Advertising on Kaznet: wagging the dog

Internet advertising on a global scale is setting new records, confidently winning more and more space in advertising budgets. The touchstone remains the USA, the motherland of the internet and many other related phenomena. They have already gone through a dotcom boom – then bust – and are now entering a very strong upswing. This is a more mature market, which can serve as an obvious teaching aid. According to the International Association of Internet Advertising (IAIA) and PriceWaterhouseCoopers (PWC), in 2005 revenues from web-based advertising in the USA exceeded US$12.5 bln, showing a 30% increase. The size of this market in neighboring Russia came close to US$60 mln last year, a year-on-year rise of 71% (data from the Association of Communications Agencies of Russia). However, this information only takes banner ads into account. As per estimates by Yandex, which takes into consideration contextual advertising associated with search engines, the volume of advertising on Runet (editor’s note: those sites utilizing the “.ru” primary domain suffix) exceeded US$100 mln. As regards Kazakhstan, our domestic market for internet advertising has yet to be estimated by anybody. Though, to be honest, we did not even have one until recently, and it is still being established: a sometimes quite painful process.
Several reasons can be named for such an unserious attitude towards internet advertising. The major one regards the low visitor rate of Kazakhstani sites, a consequence of the limited number of internet users within Kazakhstan and pressure from the popularity of Runet. The information volume and quality of sites on Kaznet (“.kz”) cannot compete at all. Owners are in no hurry to invest into the development of their sites, as associated expenses may not be covered. Another consequence of this situation is the quite limited number of popular sites. Only about ten of these exist (the average daily attendance of each of these is only about 4,500 users). Among them are: Pressure Center (http://bb.ct.kz), Gazeta.kz, and internet newspaper, Kino.kz, containing movie information and show times, ALFA.kz, a computer portal, OK.kz, for web-based e-mail, the Whole of Kazakhstan (www.site.kz), the Almaty Information System (www.infokz.com). In short, the market has a deficit of advertising space.
Just last year a trend of demand for internet advertising exceeding availability became obvious. This article will utilize banner ads, which remains the most established form on Kaznet, as the basis for discussion. Advertisers are gradually maturing in promoting their goods and services on the internet. Such concepts as media planning and target audiences have entered the realm of Kazakhstani internet advertising. Clients would like to see their banners in certain places and attached to particular resources. The peculiarity of Kaznet is that clients pay for a period of placement, as opposed to the number of clicks. As a rule, one month is the minimum placement period, and signing up for merely one or two weeks is uncommon. Even then one might have problems. One might hear, “We can provide you with one month, but what if tomorrow we have a client who wants a six-month contract? What can we do then?” That is to say, a quite strange situation occurs, in which one might not be taken seriously should one simply want a month’s placement.
Demand exceeds supply, and even those with the gold still have a hard time making the rules, forcing would-be advertisers to agree to the terms of the websites. Often these sites do not listen to the clients, and often do not wish to understand their needs. Should the client be unsatisfied with something, the magic phrase is uttered, “If you not like our terms, do not use our services, as we have enough clients without you.” Unfortunately, after such occurrences advertisers still return, which happens only due to a deficit in acceptable websites. However, cases of clients fleeing forever are also not so rare. This last especially regards advertising agencies, which generally are not even provided with discounts by the websites, who have yet another magic phrase at hand, “We sell space on our site well enough without you.”
Another problem in this developing market is that conditions on placement of advertisements may change at the very last moment. Anything may happen, starting from unexpected multiple increases in pricing up to, “Sorry. That client paid earlier, and so we cannot place your ad.”
Naturally, in such cases the websites lose clients, and the volume of lost potential income continues to mount. Some clients leave for other websites, while still others exit from Kaznet completely, choosing to instead set up on popular Russian sites that have “Kazakhstani clicks”. The point is that with the many huge resources of Runet, tracking of a user’s location is possible, and the server can respond by displaying appropriate ads.
Apparently, the deficit problem can be resolved. All we need to do is increase the amount of advertising space within existing popular sites. However, this cannot easily be done. The most effective method is to display an ad on each page of a website, whereby the banner is placed atop the page where a user can easily see it. While the most ineffective form is the placement of a banner at the bottom of a single page, which means that a user, after having gone to a page, may not definitely scroll to where the ad is located, though formally it will be registered that a user has viewed the ad. This is why banner ads are usually placed at the top of a page. Meanwhile, should a page be too crowded with banners, people will simply cease going to it. First of all, such a page would have become very burdensome to load, taking too long to actually open. Secondly, such a page can be guide difficult on the eyes due to the critical mass of advertisements.
Another way to solve this problem is the introduction of a system of rotation, which means that in one and the same place the banners of different advertisers may be shown in series (as a rule no more than five are in the rotation). However, not a single client is ready to share a place with any other. For websites themselves, this is inconvenient, as it is easier to simply sell one location for one banner, thus pushing off the headache of searching out up to five clients.
As regards pricing, the average cost of a monthly placement for a standard banner ad of 468 x 60 pixels on popular Kaznet websites is about KZT70,000. At the same time, the upper pricing limit can be oppressive. For example, a banner on the homepage of Interfax Kazakhstan’s website costs about KZT280,000 per month. In general, prices have increased marketwide over the past year by 30-40%. The average cost per 1,000 clicks (analogous to a square centimeter of print media or seconds of television time) is equal to US$15 on Kaznet, which is approximately 3.5 times above the median Runet price. This is dictated by the fact that while expenses associated with setting up and maintaining an internet property are quite comparable between Russia and Kazakhstan, the level of usage differs quite a bit – clearly not to the benefit of Kaznet.
For their part, though advertisers gradually come to an understanding of the necessity to use web-based advertising and its associated tools, they often inadequately perceive the rate schedule of this media. A belief exists that everything is free on the internet, which is why traditionally large multinationals are an example for the whole market. Therefore, over the current and previous years one has been able to observe banners of Beeline, a mobile telecommunications operator, as well as various products manufactured by Hewlett-Packard, on all the popular websites of Kaznet. I would like to point out two companies, Kar-tel (operating under the Beeline trademark, among others) and HP, both of whose activities are connected with information technologies, as the most active participants on the Kazakhstani market for internet advertising – understanding came to them first.
At the same time, the allocation of funds in budgets for web-based advertising seems most often to be a novel affair. Some companies even list it under miscellaneous expenses. In the USA, as per data from TNS Media Intelligence, of the total advertising volume, the internet takes up 5.8%. The leader on Kaznet, Kar-Tel, which allocated US$60,000 for the placement of banners and the creation of a promotional site for enhancing its marketing campaigns, has assigned a mere 1% of its overall advertising budget. Returning to the issue of market volume, I would estimate the total value at approximately US$800,000 in 2005, with growth prospects of 30-40% this year.
The market for web-based advertising on Kaznet continues to develop, and growing pains are inherent to the process. To an outsider, this progression might appear quite glacial, but on some frontlines there are real fights happening from time to time. Primarily, there are fights for space. The major factor constricting growth is the limited number of advertisers approaching a dearth of acceptable websites, all operating around a scarcity of internet users.

Nataliya Zvereva,
advertising manager at Kar-Tel LLP:
“Our company started to invest into web-based advertising after we became part of the Russian operator, Beeline. This is connected with the positive experience of our Russian colleagues in communicating advertising messages through the internet. At the moment of launching the Beeline brand in Kazakhstan we had not been able to estimate expenses for web-based advertising, as we lacked experience in the medium, and basically nobody could assess the effectiveness of such advertisement on Kaznet websites. This is why it was decided to use the method of trial and error. Applying ordinary rule of media planning, we decided to place our ads on those sites with the highest number of visitors, trying to cover our target market without being restricted by a fixed budget. Besides, we observed price jumps for internet advertising, and were unable to predict overall expenses for all websites.
“By the end of 2005, we had gained knowledge and experience. Our method of trial and error bore fruit, and we began to understand how effective internet advertising was in reality, how it affects our product in general, and how to further plan our internet-related activities.
“However, it is still too early to speak of the effectiveness of web-based advertising. The fact that this is connected to the low level of internet penetration is not a secret. We pay ten times more for one connection to the internet than for other types of communication. Nevertheless, we have not stopped placing ads on the internet. Mostly, this is explained by the goal of creating the image of an advanced and dynamically developing company, information about which anybody can find at any convenient place, including the internet.”