Post on 21-Jan-2015
description
Grace Huang, Founder / CEO February 2010
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.
Different types of ad networks
– Publishers: All quality sites – Typical
advertisers: ROI driven brands
– Pricing: typically CPM/
CPC
Behavioral ad network
– Publishers: Longtail sites
– Typical advertiser: internet service brands
– Pricing: typically CPA
– Publishers: non-selective – Typical advertiser:
medium to small brands
– Pricing: CPC
– Publishers: Vertical sites – Typical advertiser:
vertical brands – Pricing: typically CPM
Long-tail ad network
Contextual ad network
Vertical ad network
Time
Traditional internet advertising solutions are trapped by a reach vs. relevancy ‘curse’
High
Low Small
Rel
evan
cy
Scale/Reach Large
Contextual targeting Index page content to
target
Untargeted banner Index site content
THE ‘CURSE’:
Diminishing reach to gain relevancy
Search marketing Index key words through search
e.g., Baidu (China) Google (U.S.)
e.g., NarrowAd (China) Google AdSense (U.S.)
e.g., Allyes (China) Advertising.com (U.S.)
e.g., Sina (China) Excite (U.S.)
Vertical Index audience
singular dimension
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
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
Behavioral targeting ad network business model
Operator Publishers Advertisers
• Advertisers pay BT network operator to deliver behavioral targeting ad �
• Behavioral targeting operator delivers BT targeted ad on the publishers network�
• The operator gets ad inventory from publishers and after delivering target ad on the publishers, shares revenue with the publishers on CPM or CPC basis
Behavioral targeting is typically supported by sophisticated ad serving technology
Leading BT ad serving technology: • Fully scalable • Real time targeting �
Self learning profiling system: • Proprietary profiling database • Proprietary self-learning algorithm
BT advertising in the U.S.
Different BT algorithms
Cluster
Business rule
Predictive
• Assign each visitor to one and only one segment �
• Target visitors who have done X events in Y days or Y events in X days �
• Automate business rules to identify the ideal recency and frequency of activities that best correlate with brand and performance goals �
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 �
* 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
• Overall market is growing at 29.9% CAGR
• 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 2011 2013 2015 2009
Behavioral ad
Other format of internet ad
CAGR=29.9%
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
Case Study: PinYou achieved better ROI for English education client in China
Background / business challenge:
• 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 their trial classes and the acquisition cost of each registration.
Conversion rate
PinYou improved
PinYou initial
Other display ad
Search marketing
PinYou solution:
• PinYou firstly targeted people who have visited English education sites in the past 3 months and resulted in 6% conversion rate.
• Later, through model optimization, we found income level is a key factor that affects the conversion rate, and we adjusted the target audience. As a result, we improved the conversion rate to 11%.
• The cost per acquisition continues to be lower than other advertising format.
Publishers’ perspective
• Better monetize the unsold inventory
• Access to premium advertisers / non-vertical advertisers
• Save on sales force
Economics of ad networks
• Other ad network
• Traditional agency buy
• Behavioral targeting
% Publishers Operators
Typical metrics
• Click-through rate
• Conversion rate of clicks
• Cost per lead
• Return On Investment (ROI)
BT’s own headache
Who is PinYou (品友)?
• 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/).
Why did I start it?
• P&G Marketing
• McKinsey Consultant
• UCLA MBA
In 2006, everything changed …
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!
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
PinYou’s business is supported by a powerful team
Business Strategy
Operation strategy
CEO VP of sales
VP of publishers
Investors
External network
Advisors
CTO
Employees
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 (三十年河东,三十年河西). �
Nothing is too small
Sandwich story …
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
Start with something practical
• Cashflow is key
• Speed is key
• Don’t think you will get funded in a year
Q&A