1. Michael Ahern Santiago Andujar Nathan Blouin Rebekah Gilbert
NYU Stern
Firms & Markets
Spring 2011
Michael Ahern
Santiago Andujar
Nathan Blouin
Rebekah Gilbert
Min-Jee Hwang
Ana Sviatschi

2. Early Days of IA, and the Rise of the Consumer Internet
Grab photos of keyword search pop-up, sponsor
Types of Advertising Online
(Morgan Stanley Dean Whitter)
1997
1998
1999
2000
2001
2002
2003
Banner
80%
52%
50%
46%
42%
41%
40%
Sponsor
15%
39%
34%
32%
30%
Interstitial 5% 3% 4% 6% 7% 8% 0% 1%
10%
13%
Other
2001 MSDW: Advertising Campaigns: From Broad to Narrow On the Internet, advertisers can choose to reach a broad audience or a more narrow selection of users. Within both the broad and narrow audiences, the ad can be targeted, which distinguishes the Internet from other forms of advertising previously available.
• Run of Network: A run-of-network campaign runs across a media seller’s entire network, similar to the broad reach enjoyed by network television. However, on the Internet, even though the ad is run across the entire network of sites, it can still be targeted to specific users based on the available data.
• Run of Channel: A run-of-channel campaign runs on a portal or network’s distinct content channels. For instance, pet food maker Iams may advertise across Yahoo’s network of pet sites. Within the channel, the Internet allows further targeting based on users’ demographic, psychographic, or geographic data.
• Run of Site: In the late 90’s early 00’s the most popular form of advertising on the Internet, a run-of-site campaign runs only on a particular site’s pages. For example, one could advertise only on the New York Times’ site.
• Profile Targeting: Advertisers have recently been offered the option of targeting a campaign at a user with a particular behavioral history. As of now, these profiles are anonymous, but marketers may try to link their online and offline data in the future. As in the offline world, seasonality can influence an advertiser’s choice of medium. More broad-reaching advertising, such as run-of-network campaigns, seem to be favored in holiday seasons, while more targeted forms like run-of-site campaigns dominate the rest of the year.

3. The Early Consumer Internet and the Birth of Internet Advertising
MSN to Bing
1995 MSN Released, then LiveSearch, then Bing
America Online
1989 AOL founded and start of ISP Wars
AOL
AOL ISP competition was with the pioneer of online advertising, Prodigy, a company then- owned by IBM and Sears at the time, and by 1990 was the largest ISP. Although the first clickable web ad was sold by Global Network Navigator (GNN) in 1993. HotWired (which would become Wired) was the first web site to sell banner ads in large quantities to a wide range of major corporate advertisers.
1998 acquisition of CompuServe, while competing ad-supported NetZero and Juno free ISP services: In contract to the paid subscriber service, NetZero - (launched 10/98: NetZero's model was free internet access to attract an audience for highly targeted advertising. The ad serving technology has over 9 patents and NetZero was the first company to invent real-time URL targeted advertising based on surfing patterns.
2000 Merger with TimeWarner
Major advertising deals from 1996 – 2003 were sponsorship based
Search advertising became part of brand strategy with 2007 acquisition of ADTECH AG
On May 16, 2007, AOL announced its acquisition of ADTECH AG. ADTECH was acquired to provide AOL with an advanced ad serving platform that includes an array of ad management and delivery applications, enabling Website publishers to manage, traffic and report on their online advertising campaigns. ADTECH now operates as an independent and wholly owned subsidiary of AOL's Advertising.com division. ADTECH is the ad serving platform for AOL Advertising (previously Platform-A).
_________________________
MSN
Last of Big Three to develop its own ad server network
Developed MSN adCenter, similar to AdWords auction winning PPC revenue stream
Currently holds 4% market share in revenue, 30% share in search
MSN Search released, and primary search engine for Microsoft, with a brief partnership with AltaVista in Went to Windows Live Search in 2007, then Bing in June 2009.
Prior to 2006, MSN was in partnership with Yahoo!'s Overture network for ad delivery
By 2009, Bing made deals with Yahoo! to power its search engine with Yahoo! Keeping 88% of ad revenues
___________________________
Yahoo!
GoTo.com, Overture, Yahoo! Search
Maintains extensive 2-petabyte (2-mllion gigabyte) databases on user activity,more info than IRS has on all US taxpayers in all of its records.
Strength in profiles!
1995 Yahoo!, a popular Web directory, transforms into a commercial business spanning user tracking and database of user behavior, sponsored search results, and ad-words.
1998 GoTo.com (later Overture, then Yahoo! Search) offered advertisers top search result auctions, opening door to search marketing. By July 1998, advertisers were paying up to a dollar per click.
By 2000 As in the offline media world, the online media business has both a buy side and a sell side. On the sell side, agencies
and networks represent Web publishers in selling Internet ad inventory (the ad networks described earlier). It is the sell side’s job to negotiate the best deal (i.e., most money) from advertisers for the publishers they represent. On the buy side, agencies try to get the best deal for their customers — the advertisers
Since 1997, consumer-purchased broadband connection speeds have doubled roughly every four years, with advertised fixed broadband download speeds growing at a 20% annual rate.
in the early days, pricing was usually split in three: CPM or impression, 43%; Performance, 12%; Hybrid of the two, 45%
________________________
Google
1996 NetGravity 1st major local ad server for Yahoo! and TimeWarner's Pathfinder
1996 Doubleclick founded with innovative global ad serving targeted search
1998 Oingo created changed its name to Applied Semantics in 2001,which was later acquired by Google in April 2003 for US$102 million and became AdSense, Google's main ad serving platform
In 2000, Google began selling advertisements associated with search keywords. The ads were text-based to maintain an uncluttered page design and to maximize page loading speed. Keywords were sold based on a combination of price bid and click-throughs, with bidding starting at $.05 per click. 
1999 NetGravity bought by Google Subsidiary Doubleclick; Ad serving is becoming increasingly important, as data on Internet users is used to target advertising to likely consumers
2003 Adwords, Adsense (Oingo > Google Acquisition 2003 for $120 mil), and DoubleClick currently control 36.59% and 29.38% of market respectively - 8% CTR (industry leading) of the time (80,000 clicks for every one million searches)
Google
google.com was registered on September 15, 1997
Yahoo!
Started in 1995 as a search directory

4. How has the industry changed throughout the years?
HUGE growth
So how has the industry changed throughout the years?
I'm going to pause the history of the industry and quantify it and talk about it in terms of supply and demand.
Before I do that, we need to define the market.

5. How has the industry changed throughout the years?
What is Internet Advertising?
Types of ads
Types of sites that show ads
Definition
Company A has some sort of content to draw audience
Company A sells (in other words, supplies) this audience to company B so that B can advertise their products
Types of ads: (banner ads, pop-up ads, annoying Flash ads, video ads, search engine ads)
Types of sites that show ads: (content portals, ISPs, Search engines, providers, Video sites, blogs)
company A has some sort of content to draw audience (Google has search results, facebook has friends' profiles and posts, Youtube and Hulu have videos, NYTimes has its newspaper content)
company A sells (in other words, supplies) this audience to company B so that B can advertise their products (this can take the form of just selling the audience's eyeballs [i.e., selling an ad impression], or selling actual audience engagement [a click or a purchase])

6. How has the industry changed throughout the years?
Supply has increased
Demand has increased
Supply has increased: More people are online and bandwidth and technology have improved, so there are more people to view ads
Demand has increased: More people online and technology has improved, so it's better and easier for company Bs to advertise online. Increase in online spending. People are more tech savvy, more likely to spend time online

7. How has the industry changed throughout the years?
Here’s a slide that visualizes the increase in both supply and demand.
On the left you have 2003, and on the right you have 2009.
The blue bars represent the percentage of time spent on these 4 forms of media by the average person in the UD, and the gray bars represent the percentage of general advertising budget spent.
So in order to stay competitive and find ways to deliver bigger audiences to company Bs, company As have had to innovate. Michael’s going to go over some of these.

8. What Advertising Models Have Been Most Successful?
GSP
“generalized second-price auction”
Advertisers bid for certain keywords
with maximum willingness to pay for a click
Each bidder pays the next
highest advertiser’s bid.
Successful Models
Yahoo!
Yahoo! only ranks advertisers in decreasing order of bids and charges the next highest advertiser’s bid.
This model ignores other factors that might be relevant to advertisers
Google
Google AdWords computes an advertiser’s “rank number,” which is based on Click Through Rate and other factors.
Ads get ranked this number. Advertisers are then charged an amount that would sufficiently exceed the next advertiser’s rank number.

9. What Advertising Models Have Been Most Successful?
Increasing value of alphabet for advertisers
Brands who integrate this method receive more impressions
The Quest for a Shoe with Google Instant
S – Skype appears on the whole first page
Sh – Shoprite appears on the whole first page
Sho – Still Shoprite
Shoe – Zappos, Payless, DSW
A consumer could be led to another product and not even end up shopping for what they originally intended. This places huge value on bidding on letters.
Ensure your ad shows up on pages where your letters appear.

10. Impact of online advertising on Retailers budgets and business
Industry shifts ADV budget to internet advertising
Ability to put ads in front of audiences actively looking for information
Reduces industries’ overall advertising budget since is more cheaper and cost effective than TV or paper reading
Most of the largest U.S. retail chains are using YouTube
Community building project thorugh internet For ex: Coke Zone, Burger King

11. Internet Retail Tie-ins

12. Main concerns for advertisers in this industry
Effectiveness / ROI
Do more ads and clicks necessarily translate into higher sales/profits?
Effectiveness
Click Through Rate
Accurately Targeting Consumers
Relying on Reciprocal Links or
Affiliate Marketing
Getting People to Opt In
Sources
GoldfarbTucker-intrusiveness.pdf
MediaPlacementWhitepaper.pdf

13. Main concerns for advertisers in this industry
Restrictions & Bans
Adblock, Noscript, etc
Effectiveness
Click Through Rate
Accurately Targeting Consumers
Relying on Reciprocal Links or
Affiliate Marketing
Getting People to Opt In
Sources
GoldfarbTucker-intrusiveness.pdf
MediaPlacementWhitepaper.pdf

14. Main concerns for advertisers in this industry
Ethics
Manipulating Adwords - methods to falsely up the advertising revenue
Content Farms – spamming search results
E-Business Regulations:
Restrictions & Bans
Adblock, Noscript
CAN-SPAM Act
Constantly Evolving Market
Developing New Strategies Based on New Technologies and Trends
Increased use of video (java, flash)
Social Media
Geolocation
Mobile Ads
URL shortening (bit.ly, goo.gl)
***Find better images later
InsightExpressMobileNormsEOY2010.pdf

15. Main concerns for advertisers in this industry
Consumers Do Not Want to View Ads
Internet Privacy & Data Security Concerns; Consumer Distrust
Over saturation
Constantly Evolving Market
Developing New Strategies Based on New Technologies/ Trends
Ad_Trends_ pd

16. Points, Badges and Quests

17. Big Data
Big Data has been around for a long time between credit card transactions, phone call records and financial markets. Companies like AT&T, Visa, Bank of America, Ebay, Google, Amazon and more have massive databases they mine for competitive advantage. But lately, Big Data is finding its way to the smallest startups. The Web and cloud computing brings Big Data everywhere. But what exactly is pushing Big Data forward?

18. Socialnomics

19. Inverting the paradigm