This document provides an extensive overview of the online advertising landscape, detailing various ad types, revenue models, and key players in the industry. It highlights the advertising ecosystem, including publishers, advertisers, ad networks, and exchanges, while also discussing metrics, click fraud, and the emerging role of virtual currencies. The document concludes with data on industry growth and revenue distribution among different sectors.

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
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Types of ads, Parties, Cross-section of a Platform, www.howtogetrichquick.com
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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