A Digital Advertising Primer

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A presentation for students at Michigan State University studying journalism, digital media and entrepreneurialism.

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A Digital Advertising Primer

  1. 1. A  Digital  Adver-sing  Primer    And  Other  Get  Rich  Slow  (or  Never)  Schemes  for  Journalists   1 February  10,  2011  
  2. 2. Digital  Content    Between  a  Rock  and  a  Hard  Place   “Informa-on  wants  to  be  free.  It  also  wants  to  be  expensive.”   -­‐  Stewart  Brand  “Adver-sing  sucks.  The  only  thing  that  sucks  more  than  adver-sing  is  paying  for  content.”   -­‐  Some  Kid  (Somewhere)  
  3. 3. US  Ad  Spend    Dollars  ShiKing,  Market  Declining    §  Ad  spending  grows  and   declines  with  the  overall   economy  §  Spending  is  flat  to  declining   over  the  past  decade  –  but   compe::on  for  these   dollars  is  growing  §  Spend  is  shi<ing  away  from   newspapers,  magazines  and   radio  and  towards  the   Internet  §  This  is  the  primary  pool   from  which  ad-­‐supported   content  ventures  draw  their   revenue   3
  4. 4. Behind  the  Numbers    Google  and  Facebook  Rule   §  Search  adver:sing  dominates   the  online  ad  spending  with   nearly  50%  share   §  Social  media  adver:sing  is   growing  most  quickly  and   becoming  the  lion’s  share  of   the  display  ad  market   §  Google  and  Facebook  rule   4
  5. 5. 5
  6. 6. Who  Wants  What?   6
  7. 7. Digital  Marketers  Challenged  to  Think  Like  Publishers   7
  8. 8. Digital  Adver-sing  A  Simplified  Landscape   8
  9. 9. Digital  Adver-sing  A  Complex  Landscape   9
  10. 10. The  ABC’s     Cost  per  Impression  (CPM)   ü  Display  and  rich  media   Cost  per  Click  (CPC)   ü  Search   Cost  per  Engagement  (CPE)   ü  In-­‐text   Cost  per  Performance  (CPP)   ü  Leads/name  acquisi:on    10
  11. 11. Ad  Rates  What  Drives  Value  in  Digital  Adver-sing   Ad   Custom   Hulu   Network   Facebook   Content   $1     $10  CPM   $25  CPM   $100  CPM   CPM  Abundant  Supply     Untargeted   Scarce  Supply       Poor  Placement   Highly  Targeted      Sta:c  Ad  Formats   Impact  Placement         Innova:ve  Ad  Formats           11    
  12. 12. Let’s  Look  At  Some  Models    1.  The  Freemium  Model  2.  The  Whatever  you  Want  Model  3.  The  SyndicaBon  Model  4.  The  Olive  Garden  Model  5.  The  Random  Dudes  Model  6.  The  Network  Model  7.  The  I’ll  Build  My  Own  Damn  Content    Model  8.  The  UBlity  Model  9.  The  Content  =  Commerce  Model  10.  The  Altruism  Model      12
  13. 13. Freemium    Wall  Street  Journal  and  Economist  §  Primarily  ad-­‐revenue  supported  §  Some  “free”  content  §  Premium  access  requires   subscrip:on  and/or  a  la  carte  fees  §  Delivers  highest  quality  content   difficult  to  find  elsewhere  §  Heavy  investment  in  brand,   exclusivity,  technology,  and   adver:sing  formats  §  Takeaway  =  Premium  brands   command  pricing  power   13
  14. 14. Have  it  Your  Way  Weather.com  and  UsWeekly  §  Custom  content  development  and   editorial  integra:on  can  drive  ad   rates  and  program  costs  higher  §  Big  brand  adver:sers  are  always   looking  for  more  than  “just  ads”  §  Weather.com  develops  custom   “forecast”  programs  for  the  sole   purpose  of  selling  them  adver:sers  §  UsWeekly  implemented  a  new   editorial  feature  (print  and  online)   based  on  idea  from  Enlighten  §  Takeaway  =    Custom  content  can   be  great  for  revenue    but  you   need  to  find  the  right  balance   between  editorial,  adver-ser  and   consumer  needs   14
  15. 15. Syndica-on    All  Music  Guide  and  TechCrunch  §  Content  start-­‐ups  can  generate   revenue  by  going  narrow  and   deep  in  a  par:cular  area  §  All  Music  Guide  expands  revenue   beyond  adver:sing  by  licensing   deep  database  of  content  to  other   publishers  §  TechCrunch  grows  revenue  by   syndica:ng  brand  to  custom   research  and  events  §  Takeaway  =  Look  for   opportuni-es  to  turn  content   depth  in  to  addi-onal  revenue   streams   15
  16. 16. Content  Farm    Demand  Media  and  Associated  Content  §  Mountains  of  free    content  (and  you   get  what  you  pay  for…  kind  of  like   the  bo_omless  salad  and   breads:cks  at  Olive  Garden)  §  Content  is  sourced  from   independent  contributors  –   contributors  are  either  paid  for   content  or  share  in  ad  revenue  §  Sophis:cated  search  marke:ng,   demand  forecas:ng  and  auc:on-­‐ based  content  sourcing  §  Content  Farms  produce  commodity   content  at  commodity  prices.  §  Takeaway  =  Use  data  to  ra-onalize   cost  of  content  produc-on     16
  17. 17. Random  Dudes    Smosh  Wins  Big  with  Google  and  KraK  §  Smosh.com  makes  humorous  videos   for  teen/tween  audience  §  Par:cipa:on  in  Google’s  AdSense   program  delivers  almost  $1  MM  in   annual  revenue  §  Web  celebrity  status  lands  branded   content  gig  with  Kra<  §  Takeaway  =  Amateurs  with  a  low-­‐ cost  produc-on  model  can  make   money  online   17
  18. 18. The  Network  Effect  Gawker  and  Federated  §  Networks  focused  on  niche,   independent  content  have  build   strong  businesses  §  Gawker  Media  owns  a  network  of   8  blogs  focused  tech,  media,   fashion  and  pop  culture  and   reaching  20  MM  readers  §  Federated  Media  has  created  a   powerful  network  of  independent   content  sites  delivering  450  MM   page  views  a  month  §  Takeaway  =  Building  niche   networks  or  “federa-ons”  enable   a  powerful  balance  between   reach/scale  and  independence   18
  19. 19. Rouge  Marketers  P&G,  J&J  and  American  Express  §  Given  the  cost  and  distribu:on   dynamics  of  the  web,  marketers   have  explored  crea:ng  their  own   content  des:na:ons  §  P&G  developed  a  des:na:on  for   young  girls  (Being  Girl)  §  J&J  created  a  des:na:on  for   moms  (Baby  Center)  §  American  Express  launched  a   des:na:on  for  business  owners   (OPEN  Forum)  §  Takeaway  =  Adver-sers  have  the   resources  to  build  own  media  but   s-ll  look  for  audience  scale       19
  20. 20. Lead  Genera-on  Car  &  Driver  §  Car  &  Driver  sat  on  top  of  a  gold   mine  of  content  but  was  s:ll   gejng  beat  online  by  sites  like   Edmunds  and  KBB  §  Ad  revenue  was  not  enough  §  Developed  “Buyers  Guide”  feature   and  “Get  a  Quote”  feature  to  offer   more  u:lity  to  consumers  and   expand  revenue  steam  §  Takeaway  =  Think  about  ways   you  can  add  u-lity  to  content   20
  21. 21. Content  =  Commerce      The  Sugar  Network  &  Kaboodle  §  Social  shopping  is  a  growth  area  –   content  sites  that  blend  social   features,  content  and  eCommerce  §  Kaboodle  supports  key  content   areas  with  blogs  (Dwell,  Indie,   Posh),  community  par:cipa:on   and  retailer  integra:on  §  The  Sugar  Network  extends   content  with  retail  and  social   gaming  integra:on  §  Takeaway  =  Revenue  sharing  on   commerce  can  be  away  to  extend   content  business   21
  22. 22. Tip  Jar    Salon.com,  Wikipedia,  NPR  and  More  §  Sadly,  there  can  o<en  be  an   inverse  rela:onship  to  the  caliber   of  journalism  and  the  ability  to   generate  revenue    §  Commercial  ventures  such  as   Salon.com,  open  source  ventures   like  Wikipedia  and  quasi-­‐public   ventures  like  NPR  rely  on  the  “:p   jar”  concept  to  close  funding  gaps  §  Consumer  generosity  has  serious   limits  §  Takeaway  =  If  you  want  to  work   for  -ps,  wai-ng  tables,  tending   bar  or  driving  a  cab  may  be  more   lucra-ve     22
  23. 23. A  Par-ng  Thought   Who  Will  Start    The  Next  Small  Thing?   23
  24. 24. Thank  You!   Tom  Beck   President   Enlighten   734.929.1924   tbeck@enlighten.com     24

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