Back in 2006, I wrote something on how Google could be more valuable than MSFT by 2010 given:
a) given its historical growth rate
b) projected growth rate
c) size of paid search today
d) expected growth of paid search by 2010 (40% of online advertising)
e) MSFT’s lack of stock movement
In that analysis I pegged Google’s revenue growth at 70% in 2006 over 2005, apparently, they came in close, but no cigar, at 67%. It’s still a very impressive number. But because I was not alone in expecting more, Google “tumbled” 1.5% after hours.
Google reported Q4 2006 revenue today, announcing revenues of $3.21 billion, an increase of 67% compared to Q4 2005 and an increase of 19% compared to Q3 of 2006. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC. In the fourth quarter of 2006, TAC totaled $976 million, or 31% of advertising revenues. $917 million of that was payments to AdSense publishers.
Still freaking impressive.
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WatchMojo NewsletterI postponed penning a business plan for the longest time. I finally put one together this past weekend. It took me 10 hours from start to finish, 37 pages in all, and that also yielded a 6-page executive summary.
Anyway, I was able to bang it out in a weekend cause it was the amalgation of a lot of data, figures and ideas I’ve had and published here over the past 12 months.
I actually added an appendix in our business plan that included a macro and micro level landscape of the industry along with a list of keywords industry types use quite a bit not all investors might recognize at face value (not all types of investors, anyway).
Here is the overview and index, please note this is something I wrote ages ago when I lectured Internet marketing and finance when I was finishing my studies at College, updated sporadically over the years, so it’s not very sophisticated:
I also have quite the Size of Market which summarizes a lot of data from eMarketer, Morgan Stanley, Borrell, Jupiter Research and company in terms of the current size, growth of and the potential market of total advertising, online advertising, paid search, online video advertising, local advertising and classified advertising. I am thinking of just publishing it here for anyone and everyone to use.
Any thoughts?
Anyway, here is Part 1, the index and overview of the landscape, enjoy!
INDEX OF KEYWORDS IN ONLINE ADVERTISING
MACRO – ANALYSIS OF ONLINE ADVERTISING
I) WORLD WIDE WEB: The 3 C’s
1. Content: Websites that write, edit and publish content, either for free or charge for access.
2. Community: Social networking sites that are currently “hot” fall in this category.
3. Commerce: BlueNile.com, Amazon.com, eBay.com (though eBay is largely a Community site with a massive Commercial disposition).
II) CONTENT IS KING
We will mainly examine content sites; how do Content sites make money?
1. E-commerce: selling merchandise, be it t-shirts, books, CDs, jewelry, etc.
2. Database marketing: whereby websites build up email addresses, then either send these offers or resell email addresses to third party marketers. During the early 21st century, anti spam (thankfully) reduced some of the more rogue operators here… today database marketing is making a comeback of sorts
3. Content Licensing: some websites with quality content and brand equity can resell their content to other publishers, but this is largely a very small industry
4. Subscriptions: many websites do not grant free access to their sites, preferring to charge clients. The debate between free content in favor of ad sales vs. paid content in favor of subscriptions is pretty much over, with free content in favor of ad sales prevailing thus far.
5. Online Advertising: a $15 billion industry and growing at a 25-50% growth rate. Online advertising itself can be broken up into many sub-categories.
III) ONLINE ADVERITISING
Websites produce Content to generate traffic and build a Community, in the hopes of generating Commerce.
In our world, publishers control the supply of ad inventory and advertisers demand this supply to promote their products and services.
Oftentimes, demand and supply create a middle market with ad agencies representing advertisers and advertisement sales representations firms representing publishers. This is done mainly because advertisers have core competencies in their fields, and not in advertising, similarly, publishers have core competencies in publishing content and marketing their websites, but not necessarily ad sales.
1. Pricing: CPM, CPC, CPL, CPA
a) CPM: Cost Per Thousand (whereby the M stands for the Roman numeral 1,000)
Advertiser agrees to pay a given CPM rate for every 1,000 impressions served. There is no need for the web surfer to do anything for the publisher to generate revenue. This is beneficial for the publisher but riskiest for the advertiser.
b) CPC: Cost Per Click
Advertiser agrees to pay a given CPC rate for every click generated. A click is simply a web surfer clicking through (note that the Click Through Rate – or CTR – is one of the many guages of performance). There is no need for the web surfer to do anything OTHER than clicking through an ad for the publisher to generate revenue. This is more beneficial to the advertiser than CPM, but it still does not guarantee any result, or outcome to it. The publisher can benefit here, but not as much as it would in the CPM model.
c) CPL: Cost Per Lead
Advertiser agrees to pay a given CPL rate for every lead generated. This model is used by financial companies for example when they want users to enter an email, or apply for a credit card etc. Also travel companies who might want people to actually search for an airline ticket, for example. Analogously, this model is once again more beneficial to the advertiser than the CPM and CPC model. Conversely, this model is less beneficial to the publisher since there are more and more constraints now until the publisher earns revenue.
d) CPA: Cost Per Action (also known as Cost per Sale)
Advertiser agrees to pay a given CPA rate for every sale generated. This is the best model for advertiser and arguably worst for the publisher since a surfer can click away from a site, surf around and not buy anything. It can, for websites with strong “conversions” turn to a very lucrative model.
From 1996-2000, publishers had the leverage and charged high CPMs.
From 2000-2003, advertisers had the leverage and paid CPA and CPC
Google and other search engines have really solidified search marketing through CPC programs
Since 2003, a resurgent online advertising market has led to more and more CPM pricing buys.
Today, advertisers and publishers who understand the other’s objectives and risks will fare better.
2. Marketing Objectives
Different advertisers have different objectives. Realistically, no one really only wants branding. Budgets can evaporate online very quickly so every campaign has some objective or other.
a) Branding: simply increase awareness of brand, rare really, but ideal for publishers.
b) Traffic: a client who wants to drive substantial traffic to a website
c) Leads: emails, applications, etc.
d) Sales: actual sales off a campaign. Very hard for publishers to prove successful.
3. Ad Formats
Rich Media applies to:
- superstitial is the name of ads that “float” on top of a page
- interstitial is the name of ads that appear in between two pages.
- prestitial is the name of ads that appear before a site loads up, these pay most.
Video advertising has hitherto been lumped into the Rich Media category, but increasingly, video advertising is being separated into its own line item. In fact, within video advertising, there is both in-page video advertising and in-stream video advertising. The former represents ads that are in the banner areas alongside the text-content. The latter are ads that are played before the video content, these usually last 3, 5, 10, 15, 30 or 60 seconds. This model is very much in its infancy and it is unclear if such “pre-rolls” (or “post-roll”) advertising formats will prevail.
Pop ups: with pop up blockers and negative consumer feedback, pop ups and pop unders are becoming a thing of the past.
Text Links: text ads which can be sold on CPM and CPC
Traditional banner ads:
Pixel sizes, whereby the first figure is width and the second is height.
Leaderboards: 728×90
Banners: 468×60 (increasingly giving way to 728×90 since these usually sit on the same real estate)
Rectangles / Islands / Boxes / Billboards: 250×250 or 300×250 or 336×280
Skyscrapers: 120×600 or 160×600
Also 300×600 are becoming increasingly popular.
125×125 tiles or buttons are becoming less and less popular.
MICRO – ANALYSIS OF ONLINE ADVERTISING
Online advertising represents a $15 billion industry, set to double to $30 billion by 2010 in the US alone, with a $110 billion target in Asia.
LANDSCAPE
BUY-SIDE
- Advertisers: GM, Gillette, Match.com, Diageo etc.
- Ad Agencies: From digital units of traditional agencies to online-only ones.
INTERMEDIATION
Pure Ad Networks
- Advertising.com
- Blue Lithium
- Fast Click
- Valueclick
- Tribal Fusion
Hybrid Ad Networks
- Max Online
- 24/7 Real Media
SELL-SIDE
- Advertisement Representation Firms (ad reps): Gorilla Nation and Winstar Interactive are two examples.
- Publishers: Any site essentially that creates or aggregates content.
Publishers can further be broken into:
- Top tier publishers: which are essentially top 50 portals, such as Yahoo, MSN, AOL etc
- Second tier publishers: sites with between 10M uniques and up to 100M uniques, such as Marketwatch.com, iVillage.com, IGN, CNET and more. This is not a black and white division, since in many ways, CNET is a top-tier site.
- Third tier publishers: Sites with enough of ad inventory to generate $1M per year in revenue from small, “fringe” advertisers.
Enjoy. Courtesy of Ashkan Karbasfrooshan/HipMojo.com/Mojo Supreme.
Click here for Wireless Entertainment and Mobile Advertising.
If you’re anything like me you try and keep up with good concerts that come through town, but find yourself so busy that you can’t remember when they are, and then end up missing them. It happens to me all the time. If you use iTunes then you’re also like me… and a bajillion other people, but someone has invented a program to solve all of our problems!
iConcertCal is a tiny plug-in for iTunes that gives you an updated, personalized calendar with concerts for the bands from your library penciled in. It even tells you where the band is playing and who they’re playing with! Installation takes about 2 seconds and will provide a lifetime of free organization and planning.
Check it out for yourself: http://www.iconcertcal.com/index.php
This is the kind of stuff I can get behind! Simple, easy and free solution to a constant, nagging problem. Booya.
Source: Stereogum.com
I am looking to begin monetizing our search product, MetaMojo.com. It dawned on me that a nice introduction in the search marketplace/ecosystem where an aggregator essentially taps into:
- Google
- Yahoo!
- any other PPC engines
and essentially parses the top paying CPC results and then returns the top one. Ideally, it would cross-tabulate the CTR of each ad and multiply that by the bidding CPC and the highest yielding one would come on top.
Any ideas?
PLAY
