An Introduction to Online Advertising

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A beginner's guide to the world of online advertising. Find out what happens under the hood; find out how online advertising generates revenue and for whom; find out who the players are and their …

A beginner's guide to the world of online advertising. Find out what happens under the hood; find out how online advertising generates revenue and for whom; find out who the players are and their roles in the world of online advertisting.

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  • 1. The World of Online Advertising: Introduction and Overview Suhas Mallya Web Technologies Practice MindTree Ltd. October 2010 © 2008 MindTree Consulting © 2010 MindTree Limited
  • 2. Contents Sponsored Links The world of online advertising The Online Advertising Cookbook By CyberChef Online Advertising Economy 101 Proven Strategies and Tested Tactics for success in online advertising www.amazon.com/OnlineCookbook?x=... Revenue Models Powered by The Advertising Ecosystem Compelling Business Plans Bertrand Haddock presents some innovative business models that fit on the back of a paper napkin. Types of ads, Parties, Cross-section of a Platform, www.howtogetrichquick.com Ads by Sample Players, Metrics & Statistics, Keyword Costs Ecosystem Tools Click Fraud Virtual Currency: the new color of money References Online Advertising: An Introduction © 2010 MindTree Limited Slide 2
  • 3. The World of Online Advertising Vertical Ad Network Semantic advertising Interstitial Ad (your page will load in 10 seconds) Social Network Ads Dot commercial Click Location Fraud Mobile Ads Local Ads Online Offline Infra & Publishers Advertisers Networks Affiliates Exchanges Agencies Search Ads Ops Non-browser Feeds & Browser-based Newsletters based Emails Display Ads Publishers Networks & Affiliates Advertisers • Setup & Configuration • Ad Delivery & Trafficking • Search Optimization Tools • Ad Management • Campaign Management • Keyword Auctions & Bidding • Filter definitions • Inventory & Billing • Administration & Management • Channel Setup • Fraud Prevention • Planning • Reporting • Analytics • Analytics : $23b revenue, 47% from search ads, 48% from Retail+Telecom+BFSI : $12.3b revenue – up 11% from H1 2009 Online Advertising: An Introduction © 2010 MindTree Limited Slide 3
  • 4. Online Advertising Economy 101 “Commodity” being traded is “real-estate” on the web – any portion of a user’s screen where an ad can be placed (browser, IM, widget, etc.) Buyer: advertiser, Seller: publisher, Inventory: web-space for placing ads Ad units: physical specifications defined by the IAB for different sizes of ads Cash flow Buyer pays, Seller earns, middlemen take their cut (from buyer) What defines a “trade” depends on the pricing model Online Advertising Economy mirrors real-life economies Contraband goods: ads that are malicious worms in disguise, ads whose acceptance varies based on region, law and culture, etc. Caveat Emptor: Buyers beware of click fraud Barons and minions: 80% of revenue is concentrated in the hands of the top-10 Online Advertising: An Introduction © 2010 MindTree Limited Slide 4
  • 5. Parties in an Advertising Ecosystem • Sell ad units on their properties Publishers • Popular websites and portals • Buy ad units on publishers’ properties Advertisers • Pay for each ad unit “delivered” (see “Revenue Models”) • Aggregator of ad spaces supplied by publishers Ad Networks • Matches supply (ad space) with demand (ads) • “Sales channel” that drives traffic to advertisers’ sites Ad Affiliates • Categorized based on how they drive traffic • Open technology platform for trade of ad units Ad Exchanges • Provides a transparent forum for all parties in the ecosystem to coordinate and transact Online Advertising: An Introduction © 2010 MindTree Limited Slide 5
  • 6. Pricing/Revenue Models Aliases and related Model Meaning/Description terms/models CPI Cost Per Impression – used for Display Ads. CPM/CPT, Cost Per View Advertiser pays each time the ad is displayed. CPM Cost Per Mille/Thousand – same as CPI, but CPI, CPT, Cost-per-View costing is in terms of thousand impressions CPV Cost Per View – similar to CPI, but used for pop- ups, “pop-unders” and interstitials CPC Cost Per Click – advertiser pays when a “click- PPC, Cost Per Visitor, CTR, eCPA, through” happens – a visitor is delivered to the Performance-based pricing advertiser’s website CPA Cost Per Action – advertiser pays when visitor Performance-based pricing, performs an “Action”: Cost Per Conversion – total cost * Fills out a form => Cost Per Lead (CPL) of ad campaign divided by * Makes a purchase => Cost Per Order (CPO) number of acquired customers * “Engages” through poll or video => CPE CPT Cost Per Time – advertisers pays for the ad to be CPD – Cost Per Day displayed unlimited number of times during a given time period; there are often guarantees of minm impressions Online Advertising: An Introduction © 2010 MindTree Limited Slide 6
  • 7. Types of Ads Based on how the ad is Based on HOW the ad is Based on WHERE the ad SERVED DISPLAYED is SERVED • Display Ad (Web Banner) • Expandable Ad •Browser-based • Content/Contextual Ad • Floating Ad •Non-browser-based (e.g., messenger) • Search Ad • Pop-up/Pop-under •Feeds • Local Ad • Interstitial •Newsletters • Mobile Ad • Trick banner •Emails (including spam & • Map Ad • Dot Commercial phishing) • Social Networking Ad • Wallpaper • Fixed-position banner Online Advertising: An Introduction © 2010 MindTree Limited Slide 7
  • 8. Ad Units (as defined by the IAB) Rectangles and Pop-Ups Banners and Buttons Type Filesize* Length** Type Filesize* Length** 300 x 250 (Medium Rectangle) 40k 0:15 468 x 60 (Full Banner) 40k 0:15 250 x 250 (Square Pop-Up) 40k 0:15 234 x 60 (Half Banner) 30k 0:15 240 x 400 (Vertical Rectangle) 40k 0:15 88 x 31 (Micro Bar) 10k 0:15 336 x 280 (Large Rectangle) 40k 0:15 120 x 90 (Button 1) 20k 0:15 180 x 150 (Rectangle) 40k 0:15 120 x 60 (Button 2) 20k 0:15 300x100 (3:1 Rectangle) 40k 0:15 120 x 240 (Vertical Banner) 30k 0:15 720x300 (Pop-Under) 40k 0:15 125 x 125 (Square Button) 30k 0:15 728 x 90 (Leaderboard) 40k 0:15 Skyscraper Type Filesize* Length** 160 x 600 (Wide Skyscraper) 40k 0:15 120 x 600 (Skyscraper) 40k 0:15 * Recommended Maximum Initial File size 300 x 600 (Half Page Ad) 40k 0:15 ** Recommended length for animation (minutes) Source: [IAB-AdUnits] Online Advertising: An Introduction © 2010 MindTree Limited Slide 8
  • 9. Simplified Cross-Section of an Advertising Platform Customer (Advertiser) Management Account Reporting Analytics Controls Billing Publisher Layout Campaign Management Management Management Yield, Preference, Keyword/ Estimation Topology relevance Engine Site and Ad Editorial and Quality Control Listing, validity, schedule Budgets Rendering Delivery Logging Ad Selection Engine Ad Data Site Data Engine Ad Served Publisher Site Analytics Adapted from [LifeOfAClick] Online Advertising: An Introduction © 2010 MindTree Limited Slide 9
  • 10. Simplified Cross-Section of the Advertising Ecosystem Social Plug-Ins Buy-side Ad and Media Platforms Ad Networks Analytics Agencies – Horizontal, Vertical, Sell-side Advertisers Publishers Ad Exchanges, Targeted, optimization Buy-side optimization Mobile Aggregators and Affiliates Ad Servers Verification Analytics and Traffic Ad Servers and Quality Visualization Ops & Infrastructure Mgmt Adapted from [LUMA] Online Advertising: An Introduction © 2010 MindTree Limited Slide 10
  • 11. “Life of a Click”: Data Flow Advertisers User enters Campaign, Budget, Keywords, Bids, Ads, Etc. Customer Campaign Editorial Publisher Mgmt Mgmt Validation Budget Pause Cust CM EV Feed Ad call Delivery Budget Pause Engine Auction Analytics Click! Valid Clicks Auction Billing dr drdrdr Invoicing Pipelines Card Swipes Bill Revenue Feeds cr Redirect Aggregations Fraud Credits Servers [ Pub Acct, Adv Acct, Order, AdUnit, Medium] To Advertiser’s Site Source: [LifeOfAClick] Online Advertising: An Introduction © 2010 MindTree Limited Slide 11
  • 12. Parties in an Advertising Ecosystem • Sell ad units on their properties Publishers • Popular websites and portals • Buy ad units on publishers’ properties Advertisers • Pay for each ad unit “delivered” (see “Revenue Models”) • Aggregator of ad spaces supplied by publishers Ad Networks • Matches supply (ad space) with demand (ads) • “Sales channel” that drives traffic to advertisers’ sites Ad Affiliates • Categorized based on how they drive traffic • Open technology platform for trade of ad units Ad Exchanges • Provides a transparent forum for all parties in the ecosystem to coordinate and transact Online Advertising: An Introduction © 2010 MindTree Limited Slide 12
  • 13. Ad Networks Aggregator of ad spaces supplied by publishers A few Examples and Service Providers Matches supply (ad space) with demand (ads) (Horizontal & Vertical) Growing segment in the online advertising space Primary business is selling ad spaces on publisher websites Portals, Blogs and other non-browser-based properties Inventory is terms of “ad space”/ “ad units” under their “control” Build, operate and maintain an “ad server” Stores, selects and serves advertisements Key types of networks Horizontal, Vertical, Blind, Targeted Online Advertising: An Introduction © 2010 MindTree Limited Slide 13
  • 14. Parties in an Advertising Ecosystem • Sell ad units on their properties Publishers • Popular websites and portals • Buy ad units on publishers’ properties Advertisers • Pay for each ad unit “delivered” (see “Revenue Models”) • Aggregator of ad spaces supplied by publishers Ad Networks • Matches supply (ad space) with demand (ads) • “Sales channel” that drives traffic to advertisers’ sites Ad Affiliates • Categorized based on how they drive traffic • Open technology platform for trade of ad units Ad Exchanges • Provides a transparent forum for all parties in the ecosystem to coordinate and transact Online Advertising: An Introduction © 2010 MindTree Limited Slide 14
  • 15. Ad Affiliates “Sales channel” that drives traffic to advertisers’ sites A few Examples and Service Providers Categorized based on how they drive traffic Performance-based revenue model CPS: 80%, CPA (others) – 19%, Others – 1% Touted as a key source of spam and unsolicited marketing Common categories of affiliates Directory listings – including local classifieds Deal managers and coupon/rebate sites Email lists Loyalty websites Virtual currency Online Advertising: An Introduction © 2010 MindTree Limited Slide 15
  • 16. Sample Players Publishers Advertisers Ad Networks Ad Affiliates Ad Exchanges Online Advertising: An Introduction © 2010 MindTree Limited Slide 16
  • 17. Metrics and Statistics Growth of the Online Advertising Industry 25,000 $23,448 $22,661 $21,260 20,000 Revenue in $ million $16,879 15,000 $12,542 $9,626 10,000 $8,087 $7,134 $7,267 $6,010 $5,900 $4,621 5,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (Q1) Year Based on [IAB2009] and [IAB2010] Online Advertising: An Introduction © 2010 MindTree Limited Slide 17
  • 18. Revenue Concentration Revenue concentration continues to be high: The top-10 account for almost 80% of total industry revenues Source: [IAB2009] Online Advertising: An Introduction © 2010 MindTree Limited Slide 18
  • 19. Revenue Distribution across Industry Online Advertising Revenues across Industry Verticals 2008 ($23.4B) vs. 2009 ($22.7B) 25 22 20 % of total annual revenue 20 16 15 15 13 12 12 11 10 10 10 7 6 6 6 6 5 5 4 4 4 4 4 3 0 Computing Retail Entertainment Media Telecom Other Auto CPG Leisure Travel BFSI Pharma/HC 2008 Industry Category 2009 Source: [IAB2009] Online Advertising: An Introduction © 2010 MindTree Limited Slide 19
  • 20. Keyword Costs: An Illustration Keyword(s) Average CPC Specific searches have a higher Hilton Hotel $ 0.40 tendency of conversion and hence a higher average cost (compare and ) Pizza $ 0.90 Specificity can sometimes decrease Books $ 0.96 costs due to lower bid density Sports $ 1.06 (compare , and ) Diamond Ring $ 1.24 In other cases, the cost may be Washington Mortgage $ 1.31 influenced by the expected value of a Autos $ 1.32 potential transaction (see and ) Hotel $ 1.44 Diamond Engagement Ring $ 1.53 Dating $ 1.67 HDTV $ 1.67 Tokyo Hotel $ 1.97 Based on 2008 Data for US from Microsoft adCenter California Mortgage $ 3.92 Source: [LifeOfAClick] Online Advertising: An Introduction © 2010 MindTree Limited Slide 20
  • 21. Ecosystem Tools Networks & Publishers Advertisers Affiliates • Setup & • Search Engine • Ad Delivery & Configuration Optimization Trafficking • Ad Management • Keyword Auctions • Keyword Selection • Filter definitions & Bidding • Campaign • Channel Setup • Administration & Management Management • Inventory & Billing • Reporting • Planning • Fraud Prevention • Analytics • Analytics Illustration of Publisher Control Panel in Google AdSense Online Advertising: An Introduction © 2010 MindTree Limited Slide 21
  • 22. Click Fraud Modus Operandi Ranging from manual clicking to employing ClickFarms and ClickBots Motivation Ranging from individual greed to corporate sabotaging Click Fraud Index Industry-wide: 18.6% (Q1 2010) Tier-1: ~13%, Tier-2: ~23% Maintained by ClickForensics Image Source: [ClickForensicsHeatMap], Aug. 2010 Online Advertising: An Introduction © 2010 MindTree Limited Slide 22
  • 23. Click Fraud Detection, Prevention and Receding measures by networks Sophisticated and closely-guarded algorithms relying on embedded timestamps and complex analytical processing Ad verification, attribution and traffic quality management: some players DoubleVerify, ClickForensics, AdXpose, AdSafe and more High-profile incidents and cases 2004: Attempted “extortion” on Google 2004: Google vs. Auction Experts (Google won) 2005: Advertisers vs. Yahoo! (Yahoo lost and paid $4.5m) 2006: Lane’s Gifts & Collectibles vs. Google (Google settled for $90m) Online Advertising: An Introduction © 2010 MindTree Limited Slide 23
  • 24. Virtual Currency: the new color of money Virtual Currency in the monetary unit of virtual economies Buyers pay hard cash to middlemen/social platforms Publisher gets paid in “virtual currency” – e.g., FarmVille Cash, Facebook Credits Virtual Currency platforms help monetize online games and apps Fast-growing segment: $2.2bn global industry with almost 30 key players Publisher uses virtual currency for virtual goods and services Trade Facebook credits for FarmVille cash Submit content (e.g., answers on a Q&A site) to earn points which can be used to download premium content Extremely popular in online multi-player games – players can pay hard cash to get virtual currency Common controversies and criticisms Legal standing, intersections with real-life economy Online Advertising: An Introduction © 2010 MindTree Limited Slide 24
  • 25. References and Additional Reading [LifeOfAClick] “A Day in the Life of a Click” Robert Devine, Microsoft, PDC 2008 http://channel9.msdn.com/pdc2008/BB49/ [LUMA] New Ad Tech Ecosystem Map http://www.adexchanger.com/venture-capital/ecosystem-map-luma-partners-kawaja/ [IAB2009] Interactive Advertising Bureau – Full Report 2009 http://www.iab.net/media/file/IAB-Ad-Revenue-Full-Year-2009.pdf [IAB2010] Interactive Advertising Bureau – Q1 Report 2010 http://www.iab.net/about_the_iab/recent_press_releases/press_release_archive/press_release/pr-051310 [IAB-AdUnits] IAB Ad Guidelines http://www.iab.net/iab_products_and_industry_services/1421/1443/1452 [ClickForensicsHeatMap] Click Forensics Fraud Index and Heat Map http://www.clickforensics.com/resources/click-fraud-index.html Glossary of Terms http://www.iab.net/media/file/GlossaryofInteractivAdvertisingTerms.pdf Pubmatic http://www.pubmatic.com/ Wikipedia Articles (article on “Online Advertising” has all related links) TechCrunch Online Advertising: An Introduction © 2010 MindTree Limited Slide 25
  • 26. Successful Customers Our Mission Happy People Innovative Solutions Suhas Mallya Suhas_Mallya@mindtree.com www.mindtree.com Online Advertising: An Introduction © 2010 MindTree Limited 2010 MindTree Limited Slide 26