Joe Nguyen, Sr Vice President, APAC, comScore, Inc., shares some very interesting facts on online advertising as a business model
Online advertising is growing by leaps and bounds with the quick growth of internet technology and e-commerce. Many businesses have started paying attention to online advertising due to effective measurement, greater visibility and low cost. Even though online advertising increases efficiency, the business model suffers from several disadvantages since they can act as hindrances if they are not placed innovatively.
According to ZenithOptimedia Advertising Forecasts April 2014, the share of global ad spends in 2013 by television was 40.1 per cent as opposed to desktop and mobile internet that was 18.1 per cent and 2.7 per cent respectively. Newspaper, radio, outdoor and cinema stood at 16.9 per cent, seven per cent, 6.9 per cent and 0.5 per cent respectively. However, by 2016, the share of ad spends in TV will decrease to 39.2 per cent, and desktop and mobile internet will rise to 19.5 per cent and 7.6 per cent. Hence, online advertising will only increase in future.
Nguyen shared interesting facts about the comparison between branding and direct response in the last few years. In the online media spend that amounts to US$26 billion, only 23 per cent of the online dollars are spent on brand marketing and the rest 77 per cent is spent on direct response marketing. Among the measured media spend of US$186 billion, 63 per cent of the total dollars are spent on brand marketing and 37 per cent are spent on direct response marketing.
There are various business models operating in this space such as e-commerce, content publishers, search engines, e-services, content aggregators, social media and gaming. But how are they making money?
Nguyen explained that the content publishers generate revenues through advertising, subscription and pay-as-you-go channels. The search engines earn from advertising, the services get money through subscription and the content aggregators earn from advertising, affiliate model and commissions. The major source of revenue for social media is advertising and for gaming is micro-payments, subscription and advertising. However, the important question is which one is a fairly consistent model? Is it subscription and advertising or the startups should look into advertising in a different light? He highlighted that the most important thing for a startup is to maintain the cash flows.
Nguyen concluded the discussion by saying, “Startups should be brave and the investors should be braver.”