Context immersion

This is the first promised material in the special project “Launching the Context-Direction in the Web Studio” by Ruward and Aori

The end of 2014 and the beginning of 2015 brought large-scale 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 segment of the market that showed double-digit growth rates. Display advertising fell by 5%, and the contextual advertising market grew by 27%.

Market volume of advertising by segment, 2014 (data from ACAR)

All these dry figures speak of one thing: contextual advertising not only remains a “tasty morsel” during the crisis, but promises to show the best growth rates in comparison with other segments of the digital market.

Mistakes like “the contextual advertising market is divided”, “we cannot compete with large agencies”, “anyway, Yandex will make all the money” and many others are common among managers 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 your company.
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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 different aspects of working with contextual advertising in your company:

• "Manage dream". Control. A guide to adjusting business processes, developing employees, changing the structure of a company, and controlling 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 the existing customer base, drawing up a media plan and KP, customer development. Generate a stream of incoming clients to the context.
• "The customer is always right." Customer service. Differences between net production and a company with a customer service, measuring customer satisfaction, expanding account activity.
• "Henry Ford School." Production. How to organize self-maintaining contextual advertising.

Contextual advertising market in 2015

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

All this money comes from end advertisers in two ways. They either independently conduct advertising campaigns or place budgets through agencies. According to Aori, the second segment accounts for only about 30% of all advertising budgets in context. At the same time, the annual turnover of the largest agencies of contextual advertising does not exceed 2 billion rubles, or a share of 3% of the market. Consequently, the main money in the market of contextual advertising brings the "long tail" of small and medium businesses - your target audience.

Michael Cup, Google Russia
Key Agencies Manager

The contextual advertising market in Russia, in fact, is shaped largely by small and medium-sized businesses, and most of the budgets fall to direct customers. In addition, the segment of small advertisers is more sustainable. In the first quarter of this year, the growth in advertising costs in Google AdWords of small and medium-sized businesses significantly exceeded that of large advertisers. This is good news. On the one hand, it gives hope that with business in our country everything is not so bad. 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 become drivers of market development. In 2014–2015, we see a statistically significant increase in investment by regional customers.

Michael Cup, Google Russia
Key Agencies Manager

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 even outperform Moscow and St. Petersburg in the proportion of users using mobile devices to access the Internet.

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

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

In 2014, the number of web studios that are positioned 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 it is already possible to talk about dozens. Take a look at your customers' markets - maybe some of them feel better in a crisis?

Judging by the statistics voiced by Yandex at eTarget 2015 , by the beginning of 2015 compared to 2014, the used cars, deposits and refinancing, construction and repair show positive dynamics.

Michael Cup, Google Russia
Key Agencies Manager

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

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

A simple conclusion - the direction of contextual advertising will allow you to build up from other market players and get additional permanent income from the existing customer base. We'll talk about specific numbers in the following articles.

Benefits from the introduction of contextual advertising services

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

Obviously, but we'll talk about it: the development of customer service at times increases the CLV of an individual client, that is, the net profit that you get from working with a client for all the time you work with him. For example:

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 the customer with technical support on average for 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 the above, the client begins to invest in contextual advertising, it gives a good result, and his budget goes to 75,000 rubles. in the month that he invests over the course of three years (with a margin of 5% of the budget), then CLV ₃ = 273,000 = 9.1 CLV ₁ .

Rough estimates, do not take into account changes in budgets and inflation, but give a general picture. Moreover, the client's withdrawal to the placement of contextual advertising allows further support services to be sold to him. For example, modifying landing pages for narrow ads, changing interfaces for better traffic conversion, fine-tuning analytics.

Nadezhda Shilova, AdLabs
CEO

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

Customers have long been quietly perceived by 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 implementation of contextual advertising pulls the development of customer service in other areas. You will have to better understand the client’s business, offer him ways to increase revenue, prove the necessity of placing budgets in various channels and, finally. confirm the effectiveness of its 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 placing contextual advertising, the client on average doubles the budget.

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

Companies that already provide customers with search engine optimization services 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 as traffic. This is especially useful for young sites in the first months of promotion, as well as during seasonal failures in demand.

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

Risks when introducing the direction of contextual advertising

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

Marginality

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

This problem is reduced in two ways. Increasing the client's budget, which he spends on the context, increases not only turnover, but also marginality, as costs grow more slowly than budgets. We will look at this path in the sales material.

The second way - reducing unnecessary costs that reduce margins with a fixed budget. We will look at this path in the materials about 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 the effectiveness of their work.

Michael Cup, Google Russia
Key Agencies Manager

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

For example, the cost of contextual advertising will not be effective enough if the ad leads to a site that is inconvenient to view from mobile devices. Another example is a non-optimal way to place an order on the site. It is sometimes difficult for advertising agencies to influence something, as site optimization is often outside their jurisdiction. And the client itself may not be so. A web studio in such a situation can see the full picture and influence all the key elements on the way to conversion, increasing the marginality.

Reputation

The effect of Dunning - Kruger says that incompetent people tend to overestimate their competence, while competent ones - to underestimate. It’s good that the question “What if I don’t succeed?” Has even occurred to you.

All started with something. When you start working with small client budgets, your risks are small. But if you build the learning process correctly (what we will talk about later), you can pump your employees well on small clients and apply for high budgets with full responsibility. We will see that “draining budgets” because of incompetence is a very rare story. Usually it occurs either due to an improper motivation scheme of a specialist, or due to improper control by a manager. We will talk about the principles of control in the material about the managerial aspect.

Vasily Fedoseev, Aero
E-commerce director

Often, high advertising costs and their inefficiency depend, however strange it may sound, on the client. Many companies still insist that their advertisements on high-frequency key requests in any circumstances were in special placement. Top-managers of such companies, during a break from their main duties, regularly “check” performers, scoring their “favorite” keywords in search engines.

In this case, the agency should not turn a blind eye to this, despite the obvious possibility of receiving "easy" money. On the contrary, it is necessary to strongly explain to the client the meaninglessness of such inefficient spending. Such an approach will ultimately inevitably be recognized by any, even the most persistent customer, and the agency will not be “disabled” in case of a change of leadership or performers on the client side to more experienced specialists in this field.

Dependence on working capital

Those who follow the activities of contextual advertising agencies, know how much their business differs from the production business. If the web-studio the main costs - rent and payroll, then the large agencies - working capital invested in advertising and returned back to customers. Their volume can be ten 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
CEO

The main costs of large agencies - advertising, purchased on sites for customers, as well as the wage fund, rent and so on. As a rule, large agencies have a decent budget for development. It can be both the development of own technologies, and the purchase of ready-made, marketing investments in brand promotion, 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, therefore the agency should have a reserve of free cash in order to close cash gaps, to pay bills on time in time.

Competition with "experienced" agencies

The logical risk is “What can I do to compete with large or medium-sized and experienced agencies?” Fortunately, the first sales can be done on an existing customer base. Including for customers who left the development a year, two or three years ago, but with whom the parting took place in good relations, and for which the site has not changed much. This is a field of sales in which competition is completely absent.

In the near future, you will not compete with the 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 releases, but it is better to focus on the next six months.

Homework

Before the third issue of the special project, write down all the clients with whom you happened to work during your entire professional career, and with whom you broke up in good relations. Open their sites and answer the questions: A. Does the customer use a noticeable demand for an existing product or service (for example, an online parts store) or B. Is the client more engaged in creating demand (for example, complex consulting services, or a completely new product)? How do you think, how long is the sales cycle for a customer? A. An interested consumer is more likely to immediately purchase a product / service, or Will B. long compare, choose, make a decision? Write out two lists: customers who have answer A for both questions; customers who have And in response to only one question. Clients with two answers B boldly cross out.

Tomorrow, on 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

Register for a project for free to be the first to receive materials by mail and read them on the website of our special project.