Revenue Modeling Generates New Insights into Web Advertising Opportunity

Situation Analysis:

A leading player in internet technology, services, and content enlisted SDG’s help to define a platform strategy for web advertising. Despite a strong position in display advertising, the company had been outsourcing targeted ads (e.g. contextual, behavioral, or demographic) across its several large web properties. Although the company possessed the R&D capabilities to launch an in-house solution, leadership was divided on whether or not such a move would create higher profitability than a specialist provider, so turned to SDG for its analytical expertise and outside perspective

Discovery & Solutions:

A team with representation from marketing, engineering, and ad-account sales was created to analyze and evaluate the opportunity for a homegrown ad-service platform. Led by SDG, this team developed a sophisticated revenue model to clarify the drivers of advertising revenue. This analysis demonstrated that ad relevance and ad quality are more significant drivers than the number of advertisers participating in a marketplace. As a result, launching the new platform would result in a temporary dip in revenues as initial advertisers were recruited – but higher click-thru-rates would rapidly reverse the situation – and revenues and profits would actually increase.

Results & Impact:

The new platform created upside opportunities associated with (i) increasing the sophistication of the company’s display ad placement, and (ii) building a business in providing targeted ads to third-party web sites. The company pursued aggressive development and launch of the platform, and SDG was retained to both transfer the revenue model and train internal staff on value-based approaches to product strategy. Ultimately, the new platform and network have become so successful that the former supplier of web advertising has become a significant customer for the business.