Commercial advertising monetization strategy!

"How should an app with millions of DAUs monetize its traffic through advertising? What points should be considered when monetizing through advertising ?"

Perhaps these are some of the topics that people are more concerned about when measuring the value of traffic in the early stages of App commercialization. This article is a popular science article, and we will talk about the ways to monetize traffic.

1. Introduction

In the development of the Internet, the ultimate goal of any product is to achieve profitability and gain profit. At the beginning of development, the main goal of the product was to develop users, attract users, and retain users, so that the product could gain a firm foothold in the Internet wave.

Users mean traffic. As long as there are users, traffic will be brought in when they visit the product page.

But as we all know, in the current traffic market, traffic is still mainly concentrated in leading channels such as BATT. If we want to break through, we still have a long way to go.

As the user base continues to expand, that is, with a large amount of monetizable traffic, it is natural to consider how to monetize this traffic to achieve the goal of profitability.

This entire process actually corresponds to a product model: the AARRR model.

In this issue, we focus on the Revenue stage in the model: how to monetize existing traffic and generate revenue.

Looking at the entire process of Internet development, there are endless ways to monetize traffic, but in summary, they are nothing more than the following: advertising, e-commerce, value-added service payment, content payment, commissions, etc.

For conventional media, "advertising monetization" is undoubtedly the simplest and most effective model, and there is no field restriction.

It generates revenue by displaying advertisers’ ads on the App, and its revenue mainly comes from advertisers’ promotion budgets.

2. Advertising traffic

Once we have enough user traffic, we need to convert this traffic into advertising traffic to sell advertisements and realize advertising monetization.

When monetizing traffic through advertising, the first step is to open an ad space.

So which locations are suitable for opening advertising space? What are the mainstream ad formats and sizes?

How to evaluate the negative impact of adding new advertising space on the APP and users, and how to weigh the pros and cons? Next, I will give some of my own experiences and thoughts on these three questions. I hope it will be inspiring to everyone. If you have better suggestions, you are welcome to leave comments.

1. Which locations are suitable for opening advertising space?

First of all, let’s go back to the purpose of this question. The purpose of opening an ad space is to display ads and obtain traffic revenue.

So it’s natural to think that in order to obtain more traffic revenue, we need to measure whether the page is suitable for opening advertising space from the perspective of traffic and customer demand.

(1) Traffic

Traffic determines the chance of advertising exposure. Therefore, before opening an ad space, you need to measure the traffic data of the page.

Generally, page traffic is obtained by embedding points on the front end. The main data indicators for assessment include: page UV, page PV, average number of user visits, average user stay time, average user click-through rate, etc.

Generally, pages with large traffic, high user frequency, and long average stay time are more suitable for opening advertising space, so that they can get more exposure opportunities.

For other pages with low traffic, advertising space is generally not built or opened to balance the user experience and avoid disturbing users with too many advertisements.

(2) Customer demand

Customers decide who pays for your advertising traffic.

Only advertising space recognized by customers has traffic value, and customers will pay for this traffic.

Therefore, when opening an ad space, it is necessary to combine the traffic data from the previous step and customer demand to evaluate the rationality of the ad space.

So how do we measure customer needs? How do you know which advertising spaces customers are willing to pay for? It is mainly considered from the following two aspects.

• Understand customer needs through sales;
• By investigating the advertising pages of apps on the market or the advertising examples of various companies.

The advertising spaces accessed through the above two channels are basically conventional forms of advertising on the market. The media can try to develop innovative advertising spaces on their own, and in turn educate and attract advertisers.

But I believe that many advertising product managers will encounter a problem: by continuously adding new ad slots, revenue may increase in the early stages, but as time accumulates, it will tend to stabilize or decline. At this time, it is time to consider the balance between adding new advertising space and sales strategies.

When the advertising sales rate does not reach a certain threshold (not necessarily 100%, the threshold is different for each company), that is, the advertising traffic has not been sold out, you should consider the reasons, find breakthrough points, and adjust the sales strategy in time, rather than rushing to add new advertising space and then fall into the same dilemma.

But if the advertising sales rate has reached and stabilized above the set threshold, and there is a trend of continued growth, it is time to consider adding new advertisements.

However, in the process of traffic monetization, there are usually some KA customers who are interested in some non-standard locations or gameplay and hope that the APP can support them. In this case, it is not a bad idea to serve this boss, but it is necessary to measure whether the customer's advertising expenses can cover the corresponding costs.

2. Mainstream ad formats and sizes

When the media considers monetizing traffic through advertising, the format and size of the ad space should be as consistent as possible with the mainstream size ratios on the market. This can increase the fill rate of the ad and maximize traffic revenue. The figure below is a compilation of commonly used sizes of mobile ad styles for your reference.

Of course, sometimes due to the particularity of the media page, the size is not necessarily regular. It can be compatible through certain material cutting, but it is necessary to pay attention to the cutting rules to avoid affecting the advertiser's materials.

Generally, each ad slot will have a detailed MR, detailing the ad slot size and safe zone. As long as the advertiser's material content is within the safe zone, there will be no problem.

3. Measuring advertising and user experience

There is no smooth sailing on the road to commercialization. I believe that product managers who work in commercialization often encounter a problem:

When you go to the user product manager with a request for a new ad space, the user product manager will most likely reject you first. Then the next question is basically "Will this ad space affect the user experience? Will it cause DAU to drop? How do you measure the impact on users? If there is an impact, can the advertising revenue cover it?" and other similar questions.

Therefore, when adding new ad slots, we need to measure the user experience and evaluate the impact of the ad slots on users.

Since it is an evaluation, we must first collect data.

The conventional solution is to conduct AB experiments and select some users to enter the experimental group. The page that the users in the experimental group see is a page with advertising space, while the users in the control group see a normal page.

Through continuous experiments over a period of time, after collecting a certain amount of samples, analyze the data of the experimental group and the control group, and finally evaluate whether it is necessary to add the ad slot.

But in addition to rational data analysis, some intuitive ad space design rules and ad delivery strategies can also help us judge the impact on users in advance. To sum up, it mainly includes the following aspects:

(1) Native

Many apps now mention a type of advertising: native advertising.

The so-called native advertising space is nothing more than an advertising style and content that is close to the product itself, making users feel that it is content, not an advertisement. Since it looks like content, users will naturally be more accepting of it.

When it comes to content nativeness, it actually needs to be combined with personalized advertising.

Only ads that users are interested in will not be offensive.

The universal routine: push the right ads at the right time + the right place + the right scenario, and the user acceptance and effect will definitely be great.

Speaking of native, there is one more thing to note: the timing of the advertisement cannot interrupt the user's normal operation, nor can it appear in places where users are prone to make mistakes, otherwise it will also bring a bad experience.

(2) Beautiful and novel

Generally speaking, users are more receptive to new and beautiful things, so increasing the fun of advertisements and improving user experience is also a good way.

Although it cannot immediately improve the conversion effect, it at least gives users a bright feeling and does not cause rejection in their hearts.

When it comes to aesthetics, it mainly involves the compatibility of the front-end page rendering and the aesthetics of the advertising materials, as long as there is no vulgar content.

(3) Compliance

The content of compliance was not originally intended to be included here, but it will indeed affect the user experience. Now the Ministry of Industry and Information Technology has introduced a series of personal protection laws to protect user privacy and security. For this part, you just need to make changes according to the requirements of the Personal Insurance Law.

• Advertisement logos must be obvious so that users can clearly identify the ad attributes and not easily be confused with other content or cause misclicks;
• It is best if the ad has a clear close or skip button, allowing users to choose whether to watch or close it. It must be able to be closed with one click;
• When users click to watch an ad or after the ad ends, no application software can be automatically downloaded without the user's consent;
• …

Compliance issues will not only affect user experience, but if a product has compliance issues, the APP will also face the risk of being removed from the shelves.

(4) Delivery strategy

The first three points mainly focus on the style of the front end of the ad space, but in actual delivery, the delivery strategy will also have an impact on user acceptance, such as AdLoad, frequency control, etc.

If users see many identical ads among a limited amount of content, then there must be problems with the adload and frequency control settings of this product, which will lead to a poor user experience.

3. Advertising monetization forms

Now that we have advertising space and traffic, let’s see how to monetize this traffic.

In the advertising monetization methodology, the mainstream methods mainly include the following two: traffic hosting monetization and self-operated advertising platform monetization.

Each method is suitable for traffic of different scales and requires different product support. You can choose the appropriate method based on the stage of your own media.

1. Traffic hosting monetization

Traffic hosting monetization is the simplest way to monetize advertising. Media APPs connect to mainstream affiliate advertising on the market through SDK/API, such as Pangolin, Youlianghui, Baiqingteng, etc., and host their own traffic to third-party platforms, using programmatic advertising and relying on third-party platforms to monetize traffic.

Generally, apps in the early stages of development or with a relatively small user base will use this advertising method.

The advantage of this method is that it is simple and convenient, has low development and operation and maintenance costs, and can generate immediate profits.

But the disadvantage is that ecpm price, padding, ad quality, etc. are uncontrollable. Therefore, apps that usually focus on their own brand and user experience are unlikely to accept the hosting model.

(1) SDK connection

Currently, the conventional docking method in the market is mainly through SDK docking. The media app only needs to connect to the alliance advertising SDK, and the subsequent information collection and advertising rendering are all completed by the SDK. The docking method is simple and effective.

However, there are also some considerations when connecting to the SDK. You may need to pay attention to the following points:

• Should traffic be hosted on one advertising platform or on multiple ones?
• Should you connect to multiple SDKs yourself or directly connect to the aggregated SDK on the market?
• If you connect to multiple SDKs, you need to consider how to handle the request timing of multiple SDKs at the waterfall layer, that is, traffic layered operation to maximize traffic revenue;
• If you connect to an aggregation SDK, you need to consider the aggregation SDK's traffic tiered operation capabilities, data reporting, advertiser distribution, and other capabilities;
• Whether the size of the SDK package can meet the integration requirements of the App;
• When connecting to SDKs, hot-swap capabilities should be available for each SDK, and problematic SDKs should be taken offline at any time;
• With the introduction of the Personal Information Protection Law, attention should be paid to the SDK's ability to obtain user information and protect user privacy;
• You need to consider SDK compliance issues, such as opening screen hotspots, silent downloads, and waking up third-party apps.
• You need to consider the material review issue, whether to review first and then submit or submit first and then review, whether to support industry blocking, etc.
• The SDK's front-end rendering compatibility needs to be considered to avoid giving users a poor experience, which will also affect conversion results.

(2) API connection

The media connects to the advertising platform API to send traffic to the advertising platform, and performs front-end rendering and display after receiving the return material information from the advertising platform.

When connecting to the API, please note the following:

• API connection has a certain entry threshold, and you need to apply to the advertising platform for a whitelist;
• The media needs to collect relevant information and transmit it to the advertising platform. Here, you need to pay attention to the format of the field, such as whether it is encrypted.
• When the media receives material information from the advertising platform, the front end needs to render it by itself, and attention should be paid to adaptation issues;
• If you connect to the APIs of multiple advertising platforms, you need to pay attention to whether each API returns prices in real time, which determines the bidding logic;
• If you connect to the APIs of multiple advertising platforms, you also need to consider the issue of traffic distribution: serial distribution or parallel distribution? Do you support issuing a reserve price? If the reserve price is too high, should we lower it and send the request again?
• It is necessary to consider the issue of material review, whether to review before submission or submit before review, whether industry blocking is supported, etc.

Compared with SDK access, API access has a higher cost and ECPM is lower than SDK; but through API access, the media can do more control and have greater flexibility.

(3) SDK & API hybrid

If you connect to both the SDK and API, in addition to the above issues, you also need to consider the following points:

Traffic distribution issues, how to make good use of the API's real-time bidding capabilities, which determines whether the media can obtain greater traffic revenue.

The bidding issue is, is it bidding on the client side or the server side?

2. Monetization of self-operated advertising platforms

For their own traffic, media can build their own advertising platforms or purchase SaaS services provided by advertising technology companies to carry out their own advertising business and monetize traffic by developing direct customers and agents.

Generally speaking, high-quality media usually adopt this approach in order to take full control of the initiative in selling traffic.

The advantage of this approach is that both revenue and quality can be controlled; the disadvantage is that whether it is sales, operations, or product technology development, there are huge costs and time cycles, which is time-consuming, labor-intensive, and high-risk.

When the media's own traffic can no longer meet the needs of advertisers, the media can build an SSP platform and expand the media matrix by exporting SDK or API.

Some common vertical apps with advantageous brands and traffic will further expand their traffic pools and expand the media's influence in vertical fields by integrating industry traffic, so as to obtain more advertising budgets.

The monetization of self-operated advertising platforms is actually to build a so-called DSP platform to sell advertisements to advertisers. The main transaction models are PDB, PD, PA, and RTB. In terms of advertising sales priority, PDB>PD>PA>RTB.

• PDB (Programmatic Direct Buying): PDB is generally referred to as guaranteed price and quantity advertising in the industry. Since PDB's advertising space is generally the media's highest-quality traffic, this traffic is usually in short supply. In order to obtain this traffic, advertisers generally inquire about quantity and place orders with DSP in advance. Once an agreement is reached and a contract is signed, DSP needs to lock in these resources with the media in advance, which means that these resources can no longer be sold to other customers. Common sales methods for PDB are CPT and CPM. Compared with traditional scheduled advertising, PDB supports targeting capabilities, and advertisers can select the traffic they need within a certain return ratio range.
• PD (Preferred Deals): PD is generally referred to in the industry as an advertisement that guarantees price but not quantity. PD's resources are generally some relatively high-quality traffic. Since their priority is lower than PDB, the saleable inventory of these resources is uncertain, so it is impossible to guarantee the quantity. Advertisers can purchase these uncertain relatively high-quality traffic from the media at a clear price, that is, guaranteeing the price but not the quantity.
• PA (Private Auction): Private transaction. The so-called private transaction means that this position is only open to individual advertisers for bidding. Only advertisers who meet the entry requirements are eligible to purchase resources in the PA model. There is no price guarantee or quantity guarantee. The only difference from RTB is "private". This model is not common in the domestic advertising market.
• RTB (Real Time Bidding): Real-time bidding advertising. When traffic comes in, each DSP bids for the traffic according to its own needs. ADX compares the bids after receiving the bids from each DSP. The one with the highest bid wins, and the winning ad is sent to the front end for display. The entire process is completed programmatically within 100 milliseconds.

Different transaction methods actually correspond to different advertising sales methods. For example, PDB and PD are common brand advertising transaction methods, while RTB is common in performance advertising.

Author: Baozi

Source: Daily Notes on Commercialized Products