Online Advertising 101: An Introduction to the Industry Heath Row Research Manager DoubleClick Inc. Jan. 31, 2008
My email address hrow@doubleclick.com
What you will learn About DoubleClick What is third-party ad serving? A brief history of online marketing Market breakdown Kinds of media How online ads perform Major trends
About DoubleClick
DoubleClick at a glance Global third-party ad management platform Headquartered in New York 17 offices and development hubs 14 data centers worldwide More than 1,300 employees Billions of digital ads every day
One integrated platform Media planning and buying Ad serving Paid and natural search Rich media and video Mobile
DoubleClick s mission Deliver your ads anywhere, worry free Make your sales, operations, and finance processes more efficient Give you tools and data to make smarter decisions Grow your revenues from advertisers
DoubleClick research Rick E. Bruner, Director of Research and Industry Relations 212 381-5521 rbruner@doubleclick.com Heath Row, Research Manager 212 381-5139 hrow@doubleclick.com Jai Singh, Research Manager 212 381-5138 jsingh@doubleclick.com Ashley Watson, Research Analyst 212-381-5515 awatson@doubleclick.com http://www.doubleclick.com/knowledge
Core research department projects Original thought leadership reports Custom campaign benchmark reports Ad serving trend reports On-site and Web-based training sessions Research product strategy
What is third-party ad serving?
The media value chain Pre-Order Order Management Billing & Reconciliation Proposal Generation Inventory Management Trafficking Ad Delivery Reporting Optimization Invoicing Sell Side Buy Side Media Planning & Buying Creative Generation Trafficking Ad Delivery Reporting Optimization Invoicing
How online ads might be delivered Device Application Creative/ Format
How DoubleClick serves the value chain Pre-Order Order Management Billing & Reconciliation DoubleClick Rich Media Sales Manager DART for Publishers DART Adapt Sales Manager Proposal Generation Inventory Management Trafficking Ad Delivery Reporting Optimization Invoicing Sell Side Buy Side Integrated Platform Integrated Platform Integrated Platform Media Planning & Buying Creative Generation Trafficking Ad Delivery Reporting Optimization Invoicing MediaVisor DoubleClick Rich Media DART for Advertisers & DART Search MediaVisor DoubleClick Rich Media
A brief history of online marketing
Online advertising, in general Online advertising refers to any advertising delivered through media connected to the Internet.
The birth of online advertising The first spam email was sent in 1978 when a DEC employee announced a new computer by inviting everyone with an ARPANET address on the west coast to a reception. (They were chastised for breaking the ARPANET appropriate use policy, and a notice was sent out reminding others of the rule.) Computerized Bulletin Board System, the first BBS, launched in 1978. The first commercial online services, CompuServe and the Source, were founded in 1979.
The first online (service) ads The IBM and Sears-run dial-up online service Prodigy ran banner ad-like ads as early as the mid- to late- 80s.
The birth of online advertising, continued NCSA Mosaic released in 1993, leading to the rise of the graphic, commercial Web. Netscape Mozilla becomes the first commercial Web browser in 1994. October 25, 1994: The first banner ad runs on HotWired. The IAB s Ad Sizes Task Force releases the first real ad standards in 2003. March 13, 2006: Rocketboom runs what might have been the first video ad.
1994: A banner year Source: AT&T s You Will campaign, ran on HotWired in October 1994. It was among the first Web ads.
1996: Web advertising gets interactive Source: HP s Shockwave Pong banner, the first rich media ad (you could play Pong in the banner). It was made by the San Francisco-based agency RedSky Interactive in 1996.
The big picture: five-year forecast for devices and access Source: The State Of Consumers And Technology: Benchmark 2007
Online video is here, podcasting is not Please indicate how often you use or do the following % of respondents Source: DoubleClick Touchpoints IV, July 2006; N=6,121
Market breakdown
Basic terminology Forms of online advertising Display: Banners/graphic Rich media: Enhanced display (special effects such as video, expands, floats) Search: Text (keyword-based) Online campaign types Branding (awareness and message reinforcement) Direct response (ROI/acquisition-focused) Online media tactics ROS (run-of-site rotation) SOV (share of voice) Special sponsorships, partnerships, co-branded advertorials Roadblocks, surround sessions Frequency capping (limiting exposure) Targeting Content, geo, demo, day-parting, psychographic, behavioral Optimization (right ad, right person, right time) Proprietary & Confidential DoubleClick, Inc 2007
Additional terminology Transactional elements and currencies RFI, RFP, IO (request for info/proposal, insertion order) Impression: one exposure to one user of a display or text ad CPM (cost per thousand impressions) CPC/CPA (cost per click of acquisition/conversion) Flat rate (special sponsorships such as fixed placements) Workflow terms Planning, buying, proposal generation (campaign determination) Forecasting (inventory availability) Creative generation (advertising units) Trafficking (the flighting of ad units) Delivery and reporting (campaign flight monitoring and results) Post-click and post-impression (view-through) conversion tracking Proprietary & Confidential DoubleClick, Inc 2007
The basic landscape Digital Ecosystem Buyers DoubleClick Portals/Engines Sellers Marketers: Advertisers all shapes & sizes Ad Networks Agencies: account, media & creative Unified Suite Exchanges Publishers/Content Sites Communities and Social Networks Proprietary & Confidential DoubleClick, Inc 2007
Total advertising spending in the United States, 2002 2010 (in $M) Comparative Estimates: Total advertising spending growth in the United States, 2002 2010 (% growth) Source: emarketer * = actual EmpoweringOriginalsDesignTemplateUS20051117.pot
Forecast, total offline advertising spend by segment, 2005 To 2011 OFF-LINE ADVERTISING MARKET Spending Growth 2005 2006 2007 2008 2009 2010 2011 ('06-'11) Off-line Advertising by Segment (bn) Broadcast TV $41.6 $44.2 $44.1 $47.7 $46.8 $49.1 $48.5 1.9% Cable TV $20.8 $24.1 $27.3 $30.9 $34.6 $38.5 $42.5 12.0% Radio $20.0 $20.7 $21.6 $22.7 $23.9 $25.2 $26.5 5.1% Newspapers $47.3 $48.1 $49.0 $49.9 $50.9 $51.9 $52.9 1.9% Magazines $12.8 $13.4 $14.1 $14.8 $15.5 $16.3 $17.2 5.1% Yellow Pages $14.2 $14.4 $14.6 $14.8 $15.0 $15.3 $15.6 1.6% Direct Mail $54.9 $59.6 $64.8 $70.5 $76.7 $83.5 $90.8 8.8% Other $51.3 $54.6 $58.0 $61.5 $65.0 $68.6 $72.1 5.7% Total Off-line Ad Spending $262.9 $279.2 $293.5 $312.8 $328.4 $348.3 $366.2 5.6% Year-over-year growth 4.3% 6.2% 5.1% 6.6% 5.0% 6.1% 5.1% Total without Direct Mail $208.1 $219.5 $228.6 $242.3 $251.7 $264.9 $275.3 4.6% Year-over-year growth 4.1% 5.5% 4.2% 6.0% 3.9% 5.2% 4.0% Source: JupiterResearch Internet Advertising Model, 7/06 (US only)
Total advertising spending worldwide (by media & region), 2004-2008 Source: emarketer EmpoweringOriginalsDesignTemplateUS20051117.pot
The estimates for US total and online ad spend 2007
Kinds of media
Display advertising Display advertising refers to web advertising displaying the message using graphic information. Includes image, rich media, floating, transitional.
Paid search advertising Paid search advertising refers to paid text links appearing on the search results of a search engine or search page.
Text and contextual advertising Text or contextual advertising refers to text links appearing on a Web page, traditionally using contextual targeting to relate the ad to the content.
In-stream video advertising In-stream advertising refers to advertising displayed during a video or audio content stream.
Mobile advertising Mobile advertising refers to advertising displayed in a mobile device. It includes: Display and graphic, video, text, and SMS.
Email advertising Email advertising refers to advertising displayed in an email environment. It includes: Display, text, opt in. Email display and text advertising is becoming less popular as some email readers do not support images and cookies.
Gartner s hype cycle for media industry publishing Source: Hype Cycle for Media Industry Publishing, 2007, Gartner
How online ads perform
Overall industry average campaign performances Click-Through Rate (CTR): 0.14% [CTR = Clicks Impressions] Interaction Rate (IR): 11.1% [IR = Unduplicated mouseovers (i.e., mouse over is counted once per impression served) Interactive Impressions (DoubleClick Rich Media only)] Video Completion Rate (VCR): 46% [VCR = Video Completions Total Video Plays (DoubleClick Rich Media, video format, only)] Source: DoubleClick ASTRA, U.S. DFA campaigns, Jan 2006 to June 2007
Click-through rates have held fairly constant over the past year Click-Through Rate Over Time Source: DoubleClick ASTRA, U.S. DFA campaigns, Jan 2006 to May 2007
Interaction rates have also held steady in the past year Interaction Rate Over Time Source: DoubleClick ASTRA, U.S. DFA campaigns, DoubleClick Rich Media format ads, Jan 2006 to June 2007
Roughly half of in-page video ads play through to completion Video Completion Rate Over Time Source: DoubleClick ASTRA, U.S. DFA campaigns, DoubleClick Rich Media video format ads, Jan 2006 to May 2007
Rich media drive higher click rates than Flash or image Click-Through Rate by Ad Format Source: DoubleClick ASTRA, U.S. DFA campaigns, Jan 2006 to May 2007
Interaction rates slightly higher for video ads Interaction and Video Completion Rates by Ad Format Source: DoubleClick ASTRA, U.S. DFA campaigns, DoubleClick Rich Media format ads, Jan 2006 to May 2007
Response rates vary by vertical sector Various Performance Rates by Industry Sector Source: DoubleClick ASTRA, U.S. DFA campaigns, Jan 2006 to May 2007
Bigger is generally better for response rates by ad sizes Various Performance Rates by Ad Size Source: DoubleClick ASTRA, U.S. DFA campaigns, Jan 2006 to May 2007
Key takeaways Moderate decline in click rate has leveled off Rich media click rates outperform Flash and image Bigger ads tend to perform better
Initial awareness: web sites, point of sale, and word of mouth dominate How did you first hear about the product you purchased? (Choose one) % of respondents Source: DoubleClick Touchpoints IV, July 2006; N=6,121
Consideration: search and advertising play greater role How did you further learn about the product you purchased? (Select all that apply) % of respondents Source: DoubleClick Touchpoints IV, July 2006; N=6,121
Most influence: website, in-store and word of mouth lead key influencers Which of the following most influenced your decision to purchase this product? (Choose one) % of respondents Source: DoubleClick Touchpoints IV, July 2006; N=6,121
Major trends
The top five Online ad industry growth Online video Behavioral targeting User-generated content Advertising exchanges
US online ad market has grown for eleven straight quarters Source: Internet Advertising Bureau / PricewaterhouseCoopers, Q2 2007 IAB Internet Ad Revenue Report, US Market
Search and display biggest parts of online ad pie Source: Internet Advertising Bureau / PricewaterhouseCoopers, Q2 2007 IAB Internet Ad Revenue Report, US Market
Retail, financial services, and auto biggest online ad sectors Source: Internet Advertising Bureau / PricewaterhouseCoopers, Q2 2007 IAB Internet Ad Revenue Report, US Market
Internet ad spending projected to surpass radio, magazines, and network TV
Social networks, mobile, and gaming still relatively small share of ad spend
Search marketing, email, targeting, rich media work best, say online advertisers Best performing online ad strategies, according to online marketers Source: MarketingSherpa, January 2007, survey of Ad:tech attendees
Other things I m following Social media Widgets Digital out of home Video on demand, IPTV, and interactive TV Viral advertising
Next steps
What we discussed About DoubleClick What is third-party ad serving? A brief history of online marketing Market breakdown Kinds of media How online ads perform Major trends
DoubleClick research agenda 2008 Ad Serving Trend Report Best Practices for Rich Media Best Practices for Online Ad Effectiveness 2.0 Best Practices for Publishers to Maximize Yield Best Practices for Conversions and ROI Quantifying View Through Search + Display Ad Synergy Frequency on Conversion, Engagement, Brand Correlation of Brand and Response Client Surveys: Publisher/Advertiser 2008 Successes, Challenges, and Priorities Touchpoints V imedia v. 6 63
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