Russia has seen some of the fastest growth in digital advertising in recent years. Even though the torrid rate of growth proved to be unsustainable last year, digital advertising is capturing more advertising revenue, and the opportunity has attracted international investment in the classified advertising market.

News organisations, both print and broadcast, will need to monitor these fast-moving developments to develop an effective strategy to compete for digital advertising revenue with a range of new competitors.

Digital growth outpaces other media

Advertising continued to grow across most media in Russia in 2012, but while the rate of digital growth slowed, its impressive 35 percent rise year-on-year outpaced other media, according to the Russian Association of Communication Agencies.

Both print and television advertising continued to grow in 2012, but their respective growth rates of 2 and 9 percent was dwarfed by the growth in internet advertising, according to a report in East-West Digital News.

Internet display advertising only grew 17 percent. The real growth in digital advertising was driven by contextual advertising, which includes search advertising. It grew an impressive 45 percent.

In three to four years, it is predicted that digital advertising will capture a third of the advertising spend in Russia, according to a report in Vedomosti.ru. The rise of digital advertising comes at a cost for other forms of advertising. It is predicted that television’s share of advertising will decline from 48 percent to 46.4 percent this year, and print advertising will decline from 13.9 percent to 12.6 percent, according to the Vedomosti report.

Print advertising growth declined from 6 percent in 2011 to only 2 percent, but much of the coverage of the report focused on how internet advertising was cutting into television revenue.

Stanislav Povolotsky, RBC media holding’s commercial director, said that advertisers that had traditionally used television to reach consumers were now shifting to internet advertising, according to East-West Digital News.

In a widely reported sign of the shift from television to the internet, search engine Yandex almost overtook state-owned TV station Channel One in advertising revenue. In 2012, Yandex brought in 28.1 bn rubles, while Channel One earned 28.2 bn in advertising earnings, according to the Wall Street Journal. Of course, Yandex earns one out of every two rubles spent on online advertising in Russia, according to Immanuel Simonsen.

New advertising technologies such as real-time bidding are helping to fuel internet advertising growth in Russia, according to Michael Voschinsky, the managing director of Aegis Media.

Rise in digital ads attracts investment

With Russia offering such promising growth opportunities in terms of digital advertising, the market is attracting foreign investment.

In March, South African media house Naspers, struck a $570m deal to merge two Russian classified sites it owns, Slando.ru and OLX.ru, with their larger competitor, Avito.ru.

According to the Financial Times, the deal would create the fifth most popular website in Russia, with more than 100m page views per day, and the third largest classified advertising site in the world.

The move was seen as the beginning of consolidation in Russia’s online classified market, according to Ventures Africa.

Russia continues to experience rapid internet growth, with the number of internet users growing by a third every year, and the market is developing very rapidly. News organisations, especially print groups, will need to develop strategies to compete for internet advertising revenue or they may face stagnating revenues at best.

News groups will need to invest in audience intelligence in order to deliver better targeted advertising to compete with the contextual offerings of Yandex and the major social networks. Yandex poses a particular challenge to regional and local media as many of its advertisers are small and medium businesses rather than large national or international advertisers, and consolidation in online classified companies will put pressure on local media by chipping away at this lucrative source of revenue.

While search engines and online classified companies might not seem like competitors to news organisations, they will compete head-on with news groups for internet advertising revenue. News groups will need to develop strategies to face these new and growing sources of competition.

Search engines and social networks might not be in the journalism business, but they compete with news organisations for advertisers. And it’s not just new competitors that are challenging news groups for advertising revenue, it is also about an ever-changing landscape of technology and techniques, such as ad networks, re-targeting and now real-time bidding, which is also known as ‘programmatic’ buying and selling.

What is real-time bidding?

So what is real-time bidding? Online publishing data company Crowd Science explains real-time bidding like this:

Real-time bidding (RTB) is a relatively new advertising technology that allows online advertising to be purchased and served on the fly. Instead of reserving prepaid advertising space, advertisers bid on each ad impression as it is served. The impression goes to the highest bidder and their ad is served on the page.

RTB is an evolution of how ad exchanges used to sell remnant inventory, though it can seem challenging at first because of the alphabet soup of acronyms used to describe different parts of the marketplace. Here’s how it works: To facilitate the real-time bidding process, RTB exchanges buy data, often via tracking cookies, from across the web, and the data used across the process is managed by companies selling data-management platform (DMP) services. Supply-side platforms (SSPs) allow publishers to sell their inventory, and demand-side platforms (DSPs) allow advertisers and agencies to bid on the inventory. DSPs aggregate the inventory from multiple exchanges and, as Hollis Thomases explains on Clickz, “DSPs eliminate the need for another cumbersome buying step, the request for proposal (RFP) process”.

To simplify the process even further, Eric Picard of iMedia Connection broke down the RTB process from advertiser to consumer in this graphic.

For a more in-depth overview of the platforms, acronyms and technology behind digital ad exchanges and the programmatic buying and selling eco-system, we’ve written a brief primer to help you make sense of the jargon.

Here is another short explanation of RTB. The explanation is brief and useful, but the presenter speaks a bit quickly.

What is the opportunity of RTB?

RTB is relatively new and still makes up only a small part of the display advertising market, even in the most developed digital markets. Last year, RTB made up 13 percent of the US display market, but that figure was triple what it was the year before, according to eMarketer. The group estimates that the figure will rise to 19 percent this year, adding:

Research firms estimate US RTB digital display ad spending will total between $1.1 billion and $2.1 billion this year, driven by improvements in RTB technology and increased investment from both media buyers and publishers.

With the current downward pressure on CPMs (cost per thousand impressions), some publishers are concerned that RTB-powered ad exchanges will simply add to this pressure. Publishers also fear that they will lose control over how ads are displayed on their site and that this complex, technical system will require too many resources to adapt, according to Alex Gardner of MediaPost. However, RTB is not being driven to reduce already low CPMs. It is being driven by one thing only: increasing the efficiency of digital ad buying and selling.

Right now, there is too much friction and too much cost in digital ad buying. The process is complicated, time-consuming and expensive. Advertisers ask for request-for-proposals (RFPs) from publishers. After some analysis, the advertiser or agency chooses a couple of publishers based on some of their campaign goals. They create an insertion order, and send it out. Next the ad is created and agreed upon. “Somehow that all has to get delivered and measured,” Rodney Mayers, chief revenue officer of digital content data company Proximic, said in an interview with Knowledge Bridge.

The main impetus behind RTB isn’t that advertisers want cheaper inventory, Mayers said, adding:

I don’t as a buyer have the time nor does the client, the actual advertiser, want to bear the cost of all that friction. … The thesis behind programmatic buying, at least, is that I want to do the same thing. I just want to do it faster, and I want to do it right now. If your supply is in the system, and your audience data is in the system, your pricing is in the system, I don’t need to actually send you anything. I just need to buy it.

For publishers, RTB exchanges deliver greater flexibility to manage ad yield, Mayers said. Publishers can dynamically manage how much inventory they place into the exchange. He gave the following example:

This week my sales guys are selling kind of low. I am going to put 70 percent of my inventory in the exchange. Wait a second, a buy just came in. I can cut that 20 percent because I need to deliver for this $300,000 campaign. Next week, my sales guys are through the roof. I only need to put 10 percent in the exchange.

As for some publishers’ fears of lower CPMs, Mayers says that the more efficient process doesn’t just benefit advertisers and agencies but publishers as well. “Would you prefer a lower dollar CPM at a 2 percent margin because of everything that went into selling and winning, or would you prefer a $2 CPM or a $6 CPM at a 98 percent margin?” he asked, using hypothetical figures for the margins to prove a point.

The key for publishers is to effectively manage your advertising mix to the get the most digital revenue for your news organisation. He said:

It’s not a zero sum game. … It’s about balancing and managing yield so that … instead of one $200,000 buy, you end up with $250,000 where the 50 grand came basically came from exposing your inventory to everybody that wants to buy it.

How to shift your organisation’s thinking

The challenge of RTB, specifically, and digital advertising, in general, is not just technical. It also challenges much of the thinking and culture of media ad sales. How? “We’re seduced by big buys,” Mayers says. When one of your ad sales staff closes a big deal, it’s not just a jolt of adrenaline. “We feel special if we get one $300,000 buy. It reinforces everything that we believe about ourselves,” he says.

Programmatic buying takes away that rush and that affirmation. “(T)o get $300,000 automatically or through mechanised means or programmes, it seems a bit inhuman,” he concedes.

In the analysis of how news organisations have struggled and often failed to adapt to the changes of digital media, most of the focus has been on the newsrooms and on journalists and editors. However, little time has been spent on how the changes brought by the digital transition have affected the commercial side of news organisations. Mayers has put his finger on one of the reasons why traditional media sales teams have often failed to embrace some of the opportunities of digital advertising: selling thousands of impressions at $2 CPM just doesn’t feel as good.

In what he admits might sound a bit cryptic, Mayers says, “Do not underestimate the power of aggregated demand.” Sure, aggregating thousands of automated sales will not be as powerful as a big sell, but he urges publishers not to sit on the sidelines while this market develops.

With high growth and intense competition, news organisations need to stay on top of the latest developments to be competitive in the data-driven marketing era. Digital media poses business challenges, but it also requires news groups to understand key pieces of technology and terminology.

While the basic proposition of matching advertisers with audiences remains unchanged, in the digital world serving up highly targeted advertising has developed into the incredibly fast interchange of data and ad inventory between interconnected elements of advertising services platforms.  In plain English, as Ben Kneen at Ad Ops Insider says, incredibly powerful computers are running at companies such as Google’s DoubleClick and its rival Atlas that allow the buying and selling of highly targeted ads in milliseconds.

To get a strategic view of these ad technologies, we take a look at the challenges and opportunities for news organisations brought about by real-time bidding (or programmatic buying, as it is also known) in a discussion with digital advertising expert, Rodney Mayers, Chief Revenue Officer of data publishing company Proximic.

Initially one of the biggest challenges is understanding the terminology and the bewildering array of acronyms. This guide will help you make sense of it all.

Ad Exchanges – Just like a stock exchange, ad exchanges serve as an open online advertising market for buyers (publishers) and sellers (advertisers) to connect. Search advertising has captured a lot of the growth in digital advertising in the past decade fueling the development of search engines. While ruling the search engine market in many countries, Google acquired ad exchange DoubleClick, which rapidly became the biggest player amongst real-time ad networks. Google’s ad exchange helps advertisers to run display ad campaigns across the Google Content Network and on YouTube. By leveraging this platform, advertisers and publishers find it easier to manage and monitor ad campaigns in a multitude of formats and across thousands of websites.

Recently, major media companies such as Hearst and Condé Nast  and broadcaster NBC, all in the US, have launched their own private ad exchanges, enticing buyers with ever-more detailed data that advertisers can use to more accurately target the publishers’ audiences.

Data Management Platforms (DMPs) – Companies use DMPs to collect and analyse huge amounts of data from many different sources. DMPs are now so powerful that companies can track users and customers who visit from banners, Facebook pages, Tweets, mobile, video and even offline applications. They collect and analyse data from cookies, small files that keep website settings and also record user behaviour. For example, DMPs can allow e-commerce sites, publishers and advertisers to find out how many users who bought a big screen TV online also searched for high-end digital cameras in the past week.

DMPs consolidate user data into a centralised platform. They can be used not only for buying ad impressions, but also to help publishers achieve the long-term goal of attracting predefined targetable audiences. DMPs can help publishers gain more precise information about their audiences, which is useful not only in helping to sell more targeted, more effective advertising, but also in providing greater insight into the needs and interests of their readers or viewers.

DMPs can provide extremely useful insights, however publishers shouldn’t be misled into thinking that they are the sole source of useful audience data. “While DMPs do an admirable job creating segments based on data collected across multiple sites, publishers have their own treasure trove of data that often is under-leveraged for ad sales purposes,” says John Strabley, a media analyst writing for Business 2 Community.

Real-Time Bidding (RTB) – Based on campaign goals and audience profiles, real-time bidding allows ad buyers to bid for each and every impression. This dynamic transformation is called a “bidder” which can be built into any of the above platforms. For publishers, they can keep track of all their bids and build a picture of demand down to the advertiser level. However, one thing publishers should keep in mind is that data leakage is a potential risk in RTB platforms. Other parties using DSPs (Demand Side Platforms – see below) can read the stream of pages that come through in bid requests and use that to gain intelligence on their competitors.

Real-time bidding platforms still tend to be small relative to the total online advertising market, representing just $1.1 bn out of the total online advertising market, according to technology analysis firm IDC.

Supply-Side Platforms (SSPs) – SSPs provide publishers with an effective way to measure the monetization of mobile and website attention. Attention data includes a range of statistics such as how much time visitors spend on a site, the number of pages or pieces of content a visitor views per session and the percentage of return visitors to your site. SSPs allow publishers to jump into the ad exchange to make their inventory available and optimize selling of their online media space. More practically, they help publishers sell their inventory at a higher price because publishers can demonstrate more clearly how their content performs to advertisers.

Demand-Side Platforms (DSPs) – DSPs work together with ad exchanges and SSPs. These three elements support real-time bidding because they give buyers and sellers the ability to “value inventory on an impression-by-impression in real-time,” says Ben Kneen on his site, Adopsinsider.com. According to Kneen, the interplay of these systems enables targeted ads to be bid on and served to a browser in about 50 milliseconds.

DSPs submit a bid to the SSP along with an ad based on their valuation of a specific impression, determined from data about the user. The SSP picks the winning bid and serves up the ad. It is this complicated interplay of user data and bidding servers, the DSPs, SSPs and ad exchanges, that enables the near-instantaneous delivery of targeted advertising to users.

For news organisations, the key thing to remember is that the increasingly sophisticated use of user data is allowing the ever-increasing targeting of advertising. We’ll be looking at how to develop your advertising strategy in upcoming editions of the Digital Briefing.

Resources online:

• How Real Time Bidding, DSPs, SSPs, and Ad Exchanges Work by Ben Kneen at Ad Ops Insider
• Diagramming the SSP, DSP and RTB redirect path by Ben Kneen at Ad Ops Insider
• What is the difference between DSPs and SSPs? on Quora
• Demand Side Platform and why you should care by Marc Pocelli

The main digital challenge facing many news organisations isn’t attracting an audience but monetizing that audience. With dropping digital advertising rates due to an excess of digital advertising returns, and a host of new competitors for digital advertising revenue, reaching digital profitability can seem like an uphill battle.

To compete effectively, news organisations need to improve their use of data and engage with other digital advertising innovations, says  Rodney Mayers, the chief revenue officer of data and analytics company Proximic.

“Advertisers know more about your audience than publishers do,” Mayers told the independent publishers Association of Alternative Newsmedia digital conference in the United States. Publishers need to respond with their own data to earn better returns on their ads.

Use the data tools that advertisers use

The advertising industry is becoming increasingly sophisticated in their use of data to assist buying decisions. Proximic provides page level analytics to media buyers allowing them to understand more about potential ad positions, including content category, potential impact for brand advertisers and overall page quality. All of this is done in real-time, which Mayers says means less than 5 milliseconds. They work with such major companies as eBay, WPP’s GroupM and AdMeld, which was acquired by Google in 2011.

In an interview with Knowledge Bridge, Mayers challenged publishers to use these data tools to get to know their audience better. Editors and publishers used to rely on their gut instincts to deliver stories that their audience wanted to read and an audience that advertisers wanted to reach. He said:

Back in the day, that was the what the editors knew. They had a feel for their audiences. You couldn’t put it into data, but they had a feel for their audiences. That helped shape the voice of the paper. It helped attract the audience, and then the audience was able to be sold.

But where once gut feeling was enough, Mayers says there’s now an opportunity for publishers to exploit the data revolution and refine their understanding of their audiences. Data allows publishers and editors to test the “feel for their audiences” against measurable outcomes to drive more traffic and more engagement with their journalism. Higher audience numbers, higher engagement and better audience data can help publishers make the case for higher ad rates than the industry average.

For advertisers, Mayers said: “…if they have high confidence that they are reaching their target audience with the message they want in an environment that allows that message to be communicated, they don’t mind paying a premium for that. They really don’t.”

However, Mayers was frank in discussing the differences in the way that journalists and advertisers define premium content and, therefore, premium ad rates.

“The journalistic side (of the media business) says, ‘I did good work. This is journalistically sound. This is excellent. We are the major newspaper, and we are worth $35 (CPM),'” Mayers said. To put that in context, an analysis by comScore in late 2011 found that the average CPM for newspaper websites was not $35 but $6.99.

However, it’s clear that the premium probably isn’t $35 CPM. Mayers said:

Gone are the days of ‘I declare my CPMs and you just pay it’ because as with the competition of news and information, broadly speaking, you have a general competition for attention. If you prove, in your case, as a publisher, that you have won or are competitive in the attention game, that your folks disproportionately spend more time with you versus someone else, that supports a higher CPM. Just declaring, I am who I am and I’m worth it. That doesn’t work out here.

With the glut of digital ad inventory, media buyers are turning to data to improve the effectiveness of the ad buys for their clients. Proximic is just one of a number of companies that have launched to feed this need for data and analysis in the media, advertising and marketing industries. comScore provides audience data, while bluekai and Lotome provide data management platforms and other data services for marketers, publishers, ad agencies and data providers.

Mayers recommends that publishers consider using these data services to help improve their advertising returns.

The tools that are available to advertisers, publishers need to take them and flip them around and say, “…How do I use it to better describe my audiences so that I can sell that to my advertisers?”

For instance, he said that advertisers practice “impression weighting” on a site to determine which pages are getting more traffic and attention. Publishers need to use the same technique to sell those pages at a slight premium “because that is where the audience is”, Mayers said.

However, local publishers also have an advantage over most big advertisers. The advertisers might have national data, but local news organisations often have much more granular local data, including offline data that can help them pitch to advertisers. He said:

You have to be the expert (on your market). (Advertisers) will have big national numbers and distributed trends and beautiful graphs, but at the end of the day, you have to say that I know more about this because I did 14 events in the last 13 days. I have connections with the X,Y,Z (name the local organisation) and I’ve been in this market for the last 25 years.

Offline market data is hugely important even in the digital age, Mayers said:

Why? Because no one else is going to bring them that. No cookie in the world is going to describe that. That is where you get the premium side of the buy. Audience analytics. Knowing your audience better than anyone else will set you apart.

Do you have a product worth selling?

To win advertisers and get premium rates, publishers also need to be prepared to demonstrate how engaged their audience is with their content. Advertisers want to know not just how many people came to your site, but also that they stayed on your site long enough to engage with your content and their ads. Advertisers also realise that, just like journalists, they are in a battle for attention and they don’t want to be on a page where they are one of eight ads. They want to be on a page where they are one of three ads, or possibly just the only ad, Mayers said.

While he urged publishers to adopt data and analytics to improve their commercial performance, he also said that data tools are important in improving editorial performance. He said, “Publishers need to embrace that side of what they do right down to how many people read this article. Was this article important?”

If an article attracts zero readers, you don’t have anything to sell to advertisers. He added bluntly, “if your audience doesn’t think this is a product that they want to spend time with, nothing is going to help your CPMs.”

That is not something that most journalists and editors will want to hear, but if you know which stories no one reads online, that can help you allocate editorial resources, which are for many newsrooms becoming increasingly scarce. That doesn’t mean that you have to stop covering those stories, but it should make you rethink, at the very least, how you cover those stories.

Mayers’ advice for journalists, editors and publishers can appear direct, possibly even blunt, but all journalists want to have an impact and reach the widest audience possible. Data and analytics insights from companies such as Mayers’ could help your journalism compete for your audience’s precious time and attention, and to help you compete for revenue to support your journalism.

Creating your account

1. If you already have a business Google account, you can use your existing username and password to sign up for AdSense. If you don’t have a Google account, you’ll need to sign up for one first.

2. Choose the primary website for your AdSense account.  This will generate a code that you can use not only for the primary site you used for registration but your other sites as well.

At this point, you’ll also be asked the primary language for your site. AdSense has complete support for some 30, mostly European and major Asian, languages. For a handful of other languages such as Slovenian and Estonian, AdSense will serve ads in those languages but the user interface is available only in one of the main languages. Although you have to choose a primary language for your site, the service will serve ads in other languages on pages in those languages on your site.

3. You’ll next be asked to read and agree to some simplified terms and conditions to use the service. You must agree:

• Not to click on ads on your site nor encourage others to do so.
• Not to place ads on sites which include adult content.
• Not to place ads on sites that distribute content for copyright that you do not own.
• That you do not already have a Google AdSense account.

4. Enter your business details.  Note that the screenshot before is assuming personal details, so you will additionally need to enter the name and address of your business, making sure that the contact name and address are the same that you use on the bank account for your business. You will also be asked how you found out about AdSense and also if you want to receive email updates from AdSense, some of which promote new services and others that provide you with information on how to get the most out of your digital advertising.

After you click the button marked “Submit my application”, you’ll see a thank you message that also explains that you will receive an update on the status of your application in about a week. While you’re waiting for approval of your site, as Google suggests, it is useful to familiarise yourself with the service using their Newbie Central site for new users of AdSense.

5. A couple of days after you submit your application you should receive a follow-up email from Google letting you know that they have completed their partial review of your website.  In Google’s words, “after a new application is submitted, we’ll begin with preliminary checks on the site and the applicant’s submitted details”.

Adding AdSense to your website

Once you pass the partial review, you will need to set up your ad account and put an “ad unit” on your website for Google to complete the full approval process. An ad unit is an ad of a specific size, design and ad type. The e-mail you received about your successful partial review will contain instructions to log on to your AdSense Interface and get started.

1. Terms and Conditions. After you log in the first time, you’ll need to read and agree to the full terms and conditions for the service.

2. After agreeing to the terms and conditions, you’ll be taken to the AdSense interface, which at the moment is blank because you have not added any ads.  Click on Ad Units and the button “+New Ad unit”

3.  Now you will create the first ad unit for your website.  Each ad unit will have its own tracking code.  You can use this code on multiple places on your website to show multiple ads of the same format, but keep in mind that for reporting purposes they will all be grouped together making reporting much more difficult.

Type a name for this ad unit.  Under Ad size you will see a long list of options, starting with the sizes that Google determined to be optimal for click-throughs. Ad type has several options  – Text & image/rich media ads, Text ads only, Image/rich media ads only. For ad type, it is best that you select the option “text & image/rich media ads”, if possible.  This will allow the most ads to bid for your space, thus optimizing your revenue.  For now, you can ignore the option to create Custom channels as that is for advanced users.  For AdStyle, it will be important to pick Custom, which will allow you to choose colours that are appropriate for your site.

4. Once you’ve created your ad unit, click the button to get the ad code.  A window will pop up with code for you to copy into your website.

5. Now you need to put the ad unit code on your website so that Google can complete the approval process.  Here is an example of how it could be very simply added to the sidebar of a WordPress website. Many content-management systems, including WordPress, have plug-ins that allow you to easily incorporate AdSense ads or other ad networks into your site. Whether your CMS supports such plug-ins or not, it is important to consider the type of ads and ad units you will use when designing your site.

For the time being, your website will have a blank AdSense unit that blends in seamlessly with your site.  Within about 4 days after you add the ad unit, Google should finalise approval for your site – and the blank units will begin to display ads.  In the meantime, there will be dead space on your site but it should match in color and style to your website so there will be minimal disruption.

If you find an issue with adding the code, check Google’s a guide to troubleshooting common AdSense problems.

Setting up payment and finances

You won’t be able to set up payment options until after your AdSense account has been given final approval. Once that happens, you can add or edit your payment contact information by selecting Account settings under the Home tab on the AdSense management site. Here, you can also enter appropriate tax information, if required.  Usually tax information fields will not be available until you’ve met a minimum threshold of payments.

After you reach the equivalent of US$10 in ad sales, you can choose how you want to be paid.  After you make that selection, you will be mailed through the post a PIN which you will use to verify your physical address.

Lastly, once you reach US$100 in ad sales, and each time you reach US$100 thereafter, your payments will be processed.  Note that receiving your payments could take up to 1-2 months.

When Microsoft bought aQuantive, online display advertising was booming and the software maker was hoping to challenge the display king at the time, Yahoo, and the rapidly rising online advertising giant Google. It’s important to remember that while Google made its name as the search engine of choice for billions of internet users, the business that drives its billions of dollars in profit is advertising – search, display and mobile. How times have changed!

In a few short years, Facebook has knocked Yahoo from its display ad throne, and the bigger challenge for the entire sector is that the returns for display advertising have been plummeting.

In looking at Microsoft’s multibillion dollar write down, Reuters looked at why the display advertising market has gone soft:

The main culprit is an explosion of advertising space offered by Facebook Inc and other websites that is outpacing steady demand. But automated online exchanges, smarter search advertising and a growing skepticism about the effectiveness of jamming ads in people’s faces have also conspired to slash prices and suck profits out of the business.

“The inventory or amount of ad spots grew so fast, it outgrew demand,” said Dave Morgan, an industry veteran and entrepreneur. “That brought pricing down massively. So a lot of display advertising really became a ghetto for bad direct-response advertising.”

It’s not just the simple law of supply (or in this case, over-supply) and demand. Studies find that sophisticated users are able to simply blank out advertising, no matter how intrusive; Reuters quoted one business saying that it had shifted from using display ads to paid search advertising, affiliate marketing and comparison shopping sites.

For news organisations, Microsoft’s failure and the decline of the display advertising market hold some important lessons:

• Target your ads to improve performance. Reuters said that while Microsoft’s acquisition failed, Google’s purchase of display ad company DoubleClick worked in part because the search giant used its technology to deliver more relevant ads through better targeting.
• Keep pace with innovative ad offerings. You don’t want to be in the position of the US newspaper industry which now captures less than a percentage of digital advertising than they did a decade ago. Many advertising innovations have come from outside of the news and media industry. It’s important to make sure make sure that your advertisers aren’t lured away by these new digital competitors.
• Consider affiliate sales and marketing. Digital can connect an interested buyer with a seller in ways that weren’t possible in other media. Buyers can easily click from ad to purchase, and if you drove them to buy, then you’ll want to capture your commission.

Digital media doesn’t simply change your editorial opportunities, it also changes your advertising opportunities – and challenges. To make the transition to a sustainable digital news organisation, you’ll want to innovate in your advertising and sales just as your newsroom makes the effort to innovate editorially.

The challenge for Facebook, for example, is two-fold. While India might be sprinting ahead of the rest of the world in terms of market size, Facebook captures much lower revenue per user outside of its US base. Before it floated on the market, Facebook revealed its revenue per user statistics: In the US and Canada, it earns $9.51, but in Europe, it earns only $4.86 per user. In Asia, that figure drops to $1.79 and even lower for the “rest of the world”, a mere $1.42. Some, but not all, of that difference in revenue per user is down to lower per capita incomes.

Another reason for the lower revenue is that Facebook users in rapidly developing economies access the site on mobile at much higher rates than in North America, and Facebook has been struggling to generate revenue on mobile at levels approaching what it makes from computer users. Nowhere is this a bigger challenge for Facebook than in India.

Targeting young people, Facebook has grown rapidly in India, at a pace of 22 percent every six months. Toward the end of 2014, India will equal, if not exceed, the US when both countries are expected to have 170 million to 175 million members.

India’s wired internet infrastructure is poor, so users have little choice but to turn to the mobile web. It is estimated that 30 percent of Facebook users there access it via mobile devices. And although there is a huge market for mobile ads in social media, Facebook itself is not sure whether its mobile business is working, even in developed countries such as US and UK. Currently, Facebook does not generate any meaningful revenue via mobile.

Like many other internet companies, not to mention news organisations, Facebook is looking for a way to monetise its huge and growing mobile audience. The social network has just started to introduce ads to its mobile version, including sponsored updates in users’ Facebook news feeds. Controversially, Facebook is also considering using ad targeting based on its users’ mobile app usage.

Facebook has to figure out how to turn its millions of comments, recommendations and likes into revenue. In addition to ads, it is exploring ways to allow people to buy clothing, furniture, music, a book, other content or goods when a friend has liked it. All you would need to do is click, and Facebook would direct you to where you can buy the item as part of an affiliate sales program. Facebook could become the ultimate social shopping engine, giving Amazon’s recommendation system and e-commerce juggernaut a run for its money.

As we’ve noted before, audiences are moving to mobile, but advertising revenues often lag behind the growth of digital platforms. News organisations need to make sure that they don’t cede this important digital space to search engines and social networks when it comes to developing new revenue. News organisations also need to explore the idea of moving beyond advertising to affiliate sales and other transactional business models to add to their digital revenue.

We’ll start by looking at what Gupta says hasn’t changed, which he outlined in a recent article on GigaOm.

• The selling point of online advertising has been that it can be more measurable and more targeted. However, even now the debate rages on the effectiveness of banner advertising, Gupta said, adding: “Banner ads are reviled in many quarters, but they’ve shown remarkable resilience.”
• The industry still remains concentrated, he says, with the top 50 online ad sellers capturing more than 90% of the market. We think it could be argued, however, that an industry with 50 competitors isn’t very concentrated. Compare this to search advertising, where Google, Yandex and Baidu enjoy far greater dominance.
• The same two companies, Nielsen and ComScore, remain the top measurement companies.
• Mobile is still the next big thing in digital advertising – it was in 2004, and it still is in 2012. As we said recently, the audience is moving to mobile, but advertising still lags. It might catch up, but mobile advertising revenue won’t increase simply by copying techniques from the desktop web.

Gupta gives a good overview of online advertising and it’s interesting to see how much has remained relatively constant over much of the past decade.

One thing that has changed is that ads can more effectively target people in your audience. The better targeted the ads are, the better they perform, which means that you’ll earn more revenue to support your journalism. We’ll post another blog soon to look at some of the things that Gupta says have changed, such as new advertising technologies.