Feb. 18, 2002ISOC IL - 6th Annual Conference 1 Top Internet Advertisers who are they and what can be learnt from them? ROI Driven Online Advertising Presentation.

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Presentation transcript:

Feb. 18, 2002ISOC IL - 6th Annual Conference 1 Top Internet Advertisers who are they and what can be learnt from them? ROI Driven Online Advertising Presentation by Yaron Ilan

Feb. 18, 2002ISOC IL - 6th Annual Conference 2 Topics Introduction Top advertisers –Who are they? –Common characteristics? ROI Driven Online Advertising –Definition –How to do it? –Who can do it? Notes on Israel Q&A

Feb. 18, 2002ISOC IL - 6th Annual Conference 3 Introduction (1) The Internet is a platform for communication, commerce and media delivery. Advertising is the main revenue source for traditional mass media companies. Subscription fees are the main revenue source for non-mass media companies. The Internet can be used both as a mass media platform and as a direct delivery platform.

Feb. 18, 2002ISOC IL - 6th Annual Conference 4 Introduction (2) Internet companies struggle to sustain themselves with advertising revenue. They may turn to subscription based models. Turning away from advertising means turning away from being a mass media platform. The future of the Internet as a mass media platform depends on online advertising.

Feb. 18, 2002ISOC IL - 6th Annual Conference 5 Introduction (3) Market Data: –CTR: 0.5% and dropping –CPM: Rate card $28 Street Price: $5 Equilibrium $0.4 Common wisdom: Online advertising is ineffective. –People don’t notice banners. –People don’t click banners. –People don’t buy online. Total yearly spending around $8B.

Feb. 18, 2002ISOC IL - 6th Annual Conference 6 Top Advertisers Nielsen NetRatings. Monthly. Home users. U.S December 2001.

Feb. 18, 2002ISOC IL - 6th Annual Conference 7 Top Advertisers Nielsen NetRatings. Monthly. Home users. U.S October The list needs to be “Cleaned”The list needs to be “Cleaned”

Feb. 18, 2002ISOC IL - 6th Annual Conference 8 House Ads Unsold inventory is filled with House Ads. Two types: –Blank fill. –Promotion of additional. Services and partners. Media Companies are not Advertisers.

Feb. 18, 2002ISOC IL - 6th Annual Conference 9 House Ads Unsold inventory is filled with House Ads. Two types: –Blank fill. –Promotion of additional. Services and partners. Media Companies are not Advertisers.

Feb. 18, 2002ISOC IL - 6th Annual Conference 10 Top Advertisers Three Leading Segments: –Financial Services. –Online Services. –Retail.

Feb. 18, 2002ISOC IL - 6th Annual Conference 11 Online Services Products –Information Goods. –Low fulfillment costs. –High Profit Margins. –Network effects. –Economics of Scale. Sample:

Feb. 18, 2002ISOC IL - 6th Annual Conference 12 Financial Services Products –Information Goods. –Low fulfillment costs. –High Profit Margins. Sample:

Feb. 18, 2002ISOC IL - 6th Annual Conference 13 Retail Products –Traditional. –“Nothing special”. Sample:

Feb. 18, 2002ISOC IL - 6th Annual Conference 14 Top Advertisers “Not your everyday advertiser”. –No big brand names. –No traffic buys by “Dot.Coms”. –Small private companies. All sell online. All promote specific product or service. All spend heavily.

Feb. 18, 2002ISOC IL - 6th Annual Conference 15 Top Advertisers All employ an ROI Driven Online Advertising Strategy

Feb. 18, 2002ISOC IL - 6th Annual Conference 16 ROI Driven Online Advertising Definition: A method of Online Advertising in which the Advertiser: –Can directly measure ROI of advertising activity. –Uses ROI as the sole decision factor for advertising activity.

Feb. 18, 2002ISOC IL - 6th Annual Conference 17 How to do it? Every ad is tracked. Conversion ratios are calculated. Media value is calculated. Media buys are based on ROI. Deal structure is modified: –CPM to CPC. –CPC to CPA.

Feb. 18, 2002ISOC IL - 6th Annual Conference 18 ROI Driven Online Advertising Characteristics: –Breakeven point is clear. –Gross profit on each dollar spent. –“Unlimited” Advertising Budget. –Growth constrained by market prices. –Creativity by itself is irrelevant. –Brand Recognition is a side effect.

Feb. 18, 2002ISOC IL - 6th Annual Conference 19 Who can do it? Everyone can try. System Requirements: –Tracking. –Online Sale/Order/Lead capabilities. Management Requirements: –Commitment to strategy. –Basic knowledge of Statistics. Product Requirements: –Short Sale cycle. –High Revenue/Conversion ratio.

Feb. 18, 2002ISOC IL - 6th Annual Conference 20 Notes on Israel A small niche market with almost no international advertising. Underdeveloped local e-commerce. Few “Big players” many “too small players”. Wrong perception of the Internet as an advertising platform: –By advertisers –By media companies Village mentality.

Feb. 18, 2002ISOC IL - 6th Annual Conference 21 Summary ROI Driven Online Advertising is the dominate strategy. The Internet can be a very effective media platform for advertisers. Online advertising future is directly linked to e-commerce development. Those who choose not to play miss an opportunity.

Feb. 18, 2002ISOC IL - 6th Annual Conference 22 Questions?