Revenu e The Internet Wants to Be Free, but You Need to Get Paid
May 06, 2015
Revenue The Internet Wants to Be Free, but You Need to Get Paid
How I Got Here
Andrew Chen
How Online Companies Make Money
From Ads
CPMCPC
CPA / affiliate, leads
From Users
ecommercesubscriptionsvirtual goods
From Users
ecommercesubscriptionsvirtual goods
The Basic Model
Transactions as funnels
User enters
Browses
Adds to cart
Buys
Source: Andrew Chen
ARPU = average revenue per user
ecommerce ARPU• new users• % browse• % add to cart• % who buy• average order size• * frequency of
purchases
virtual items ARPU• new users• % register• % buy currency• purchases/month• average order size• churn %• month2 revenue
subscription ARPU• new users• % register• % subscribe• month1 revenue • (1-churn %) *
month2 revenue• …
Source: Andrew Chen
Maximizing ARPU
• Track, track, track• Understand user funnels– Increase repeat visits– Increase visit to purchase ratio, etc.
• Lower threshold for purchase (“Freemiums”)• Raise average order size• Close off any holes
From Ads
CPMCPC
CPA / affiliate, leads
Advertisers Publishers
Risk
CPM
CPC
CPA
CPM
CPC
CPA
Understanding Risk
Equal Risk. Not surprising CPC became dominant pricing method.
Calculating Revenue Per Thousand (RPM) –
The standard unit for measuring ad revenue
• Fixed Price Ad ImpressionsRPM = CPM (Cost Per Thousand Impressions)
• CPC Based Ads(CTR * PPC) * 1000
• CPALead based: ((CPL * # leads) / Imps) *1000Sale based: ((Gross Revenue * Rev Share) / Imps))
*1000
Click Through Rate (CTR) - Clicks/Impressions * 100 (%)
What Will It Take to Win?
• # users• user growth• activity of users• content• no more me too’s
No One Said It Was Easy
• SEO Publisher of Lyrics• Low Value Content• 16 Different Ad Spots• Spans Thousands of Pages
An Imperfect World
You Have (1) MessageFind Out Right Now Who. Hint: They Are On Your Friends Listmyluvcrushmsg.com
Is It Love? Take The QuizEnter Your Names To Check This Is So Accurate, It's Scary!NewCrushAlert.com
Monetizing Your Inventory
Option Pros Cons
In-house Sales Team Better Rates, Full Control Pricey, Need Staff
Ad Networks Quick set-up, Great Reporting Limited Ads, No Guarantees
Ad Sense Strong Adv Base, Solid Yields Restrictive Terms, Ad Crack
Affiliate/CPA Programs Flexibility, More Integration Options Hit or Miss, More Manual
Maximizing Ad Revenue
• Test, Test, Test• More eyeballs• Increase CTR and/or Conversion Rate (CVR)• Focus on quality / value to advertiser• Automation / technology
When East Meets West
From Ads
CPMCPC
CPA / affiliate, leads
From Users
ecommercesubscriptionsvirtual goods Ad Payment
Platforms
Ads Instead of $
Ad Payment Platforms
Users Want Something
The Problem: They Don’t Want To Pay with Cash
Social Media Apps
Software The Solution:They Will “Pay” Through Ads
Movie Tickets
Source: Trialpay.com
What Is It
Social Media – App Developer
Flow
Digital Goods – Consumer Proposition
Source: Trialpay.com
Source: OfferPal Media
Source: Super Rewards
Social Media - Integration
Maximizing Ad Platform Performance
• Test Among Platforms• Tweak Offer / Point Matching• Integrate Look and Feel• Push for Margin• Focus on The Value Proposition• Track Performance Carefully
Mix And Match
From Ads
CPMCPC
CPA / affiliate, leads
From Users
ecommercesubscriptionsvirtual goods
Ad Payment Platforms
Ads Instead of $
One Style Does Not Fit All
Questions?
Jay Weintraubjay.weintraub[at]gmail.comBlog: jayweintraub.com@jayweintraub@leadscon
Four Factors Affecting RPM
Impression Count/Person
RPM
# Impressions Targeting & Placement
Level of Targeting
RPM
# Advertisers
Advertiser Base
RPM
Content / Ad Relevance
Relatedness
RPM