Ad Network Essentials (PinYou)

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Presentation delivered by Grace Huang (founder/CEO of PinYou) on building an Ad Network start-up in China.

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Ad Network Essentials (PinYou)

  1. 1. Grace Huang, Founder / CEO February 2010
  2. 2. What is an ad network? An advertising network (or ‘ad network’) is a company that connects online publishers who want to host advertisements with advertisers who want to access their inventory and audience.
  3. 3. Different types of ad networks Behavioral ad network Vertical ad network Contextual ad network Long-tail –  Publishers: ad network –  Publishers: All quality sites Vertical sites –  Typical –  Publishers: –  Typical advertiser: advertisers: ROI non-selective driven brands vertical brands –  Publishers: –  Typical advertiser: –  Pricing: Longtail sites medium to small –  Pricing: typically CPM typically CPM/ –  Typical brands CPC advertiser: –  Pricing: internet service CPC brands –  Pricing: typically CPA Time
  4. 4. Traditional internet advertising solutions are trapped by a reach vs. relevancy ‘curse’ High Search marketing THE ‘CURSE’: Index key words Diminishing reach through search to gain relevancy e.g., Baidu (China) Relevancy Contextual targeting Google (U.S.) Index page content to target e.g., NarrowAd (China) Google AdSense (U.S.) Vertical Index audience singular dimension e.g., Allyes (China) Untargeted banner Advertising.com (U.S.) Index site content e.g., Sina (China) Excite (U.S.) Low Small Large Scale/Reach
  5. 5. Behavioral targeting advertising solves the problem by delivering ads against audience Behavioral targeting is not about page Different persons will see different ads when landing on the same page
  6. 6. Behavioral audience segments are built on observable behaviors •  Recency, frequency and volume of visits to content relevant to an interest •  Active searches for information relevant to the interest •  Use of tools, surveys and quizzes, etc. •  Ad interactions (clicks, downloads, demo views, games played, etc.) •  SNS activities
  7. 7. Behavioral targeting ad network business model Advertisers Operator Publishers •  Advertisers pay BT •  Behavioral targeting •  The operator gets ad network operator to operator delivers BT inventory from publishers deliver behavioral targeted ad on the and after delivering target targeting ad publishers network ad on the publishers, shares revenue with the publishers on CPM or CPC basis
  8. 8. Behavioral targeting is typically supported by sophisticated ad serving technology Leading BT ad serving technology: Self learning profiling system: •  Fully scalable •  Proprietary profiling database •  Real time targeting  •  Proprietary self-learning algorithm
  9. 9. BT advertising in the U.S.
  10. 10. Different BT algorithms •  Assign each visitor to one and Cluster only one segment •  Target visitors who have done X Business rule events in Y days or Y events in X days •  Automate business rules to identify the ideal recency and frequency of Predictive activities that best correlate with brand and performance goals
  11. 11. Behavioral targeting ad network is estimated to be over US$ 2 billion by 2015 in China  US$ mn Growth of Online Ad and behavioral targeting ad network Other format of internet ad •  Overall market is Behavioral ad growing at 29.9% CAGR CAGR=29.9% •  Behavioral targeting will be the fastest growing category, expected to reach 20-30% of the overall spend by 2015, or $1.5-2 billion. 2005 2007 2009 2011 2013 2015 * J.P Morgan expects YOY market growth from 2010 to 2015 is 18% for online ad market in China in near term as conservative Source: JP Morgan, CTR, Jupiter Research
  12. 12. Advertisers’ perspective •  Better targeting mechanism •  Easy to buy since it sells audience instead of page •  Generates better ROI •  Generally better quality publishers than contextual ads
  13. 13. Case Study: PinYou achieved better ROI for English education client in China Background / business challenge: Conversion rate •  Our client is a leading English education brand. It spends majority of its advertising budget on display ads and search marketing. The key KPI it measures is the conversion rate from clicks to registration for PinYou their trial classes and the acquisition cost of each improved registration. PinYou PinYou solution: initial •  PinYou firstly targeted people who have visited English education sites in the past 3 months and resulted in 6% conversion rate. Other display •  Later, through model optimization, we found income level is a key factor that affects the conversion rate, ad and we adjusted the target audience. As a result, we improved the conversion rate to 11%. Search marketing •  The cost per acquisition continues to be lower than other advertising format.
  14. 14. Publishers’ perspective •  Better monetize the unsold inventory •  Access to premium advertisers / non- vertical advertisers •  Save on sales force
  15. 15. Economics of ad networks Publishers Operators % •  Traditional agency buy •  Other ad network •  Behavioral targeting
  16. 16. Typical metrics •  Click-through rate •  Conversion rate of clicks •  Cost per lead •  Return On Investment (ROI)
  17. 17. BT’s own headache
  18. 18. Who is PinYou ( )? •  First and largest behavioral targeting network, founded in 2008 (http://www.ipinyou.com.cn/). •  Blue chip clients include P&G, Elong, Nestle, English First, etc. •  Nearly 1,000 quality publishers, with about 180 million UV’s/month and 1.5 billion page views. •  Reached profitability in mid-2009. •  Recently launched a re-targeting platform (http://www.userback.com.cn/).
  19. 19. Why did I start it? •  P&G Marketing •  McKinsey Consultant •  UCLA MBA In 2006, everything changed …
  20. 20. Entrepreneur’s life … -  Making decisions (making mistakes and correcting them). -  Title means nothing. -  You are spending more time with your partners than with your family. -  You are 24/7 on call! -  There is no boss!
  21. 21. Key success factor in starting up companies 1. It’s all about the team 2. Persistence is the key 3. Lots of little things (sandwich story) 4. Don’t worry about competition 5. Start with something practical 6. Understand your strength and leverage it
  22. 22. PinYou’s business is supported by a powerful team Business Strategy Operation strategy CEO VP of VP of sales publishers CTO Investors Advisors Employees External network
  23. 23. Persistence is the key •  Founders always misjudge the market and are over optimistic. •  You will face all the difficulties you can ever imagine. •  Don’t expect your company to become YouTube or Facebook overnight. •  The “trend” is changing over time ( ). 
  24. 24. Nothing is too small Sandwich story …
  25. 25. Don’t worry too much about competition •  Don’t believe your idea will be “yours only” •  Don’t spend too much time studying your competitors’ strategy, because they may be wrong •  PinYou’s case
  26. 26. Start with something practical •  Cashflow is key •  Speed is key •  Don’t think you will get funded in a year
  27. 27. Q&A

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