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In-Depth Introduction to Internet Advertising

In-Depth Introduction to Internet Advertising. By Greg Stuart Co-author of What Sticks & former CEO of Interactive Advertising Bureau (see full bio on last slide). Prepared July 2008. Goal of This Document. Topline the major elements of Online Media and Online Advertising:

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In-Depth Introduction to Internet Advertising

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  1. In-Depth Introduction to Internet Advertising By Greg Stuart Co-author of What Sticks & former CEO of Interactive Advertising Bureau (see full bio on last slide) Prepared July 2008 www.gregstuart.com

  2. Goal of This Document • Topline the major elements of Online Media and Online Advertising: • Use as a guide for areas to potentially dig into deeper where required/interested • Provide a glossary of key definitions, issues, etc. www.gregstuart.com

  3. Agenda • Digital Media in Context • What is the Internet? What are the Online Media types? • Online Advertising Overview • What are the Channels? Targeting Technologies? • Does Online Advertising Work? • The Research all shows it really works • Online Research and Measurement • Measurement is a tangled mess and there are many issues • Positioning Online Advertising • It is additive to other media, Frequency, Audience, Engagement • Various Internet Advertising Trends www.gregstuart.com

  4. Digital Media in Context What is the Net, where is Digital going, and what does Media mean? www.gregstuart.com

  5. Digital Evolution of Media • The future is a number of Digital and Networked media www.gregstuart.com

  6. What is the Internet? • The Internet is a worldwide, publicly accessible series of interconnected computer networks that transmit data by packet switching using the standard Internet Protocol (IP). • It is a "network of networks" that consists of millions of smaller domestic, academic, business, and government networks, which together carry various information and services, such as electronic mail, online chat, file transfer, and the interlinked web pages and other resources of the World Wide Web (WWW). • Source: Wikipedia www.gregstuart.com

  7. Portals Yahoo, AOL, MSN Content NY Times.com, CNN.com, Forbes.com, CBS.com Search Engines Google, Yahoo Search, Dogpile Social Media (Or User Generated Content – UCG) Facebook, MySpace Video YouTube, Veoh Blogs Federated Media, Email & Newsletters eCommerce Amazon, BestBuy.com RSS (real simple syndication); aka Feeds Feedburner, Google Reader Ad Networks Tacoda (AOL), Blue Lithium (Yahoo), Tremor Media, Advertising.com Online Media Categories Generally accepted types of Online Media: www.gregstuart.com

  8. The Vision for the role of Digital Media BEFORE AFTER Supplier Internet Customer Customers Supplier Monologue One way Mass communication Static No interaction among customers Shotgun approach Hard to identify customers Hard to manage customers Dialogue One-to-one marketing Real-time Dynamic Collaborative Segmented Rich customer interaction Rich customer data www.gregstuart.com

  9. If you had to live on a deserted island and couldonly take one of the following with you, whichwould you take? www.gregstuart.com

  10. Types of Online Advertising It’s just not one media. It’s the Network and there are many options www.gregstuart.com

  11. Recent Major News About Online Advertising “The country’s third-largest advertiser (General Motors) is getting ready to shift fully half of its $3 billion budget into digital and one-to-one marketing within the next 3 years.” Advertising Age March 17, 2008 Even ad-spending giant P&G is considering cutting its overall ad budget by as much as 10% this year and aggressively moving ad dollars to the Web. WSJ May 12, 2008 “Online is getting to the point where it may be more important than the 30-second TV spot.” Joel Ewanick VP Marketing Hyundai Motor America www.gregstuart.com 11

  12. Types Display SEM Search Engine Marketing * SEO Search Engine Optimization * Email Marketing Newsletters Video Viral Marketing (Word of Mouth) * Classifieds Affiliate Marketing * Desktop or Software Product Placement Pop Ups or Pop Unders Landing Pages Lead Gen * Not really sold by Publishers Technologies Behavior Targeting Contextual Targeting IP or Geo Targeting Rich Media Rich Internet Applications (AJAX) Keyword Targeting / Adwords Video Scanning Social Media Targeting / Influencers Types of Online Advertising Est. Spending By Category www.gregstuart.com

  13. More Types of Online Media www.gregstuart.com

  14. Online Ad Pricing Dynamics • CPM – Cost per (M) Impressions • CPC – Cost per Click • CPA – Cost per Acquisition (action) • CPL – Cost per Lead • Hybrid • Online advertising overall is reportedly around 45% CPM and 45% Performance prices (CPC or CPA/CPL) and the rest is hybrid or combination of above. www.gregstuart.com

  15. All IAB Ad Units www.gregstuart.com

  16. Key is the UAP (aka Universal Ad Package) 728x90 180x150 300x250 160x600 www.gregstuart.com

  17. Adoption of the UAP Units Four UAP Units now represent 37% of total inventory, down 10% from Q4 ’05. IAB Recommended IMU “Button 1” (120x90) up 15.2% from Q4 ’05. “Button 1” = 19.6% “Button 1” = 4.4% www.gregstuart.com

  18. Internet Advertising Revenue By Type: Classifieds; Search Remains a Strong Leader % of ‘06 First Six-Month Revenues % of ‘05 First Six-Month Revenues Total $7.9 Billion Total $5.8 Billion Should be Updated Source: PricewaterhouseCoopers LLP/IAB Internet Advertising Report Note: Lead Gen is a new category in ’05, revised vs Referral. Changes vs YAG are recommended www.gregstuart.com

  19. Does Online Advertising Work? Really, does it? And how well? (Answer sometimes 10x better than TV) www.gregstuart.com

  20. 16 XMOS Public Studies to DateXMOS = Cross Media Optimization Study • XMOS 1.0 • Unilever’s Dove • XMOS Branding - 1st wave • McDonald’s • Colgate Total • Kimberly Clark Kleenex • AstraZeneca Nexium • XMOS Branding - 2nd wave • Universal Pictures Home Video • ING • VeriSign • XMO$ Sales & Branding I • Ford F-150 • P&G’s Olay • Kraft’s Jell-O • Nestlé's Coffee-mate • XMO$ Sales & Branding II • Target • Volkswagen • Philips • Motorola www.gregstuart.com

  21. Methodology Validated by Key Industry Bodies “This measurement approach is the most even handed to all media and extremely accurate in measuring Online’s contribution and cost efficiency.” Jim Spaeth, Former President, The Advertising Research Foundation Note: The methodology used to calculate the effects of online and offline media has been supported by the Advertising Research Foundation (ARF) and received the prestigious John & Mary Goodyear Award nomination for best International Research from the global research authority ESOMAR The research has earned the endorsement of Forrester research, and led to Forrester’s request to develop a summary analysis of findings so that they can counsel their clients on the role of Online advertising www.gregstuart.com

  22. Sales lift is the % difference between actual buyers in exposed and control groups.. Calculation: Exposed – Control The lift is among those reached by online. . Control Online Sells Product (Online & Offline) Online sales lift averaged 11% 25% Hi 19% Sales 17% 14% 12% 11% Sales Lift 10% 8% 8% Low 2% Philips >1% Motorola www.gregstuart.com * Target sales lift averaged across 99 GRPs from Homepage and display ads

  23. Summary Of XMOS ResultsOnline Optimization Only * Not the actual optimized level, but considered an interim increase ** Brand ran Optimal level so there was no gain from more online spending *** Because of differing objectives, cross media comparison was inconclusive www.gregstuart.com

  24. A B What Do We Know about Creative Better creative can make the difference between success and failure www.gregstuart.com Source: XMOS

  25. Creative Makes a HUGE Difference Better creative can make the difference between success and absolute failure Ad A www.gregstuart.com

  26. Add a New Medium is Driven by Diminishing Returns 100 90 5 4 80 3 70 60 2 Diminishing returns 50 % of Brand ImpactAwareness, Image or Purchase Intent 40 1 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Frequency www.gregstuart.com

  27. 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Adding Online Can Have Major Impact for Even McDonalds Introducing New Menu Item: Grilled Chicken Flatbread Sandwich Reinvested 13.6% in Online Cut6.4% 5pt Gain! 20% of Broadcast Budget % Aided Awareness Point of DiminishedReturns Ad Frequency (or Budget) www.gregstuart.com

  28. Performance is Partly Due to Media Mix Use by Consumers Heavier Heavy Online Light TV Heavy Online Heavy TV 26% 38% Online Use 34.3 Million! Media Usage among 18-49 year old target TV Use Heavier Lighter Light TV Light Online Heavy TV Light Online 15% 21% Lighter www.gregstuart.com

  29. Trying Something Brand New:Home Page Takeover Ad Ran One Day on Each Portal - Roadblock 43% One Day Reach Roadblock www.gregstuart.com

  30. Cost Effectiveness of Each MediumCost to Increase Purchase Consideration Interpretation: If it cost Roadblock $1 (indexed at 100) to increase purchase consideration, then it cost $1.35 for Online, $4.56 for magazine and $11.04 to TV to achieve the same increase. www.gregstuart.com

  31. Result was another $750,000,000 in U.S. Truck sales Total of +$1,350,000,000 in U.S. Truck Sales(at retail vs. Base Plan) The Value of Small Changes Ford Media Mix * Online Online Traditional Media Plan * Approx. $200 Million Budget www.gregstuart.com

  32. Based on detailed confidential interviews with 7 XMOS marketers: $230 million estimated Internet Ad Spending for company one year post each brand’s study. Lifetime would be much higher Only $2.2 million invested in studies Analyzed Brands/Companies Corporate DataBrand Data Johnson & Johnson Neutrogena Nestle Beverage Coffee-mate Procter & Gamble Olay Ford F-150 Kraft Jell-O Target Target Apparel AstraZeneca Nexium Other Studies–not included in analysis Unilever’s Dove McDonald’s Colgate Total Kimberly Clark Kleenex Universal Pictures Home Video ING VeriSign The Big Question: Has XMOS Caused Change in the Industry? www.gregstuart.com

  33. Change in Online’s Total Budget One Year After @ Study www.gregstuart.com

  34. Change in Online’s Share of Total Budget www.gregstuart.com

  35. What Has Been the Real Value of XMOS 30x vs.4 YAG 18x vs.4 YAG Avg XMOS Brand Avg Company www.gregstuart.com

  36. Online Advertising Research & Measurement And the Issues that do not get discussed publicly www.gregstuart.com

  37. Good News Lots & lots of data It’s all digital and networked Can track directly to sales online First medium to measure the ad (not just content) Immediate insights Bad News Lots & lots of data Do we have the systems to handle data There is Fraud and manipulation Consumer has control BIG privacy issues Huge discrepancies creates mis-trust Online Media Measurement Data is Not Good; and Yet its World Class www.gregstuart.com

  38. Main Terms of the Medium • Uniques • A unique visitor is a statistic describing a unit of traffic to a Web site, counting each visitor only once in the time frame of the report. This statistic is relevant to site publishers and advertisers as a measure of a site's true audience size, equivalent to the term "Reach" used in other media. • The Unique Visitors statistic is most accurately measured in two ways with current technology: • by requiring all Visitors to log-in to the site, thereby capturing the identity of each Visitor on each visit, or • by placing a cookie on each Visitor's computer, writing the cookie ID to a database, and checking for the cookie on each Visitor's computer each time they visit. • Visits • A series of requests from the same uniquely identified client with a set timeout. A visit is expected to contain multiple hits (in log analysis) and page views. • Page Views • A page view (PV) or page impression is a request to load a single page of an Internet site. On the World Wide Web a page request would result from a web surfer clicking on a link on another HTML page pointing to the page in question. This should be contrasted with a hit, which refers to a request for a file from a web server. There may therefore be many hits per page view. • Impressions or Ad Views • Same as Page Views, but for the advertisements. Defined as communication Please never use the word “Hits” www.gregstuart.com

  39. Online Media Research Overview www.gregstuart.com

  40. Big Strategic Advantage was Global Internet Ad Impression Measurement Guidelines www.gregstuart.com

  41. Key Elements of Guideline - 1 of 2 Refined definitions and standards • Client side measurement Via a beacon/clear gif or client side call (i.e., 302) • Spiders & Bot Filtering (database) 2 step process, via 1) short list of bots (20-25), 2) known browser • Behavioral Filtering to remove non human activity Might not be relevant if we use 2 step process above • Internal Traffic Do not exclude as it is insignificant • Cache Busting Agree to header based cache busting www.gregstuart.com

  42. Key Elements of Guideline - 2 of 2 Internal Controls • Shared “Areas of Auditing” • Asked to Communicate Internal Control Best Practices Disclosures • Goal is Transparency • Description of Measurement Methodology • Definitions • Data Collection Methods • Editing, Data Adjustment, etc. • Calculation Explanations • Reporting Standards • General Reporting Parameters • Certification and/or Auditing Applied www.gregstuart.com

  43. The Old Way: Server-side serving and counting 1: User requests content from publisher web server. 2: Publisher web server calls Publisher Ad Engine to retrieve ads. 11 3: The Publisher Ad Engine logs that it has served an ad. Publisher Ad engine returns an HTML blob to Publisher Web Server. Some of these ads may actually be pointers to a location on a Third Party server. 8 5 4: The Publisher Web Server receives the HTML blob. 5: The Publisher Web Server returns the page and the page begins to render on the user’s machine. 1 9 Publisher Ad Engine 6 6: While rendering the page, the browser determines that it needs to pick up an ad from a Third Party server. The browser fires off a separate thread to get the ad from the Third Party server. 2 4 7: The Third Party server logs that it has served an ad. 8: The Third Party server receives the request for the ad and returns a pointer to the location of the ad image by instructing the user’s browser to pick up the ad from an image server. Publisher Web Server 9: The user’s browser makes a call to the image server where the creative resides. 3 7 10 Publisher Ad Engine Log Third Party Ad Engine Log Image Server Log 10: The Image server logs that it has served an image. 11: The image server returns the image. A B C www.gregstuart.com

  44. Causes of discrepancies • Network latency • Publisher count is higher • Caching • Publisher count is lower • Crawlers • Publisher count is higher • Filtering techniques may differ • Implementation errors • Typically cause extreme discrepancies www.gregstuart.com

  45. The Better Way: Client-side serving and counting 11 2 8 3 5 1 9 Publisher Ad Engine 6 Publisher Web Server 4 7 10 Publisher Ad Engine Log Third Party Ad Engine Log Image Server Log A B C www.gregstuart.com

  46. The Way it’s Being Done Now: Server-side serving with client-side counting 11 8 5 5a 5c Publisher Beacon Server 1 9 6 Publisher Ad Engine 2 4 Publisher Web Server 5b 7 10 3 Publisher Beacon Log Third Party Ad Engine Log Image Server Log Publisher Ad Engine Log D B C A www.gregstuart.com

  47. How Good is NNR and comScore Data and do They at Least Trend the Same? • NetRatings and comScore Page View and Unique Visitor data trend together (are positively correlated) for less than half of websites examined. • NetRatings and comScore trend together for both Page Views and Unique Visitors for only four of the nineteen sites • Overall, the lack of consistency between the two services is no worse (and no better) in the second half of 2006 than it was in late 2005 • The average NetRatings/comScore monthly difference for Unique Visitors across the nineteen sites ranges from 15% to 25% over the 13-month period, with no particular trend. For Page Views the average monthly difference has settled around 40% • There is a tendency for a majority of individual websites to be significantly (and consistently) higher in either NetRatings or comScore. • In those cases where differences are significant, NetRatings and comScore are each higher half of the time • In most cases, the two services are not close, and are reporting different “realities” regarding usage of specific websites • Differences in websites where one service is consistently higher may be related to the demographic make-up of the panels www.gregstuart.com

  48. Sample NY Times - Unique Visitors www.gregstuart.com

  49. Sample: NY Times - Page Views www.gregstuart.com

  50. Backbone of Measurement and Targeting – Cookies! • HTTP cookies, or more commonly referred to as Web cookies, tracking cookies or just cookies, are parcels of text sent by a server to a webclient (usually a browser) and then sent back unchanged by the client each time it accesses that server. HTTP cookies are used for authenticating, session tracking (state maintenance), and maintaining specific information about users, such as site preferences or the contents of their electronic shopping carts. The term "cookie" is derived from "magic cookie," a well-known concept in UNIX computing which inspired both the idea and the name of HTTP cookies. • Cookies have been of concern for Internet privacy, since they can be used for tracking browsing behavior. As a result, they have been subject to legislation in various countries such as the United States, as well as the European Union. Cookies have also been criticized because the identification of users they provide is not always accurate and because they could potentially be a target of network attackers. Some alternatives to cookies exist, but each has its own uses, advantages and drawbacks. • Cookies are also subject to a number of misconceptions, mostly based on the erroneous notion that they are computer programs. In fact, cookies are simple pieces of data unable to perform any operation by themselves. In particular, they are neither spyware nor viruses, despite the detection of cookies from certain sites by many anti-spyware products. • Most modern browsers allow users to decide whether to accept cookies, but rejection makes some websites unusable. For example, shopping carts implemented using cookies do not work if cookies are rejected. www.gregstuart.com

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