The average advertising budget in Russia is 7,000 rubles per month

    Yandex has released the newsletter Contextual Advertising in Russia. Summer 2007 ”( PDF ). The study was compiled on the basis of Yandex.Direct, the data cover the period from January 2006 to June 2007.

    For the first time, the report published data on the average budget of advertising companies on Yandex.Direct, and also analyzed the reasons for the decrease in the average click price.

    Contextual online advertising is the most dynamic segment of the Russian advertising market today. The growth rate of its volumes in monetary terms is 150-200% per year, which is several times higher than the rate of sales of advertising in traditional media (no more than 30-36% growth in 2006, according to AKAR). Both in terms of development rates and absolute sales figures ($ 110 million for 2006 alone), contextual advertising in Runet is ahead of banner advertising (+ 60% for 2006).

    The contextual advertising market is becoming increasingly widespread. As of June
    In 2007, on the Direct system alone, on weekdays, contextual ads are shown 140 million times and more than 1.2–1.3 million users click through to advertisers ’sites. From January to December 2006, 147 million user clicks to advertisers' websites were registered in the Direct system. On the whole, in 2006 the monthly traffic to Russian Internet sites generated by contextual ads almost quadrupled. In 2006, Direct held advertising campaigns for more than 30 thousand advertisers.

    Along with the expansion of the market and the increase in its coverage, the budgets of advertisers for contextual advertising also increase. In 2005 and 2006, the monthly budget allocated by the average advertiser to their contextual company almost doubled during the year, so in March 2007 it exceeded 7,000 rubles.

    A good illustration of the change in demand and the corresponding change in supply is the dynamics of the average bid per click. Throughout 2005, it steadily grew (+ 65% by the end of the year), however, in 2006, the growth rate stopped. This was largely due to the fact that a large number of advertisers could no longer increase the bid: their business simply did not allow paying even more for each site visitor.

    In order to attract new customers whose rates are strictly limited and small, Direct at the end of 2006 reduced the minimum rate from 3 rubles to 30 kopecks. As a result, the average advertiser’s bid for one user’s conversion has significantly decreased, but the number of advertisers and advertising campaigns has begun to grow. This, in turn, caused an increase in contextual advertising turnover amid a decrease in the average bid. However, after a few months, the growth in the average rate resumed, as competition among the newcomers began to intensify.

    As of April 2007, the average conversion rate was approximately 10% higher compared to the same period of 2005. Thus, the change in the average rate stimulated the expansion of the market; opened it to advertisers from regions and low-margin business segments. At the same time, in the high-margin and highly competitive segments (which, for example, the plastic window market refers to), the average rate for a visitor has been and remains high.

    The marked decrease in the average conversion rate cannot be considered a trend common to the entire Russian contextual advertising market: only Direct performed the reduction of minimum CPCs, while Begun left them at the same level. The monetary growth of the Russian contextual advertising market occurs not only due to price competition between advertisers (although its influence is undeniable), but also due to the arrival of new advertisers (including from low-margin businesses), increased investment in contextual advertising and the overall growth of the advertising audience. The ongoing popularization of contextual advertising, that is, the qualitative expansion of its client base, is today one of the most important trends in the development of the advertising market.

    As the contextual advertising market develops and the conditions for its placement change, the behavior of advertisers also changes. The most interesting trend in this area is the expansion of the set of keywords for which the ad is displayed. In 2006, the share of purchased queries in the total number of all searches by search users almost doubled. This growth was also influenced by the ability to set low rates.

    The total increase in contextual advertising impressions in 2006 was 475%; the number of clicks on contextual ads to advertisers' websites increased by 280%. The last figure means that the traffic of interested visitors, which provides contextual advertising, has increased almost fourfold over the year.

    The growth dynamics of the market indicators of previous years continues in the current year. For the first quarter of 2007, the average monthly budget of one contextual campaign increased by another 10% (more than one and a half times higher than the average monthly budget of the same period of 2006), the number of advertisers and the number of advertising campaigns also increased by 10%.

    Today, the Russian contextual advertising market is actually divided between the two largest players: Yandex.Direct and Runner. According to reports, in money terms Yandex.Direct owns 55-60% of the Russian contextual advertising market, and “Runner” - 30-35%. The remaining market share is shared between Rorer, Google AdWords, as well as, Optimist and several other contextual networks.

    Who buys contextual advertising? The largest budgets for contextual advertising in Russia are ready to spend, mainly, businesses with a high cost of attracting a client: participants in the construction and automotive markets, as well as manufacturers and suppliers of industrial goods (B2B segment). A significant share of the contextual advertising market turnover is provided by sellers of household appliances and electronics, representatives of financial and insurance businesses, the business services sector, the tourism market and the real estate market.

    Almost all of these industries are also among the ten industries whose representatives are willing to pay the highest CPC.

    Some of the industries included in the Top10 in terms of contributions to the contextual advertising turnover are not included in the Top10 in terms of CPC. In particular, sellers of household appliances, travel services and cars, although they spend significant budgets on contextual advertising, set low prices for the transition: the average cost of a visitor in these industries is 8.5, 7 and 5.5 rubles, respectively .

    The main share of contextual advertising budgets falls on customers from Moscow. The capital provides 70.92% of advertising turnover, while all other regions of Russia - only 25.78% (the rest is the CIS, and two thirds are Ukraine). For comparison, in the daily audience of Yandex search, Muscovites account for only 38% of visitors.

    Moscow advertisers are willing to pay a significantly higher price for audience attention - the average cost per click in Moscow and the regions varies 2-2.5 times.

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