ROI Driven Online Advertising Presentation by Yaron Ilan (yaron@evrit.co.il)

1 ISOC IL - 6th Annual Conference Feb. 18, 2002

Top Internet Advertiserswho are they and what can be learnt from

ROI Driven Online Advertising

Presentation by Yaron Ilan (yaron@evrit.co.il)

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

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.

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.

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 Conference6

Top Advertisers• Nielsen NetRatings.• Monthly.• Home users.• U.S• December 2001.

Adv ertiser Impression Reach %

1. Aol Time Warner Inc 3,791,931,977 57.442. Microsoft Corp 2,446,755,720 43.263. Yahoo! Inc 1,520,493,601 40.644. Ebay Inc 722,098,806 33.265. Sony Corp 608,552,726 41.016. Barnes & Noble Inc 545,237,585 38.897. Cassava Enterprises Ltd 543,848,740 32.958. Orbitz Llc 434,549,940 30.19. Amazon.Com Inc 405,048,307 39.410. Oxygen Media Inc 375,343,193 25.0411. Classmates Online Inc 370,608,203 33.2612. Citigroup Inc 352,633,977 34.2513. Vivendi Universal Sa 321,103,986 27.3514. Providian Financial Corp 320,160,864 26.615. Natl Geographic Society 308,216,804 20.2216. Ediets.Com Inc 278,973,562 30.3617. Bertelsmann Ag 278,359,886 21.2718. Walt Disney Co 266,764,653 17.0219. Sprint Corp 249,148,942 24.8720. Datek Online Holdings Corp 246,274,358 5.0221. Homestore.Com Inc 244,966,260 11.7422. Telefonica Sa 239,116,966 19.9823. Bank One Corp 229,814,940 3824. Ameritrade Holding Corp 229,695,435 19.6525. Electronic Arts Inc 216,847,012 5.24

Top Advertisers• Nielsen NetRatings.• Monthly.• Home users.• U.S• October 2001.

• The list The list needs to be needs to be “Cleaned”“Cleaned”

Adv ertiser

1. Aol Time Warner Inc2. Microsoft Corp3. Yahoo! Inc4. Ebay Inc5. Sony Corp6. Barnes & Noble Inc7. Cassava Enterprises Ltd8. Orbitz Llc9. Amazon.Com Inc10. Oxygen Media Inc11. Classmates Online Inc12. Citigroup Inc13. Vivendi Universal Sa14. Providian Financial Corp15. Natl Geographic Society16. Ediets.Com Inc17. Bertelsmann Ag18. Walt Disney Co19. Sprint Corp20. Datek Online Holdings Corp21. Homestore.Com Inc22. Telefonica Sa23. Bank One Corp24. Ameritrade Holding Corp25. Electronic Arts Inc

House Ads

• Unsold inventory is filled with House Ads.

• Two types:– Blank fill.– Promotion of additional.

Services and partners.

• Media Companies are not Advertisers.

Adv ertiser

House Ads

• Unsold inventory is filled with House Ads.

• Two types:– Blank fill.– Promotion of additional.

Services and partners.

• Media Companies are not Advertisers.

Adv ertiser

Top Advertisers

• Three Leading Segments:– Financial Services.

– Online Services.

– Retail.

Adv ertiser

Online Services

• Products– Information Goods.

– Low fulfillment costs.

– High Profit Margins.

– Network effects.

– Economics of Scale.

• Sample:

Adv ertiser

Financial Services

• Products– Information Goods.

– Low fulfillment costs.

– High Profit Margins.

• Sample:

Adv ertiser

Retail

• Products– Traditional.

– “Nothing special”.

• Sample:

Adv ertiser

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.

Adv ertiser

Top Advertisers

• All employ an ROI Driven Online Advertising Strategy

Adv ertiser

• 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.

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.

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.

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.

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.

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.

Questions

ROI Driven Online Advertising Presentation by Yaron Ilan (yaron@evrit.co.il)

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