Background Report on Internet Advertising 1998 Nov, Elder, aa456 ========================================= At the meeting of the board of directors in October, there was discussion of augmenting NCF's cash by hosting banner advertising on the NCF portal web page. I volunteered to learn a bit about internet advertising and report to the board. This is not an endorsement of revenue from advertising, it's just information. Here's my report (please point out errors -- it's based on just an hour or so of web surfing and a bit of analysis of NCF's web server log). Overview ======== Getting revenue from advertisers is the core business of major mass communication media owners. Television and radio operators get most of their revenue from advertisers (that's why television and radio are 'free' to receive), and newspaper and magazine publishers get a large portion of their revenue from advertisers. The internet has evolved as another mass medium, becoming another channel for advertisers. Just as in other media, many internet publishers gather content that will attract an audience, and then sell that audience to advertisers. Advertisers are interested in reaching a particular part of the population. Content-publishers who can attract audiences that are of particular interest to an advertiser get the most money. This is a simple market force, but very powerful because billions of dollars are spent on advertising (a rapidly increasing part of that on internet advertising) and there is no equally lucrative alternative methods to finance web content. Thus advertising has shaped much of the internet content. Much content and most services (such as search engines) aren't there just for our benefit. There is a fascinating and ever-changing dance between advertisers, web site publishers dependent on advertising revenue, and millions of internet surfers. Of course not every web site participates, but those that do share hundreds of millions -- soon billions? -- of dollars of revenue, and thus become the best-funded web sites, able to finance further development. Operating a web site able to generate revenue allows a company to obtain financing -- such 'internet companies' are now attracting billions of dollars of investment -- all based on their ability to connect advertisers with potential consumers. If you produce a web page that ends up attracting millions of 'hits', you could earn money by selling banner ad space on your web page(s) to advertisers. How much you could earn depends on the type of audience your content attracts. Internet Advertising and NCF ============================ Advertisers pay for banner ads by frequency of exposure ("impressions") or by user activity (eg., click-through or form-filling). Payment based on exposure goes by the term "CPM" (cost per thousand). Payment based on user actions is called "revenue sharing". CPM banner ads -------------- A banner ad site operator gets paid for each display of a banner ad -- more money if the audience is targeted. The main NCF page would be considered untargeted, while pages in the 'Sailor Moon SIG', for example, would be considered 'targeted' (presuming that Sailor Moon fans can be easily typecast). Typical rates are $10 per thousand displays (1 cent per display) for untargeted ("run of the network") ads, and $40 to $50 for targeted (and higher, if the targeting is better, eg., on a page frequented by people in the final stages of a purchasing decision). There are companies that analyse and audit web logs to determine the 'true' hits per page. I imagine they try to detect web site owners pumping up hits by using computers. Revenue-sharing --------------- A revenue-sharing site operators gets paid each time a user clicks on a banner ad, fills out a form, gives their email address, buys a product, etc. Thus in this form of advertising, the advertiser only pays if the advertisement attracts interest. However, the media provider's revenue then depends on the quality of the advertiser's ad, which obviously isn't pleasing to the media provider. Payments per action are higher than payments per impression but obviously less frequent. The more traffic a web site gets and the more targeted that traffic, the more valuable a web site is to an advertiser. Selling advertising has become the mainstay of commercial web sites. Many companies spend millions on content and service development and give it away free simply to attract a huge volume of traffic, and then target it. For example: Category Service offered Targeting mechanism Search engine Finding things Ads based on search keywords GeoCities Home page hosting Interest groups Classifieds/auctions Connecting people Category of goods News & reviews Info & advice Category of goods It's a business model that is attracting billions of dollars of investment. If they are large enough, web site managers might deal with advertisers directly. However, most sites (even large ones like altavista and theglobe.com) go through intermediaries whose business is to buy banner ad slots and place appropriate ads in them. DoubleClick is a typical intermediary. Here is what DoubleClick looks for (from their web site): To ensure the strategic growth of the DoubleClick Network, candidates for affiliation are evaluated on the following criteria: Number of Available Impressions - To generate the most revenue for your site, it is important that a minimum of 1,000,000 impressions per month is available to receive DoubleClick ad banners. Traffic Acquisition - Since the number of ad banner avails is relative to your traffic level, affiliate candidates should demonstrate current promotional and marketing programs used to drive traffic to your site. Content Category - In response to market-driven demand for highly-targeted editorial content, we are currently placing special emphasis on selecting sites in the following categories: Automotive; Business & Finance; Entertainment; Health; News, Information & Culture; Search, Directories & ISPs; Sports; Technology; Travel; and Women & Family. If your site currently meets these criteria for DoubleClick Network affiliation, or if you are interested in our DART or Direct solutions, please complete the questions on our form. NCF as a platform for internet advertisers ========================================== NCF has the same basic content model as used by GeoCities or theglobe.com, both of which are very successful at earning revenue from advertising (and at attracting investment capital -- hundreds of millions). In addition, NCF could be said to attract traffic by offering access services. On the surface, it appears that NCF could generate significant revenue from banner advertising. But does NCF have the necessary traffic levels? NCF's text service attracts about 6,000 people per week, with about 75,000 hits on NCF's login text page -- that's about 300,000 impressions per month. Since NCF knows who these people are, prehaps they qualify as "high quality" impressions (as opposed to web page hits, which could be anything, including 'robots', and are harder to link to particular people). But text advertising probably commands low CPM rates (and NCF is already using text banner ads on its main text page). Statistics from NCF's web server are harder to interpret. A piece of content usually starts from a main page and then links in many other pages and images. A single page might cause the web server to send several dozen files (text and images). The server reports each file sent. To reduce to this to page hits may require some knowledge of each page's structure. NCF's web pages consist of pages maintained by NCF (eg., the main page and other content organizers) and pages maintained by members (home pages) and information providers. Below are some stats from NCF's web server for the period Nov 7 (4am) to Nov 13 (9pm). These are hits to 'root' html pages. During Scaled to period one month Type /~cp171 25117 127329 Member home page / 12915 65471 NCF root page (not sure about this) /~bs904 2390 12116 Member home page /~aa571 1519 7700 Member home page /Stylesheets 1499 7599 Information provider page /dharma 1121 5683 Information provider page /~aw220 984 4988 Member home page /~bg283 961 4872 Member home page /ncf/auction 642 3255 NCF page /~cj434 486 2464 Member home page /fibromyalgia 421 2134 Information provider page /~bj333 403 2043 Member home page /~dm870 365 1850 Member home page /ncf/freeplace 311 1577 NCF page /~bf018 308 1561 Member home page /boating 290 1470 Information provider page /~ba640 281 1425 Member home page /~ck651 238 1207 Member home page /acainnerpeace 220 1115 Information provider page /ncf/homepages 206 1044 NCF page /~ah370 200 1014 Member home page /ncf/register 196 994 NCF page Member homepages are amoung NCF's most popular web offerings. Some members run banner ads -- publish something that generates traffic (thus something presumably valued and valuable?) and reap $0.01 to $0.05 per visitor. NCF's main web page got about 12,915 hits during the period (65,000 per month). If someone were willing to pay $25 CPM for a slot on the NCF main page, that would be a revenue stream of $1,625 per month. If impressions on NCF's text page could be sold at $10 CPM, at 300,000 impressions/month, that would be $3,000 per month. NCF offers content provided by members and the community organized by subject and searchable. This same basic format is implemented also by GeoCities, theglobe.com, and others -- in a way that generates significant revenue and is the basis for their many hundreds of millions of market capitalization. Thus there is reason to believe that if NCF set its mind to it, NCF's site could also be organized to optimize advertising revenue potential. For example, to increase the draw of the main page, NCF could format it to look more like what has become the standard (used by, eg., Yahoo, GeoCities, theglobe.com, Altavista): title, banner ad, site/web search box, content category list, and news. WebMail, WebNews, and WebIRC are other possible ad banner vehicles (simply look at Yahoo or any of the NCF-like sites to see what is being done to get those banners out there). NCF's most popular SIGs involve buy/sell. This is reason to believe that a classified/auction service would be popular. Such a service is ideal for banner ads -- a camera advertiser, for example, would love to place a banner ad on a web page being displayed to people interested in buying a camera (hence the success of eBay.com, another recent billion-dollar market capitalization). Thus, while NCF is not likely to displace already establish global players, there is a possibility of re-organizing existing content and introduce new services that would enhance NCF's potential to participate in the dominant internet business model -- revenue from banner ads. NCF might especially appeal to advertisers interest in a vehicle specifically targeting the Ottawa market (eg., local ISPs). Information and data are good first steps in policy development and decision making. The above is a quick background report on internet advertising. It is not an endorsement of any particular action, just information. Here are some policy questions: Should members run banner ads on their home pages? Who should get the revenue? Should there be hit count limits or some sort of resource-sharing mechanism? Should NCF use banner ads to supplement donations from members? Or would members rathr just support NCF directly (eg., $2/month/member)? These are cost/benefit trade-offs for well-informed members to make. Related info: 1) Have a look at http://www.yahoo.com/ and http://www.theglobe.com/ to see how they organize to maximize traffic and targeting. Notice that the banner ad you see on Yahoo search result pages is related to the topic you search for (eg., automobiles, computer hardware). Notice how they lay out their main page, and its similarity (in principle) to NCF's main menu. 2) Internet adverting basics: http://www.iab.net/advertise/adsource.html 3) DoubleClick US Network Rates (from DoubelClick's web site): Rates are expressed in cost per thousand impressions. Base One Two Filter Filters Unlimited Automotive $50 $51 $52 $53 Business & Finance $40 $41 $42 $43 Entertainment $40 $41 $42 $43 Health $40 $41 $42 $43 News, Information & Culture $40 $41 $42 $43 Search, Directories & ISPs $30 $31 $32 $33 Sports $40 $41 $42 $43 Technology $60 $61 $62 $63 Travel $40 $41 $42 $43 Women & Family $50 $51 $52 $53 Run of Network $25 Targeted RON (Deliver Fast as Possible) $15 RON (Deliver Fast as Possible) $10 Base -- Runs untargeted. One Filter -- Allows the advertiser to select 1 targeting filter from the targeting menu. Two Filters -- Allows the advertiser to select 2 targeting filters from the targeting menu. Unlimited -- Allows the advertiser to select unlimited criteria from the targeting menu. Targets If you use the highly focused target selection criteria, you can select the most efficient combination of criteria to guarantee the most cost efficient and effective method of advertising. Frequency Geography Domain Name SIC Codes Company Size Browser Type Operating System Service Provider Micro Targets DoubleClick DART allows the following microtargets: Specific Company ($120 CPM) Specific College ($120 CPM) To Reserve Your Space Please read these instructions carefully. DoubleClick will be unable to reserve your ad space or fill your order unless these criteria are met: 1.Contact your DoubleClick sales representative (if you do not have a representative, please fill out this form. 2.Send a signed contract and purchase order (Important - due date is three days prior to the campaign start date). Please phone your sales representative for additional information. Note: Advertising cannot be reserved for an available slot without a signed contract and a purchase order. 3.Send GIF Image and URL of banner link (All URLs must follow this syntax: http://server.domain.com/file.type). Due date is three days before the campaign start date. 4.Send URL of banner link via email three days prior to the sponsors start date.