10,000 $10,000 14% $5,000 $5,000 23% $0 $0 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Telecommunications Media and entertainment Consumer goods Automotive Retail and wholesale trade Financial services Other Source: Forrester Research Interactive Advertising Forecasts, 4/09 and 10/09 (US only) 6
  • 7. Stadium will lose 50% sponsorship revenue in the next five years US Interactive Marketing Forecast, 2009 To 2014 4% 3% 3% 3% 3% 2% 100% 34% 33% 32% 38% 37% 36% 75% 50% 61% 63% 64% 66% 58% 60% 25% 0% 2009 2010 2011 2012 2013 2014 Performance-based Impression-based Sponsorship Source: Forrester's Interactive Advertising Model, 4/09 (US only) 7
  • 8. Stadium can implement interactive and targeted advertising system Advertising Vehicles Banner Ad In-Stream Ad Smartphone Hall Screen Buy Pepsi Buy Pepsi Buy Pepsi Opt-in and behavioral targeting - 66% Limited number of eyeballs Limit is a number of Coupon Sweepstakes Replays impressions each visitor can physically have. REPLAY Putting too much advertising will have negative user experience. Fenway Park Stadium Account Manager 8
  • 9. Interactive ads can increase annual revenue up to $46M per baseball stadium In-stream Banner $ 358K $ 6.75 $ 46M 77 63 Total Per Game Per visitor For 1 Year in-stream banner ads/game/fan ads/game/fan 53,000 4M 3.3M Sold impressions - 90% Revenue fans/game in-stream banner ads/game ads/game In-stream Banner In-stream Banner 3x $90 $30 Targeted CPM CPM Tightly 70% 2.8M 2.3M 2.6M 2.1M 2x $231K $63K 2x impressions impress impressions impress $45 $15 Targeted Loosely 30% CPM CPM 1.2M 1.0M 1.1M 0.9M $50K $14K impress impress impress impress 9
  • 10. Stadium Supply/Demand Evolution 1 Interactive ads increases revenue $ Revenue = Ticket Revenue + Ad Revenue Ads Demand $6.75 Price 1 Demand 1 Sponsorship Supply1 Q 10
  • 11. Stadium Supply/Demand Evolution 1 Interactive ads increases revenue $ Revenue = Ticket Revenue + Ad Revenue Ads Demand $6.75 Price 1 Ticket Demand 1 Sponsorship Revenue 1 Supply1 Q 10
  • 12. Stadium Supply/Demand Evolution 1 Interactive ads increases revenue $ Revenue = Ticket Revenue + Ad Revenue Ads Demand Interactive Ads Revenue 1 $6.75 Price 1 Ticket Demand 1 Sponsorship Revenue 1 Supply1 Q 10
  • 13. Stadium Supply/Demand Evolution 2 Increased fan experience drives ticket demand $ Ads Demand Interactive Ads Revenue 1 Price 2 Demand 2 Price 1 Ticket Revenue 2 Demand 1 Sponsorship Supply1 Q 11
  • 14. Stadium Supply/Demand Evolution 3 Increased demand enables stadium to increase supply ∆Revenue = ∆Supply * Price3 - $ Supply1* (Price 2- Price3) + ∆Supply * Ad Per User Price 2 Ads Demand Demand 2 Price 1 Demand 1 Sponsorship Supply1 Supply 2 Q 12
  • 15. Stadium Supply/Demand Evolution 3 Increased demand enables stadium to increase supply ∆Revenue = ∆Supply * Price3 - $ Supply1* (Price 2- Price3) + ∆Supply * Ad Per User Price 2 Ads Demand Interactive Ads Revenue 3 Price 3 Demand 2 Price 1 Ticket Revenue 3 Demand 1 Sponsorship Supply1 Supply 2 Q 12
  • 16. Stadium Supply/Demand Evolution 4 Ads auction system enables first degree price discrimination $ Interactive Ads Revenue 4 Price 3 Demand 2 Ticket Revenue 3 Sponsorship Supply1 Supply 2 Q 13
  • 17. Conclusions • Stadiums donʼt capture large part of the value of in- stadium advertising • Brands are starting to switch to targeted/interactive advertising • Interactive/targeted advertising could be 3-12 times more effective • Stadiums could be converted to interactive/targeted advertising vehicle • New revenue to stadium could increase up to $46M per year* * For Baseball. Revenue could be different for each sport because of different attendance and different amount of impressions delivered 14
  • 18. Questions?
  • 19. Appendixes 16
  • 20. Brands prefer measurable, targeted and interactive ads “We spent millions of dollars on sponsorship contracts, but we donʼt know the results of the advertising in stadium.” PepsiCo Measurable “In some cases, like search and online advertising, we have been able to measure ROI driving true incremental volumes and true increases in sales.” VP, Global Interactive Marketing The Coca-Cola Co. “Target group for each of our brands is around 20% of population. We want Targeted advertising to be as targeted to these consumers as possible!” PepsiCo “ We try to experiment with different types of interactive advertising. We believe itʼs more efficient.” Effective “Our experiment with targeted advertising on Facebook for Easy Tone had a great effect in brand awareness.” Reebok 17
  • 21. Interactive ads are more effective in achieving marketing objectives than traditional ads US Marketers' Attitudes Regarding the Effectiveness of Interactive Marketing Compared to Traditional Advertising, by Goal, Q3 2007 (% of respondents) Chart 1 Selling products online 87% 10% 3% Driving online traffic 87% 10% 3% Delivering promotions 79% 19% 2% Generating leads 75% 15% 10% Building loyalty 64% 28% 9% Increasing consideration 61% 32% 8% Creating brand awareness 56% 33% 11% Selling products offline 50% 32% 19% Driving traffic to a store 47% 35% 18% 0% 25% 50% 75% 100% More effective Neither more nor less effective Less effective Source: Forrester Research, Teleconference: The US Interactive Marketing Forecast 2007-2012, January 4, 2008 18
  • 22. Interactive ads are the second most influential among online ads Chart 1 Types of Online Ads that Most Influence US Internet Users, by Age, October 2007 (% of respondents) 67% 77% Search engine result ads 87% 87% 55% 58% Interactive ads that provide information or entertainment 68% 73% 53% 59% Banner ads 63% 71% 36% 30% Video pre-roll ads 28% 28% 21% 19% Video post-roll ads 19% 17% 22% 22% Embedded video ads 12% 9% 23% 19% Ads or products placed within online virtual worlds 14% 7% 23% 16% Ads or products placed within video games 8% 8% 0% 23% 45% 68% 90% Millennials (13-24) Generation X (25-41) Boomers (42-60) Matures (61-75) Source: Deloitte Development and Harrison Group, "The State of the Media Democracy Second Edition," provided to eMarketer, January 2008 19
  • 23. Only 7.4% of US marketers think interactive ads have lower ROI Interactive vs. Traditional Marketing ROI According to US Marketers, 2007-2009 (% of respondents) 40.0% 34.0% 30.0% 28.7% 20.0% 13.9% 10.0% 9.0% 7.4% 7.0% 0% e ow e re e l y bl bl bl pp su kn ita ita ita ea ta of of of t m no no pr pr pr t Do no es e y ss ll or ua Le Do Do M Eq Source: PROMO magazine, "2009 Promo Interactive Marketing Survey" conducted by Penton Research, April 1, 2009 20
  • 24. The effectiveness of Interactive marketing will increase and interactive ads grow at the expenses of traditional media US Marketers Perception of the Effectiveness of Interactive Media in 9 Next Three Years Chart the Interactive marketing tactics Created social media Online video Search engine optimization (SEO Mobile marketing Paid placement in social media Email marketing Paid search listings Online classifieds or directory listings Display advertising through Ad Networks Display advertising directly through publishers Traditional marketing tactics Direct mail Television Magazines Outdoor Telemarketing Radio Newspapers Yellow pages 0% 25% 50% 75% 100% Increase Stay the same Decrease Not applicable Source: March 2009 US Interactive Marketing Forecast Online Survey 21
  • 25. Video Ads are up to 4x More Effective than Other Types of Display Ads Media Advertising Effect, % comparing to control group Rich Media with Video 1.9 2.3 1.16 Rich Media without Video 0.9 0.46 0.5 GIF and JPG -0.15 1.08 0.41 Simple Flash 0.360.150.26 MarketNorms, All Display Ads 1 0.7 0.6 -1.00 0 1.00 2.00 3.00 4.00 5.00 6.00 Aided Brand Awareness Increase Brand Favorability Increase Purchase Intent Increase Statistically significant difference between control Source: Dynamic Logic MarketNorms®, 2008. Fixed frequency level of 1. and exposed groups at 90% confidence level 22
  • 26. Technology enables opportunities to improve fan experience Replay Score update Food delivery Replay Technology is scoring in America's favorite sport, baseball, by making the ballparks high-tech. Technology has made it to first base with fan satisfaction. Many of the newly designed ballparks are attempting to make the "Park Experience" the best spectator event possible. Sandy Berger, Technology Reporter 23
  • 27. Is Opt-In Value Building Exercise? Weʼre seeing about two-thirds of people take advantage of these 66% user-choice types of ads [ability to choose between two or three ads]. Jean-Paul Colaco Senior Vice President of Advertising, Hulu.com Why such big difference? US Internet User Who Would Like Websites to Show Information Personalized to their Interests, June-July 2009 Show you ads tailored to your interest 32% 66% 2% 32% Give you discounts tailored to your interest 47% 49% 4% 0% 25% 50% 75% 100% Yes No Maybe Source: Annenberg School for Communication, University of California Berkeley School of Law and the Annenberg Public Policy Center 24
  • 28. Opt-in Rate is High for “Relevant Marketing” Types of Products for Which US Mobile Phone Owners* Would Be Interested in Receiving Location-Based Mobile Alerts, July 2009 (% of respondents) Restaurants 53% Movie/event tickets 43% Weather 39% Clearance sales 37% Pizza 31% Clothing 30% Fast food 27% Electronics 25% Music 24% Happy-hour specials 21% 0% 15% 30% 45% 60% Source: 1020 Placecast survey conducted by Harris Interactive, October 15, 2009 25
  • 29. In-stream has three times higher CPM than banners Average Direct Sales CPMs for Online Advertising Sold US Online Video Advertising CPMs and Sell-Through by Select US Web Publishers, by Type, 2007 Rates, by Content Category, August 2008 Company A 98 17 Sell- 43 Example CPMs through Company B 14 rate* 26 Video ads Company C 15 Display ads Premium FOX, NBC, 35 content $35-$50 90% Company D CBS 6 creators Company E 16 6 Content MSN, Yahoo!, aggregator $20-$35 50% 54 AOL Comany F 24 s/creators Company G 32 User- Bebo, 23 generated Metacafe, $10-$15 10% Average 43 content YouTube 15 * Sell through rate - percentage of impressions sold 0 25 50 75 100 Source: YuMe and Collins Stewart LLC, "Global Internet: Search Source: Bain & Company and the Interactive Advertising Bureau Engine Strategies San Jose, Key Takeaways from Day 1," August 19. (IAB), "Bain/IAB Digital Pricing Research," August 2008 2008
  • 30. Tightly-targeted Impression costs 2x More than Loosely-targeted, yet Cost Per Impact is 1/3 Less Tightly-targeted Loosely-targeted The Buy CPM $10 $5 Total Impressions 10 million 10 million Total Campaign Cost $100,000 $50,000 The Result Reach 3 million 3 million % Impacted (Ad index) 12% 4% Impacted Reach 360,000 120,000 Cost Per Impact $0.28 $0.42 Source: Millward Brown March 2009 27
  • 31. Creative Quality “Regardless of how well a campaign is targeted, its overall success will depend heavily on the strength of the creative. In multiple regression models we typically see creative quality accounting for more than half of the overall effectiveness.” Millward Brown 28