Laboratoria reklamy - April 12, 2005

One in twelve Russian citizens use the Internet, information technologies and communications minister Leonid Reyman has said summing up the results of 2004. Ten percent of Russians have personal computers (the total amount of PCs used in Russia exceeded 15m at the end of last year). Of course, this is far less than in developed countries, but today, these people are users of the Russian segment of the Internet (Runet), who constitute the most affluent part of the country's population. Advertisers are trying their best to take advantage of this: such words as "banner", "CTR" (click-through rates) and "CPC" (cost per click) are as common in offices now as "Pieces of eight! Pieces of eight! Pieces of eight!" Most companies, primarily those working in large cities, already have experience of using Internet technologies. In order to attract the attention of potential clients, businesses are investing tens of millions of dollars in the Runet. And these figures are growing every year.

Everything is calm on the Runet

According to the Russian Association of Communications Agencies, Russian advertisers increased their spending by 32 percent to $2.3bn in the first 9 months of 2004. The Internet showed the most intensive growth of 55 percent: some $30m to $35m were spent on advertising in the global network over this period. Experts say that businesses have generally stopped disbelieving new communications channels. For many companies, having the Internet in their media-advertising portfolio has become an indispensable and irrefutable factor for an efficient advertising strategy.

This does not concern sales only. The Internet offers excellent opportunities for interactive communication between brand and consumer. According to Advertology.ru, the Runet's interactive services market (excluding advertising) was estimated at $4m to $6m in 2004, and in 2005 this figure may double. What attracts people first and foremost is the relatively low cost of online PR campaigns, the fast consumer response they generate and the high credibility they enjoy among their audience (in general, a third of respondents trust information published on the Internet). In addition, skilful use of the Web's capabilities enables advertisers to address target audiences directly.

Obviously, the absence of turmoil in the industry has contributed to the online advertising market's growth. Nobody has been arrested on the Runet; not a single backbone holding has been forced into bankruptcy by tax claims for the past millennium; not even a precedent for domain withdrawal due to extrajudicial bankruptcy procedures in the RU zone has been created. On the contrary, the online-advertising business is developing; revenue of portals is growing and so are investments, and the number of users is surging.

Finally, the Internet has become a part of day-to-day life. According to the Russian Public Opinion Foundation's data, as of mid 2004, some 15 percent of the country's population above 18 years old, or almost 17m people, use the global network. SpyLog, a Russian company specializing in Internet statistics, says the Runet's weekly audience totals 8m active users, i.e. those who visit 9 to 12 websites per session. The only thing that may upset advertisers is that the number of users who have disabled banners, the main advertising instrument, is growing. Experts believe 15 to 20 percent of Runet users have removed standard banners from their screens. Such is the audience Internet advertisers have to deal with, but they do not have an alternative…

Various estimates say that Russian online advertising was worth a total of about $40m in 2004. "The online advertising market consisted of the media advertising market and the search advertising market," Yandex editor-in-chief Elena Kolmanovskaya said. "Our estimates show that the search advertising market's turnover reached approximately $15m in 2004; media advertising amounted to $25m," she added.

According to webrating.ru, explosive growth of online advertising in 2005 may result in redistribution of advertising budgets. The press will suffer the most: the monthly Internet audience of websites dealing with "business", "automobiles", "computers" and "digital equipment" outnumbers that of the printed media. Offline periodicals specializing in these topics may be the first to lose advertising revenue. Advertisers' calculations are simple: why overpay for the audience? For example, what is the point in spending $20,000 on placing an advertisement in one issue of a business newspaper if it is possible to place a banner on rbc.ru for two weeks for the same amount?

Who will earn the most money from advertising? The most visited websites of course. In 2005, "the gap between large leading websites, such as Yandex, Rambler, Mail.Ru, and RBC, and the remaining advertising platforms will increase," director of the PRIOR.ru agency director Sergey Spivak said. "The former will enjoy major and eminent clients and their budgets worth thousands of dollars; the latter will continue dumping and trying to attract advertisers by using unconventional ideas," he pointed out.

Where is the most efficient advertising?

Up to 80 "main" advertising platforms exist on the Runet. This is, at least, the amount of resources on the list compiled by WebScan Technologies, a company that has monitored Russian online advertising and held independent assessment of advertising budgets since September last year. These primarily include news, industrial and service websites. If we take a look at Rambler's Òîð100 rating, the most popular websites are those falling into the "service", "mass media", entertainment", and "business" categories. In other words, the most popular websites (search engines, mail, news and topical websites) are daily visited by about half of all Runet users.

How should you choose "your" resource? How should you build online communication that will enable you to deliver your message to a large audience immediately? This is not a simple task. It is necessary to consider a variety of factors, even if you are choosing between the four leaders only.

The main players on the advertising market fighting for visitors and advertisers' budgets, can be divided into two groups: these are portals based on popular services, such as search engines (Rambler and Yandex) or mail (Mail.ru), and portals created on the basis of specialized resources, primarily news services (for example, the information division of the RBC holding, which started as an economic newsline).

Of course, search engines draw the largest audience. According to the Public Opinion Foundation, indisputable first place in terms of number of visitors on the Russian Internet belongs to Yandex. Of all Russian users surfing the Web on a typical day, at least 75 percent on average visit this website. However, a large audience is not a convincing argument for advertisers. They are looking for target audiences, their customers, whereas the audience profile of those who constantly visit a particular search engine is more than fuzzy: the age is approximate, 15 years and upwards; they cover the whole country in terms of geography, and one can only guess what their average income is. In a word, this is Runet's average user.

Topical news websites are another matter. An ideal example is the RBC media holding. Having launched its web page in 1996 with economic news only, RosBusinessConsulting has attracted to its resources the economically active part of the country's population: those who are professionally interested in economic news, and those who just want to be aware of the economic situation in the country to improve their own welfare. Initially, rbc.ru offered news coverage, and then began to offer commentaries written by experts, introduced specialized online instruments for professionals working on the financial market, launched an online newspaper, created topical websites (cars, real estate), and finally, introduced popular services (mail) too. Today, RBC offers its visitors news on economics, education and tourism; Internet household-appliance shops, cars, and real estate - everything on the hottest topics. The media holding is constantly expanding its news product line, thus retaining and increasing its audience. Owning Russia's first business television channel ensures an additional competitive advantage for RBC. This strategy has enabled the company not only to rank among the most visited online resources (the TOP 10 includes rbc.ru, top.rbc.ru, utro.ru, pochta.ru, rbc Daily, RBC.Rating, quote.ru, and autonews.ru), but also to gather a fairly homogeneous and high quality audience.

At present, rbc.ru's monthly audience totals 4m people, and more than 5m people visit the holding's websites a month. According to MASMI Research, the most part (87 percent) of those visiting rbc.ru are Russian citizens; 69 percent live in cities with a population of more than 1m people. Muscovites constitute a little more than half of the audience. Sixty percent of visitors are 25 to 44 years old with a fairly high level of education. Seventy-one percent have higher education; 39 percent are top and middle managers. The families of 57 percent of visitors enjoy an average monthly income of more than EUR400 per capita.

There is no doubt that RBC offers one of the most affluent audiences to advertisers. What can portals based on popular services such as Yandex, Mail.ru and Rambler, offer in response? Only sophisticated search engines. Context advertising is the main form of advertisement on search engines. Advertisers reach their clients through keywords that users enter while looking for a necessary resource. This type of advertising is pretty efficient. One advantage of such advertisement is the possibility of clearly identifying the target audience, although the latter cannot be covered in full. Not all of an advertiser's potential clients use search engines to find what they are interested in. Moreover, for certain product groups, the share of those who do this is simply tiny.

Another case for advertising on search engines is that a comparatively low budget is needed: on Yandex, $100 is a budget considered.

However, prior to launching an advertising campaign on a certain resource, it is necessary to figure out what tasks the campaign should solve. A customer looking for a well-known product is one thing, but a product searching for a customer, i.e. a new product introduced onto the market, is another. If you want to sell a batch of Nokia phones you need one type of resource. But if you wish to hold a campaign that should change the customer's attitude to a brand, the resources you need will be completely different.

Experience shows that context advertising on search engines is the best strategy for a target advertising campaign. A person who enters the name of a certain model of household appliance will be offered a direct hyperlink to your shop.

On the contrary, image-advertising campaigns should be held on such resources as RBC. And the reason for this is not just the large audience coverage and high demographic targeting (sex, age, education). The thing is, that RBC enables advertisers to successfully use major and unconventional advertising formats (rich-media, expanding banners on the main page, pop-under, etc), which have a higher response level and are more memorable for the audience. It is not by chance that most brand advertisements are placed on RBC. Large businesses, working with RBC in this field, are not discouraged by the low CTR level of 0.3 to 1.5 percent depending on the resource. A success story reads that back in 2001 AutoSpecCentre Audi na Taganke placed its advertisement on RBC's resources for the first time. Three people came in the dealership within two weeks, and bought three cars! This is the magic of banner advertising.

Search engines tend not to use banners. For example, Yandex has abandoned the use of banners on its main page. In essence, this is a refusal to use one of the main formats of image advertising. However, Yandex's reasons are explicit: the fewer banners on the page, the more loyal users the website enjoys. Well, this is indeed a paradox of the online advertising market: resources cannot equally pander to both advertisers and Internet users.

It is fair to say that not all portals with powerful search engines have abandoned first-page banners. For example, Mail.ru has kept them. However, employing this platform is very problematic because all advertising spots are snapped up a year in advance. Old clients prolong their contracts, and supply obviously doesn't keep up with demand.

Of course, a certain deficit of the best advertising spots exists on RBC's resources too, but it is always possible to place an advertisement. The number of banners on the media holding's websites is not decreasing - the company is simply raising its prices. RBC has already announced a 30-percent price advance beginning April 1. "We have taken this measure to put the boom down, as the most popular spots, such as the first pages of rbc.ru and the RBC Daily business newspaper are sold out several months in advance," the company said. RBC's media planning department commented that prices were growing on static banners only. However, advertising on RBC's resources is one of the most expensive even without that: 1,000 impressions cost $17 against an average price of $7 on the Runet.

How do the four leaders share the market? It is impossible to cite exact figures; only approximate market shares of the competitors can be determined. Firstly, we have expert assessments of the online advertising market's total volume. Although varying data is given, $40m seems convincing. Secondly, certain information on revenue from advertising on search engines exists. Neither Rambler nor Mail.ru give information about their revenue on their websites, whereas Yandex has placed an article (in its press section) mentioning its advertising revenue for 2002: the company's consolidated revenue approached $400,000 per month (money dealings excluding barter) at that time. Yandex general director Arkady Volozh said the company receives two thirds of its revenue from context advertising. Finally, RBC publishes press releases specifying its advertising revenues, thus confirming its reputation of being one of the most open Russian companies. Official data says RBC's media revenue, including news services, online advertising and marketing communications, surged 60 percent to $24m in the first 9 months of last year.