I. Advertising models for the web • What’s different about the web? • Types of ads

1. I. Advertising models for the web • What’s different about the web? • Types of ads • Come-ons • New technologies and concepts II. The digital advertising value chain • Who’s involved and what do they do? III. Business processes in digital advertising • Managing digital advertising

2. I. Advertising models for the web “Advertising may be described as the science of arresting the human intelligence long enough to get money from it.” (Stephen Leacock, 1982) “Advertising is the rattling of a stick inside a swill bucket.” (George Orwell, 1992) "Advertising is the modern substitute for argument; its function is to make the worse appear the better." (George Santayana (1987)

3. Current trends in online advertising Use of larger ad formats increased, with standard sizes used most often Skyscrapers and large in-page rectangles were most common new formats The standard 468 x 60 pixel banner accounted for 50% of DoubleClick ads in Q4 (02) Skyscrapers were 8.3% of total volume Use of large rectangles grew 300% over the year, but accounted for 2% of total volume Morrisey, B. (2003). Online Ads Are Bigger, Richer. CyberAtlas http://cyberatlas.internet.com/markets/advertising/article/0,,5941_1576651,00.html

4. In the Q4 (02), rich-media ads accounted for 25% of all DoubleClick ads View-through rates rose 47% in ‘02, from .36 % in the first quarter to .53 % in Q4 This means that users took an action within 30 days of seeing the ad Rich media had click-through rates of 2.5% in Q4 Non-rich-media ads declined from .4% in Q1 to .3% in Q4 Online advertising brought in $5.6 billion in 2002 This is ~20% lower than in 2001 ($7.2 billion) Internet Advertising Bureau http://www.iab.net/news/pr_2002_12_19.asp

5. Total advertising revenue in 2002 was ~$230 billion Online ad spending accounts for 2.4% of this amount Overall spending is expected to increase ~2.4% this year eMarketer. (2002). Media spending outlook 2003. White Paper. p. 15

6. eMarketer. (2002). Media spending outlook 2003. White Paper. p. 33

7. Online ad revenue in the US for Q4 (03) totaled ~$2.2 billion Revenues for 2003 are ~$7.2 billion The year-to-year growth for the Q4 and 2003 were 38% and 20% respectively The previous record quarter for interactive advertising was Q4 (00) with $2.12 billion in revenue The net led all other advertising segments in percentage revenue growth for the year Internet Advertising Bureau (2004). Interactive Ad Revenue Sets Record With Best Quarter Ever. http://www.iab.net/news/pr_2004_2_12.asp

8. Spam: two views of unwanted commercial e-mail Ferris Research estimates that it cost U.S. corporations $8.9 billion in 2002 Loss of worker productivity; consumption of bandwidth and tech resources; and use of technical support time A Pew Internet & American Life Project survey (n=2,500) found that workers encounter little spam while on the job 53% said all of their incoming email was work-related 71 % said "a little" of the e-mail they receive is spam Nearly 60% receive fewer than 10 e-mails per day and half said “none” of their work e-email was spam Morrisey, B. (2003). Spam Cost Corporate America $9B in 2002 . Cyberatlas. http://cyberatlas.internet.com/big_picture/applications/article/0,,1301_1565721,00.html

9. Most Annoying Types of Spam Type Percentage Pornography 91% Mortgage and loans 79% Investments 68% Real estate 61% Software 41% Computers and other hardware 38% None 3% Base: 2,221 U.S. adults, 11.22.02 through 12.02.02 Source: Harris Interactive http://cyberatlas.internet.com/big_picture/applications/article/0,,1301_1565721,00.html#table

10. What’s different about the web? On the WWW, you “will slowly discover that nothing less than an entirely new publishing and advertising economy is taking shape in this information-based terrain.” (Schwartz 1996) A“new business paradigm is required in which the marketing function is reconstructed” (Hoffman and Novak 1996) “To achieve the goal of providing information, advertising itself must change” (Coalition for Networked Information’s Working Group on Advertising 1996)

11. The basic questions are: How can marketing content best be delivered to online consumers? What works in the online environment? Can traditional methods and models be ported to the web? Will techniques used in print and electronic broadcast media work on the web? How can return on investment be measured? Will standard methods used to track the success of advertising in offline media work on the web?

12. Two principles about web advertising influence many advertising practices The direction of the advertising message is reversed In traditional advertising, the message is imposed on a passive consumer We are delivered to the advertiser in a one-to-many model of marketing communications On the web, the consumer Chooses to view an advertisement Takes actionsto uncover the information the advertiser wishes to deliver Enters the “clickstream”(taking further action)

13. Also: Content is important as the core of the advertising effort Traditional advertising uses brief distilled messages to catch and hold our attention It depends repetition to deliver the message Content is minimized and simplified to fit time constraints of media or the size constraints of the page Packing the maximum amount of meaning into the minimum amount of content is critical

14. Web-based advertising has different constraints emphasizing content and presentation Time and page size limitations become less important Presentation, content, navigation, and flow become more important Space (real estate) becomes important Content must be dynamic, current, substantive, and relevant to a variety of audiences It must catch the viewer’s eye in 10 seconds or less

15. Spending on web advertising beginning to recover What is needed to rebuild the web-based advertising industry? Standardization on advertising formats, sizes and duration Established, industry-wide principles for traffic analysis Reliable and valid procedures for capturing consumer responses to advertising Reasonable media pricing models

16. Interactive Advertising Bureau’s standardization model 728X90 300X250 180X150 160X600 http://www.iab.net/standards/uap/index.asp#

17. Banners provide “passive advertising exposure” The decision to view is not made by the consumer The banner is displayed randomly or in response to consumer actions (search terms…) The more targeted the display, the more likely is the click-through Key factors motivating click-through include Size Position Motion Color Novelty From: http://www.addesigner.com/ For: http://www.deleteddomains.com

18. This is the first banner ad It’s for ATT and was on Hotwired in 1994

19. A banner for Redbook Magazine on Lycos 10.95 http://www.lycos.com Ad for a TV on Hotbot in 3.00 http://www.hotbot.com Ad for Red Herring magazine by eye-scream http://www.eyescream.com/work/21.html

20. Banner for the Internet Link Exchange http://www.bcentral.com/?leindex Banners found on AltaVista 3.02 http://www.altavista.net

21. Animated banner ad from WDVL 3.00 http://www.wdvl.com/ An animated banner from Hotbot 1.98 http://www.hotbot.com

22. Animated banner ad from WDVL

23. An animated banner from Hotbot

24. Pop up and pop under ads Pop-ups cover the page you are trying to look at They vary in size and positioning With scripting, additional pop ups can be triggered by closing the first one Pop under ads are positioned behind the page you are looking at They will remain after you have left the page that triggered them Both are popular because they have a higher click through rate (8%) compared to banner ads (<1%) Here are two examples

25. Text: you have a few sentences to make your point Pose a question Give something away Play a game Placement: consider placement on the page Also, banners must reach your target audience Search engines are a good location to reach a more general audience Duration How long will it be displayed? How many times?

26. Important concepts: Visitor: someone who goes to a Web site The value to an advertiser of a visitor increases as more information is gathered about him or her Visit: making page requests on a single site from a single machine within 30 minutes Page view: a visitor viewing a page of content Assumes that asking for the page is viewing it Ad view: a visitor seeing an ad Most pages have more than one ad so the number of ad views is usually greater than the number of page views

27. Hit: A questionable measure of site traffic Impression: How many times a banner is displayed Click: When a visitor clicks on a linked object A click brings the visitor to another page or site CTR: Click-through ratio A ratio of the number of times a banner is shown to the number of times it is clicked on A CTR of 20:1 means that 1 in 20 people have clicked on the banner (5% of those who viewed it)

28. Cost of web advertising: Flat fee (ex: monthly charge) is rare and is usually done for smaller purchases CPM (Cost per thousand impressions): You pay for the number of times the banner is displayed in a time period (month) 20,000 impressions at a $20 CPM costs $400 Purchasing by CPM is the most common method CPM’s range from $10-$150 depending on the site and how targeted the banner placement is Average CPM in 1999: $36 (offline CPM: $6-20) Average CPM in 2002: $10 (offline CPM: $8-22)

29. The trouble with CPM You sell a book and budget $3/book for advertising You pay CPM = $30 and purchase 100,000 impressions ($3,000) Assume a response rate of .5% (five clicks per 1,000 impressions) 500 people click on the ad during the time the 100,000 total impressions are running 2% purchase the book resulting in 10 purchases You’ve paid $300 for each book sold For this to work, the publisher would need to pay CPM = $.30 rather than $30 How Web advertising works. HowStuffworks.com http://computer.howstuffworks.com/web-advertising2.htm

30. CPC: Cost per click-through You are charged by the click on the banner, not the number of impressions Common costs tend to be between $0.02 - $0.10 (from $0.50-$2.00 in 1998) Click through rates range from >1% - 8% CPC = CPM / (CTR x 1000) If you pay $20 CPM for a banner with a 2% CTR A 2% CTR means 20 visitors for 1000 impressions But you pay $20 for each 1000 impressions CPC = $20 / (0.02 * 1000) = $1.00 for each visitor

31. CPA: Cost Per Action The price is based on each “action” that a content site delivers The visitor is exposed to the target communication “Action” may be a sale, a lead, a successful form fill- out, a download of a software program or a sale Measured by time on page, number of pages viewed, number of return visits The action, price and terms of a CPA purchase are negotiated by the advertiser and content site Uses a back end tracking system provided by the advertiser allowing the content site to view clicks and actions

32. CPS: Cost Per Sale The price paid by an advertiser to a content site for each sale to a visitor referred from the content site to the advertiser’s site This buying model is typically tracked with cookies The cookie is set on the content site It is read on the advertiser's site at the final page after completion of one transaction/sale Typical rates/bounties range between 5% and 25% of the retail price of the product or service

33. Come-ons: what advertisers will do to draw you to the site Free stuff: this has ranged from CDs to computers Contests: this resembles offline contests Free web space: web hosting is a way to develop a loyal customer base Free email: this is a way to keep you at a site Free calendar, scheduling, storage space, bookmarks, desktop: same here

34. New technologies Push media After the consumer has taken certain action, content is delivered to the desktop Typically, this involves downloading, registering, and installing software on your machine It works together with the browser to send a stream of content across the screen Changes in technology (computer power, network throughput, browser capabilities) have allowed a richer media mix to be delivered to the desktop Pointcast, Castanet, Java, Active Desktop and similar software are the beginnings of push media

35. You customize delivery by selecting channels, format, and timing of delivery You develop a user profile that is used to customize the content There is a balance between the active and passive user Once the parameters have been set, push can occur without much intervention by the user This may lead to a push-pull model of content delivery This development is waiting to be exploited by advertisers

36. Rich media A web page ad that uses advanced technology such as streaming video or downloaded applets that interact instantly with the user Also, ads that change when the mouse passes over them Streaming email This is interactive email that contains multimedia but no plugins It works on any java enabled browser Avalon’s radicalmail.com http://www.radicalmail.com/demo/mediatype.asp?TypeID=2&demoID=73

37. Standardizing rich media 2/04: 30 leading online publishers (65% of total advertising inventory) are or plan to be in compliance with IAB’s “Rich Media guidelines Version 2.0” http://www.iab.net/news/pr_2004_2_12a.asp

38. Interstitial ads These are a way of placing full page messages between the current and destination page They are pages that pop up between what the viewer is looking at and what they are expecting to get Viewers, quickly learn at some level to recognize banner ads and filter them out Interstitial messages, like TV commercials make viewers a captive of the message. Typical interstitials last ten seconds or less where the viewer is doing nothing but looking at the ad

40. New concepts Community as a site for ads Community sites are among the fastest-growing sites on the net People who join have decided to become part of a “neighborhood” They'll come back and stay for long periods of time This means customer loyalty and tremendous usage patterns This differs greatly from the “drive-by” usage patterns on search engines and other portals People stay for, on average, only a few minutes, and develop no sense of loyalty to a particular site

41. Community sites are moving from homesteading to more task oriented and purposeful types of places Providing local auctions, third party content (sports and financial news), ecommerce Yahoo/Geocities http://geocities.yahoo.com/home Tripod http://www.tripod.lycos.com/ Angelfire http://angelfire.lycos.com Problem: ads are linked to local user content

42. Smaller community sites Homestead http://www.homestead.com Allows real-world communities to set up virtual communities (ex: baseball team) Members can put partner’s banners on their pages Hotbot, Accuweather, Rolling Stone, Garden.com pay per placement, clickthrough, or transaction List of free web space hosts http://www.100best-free-web-space.com

43. Personalization (a form of customization) It begins with online profiling This involves obtaining personal information from visitors and storing it in a database The visitor must accept a cookie to link their visits to this information They could also be given a password protected page that is their entryway A dynamically generated page is presented to them the next time based on their information Clickstream data is used to modify the profile They can also be asked to fill out more information

44. To do this well, you have to know what types of information to ask for This means knowing your customer well How do customers interact with us? What are their interests in our store? How do they make buying decisions You also have to know how much to ask for Marketers say typical buying decisions are made on the basis of 6 or less factors

45. I. Advertising models for the web • What’s different about the web? • Types of ads • Come-ons • New technologies and concepts II. The digital advertising value chain • Who’s involved and what do they do? III. Business processes in digital advertising • Managing digital advertising

46. The digital advertising value chain Advertiser Advertising Agencies Site Repping Firms Websites Consumers

47. Advertisers: Businesses want to market and advertise products and services on the web Digital marketing and advertising are two ways a company can market itself Why choose this media outlet? Companies are investing heavily in their on-line presence as on-line audiences continue to grow They will work with media buyers Immediabuy https://www.mediapost.com/ Enginehouse http://www.enginehousemedia.com The Digital Marketing Company http://www.thedmco.com/

48. Advertising agencies create the digital advertising strategy and presence Traditional agencies have developed interactive media groups and compete with interactive agencies Digital marketing and advertising involves: Developing, maintaining, and updating corporate web sites Coordinating multi-media advertising campaigns to attract people to sites Companies are transforming themselves into “web strategists” and “i-builders”

49. Who are some of the majors? Web strategists Agency.com http://www.agency.com Sapient http://www.sapient.com/ Modem Media http://www.modemmedia.com/index.html System integrators Cap Gemini Ernst & Younghttp://www.capgemini.com/ Sbi Group http://www.sbigroup.com/home.asp Digital change management Razorfish http://www.sbigroup.com/rzf.html Accenture http://www.accenture.com/ Integic: http://www.usiva.com/

50. Site repping firms They represent clients who want to sell advertising space on their websites They act as the salesforce, selling available advertising inventory to agencies A site repping firm allows website creators to generate advertising revenue while staying focused on creating content Examples of site repping firms include VirtualFocus, Inc http://www.virtualfocus.com/marketing.html JDA Software Group http://www.jda.com/p_revenuemgmt.asp MaxWorldWide: http://www.maxworldwide.com/