Tinkoff brings online advertising to Russia

By bne IntelliNews February 1, 2013

Jahan Hoggarth in London -

With the number of users approaching 60m by the end of last year, Russia's internet provides one of the largest audiences in Europe and is already the country's second biggest advertising market. And with no big players around yet, filling that space in Russia's online advertising was a no-brainer for Oleg Tinkoff, the serial entrepreneur who has been involved in businesses ranging from beer to online banking.

Experienced in bringing successful business models from abroad to Russia, such as the online banking, Tinkoff last year came up with his most technologically ambitious project to date: Tinkoff Digital, which will look to exploit the growing market for new, cost-effective ways to advertise on the internet.

According to Tinkoff Digital's chief executive, Anna Znamenskaya, the idea came as a result of running Russia's only online bank, Tinkoff Credit Systems (TCS). At TCS, she explains, most of the advertising is done online and out of its 3m customers, half became clients as a direct result of online and mobile advertising. From this, Tinkoff Digital could see that attracting a customer through online advertising cost about half of that using a TV ad.

With the help of Goldman Sachs and $20m of shared investment, Tinkoff Digital kick-started the monetising of Russia's hitherto untapped online and mobile advertising opportunities. In December, Tinkoff Digital launched its first project called "DataMind", which serves as a real-time bidding (RTB) demand side platform - a fairly new concept for targeted advertising that started its life in the US. In a nutshell, each time a web user visits a page, the RTB, as an online auction, offers advertisers the chance to bid for an impression (an online advertisement) on a page the user is about to view. The system then chooses the most relevant advertising and, as a result, the web user sees the ad that has won the auction. The whole process is over in 120 milliseconds, which allows advertisers to adjust their selling strategies almost instantaneously.

On the move

Analysts predict that Russia's online advertising market will be worth $4bn by 2015, with RTB accounting for 18% of that, up from $1.9bn in 2012, which was 18% of the total media advertising budget. "TV advertising is still the biggest media for companies where the image and visual branding is crucial, but for many others, such as telecom or retail companies - where the immediate online purchase is possible - web advertising is ideal," says Znamenskaya.

Moving into the field of RTB with a complex approach, Tinkoff Digital has amalgamated a number of interconnected projects, including MadNet - the first Russian RTB-based mobile advertising network. The contracts for buying impressions from Google, Hunt, MobUp, MobClick and other mobile networks are already signed.

Also a niche spotter and a founder of many online projects, including workingmama.ru, a website for successful and socially active Russian mums, and ivi.ru, the biggest online video portal with licensed content, Znamenskaya explains tirelessly that RTB is the "hottest topic" for advertisers around the world. "Mobile advertising in Russia and the consumption of media is growing very rapidly, but the monetisation of this market is still very low," she says.

Serving as the RTB platform, DataMind collects the online advertising space, enriches it with data (web user search behaviour, shopping history, demographics, age, etc.) and sells these impressions to advertisers through bidding. "We collect our data from third-party providers and also during the winning of impressions, and we use it to target the advertising better," explains Znamenskaya.

Increasing the market coverage, Tinkoff Digital's next project, supply side platforms (SSP), will work with publishers (ie. websites) to monetise traffic on their websites and build the advertising network on the "big" web (that on PCs) and mobile.

Of the total internet audience, 35% do so via their mobiles and tablets, which is also 23% of the total population of Russia. And with 56% using their smartphones or tablets for web browsing, the scope for mobile advertising in Russia is evidently vast. And cheap - cost per click for mobile advertising is three- to four-times cheaper than on the "big" web.

And while the economic slowdown still has a suffocating grip on advertising budgets, Tinkoff Digital believes it will benefit as companies gravitate toward cheaper advertising solutions. "Our type of selling advertising space is more attractive to companies, as it will help to sell to the exact group of customers for the exact amount of money and will mean no waste," Znamenskaya says.

Yet local businesses are still slow to catch on. "There is a certain conservatism in the approach of local advertisers, who are apprehensive about internet advertising and the new technologies, so they are a bit reserved about it all," she says.

The company plans eventually to expand into Ukraine and Kazakhstan, where there are large populations of Russian-speaking web users. For now, though, Tinkoff Digital's market is currently confined to Russia - "There is so much to do in Russia - it's a vast un-ploughed virgin land!" says Znamenskaya, a sentiment echoed by her boss.

"They (foreign investors) should invest in Russia! If you are young, smart and like risk, there is no better place on the earth," Tinkoff says.

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