Revenue The Internet Wants to Be Free, but You Need to Get Paid

How I Got Here

Andrew Chen

How Online Companies Make Money

From Ads

CPMCPC

CPA / affiliate, leads

From Users

ecommercesubscriptionsvirtual goods

From Users

ecommercesubscriptionsvirtual goods

The Basic Model

Transactions as funnels

User enters

Browses

Adds to cart

Buys

Source: Andrew Chen

ARPU = average revenue per user

ecommerce ARPU• new users• % browse• % add to cart• % who buy• average order size• * frequency of

purchases

virtual items ARPU• new users• % register• % buy currency• purchases/month• average order size• churn %• month2 revenue

subscription ARPU• new users• % register• % subscribe• month1 revenue • (1-churn %) *

month2 revenue• …

Source: Andrew Chen

Maximizing ARPU

• Track, track, track• Understand user funnels– Increase repeat visits– Increase visit to purchase ratio, etc.

• Lower threshold for purchase (“Freemiums”)• Raise average order size• Close off any holes

From Ads

CPMCPC

CPA / affiliate, leads

Advertisers Publishers

Risk

CPM

CPC

CPA

CPM

CPC

CPA

Understanding Risk

Equal Risk. Not surprising CPC became dominant pricing method.

Calculating Revenue Per Thousand (RPM) –

The standard unit for measuring ad revenue

• Fixed Price Ad ImpressionsRPM = CPM (Cost Per Thousand Impressions)

• CPC Based Ads(CTR * PPC) * 1000

• CPALead based: ((CPL * # leads) / Imps) *1000Sale based: ((Gross Revenue * Rev Share) / Imps))

*1000

Click Through Rate (CTR) - Clicks/Impressions * 100 (%)

What Will It Take to Win?

• # users• user growth• activity of users• content• no more me too’s

No One Said It Was Easy

• SEO Publisher of Lyrics• Low Value Content• 16 Different Ad Spots• Spans Thousands of Pages

An Imperfect World

You Have (1) MessageFind Out Right Now Who. Hint: They Are On Your Friends Listmyluvcrushmsg.com

Is It Love? Take The QuizEnter Your Names To Check This Is So Accurate, It's Scary!NewCrushAlert.com

Monetizing Your Inventory

Option Pros Cons

In-house Sales Team Better Rates, Full Control Pricey, Need Staff

Ad Networks Quick set-up, Great Reporting Limited Ads, No Guarantees

Ad Sense Strong Adv Base, Solid Yields Restrictive Terms, Ad Crack

Affiliate/CPA Programs Flexibility, More Integration Options Hit or Miss, More Manual

Maximizing Ad Revenue

• Test, Test, Test• More eyeballs• Increase CTR and/or Conversion Rate (CVR)• Focus on quality / value to advertiser• Automation / technology

When East Meets West

From Ads

CPMCPC

CPA / affiliate, leads

From Users

ecommercesubscriptionsvirtual goods Ad Payment

Platforms

Ads Instead of $

Ad Payment Platforms

Users Want Something

The Problem: They Don’t Want To Pay with Cash

Social Media Apps

Software The Solution:They Will “Pay” Through Ads

Movie Tickets

Source: Trialpay.com

What Is It

Social Media – App Developer

Flow

Digital Goods – Consumer Proposition

Source: Trialpay.com

Source: OfferPal Media

Source: Super Rewards

Social Media - Integration

Maximizing Ad Platform Performance

• Test Among Platforms• Tweak Offer / Point Matching• Integrate Look and Feel• Push for Margin• Focus on The Value Proposition• Track Performance Carefully

Mix And Match

From Ads

CPMCPC

CPA / affiliate, leads

From Users

ecommercesubscriptionsvirtual goods

Ad Payment Platforms

Ads Instead of $

One Style Does Not Fit All

Questions?

Jay Weintraubjay.weintraub[at]gmail.comBlog: jayweintraub.com@jayweintraub@leadscon

Four Factors Affecting RPM

Impression Count/Person

RPM

# Impressions Targeting & Placement

Level of Targeting

RPM

# Advertisers

Advertiser Base

RPM

Content / Ad Relevance

Relatedness

RPM