Toutiao: We aim to earn 6 billion from advertising this year and make the data transparent!

It is said that the second floor of the new office building that Toutiao just moved into at AVIC Plaza was originally a warehouse for storing retired fighter jets. After some renovation, it was filled with workstations of this Internet company, which are lined up one after another and can be seen at a glance, which looks amazing.

Of course, the inconvenience is also unique: when Zhang Yiming intended to organize employees to drink beer and watch the European Cup on the rooftop terrace, he was tactfully forbidden by his colleagues because the neighboring scientific research units all had confidentiality requirements.

While visiting the building, I spoke with Liu Siqi, Toutiao’s vice president of commercial products, about his recently proposed annual advertising revenue target: 6 billion RMB. Based on the 2015 public financial report and the industry average growth rate, if nothing unexpected happens in 2016, Toutiao will have already ranked among the top five domestic Internet companies (platforms that cash in on traffic) in terms of advertising revenue.

Prior to this, Liu Siqi also attended a closed-door meeting in Shanghai on behalf of Toutiao titled "Let's Talk About Advertising Data Transparency Again", aiming to call on media colleagues to make advertising data transparent and open it to third-party monitoring agencies.

Liu Siqi, a veteran in the online advertising industry with experience working for Baidu and Sina, does not shy away from the fact that this field is a mixed bag with deep conflicts of interest. When it comes to advocating collective action, there has always been "more talk than action", and many seemingly important meetings are more about empty talk than practical action. However, Toutiao still believes that a unified standard environment will inevitably benefit the entire industry. For this reason, Liu Siqi even advocated that Toutiao pay for advertisers' data monitoring: " As long as advertisers are willing to use a third party to monitor the effectiveness of their advertising on Toutiao, we can afford the monitoring fee. "

From a macro perspective, the media’s openness to advertising data is the basic condition for establishing a single market, and going forward, it will require the application of products such as DSP. To put it in a more vivid way, all media around the world have the dream of establishing the "European Union". Regardless of their size, they can access a fair traffic exchange to sell advertisements. Interestingly, just as the Brexit turned, Facebook announced at the beginning of this year that it would abandon its DSP product, which dealt a heavy blow to this emerging trend.

The reason why Facebook "escapes" is that it is temporarily unable to deal with the "astonishing amount of fake traffic", which also means that the battle between good money and bad money will never stop. The higher the quality of the media platform, the more likely it will be targeted by the underground arbitrage industry, thereby diluting the real effect of advertisers.

"You know that half of your advertising is wasted, but you don't know which half." This maxim in the advertising industry was once thought to have a chance to be overturned after the Internet boom: when advertisers' purchase and management of traffic can be segmented into hundreds or thousands of user tags, this kind of visual feedback is far better than the old days when they could only rely on newspaper circulation and TV ratings as the only statistical data.

Unfortunately, overestimating the power of technology and underestimating the establishment of rules is a flaw that most predictions cannot escape.

At the closed-door meeting attended by CEOs/VPs from 21 companies and agencies including Lexus, Haier, BBDO Proximity, and Dentsu Aegis Network, "There is no technology that cannot be monitored, only media that are unwilling to open up" became the golden phrase of the day. Liu Siqi believes that the media has long enjoyed the privilege of being both an athlete and a referee, and has habitually "added a little more" to data output. This has led to advertisers also forming a habit of being keen to "subtract a little" when evaluating the effectiveness of the media, and the industry's trust has been lost.

It cannot be said that Toutiao has no interests in encouraging the media to accept third-party monitoring. In the eyes of this entry-level application whose user usage time is far ahead of its competitors, the value of its traffic is self-evident. An open market is conducive to eliminating the false and retaining the true, highlighting the effectiveness and quality of Toutiao.

However, platforms that also have high-quality traffic - such as "BAT" - each have different strategic thinking. When it comes to evaluating the risks and benefits of open data, there may not be a standard answer, and Toutiao's initiative also needs to establish a certain consensus of trust.

However, Liu Siqi still insisted that as a leader in this matter, Toutiao has the responsibility to urge the industry to make progress.

In the sale of display ads, Toutiao has achieved full "CPM" and accepts exposure monitoring, which is different from other apps that charge on a daily basis. "We are also learning from the model that Google pioneered in the online advertising industry, which is that the design of advertising content by advertisers will affect its cost. The better the content, the more likely it is to attract users to click, and the greater the probability of its appearance. Within Toutiao's system, we also support advertisers to test different materials and help them optimize their delivery to see which content is most recognized by users."

CPM (pay per impression), CPC (pay per click), and CPS (pay per transaction) are the three mainstream models of online advertising. They are also considered to be media-friendly, relatively neutral, and advertiser-friendly, respectively.

After a long period of running-in, CPM has gradually evolved into an option for brand advertising. Advertisers care about brand delivery and user notification; CPS is more widely used in consumer areas such as e-commerce and games , such as Taobao and web games. The moderate and simple CPC can accommodate the vast majority of remaining advertising demands.

In terms of Toutiao's advertising structure, CPM ads are mostly placed by large customers, accounting for about 30% to 40% of the revenue, while long-tail customers prefer CPC ads, especially native promotions in information flow . Toutiao has provided these data interfaces to the industry's most mainstream third-party monitoring products such as Miaozhen, Admaster, and DoubleClick. Liu Siqi has also formed a small team to specifically connect with them for collaborative investigation and data tracking.

This indirect "showing off" - horizontal comparison without fear of effect - also serves Toutiao's goal of 6 billion in revenue this year: it needs to gain as much advertising budget as possible.

An important reason why mobile Internet advertising was once criticized was due to simple logical judgment, that is, the size difference between PC screens and mobile phone screens determines the difference in the advertising capacity that can appear on the same screen.

This view itself is not wrong. So far, the large screens of smartphones have not enabled traditional portals to fully utilize page layouts, and single-column scrolling browsing is still the mainstream of mobile design.

However, the length of time users spend on their mobile screens and their high-density interactive behaviors have greatly increased the refresh frequency of native ads. The media no longer needs to worry about the balance between the number of ads and user experience - in the PC era, there was a common saying that "one more window means 20% less traffic" - but instead they have turned to finding ways to present good content so that users continue to read and refresh. As long as the accuracy of native ads inserted in the information flow is high enough, their monetization value is directly proportional to the user's stay time.

It is also based on this background that Toutiao’s advertising revenue is, in a sense, “controllable” because advertising inventory theoretically has infinite increments: if ten pieces of information paired with one advertisement cannot achieve the expected goal, then the advertising ratio can be flexibly adjusted, just like a search engine controls its own revenue growth.

After solving the digestion problem, the only problem is that there must be a large number of advertisers on the other end of the transaction to solve the supply problem. Therefore, it is understandable that Toutiao advocates openness and transparency of advertising data. This confidence is one of its competitive advantages in serving advertisers. The implication is that media that are not allowed to be monitored have no value in advertising.

In addition to Toutiao, Sina Weibo is also a positive case that has benefited from the explosion of native advertising. In order to avoid competing with portals for customers, Sina Weibo was forced to enter a work area that it was not good at, namely developing agents, winning over small and medium-sized enterprises, and developing incremental markets. Native advertising has also become the best media form chosen by advertisers who absolutely cannot afford the homepage banners that cost millions.

What is even more exaggerated is Tencent. Its Guangdiantong bought Baidu's bidding ranking and intercepted potential customers of its Zhihuitui.

It seems that after search engines have led online advertising for many years, the mobile Internet 's unremitting transformation of user behavior finally has a chance to break this deadlock.

Liu Siqi still praises Google's success. He believes that in the early days of the Internet when traffic was uneven and data depth was limited, advertisers basically "left their spending to fate." Google's solution makes advertisers' spending seem justified, which is a very important breakthrough in the business model.

However, just as Google failed to stop the rise of Facebook, platforms that serve as content containers rather than relay springboards will inevitably understand users better, and this is also Toutiao's opportunity for tomorrow.

At present, Toutiao is still facing competition mainly from Tencent in terms of content ecology. In addition, Tencent has also seen a significant increase in performance-based advertising in recent years, so its sniping effect cannot be underestimated.

According to the forecast of eMarketer, an international market research organization, the output value of mobile advertising will increase by 38% in 2016, and the overall figure may reach 100 billion US dollars. This is an unprecedented event and also a good opportunity for a reshuffle.

"If you have users, you will definitely have revenue" - revisiting this proverb, in fact, it does not mean to encourage simply spending money to occupy the market, but that product development needs to be quite forward-looking. The commercial market will never treat unfairly those adventurers who brave the wind and waves to open up new routes.

Toutiao is confident that it will pocket the 6 billion yuan, and this is the reward it deserves.