Leo的恒河沙

Monetizing Traffic Has No Secrets - Huxiu#

#Omnivore

Highlights#

In-app purchases and advertisements are also referred to as forward payment and backward payment, respectively. ⤴️ ^6c2eff68

In the era of computational advertising, competition and gamesmanship are the means to maximize revenue, rather than thoughtlessly connecting and using. ⤴️ ^ba63371b

Monetizing Traffic Has No Secrets#

This article introduces the two main methods of monetizing traffic: in-app purchases and advertisements, with a focus on the logic and operation of advertising monetization. The article also discusses the differences between brand advertising and performance advertising, as well as their respective characteristics and requirements. Additionally, it introduces two paths to obtain advertising revenue: building an in-house advertising platform and using third-party advertising platforms.

• Advertising traffic is not a standardized product; the basis of competition is understanding the core and operational logic of advertising.

• Brand advertising emphasizes influencing user perception and creating brand image, while performance advertising focuses more on conversion data and purchasing behavior.

• Building an in-house advertising platform can ensure stable revenue, but it requires good management of payment cycles; third-party advertising platforms yield quick profits but are easily subject to platform control and restrictions.

1. The Cause

A public secret is often the biggest secret.

I have been in the computational advertising industry for over 10 years and have interacted with many companies and developers.

I have personally monetized products for hundreds of millions of users and have also served as a monetization consultant for many teams.

I found that many people approach monetization simply as plug-and-play, without digging into the deeper secrets of revenue generation, thus missing out on a lot of hidden income.

This is also a common mistake among product people, who often put 99% of their energy into the product itself, while the ultimate goal of making money receives little attention.

I have seen many teams, even products from publicly listed companies, where the commercialization team has zero personnel allocated.

It seems that everyone thinks that having traffic automatically guarantees income.

— If you say they lack business awareness, they will lament that they have only recouped 50% of their costs in a year, and a positive ROI seems far away.

— If you say they have business awareness, they only know they need to focus on LTV, but when it comes to how to increase revenue, they are at a loss.

This is very dangerous; if decision-makers remain at this level of awareness, it is only a matter of time before the company or project fails.

Thus, the intention to write an article on monetization was born.

Monetizing traffic mainly has two categories: ==in-app purchases and advertisements, also known as forward payment and backward payment.==

Due to the professional nature of the topic, this article will focus on advertising monetization.

In relation to advertising monetization scenarios, let’s first discuss a fundamental theory: ==In the era of computational advertising, competition and gamesmanship are the means to maximize revenue, rather than thoughtlessly connecting and using.==

Advertising traffic is not a standardized product; no one can clearly explain why a single exposure should be sold at this price; the transaction price is essentially determined by algorithms negotiating with algorithms.

The foundation of competition is understanding the core and operational logic of advertising, which is fundamental to maximizing revenue.

Therefore, in the later stages of my entrepreneurial involvement, I transferred years of experience building advertising platforms to serve media commercialization, forming a commercialization SaaS product. I have served numerous H5 and APP-type applications, with the highest serving application having over 100 million monthly active users.

During my interactions with many application teams, I discovered an interesting fact: what is common knowledge within the circle has an exponentially higher understanding cost for developers.

However, the more frightening aspect is not the understanding cost, but the complete lack of awareness of what they do not know.

— For them, there are too many secrets in traffic monetization.

Thus, the core of this article is to interpret the "public secrets" within the field, aiming to make traffic monetization devoid of secrets.

To empower readers, this article sets the primary goal as "understanding logic," so it will provide a lot of background and causal relationships, while practical operational details will be secondary.

The target audience for this article is those in the early to mid-stages, and it will avoid overly technical jargon as much as possible; experts can skip the entire text. The article will be divided into two main parts:

1. The Secret of Revenue: Where can revenue be obtained?

2. The Secret of Increasing Revenue: How can more be obtained?

3. Are You Ready to Monetize with Advertising?

A coin has two sides.

Advertising can bring you revenue, but it naturally stands in opposition to user experience.

Perhaps on the first day you add advertising, you will receive many user complaints, so you need to be mentally prepared for that.

We once approached the largest educational app in China, trying to recommend they use advertising for monetization. Given their scale, a conservative estimate would yield tens of millions in additional revenue per year, and the person in charge of commercialization was in complete agreement with us.

However, when reporting to the CEO, the first question he asked was: Is it necessary for us to add advertising for this tens of millions in revenue?

The implication is that the audience consists of middle and primary school students and their parents, which is a serious educational scenario. The uncontrollable nature of advertising content could negatively impact the brand image, or even jeopardize it entirely.

Similar questions will be faced by most developers and companies.

Therefore, developers must think clearly about their business model: is it in-app purchases, advertising, or a hybrid monetization approach?

This is not just a matter of money; it is often the lifeline of the application.

Of course, if you hope to generate revenue out of love and not for profit, that’s another matter.

If your answer is yes, then let’s move on.

3. The Secret of Revenue

Revenue comes from the output of advertising platforms—whether building an in-house advertising platform or using third-party advertising platforms.

Thus, understanding the internal logic of advertising platforms is essential for effective revenue generation.

Source of Budget

We all know that by connecting to different monetization platforms, revenue can be generated.

But where does the money from monetization platforms come from?

The main directions of advertising budgets in the market fall into two categories: brand and performance, with significant differences in budget logic that directly affect traffic monetization decisions.

• Brand Type

Typically, these are major market players, names you can easily recall, such as LV, Apple, Coca-Cola, Procter & Gamble, etc., similar to the following image:

Typical brand advertisers

Brands primarily emphasize influencing user perception because once cognition is established, it can even affect lifelong consumption decisions.

For example, Apple not only creates great products but also places great importance on creating a "cognitive field" through marketing. Think about it—when you mention Apple, doesn’t it evoke a sense of high-end sophistication?

In 1984, they released the original MAC classic advertisement during the Super Bowl, propelling MAC to new heights.

“With MAC, you will understand that 1984 will not be ‘1984.’”

Screenshot of the Mac 1984 advertisement

It conveyed a single idea: break free from constraints and embrace freedom.

There were no phone numbers or addresses sold, yet users would chase after it; even 40 years later, this remains true—this is the mental implantation sought by brand advertising, a real-life inception.

“Stealing dreams” requires “creating dreams,” which is an extremely costly endeavor.

The reason many brands can be easily recalled is that they spend large sums of money to constantly buy attention.

Their annual marketing expenses can reach billions, while the top five global advertising agencies generate annual revenues ranging from 70 billion to 120 billion RMB. For example, Budweiser had a global marketing budget exceeding 5 billion USD in 2022, which is enough to keep the winning agency well-fed.

Revenue of the top five international advertising agencies (data source: Morketing)

Since the core purpose of brand budgets is to influence perception, they naturally aim for long-term gains—having a vision.

Thus, they do not seek immediate results; generally, conversion effect requirements are lower, but that does not mean they have no requirements. On the contrary, brand advertising is the most demanding type of advertising; I will gradually reveal how high their requirements are. Although brand advertising has abundant funds, they are not foolish.

Since they aim to influence perception, they naturally hope for a higher reach among the target audience and sufficient frequency of exposure. To put it bluntly, I am not even asking for conversion effects; you need to sprinkle the pepper evenly and sufficiently; this is the core testing standard for brand advertising.

Thus, various quantitative monitoring metrics have emerged. These terms may sound like jargon to most people, but they are logically simple, such as:

• TA Concentration: The concentration of the target audience, which indicates the proportion of the desired audience among those who see the advertisement;
• N+ Reach: Frequency distribution, which indicates how many people in the target audience saw it once, how many saw it twice, and so on;
• iGRP: Internet Gross Rating Point, a metric migrated from traditional television advertising, indicating how many people who saw the advertisement reached the landing page;

……

See, it’s not that complicated; it’s essentially measuring the level of pepper sprinkling.

These metrics will be monitored by third parties and reported back to advertisers. For example, in China, there are companies like Miaozhen and Admaster, while internationally, there are Nielsen and DoubleVerify.

However, some powerful media parties may refuse third-party monitoring, stating that they can simply look at their reports to see how well the ads performed; generally, only BAT-level companies have the power to be so capricious.

In addition to the above performance requirements, brand advertising also has strong demands for safety.

Simply put, advertisements cannot appear in inappropriate environments, such as pornography, vulgarity, or content that may provoke religious or political conflicts, such as placing a Japanese brand's advertisement in a drama about the War of Resistance.

Moreover, if an application is infringing, such as containing pirated content, it will also be deemed infringing and unsafe for the brand by third-party monitoring.

Especially for overseas applications, the global market is divided into China and foreign markets. Although copyright protection in China is becoming stricter, the current situation is well understood. However, abroad, your application is subject to various data, copyright, and privacy protection laws, and various data alliances are interconnected, already marked in various ways. When third-party monitoring checks the package name, it can clearly determine whether there is infringement.

Due to the early days when advertising exposure and clicks could generate revenue, some media would overlap many advertisements on a page or app, leading to ads being invisible. Therefore, brand safety often includes visibility.

For example, Procter & Gamble requires visibility monitoring for full-screen advertisements, as there is virtually no possibility of being blocked, indicating the brand's emphasis on safety.

Thus, domestic developers should ideally support MMA SDK monitoring, including both standard monitoring and visibility monitoring.

Only when deemed brand safe can you have a chance to receive additional budget.

However, if your scale is not large enough, there is no need to support the technical requirements related to brand advertising, as the understanding and development costs are too high.

MMA Advertising Standards List (source: https://mmachina.cn)

For instance, after integrating the MMA SDK, you also need to find a third-party monitoring agency or MMA official to conduct tests, which is not only cumbersome but also time-consuming. Some third-party monitoring agencies may take the opportunity to charge you technical service fees.

Even after testing, there are various other service fees—essentially a form of protection fee; it is no longer surprising that third-party monitoring companies charge money to alter data.

Brand advertising budgets typically come from the brand or marketing department, most of which will then hand over the budget to 4A companies for agency work. The 4A companies will provide all creative, planning, and media procurement solutions.

Internationally, there are five major 4A agencies: WPP, IPG, Publicis, Dentsu, and Omnicom, akin to the five permanent members of the United Nations; they eat meat while others drink soup.

Domestically, there are also local 4A agencies, such as Province Advertising, Huayang, Tianxiexiu, and Disi.

They travel to various brand pitch events every year, where the pitch content revolves around how to help you spend tens of billions of dollars—what ideas to convey, how much to buy elevators for, how much to buy influencers for, how much to buy online ads for, all clearly accounted for.

Thus, media procurement by 4A agencies is a lucrative business; to get brands to buy your media, you must navigate the upper and lower levels of the 4A media procurement department. Recently, three executives from GroupM under WPP were exposed for allegedly embezzling over nine figures, which gives a glimpse into the situation.

So how do brand parties or 4A agencies decide which media to buy?

This logic can be very complex or very simple.

For related categories in the rankings, at least ten must be included; otherwise, it is difficult to enter the brand's candidate list.

Therefore, rankings from QuestMobile, iResearch, etc., are often key PR targets for media; this is also their survival value. Indeed, some rankings can also charge money to alter data; they refuse to change it most of the time simply because the money has not reached a point where they cannot refuse.

Moreover, attentive readers may notice an interesting phenomenon: the daily active users on rankings are generally lower than what applications see themselves. Rankings can claim that this is due to incomplete monitoring, but in reality, it leaves room for "public relations."

It can be seen that obtaining large brand budgets is an opportunity reserved for top players; small and medium developers cannot access it at all.

What can be accessed are placements that come through alliances or programmatic trading; your traffic is like being in a black box, and advertisers do not perceive you.

Thus, another survival logic for most small and medium apps is to "swap the prince" with large media—when large media cannot absorb large budgets, the traffic from small and medium media is pulled in to make up the numbers.

A common tactic is "changing package names," where your traffic disguises itself as someone else's app, which is extremely common in programmatic trading.

Therefore, it is no wonder that many brand parties insist on third-party monitoring, especially in SDK form, because API methods are too easy to cheat.

Of course, from the perspective of small and medium media owners, finding a big tree to lean on and increase their value is also a viable path.

Just be cautious, as in the past two years, false traffic can also lead to criminal charges.

At this point, the sources, distribution, and acceptance logic of large brand budgets have been largely covered.

Now, someone might ask, since brand budgets are likely out of reach, why discuss so much?

For three reasons:

1. Brand budgets genuinely have a lot of money; even in today's environment where everyone is calling it tough, they still occupy a significant share of the market, and we should at least be aware of that.

2. There are still some insights that can open up your traffic sales channels or ideas.

3. What if one day you grow larger?

• Performance Type

Unlike brand types, performance advertising budgets have almost no requirements for media scale, safety, or tone.

Advertisers are a mixed bag; usually, as long as there is sufficient traffic and real conversions, it suffices. In urgent situations, they may not even need to scrutinize conversions; they just need to squeeze out competitors.

For example, during the Double Eleven shopping festival, major clients directly ask, can you bring in 50 million clicks a day? If not, that’s okay; just don’t sell to the other side—I’ll take it all.

There are many types of performance advertising cash cows, including: downloads, leads, games, and e-commerce.

Take a closer look at several major companies, such as ByteDance and Tencent's advertising platforms; they basically fall into these categories plus others. Of course, Baidu is somewhat special due to its focus on "big health":

Proportion and growth rate of overseas advertising categories (source: iResearch)

Lead Generation

Typical examples include:

• Insurance, generally using free insurance as bait, collecting phone numbers and ID cards, and after gathering data, selling it based on demographic profiles, with good leads fetching thousands.
• Automotive, typically for free test drives, collecting phone numbers, with a lead costing between 200 to 3000.
• Real estate, notoriously wealthy, for example, before Evergrande's collapse, they could burn through 200 million in ten days on one app.
• Education, after adjustments in the past two years, has significantly declined, but during the frenzy, hundreds of billions could be spent in a single summer.

Generally, the various spam calls you receive come from these scenarios; as long as you have left your information, it may be sold multiple times within the industry chain.

Some data companies, to avoid directly selling private data, establish outbound call centers to help advertisers make spam calls, thus selling data while avoiding legal repercussions.

If you haven’t left your information in any of the above scenarios, you might have connected to free Wi-Fi in places like hospitals, airports, 4S stores, or cafes, right?

These scenarios also reflect demand and purchasing power, so being sold is quite reasonable.

App Downloads

Simply put, this involves promoting apps to meet user acquisition needs.

Generally, app download budgets come from two sources:

• Those taking the high-end capital route aim to expand user scale; before their funding runs out, they may sometimes spend recklessly on user acquisition, especially around 2015 when the valuation logic was based on revenue per DAU, making download numbers and daily active users significant.
• Those pursuing grassroots traffic monetization, with tool-type apps being heavily affected, such as cleaning and weather apps, as well as various borderline cases, such as paid tracking of WeChat locations; the online money-making apps of that time also belonged to the realm of traffic monetization at scale.

This type of budget can be pursued as long as your audience overlaps with theirs.

For instance, do you think Alipay has already saturated the country? In reality, it hasn’t penetrated everywhere. In the past two years, Alipay was still seeking to promote apps in lower-tier markets, easily spending over a million a day.

However, this type of budget is usually a one-time deal; once a user is converted, they no longer hold advertising value.

Games

Everyone has seen how profitable games like Honor of Kings and Genshin Impact are, so they are generous with advertising spending.

Gaming is also a key industry for several top advertising platforms, generally divided into three forms: APP, H5, and WeChat mini-games; there is also a niche for quick applications, which I won't detail here.

APP games are well-known, and since they overlap with the above app downloads, I won’t elaborate further.

H5 games generally require a positive ROI on the same day, as they have almost no retention; if the ROI isn’t positive on the same day, there won’t be another chance. The logic is essentially the same domestically and internationally; many developers scrape skins and then find advertising platforms with traffic dividends to run ads, monetizing through ad networks. With a little effort, achieving a 200% ROI is not a big deal; for example, this year, running ads for overseas H5 games on Google is certainly challenging for profitability, but there are still dividends on TikTok.

WeChat mini-games have become quite popular since last year; after all, the reason Tencent's financial report turned from decline to growth this year is due to the increase in WeChat advertising spending. These games may seem simple, but they can be quite profitable; for example, the mini-game "King of the Dried Fish" that floods WeChat once spent 2 million a day on Douyin.

E-commerce

E-commerce is divided into first-class and second-class e-commerce, with ample budgets.

After all, people generally do three things online: browse, play games, and shop.

First-class e-commerce refers to the major platforms we use daily, such as JD, Alibaba, and Vipshop—large companies and legitimate e-commerce platforms, akin to medium to large shopping malls in cities. If you take a closer look at their financial reports, they may appear to be e-commerce companies on the surface, but in reality, they are large advertising companies, with Alibaba's annual advertising revenue nearing 300 billion.

Second-class e-commerce typically lacks a fixed app or website, often consisting of a single product page, where you might not even be able to find the seller after purchase, similar to street vendors. This type of e-commerce also has considerable budgets, especially for products that are somewhat gray or black market; many second-class e-commerce platforms not only run information flow ads but also transform into live-streaming e-commerce, mingling with KOLs.

Others

Every so often, a new type of budget becomes a trend.

From the early "Hundred Groups War" and "Novel Distribution" to recent "Online Earning Wars," "Free Novels," "Community Group Buying," and "Frenzied Education and Training," many should still have impressions of these.

Recently, short dramas have become so popular that even the "Pangolin" platform is focusing on introducing this type of budget.

Some involved in short dramas share that they can spend up to 70 million a day; even if there might be some exaggeration, even removing a zero still results in a staggering figure.

Currently, there are also a large number of short dramas going overseas; many companies that previously focused on novels, holding copyrights, are now diving in.

In the past, foreigners absorbed Chinese novels; now they are looking to absorb "Dragon King with a Crooked Mouth."

The above outlines the main sources of performance advertising.

Performance advertising, like brand advertising, also has monitoring needs, but rarely uses third-party monitoring, as conversion data can be collected through embedded points.

This can also pose difficulties for media parties, as the basis for performance judgment is entirely in the hands of the other party, making deductions and reductions quite normal.

Different types of performance clients value different data; for example, lead generation clients directly look at lead data, while e-commerce clients may consider more factors: visits, additions to cart, and repurchases.

Your traffic may also cater to different budget types, yielding different performances, so it’s essential to experiment with various budgets and advertising platforms.

But overall, the essence is still about audience differences; an app that consists entirely of elementary school students shouldn’t expect much purchasing power. However, don’t underestimate certain demographics; for instance, users in lower-tier markets can afford Dyson products and electric toothbrushes, not necessarily less than first-tier users.

Conversely, this means that from the start of developing your application, you should have basic thoughts on commercialization; audience positioning is crucial, and don’t waste time only to find that you cannot monetize at all.

For example, in China, an app with 50 million daily active users can easily generate tens of billions in advertising revenue; even Bilibili, which is the most restrained in advertising, had 5.2 billion in revenue last year. However, in Africa, generating 200 to 300 million a year is already considered remarkable.

The differences in purchasing power among audiences directly determine monetization effectiveness.

4. How to Obtain Revenue

From a general perspective, there are two main paths to obtain advertising revenue:

1. Build an In-house Advertising Platform

This means you need to establish a business, operations, and product research and development team.

Of course, systems can also be purchased; you don’t necessarily have to build a product research and development team, but business and operations are essential.

The advantage is that you have control over revenue and no middlemen taking a cut; however, the downside is a long construction cycle and high costs.

At this point, I want to highlight something particularly important, which involves the fundamentals of management—building an in-house advertising platform requires good management of payment cycles.

Many people focus only on revenue without considering payment cycles, which is extremely erroneous; too many have been dragged down by payment cycles.

This is also why companies like Google and BAT have pre-recharge advertising platforms.

The benefits are never given for free; the reason they are willing to release so many agents and give them rebates is to have these agents bear the payment cycle responsibilities, thus transferring the risk.

I have also seen bosses give commissions to business personnel and intermediaries without having collected any payments, which is unbelievable, but this is indeed a reality.

2. Third-party Advertising Platforms

Generally, this involves integrating external advertising platforms via SDK or API.

The advantage is quick profitability.

The downside is that you will be charged a commission by the platform; generally, platforms claim to take 30%, giving 70% to media, but it is entirely a black box, and it is unclear who actually takes the 70%, leaving media parties at the mercy of others.

Another point is that you may be bullied by larger platforms, which can stop your spending at any time for various reasons.

Therefore, if you just want to play with traffic to make some money, you can directly ignore building an in-house advertising platform because you cannot afford to wait.

Moreover, once business dealings are involved, many underlying matters are not something ordinary players can understand or handle.

However, if you want to build for the long term, establishing an in-house advertising platform is still essential.

Whether you make a lot of money or not is another matter; first and foremost, you need to ensure stable revenue.

For example, many people going overseas have experienced various inexplicable suspensions of spending and account bans from Admob; I believe no one wants to go through that experience a second time.

Specifically, integrating third-party advertising platforms includes the following six categories:

a. Ad Networks

This is something everyone is familiar with, such as Pangle, Youlianghui, Baidu Union, etc.; internationally, there are Admob, Audience Network, etc.

These networks generally provide stable income, but they are also quite powerful, and when they deduct your money, there is basically no negotiation.

There are also many aggregation monetization service providers in the market that support aggregated bidding to achieve maximum revenue.

b. E-commerce Networks

In addition to conventional networks, you can also connect to e-commerce platforms' own networks, such as Taobao Alliance, JD Alliance, and Duoduo Ke.

These networks generally use CPS (Cost Per Sale) billing, meaning you earn a commission on purchases.

Due to the deep nature of the purchasing action, there is income instability unless your traffic has reached a certain scale.

Additionally, one detail is that whether a purchase can be "attributed" to your traffic is also difficult to ascertain; aside from algorithmic logic, there are many gray market hijackings.

Thus, these networks are generally used as budget supplements when conventional networks have low eCPM or low fill rates; trying e-commerce networks may yield surprises.

c. Interactive Advertising Platforms

Interactive advertising platforms are essentially a special type of network advertising; this form was detailed in a previous article.

The advantage lies in simple integration; usually, just one link is needed, which can be placed in any standard or non-standard ad slots, also forming a revenue supplement.

Since interactive advertising can accommodate a wide range of advertising tones, the income is generally decent, but the user complaint rate may be relatively high, so more attention is needed on the advertising content.

d. Programmatic Trading

This is commonly referred to as RTB (Real-Time Bidding), where you can connect to some DSPs. In China, you need to find a business person to run it, while internationally, it is relatively simple to contact via their official website, usually through API.

e. Direct Orders

There are tens of thousands of agency companies in China, holding numerous relationships with advertisers, both legitimate and gray market; you can find whatever you need.

If you have resources, you can look for one or two agencies.

Of course, you need to find those that match your scale; they are not willing to take on just any media resources.

However, if you can get to know their business personnel, it can be a good choice to have them fly some orders your way.

4. Conclusion

In general, the channels and logic for making money through advertising available in the market have been covered here.

However, merely knowing these is not enough; it will only lead you to "have income."

The difference between "having income" and "having more income" is significant, so the next article will focus primarily on "the secrets of increasing revenue," which is the core content of this theme.

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