Immersion in the context

    This is the first promised material in the special project “Launching a context-direction in a web studio” from Ruward and Aori
    The end of 2014 and the beginning of 2015 brought widespread economic difficulties, which also affected the advertising market. The growth rate of the entire advertising market in 2014 decreased by two and a half times - to 4% from 10% in 2013. Internet advertising was the only market segment that showed double-digit growth. Display advertising dipped by 5%, and the contextual advertising market grew by 27%.

    Segment advertising market volumes, 2014 (AKAR data)

    All these dry numbers indicate one thing: contextual advertising not only remains a “tidbit” in the crisis, but promises to show better growth rates compared to other segments of the digital market.

    Misconceptions such as “the contextual advertising market is divided”, “we cannot compete with large agencies”, “Yandex will earn all the money anyway,” and many others are common among the leaders of web studios. In our series of materials, we will dispel these and other misconceptions, as well as give a step-by-step guide to develop the direction of contextual advertising in our company.

    In this part, we will talk about the structure of the contextual advertising market, the benefits of introducing a new direction and the potential risks of such an introduction.

    And the following five articles will be devoted to various aspects of working with contextual advertising in your company:
    • "Manage dream". Control. Guidelines for adjusting business processes, employee development, changing the structure of the company, monitoring a new direction.
    • "Ogilvy is resting." Marketing. Positioning corrections, recommended marketing and advertising activities, emphasis on a new service.
    • “Sell it, I know what.” Sales. Effective sales on an existing customer base, preparation of a media plan and CP, customer development. Generate a flow of incoming clients to the context.
    • “The customer is always right.” Customer service. Differences between pure production and companies with customer service, measuring customer satisfaction, expanding account activities.
    • "Henry Ford School." Production. How to organize the very conduct of contextual advertising.

    Contextual Advertising Market in 2015


    An interesting coincidence: contextual advertising in search results and affiliate advertising networks accounted for 89% of Google’s revenue in 2014 (the second IT company in the world according to Forbes) and 90% of Yandex’s revenue (the largest Internet company in Russia according to Forbes) . Despite all the other products and services of these two companies, they earn 9 out of 10 dollars and rubles from advertising.

    All this money comes from end advertisers in two ways. They either run advertising campaigns on their own or place budgets through agencies. According to Aori estimates, the second segment accounts for only about 30% of all advertising budgets per context. At the same time, the annual turnover of the largest contextual advertising agencies does not exceed 2 billion rubles, or a share of 3% of the market. Consequently, the main money in the contextual advertising market is brought by the “long tail” of small and medium-sized businesses - your target audience.
     
    Mikhail Kubka, Google Russia
    Key Agency Manager Key words:


    The contextual advertising market in Russia is, to a large extent, formed by small and medium-sized businesses, and most of the budgets are allocated to direct customers. In addition, the small advertiser segment is more sustainable. In the first quarter of this year, the increase in advertising costs in Google AdWords for small and medium-sized businesses significantly exceeded that of large advertisers. This can not but rejoice. On the one hand, this inspires hope that business is not so bad in our country. On the other hand, a noticeable increase in contextual advertising in times of crisis once again proves its effectiveness.

    According to our estimates, this situation will not change significantly in the coming years. Moreover, regions are becoming drivers of market development. In 2014-2015, we see a statistically significant increase in investment by regional customers.
     
    Mikhail Kubka, Google Russia
    Manager for work with key agencies


    According to all studies of the RuNet audience, it can be seen that it is growing mainly due to the regions. Interestingly, a number of regions are even ahead of Moscow and St. Petersburg in the proportion of users using mobile devices to access the Internet.

    In the 3rd quarter of last year, Krasnodar Territory became the first region where the share of Internet users searching on Google from mobile devices exceeded 50%. If we talk about money, I have to limit myself to general words: Moscow is big, but growing slowly, and the regions are small, but growing much faster.

    If you add two and two, you will have to answer your only question - where will the customers carry their growing budgets for the context: directly to Yandex and Google, to existing agencies or to you.

    In 2014, the number of web studios based on a specific client niche increased: finance, insurance companies, builders and developers, medical companies and so on. If in 2013 these were units, then in 2014 you can already talk about dozens. Take a look at your customers' markets - is it possible that one of them is better off in a crisis?

    Judging by the statistics announced by Yandex at eTarget 2015 , by the beginning of 2015, compared to 2014, used cars showed positive dynamics, deposits and refinancing, construction and repair.
     
    Mikhail Kubka, Google Russia
    Manager for work with key agencies The


    dynamics of advertising budgets in general and the context in particular, largely repeats the dynamics of markets. If we compare 2014 and 2013, the categories of tourism, banks, cars decreased. Among the grown-ups were such categories as home and garden, consumer electronics and computers, jewelry, food.

    According to CMS Magazine, of the 8.5 thousand web production sites registered on the portal, 38% also say they provide SEO services, and only 17% say contextual advertising. We assume that fewer companies actually provide these services.

    A simple conclusion is that the direction of contextual advertising will allow you to detach yourself from other market players and get additional permanent profit from your existing client base. We will talk about specific figures in the following articles.

    Benefits of introducing contextual advertising services


    An ordinary web-studio works project-wise: the site was sold, developed, leased, forgotten, and everything is new. At the stage when 8-10 people work in the company, managers usually think about how to allocate technical support as a separate service and begin to focus on customer service.

    Obviously, but we will talk about this: the development of customer service significantly increases the CLV of an individual client, that is, the net profit that you get from working with a client for the entire time you work with him. For instance:
    1. You have developed a website for a client for 150,000 rubles. with a margin of 20%, and he left. CLV 1 = 30,000.
    2. In addition, you provide technical support to the client for an average of 15,000 rubles. per month with a margin of 20% for another three years, after which the client leaves. CLV 2 = 138,000 = 4.6 CLV 1 .
    3. If, in addition to all of the above, the client begins to invest in contextual advertising, it gives a good result, and its budget goes to 75,000 rubles. per month, which he invests for three years (with a margin of 5% of the budget), then CLV 3 = 273,000 = 9.1 CLV 1 .

    The estimates are crude, they do not take into account changes in budgets and inflation, but they give an overall picture. Moreover, the client’s withdrawal of contextual advertising allows him to further sell him technical support services. For example, refine landing pages for narrow ads, change interfaces for better traffic conversion, and fine-tune analytics.
     
    Nadezhda Shilova, AdLabs
    General Manager


    Contextual advertising is a permanent service, do it efficiently , and customers will work with you for years and pay off in the long term.

    Clients have long been calmly accepting agency commissions, because the quality work of the agency should be paid normally. Do not be afraid to take a commission, sell the benefits that the client will receive from working with you.

    As we will see in future articles, the introduction of contextual advertising leads to the development of customer service in other areas. You will have to better understand the client’s business, offer him ways to increase income, prove the need to place budgets in various channels, and finally. confirm the effectiveness of his investments.

    Is this a very long-term job? True, at the same time, tangible results appear in the first months of work. The statistics of Aori partners shows that in the first four months of contextual advertising, the client on average doubles the budget.

    Average budget growth dynamics for a typical client (data from Aori partners) in the first 4 months of placement, rub.

    Companies that already provide search engine optimization services to customers win even faster and more than web studios. They already have a certain level of customer service and experience in selling extended services, rather than projects. Contextual advertising allows you to generate more traffic from the same volume of demand, without losing quality traffic. This is especially useful for young sites in the first months of promotion, as well as during seasonal demand failures.

    In the article on the managerial aspect, we will see specific numbers and a business plan from the implementation of contextual advertising services.

    Risks when introducing the direction of contextual advertising


    In each barrel of honey, a tar spoon may lurk. The task of our special project is to reduce the number of tar spoons to zero.

    Marginality


    The most common question and the most serious problem is the relatively low margin of contextual advertising compared to search engine optimization and development. This is true, indicators of 15-20% are available only to the largest market players who can get a high commission from Yandex.

    This problem is reduced in two ways. The increase in the client’s budget, which he spends on the context, increases not only the turnover, but also the margin, since costs grow more slowly than budgets. We will consider this way in the material on sales.

    The second way is to reduce unnecessary costs, which reduce the margin with a fixed budget. We will consider this way in materials on management and processes and discuss how additional “interfaces” between the agency and Yandex with Google can be useful, how to simplify employee training and monitor their work efficiency.
     
    Mikhail Kubka, Google Russia
    Key Agency Manager


    Web studios have a big advantage over advertising agencies. This is an opportunity to initially create the right website, taking into account the user's path to conversion, and to constantly optimize the site’s content and contextual advertising taking into account user behavior.

    For example, the cost of contextual advertising will not be effective enough if the ad leads to a site that is inconvenient for viewing from mobile devices. Another example is a non-optimal way to place an order on a site. It is sometimes difficult for advertising agencies here to influence something, since website optimization is often outside their jurisdiction. And the client himself may not be up to it. In this situation, the web studio can see the full picture and influence all the key elements on the path to conversion, increasing the margin.

    Reputation


    The Dunning-Krueger effect suggests that incompetent people tend to overestimate their competence, while competent people tend to underestimate. It’s good that the question “What if I can’t succeed?” Came to your mind at all.

    Everyone started with something. When you start working with small client budgets, your risks are small. But if you build the training process correctly (which we will talk about), on small clients you can pump your employees well and apply for high budgets with all responsibility. We will see that “draining budgets” due to incompetence is a very rare story. Usually it occurs either due to the incorrect scheme of motivation of the specialist, or due to incorrect control by the head. We will talk about the principles of control in the material on the managerial aspect.
     
    Vasily Fedoseyev, Aero
    Director of e-commerce


    Often, high advertising costs and their inefficiency depends, however strange it may sound, on the client. Many companies still insist that their announcements on high-frequency key requests be placed in special placement under any circumstances. The top managers of such companies, during a break from their main duties, regularly “check” the performers, driving their “favorite” keywords into the search engines.

    In this case, the agency should not turn a blind eye to this, despite the obvious possibility of obtaining "easy" money. On the contrary, it is imperative to explain to the client the pointlessness of such inefficient spending. Such an approach will ultimately inevitably receive recognition from any, even the most stubborn customer, and the agency will not be “disconnected” in the event of a change in management or performers on the client side to more experienced specialists in this field.

    Working capital dependency


    Those who monitor the activities of contextual advertising agencies know how their business differs from the production business. If the web studio has the main costs - rent and payroll, then large agencies - working capital invested in advertising and returned back by customers. Their volume can be tens of times more than rent and payroll. Fortunately for the “long tail” of the market, this problem is peculiar only to large agencies.

    We will talk about how to reduce the risks of receivables and problems with working capital.
     
    Nadezhda Shilova, AdLabs
    General Director


    The main costs of large agencies are advertising purchased on customer sites, as well as payroll, rent and so on. As a rule, large agencies have a decent development budget. It can be either the development of proprietary technologies, or the purchase of ready-made ones, marketing investments in brand promotion, the purchase of market research, contributions to associations, etc., which small studios simply do not do. Also, large clients do not work on a prepaid basis, so the agency must have a stock of available cash in order to close cash gaps and pay bills on sites on time.

    Competition with "experienced" agencies


    The logical risk is “And due to what will I compete with large or medium and experienced agencies?” Fortunately, the first sales can be done on an existing customer base. Including customers who left the development a year, two or three ago, but with whom the separation occurred in good relations, and whose site has not changed much. This is a sales field in which competition is completely absent.

    In the near future, you will not compete with contextual advertising agencies, but with other web studios that do not have contextual advertising.

    We will also talk about the distant future in our next issues, but it is better to focus on the coming six months.

    Homework

     
    Before the third issue of the special project, write down all the clients with whom you have worked in your entire professional career, and with whom you broke up in good relations. Open their sites and answer the questions:
    1. A. Does the client use noticeable demand for an existing product or service (for example, an online parts store) or
      B. is the client more interested in creating demand (for example, complex consulting services, or a completely new product)?
    2. How long do you think the customer’s sales cycle is?
      A. An interested consumer is more likely to immediately purchase a product / service, or
      B. will it be a long time to compare, choose, make a decision?

    Write down two lists: clients who have the answer A to both questions; customers who have A in the answer to only one question. Clients with two answers B cross out in bold.

    Tomorrow, Wednesday, June 17, 2015, the fourth material will be released in the special project “Launching the context direction in the web studio” by Ruward and Aori

    Free sign up for the project to be the first to receive materials by mail and read them on the website of our special project.

    Also popular now: