Hacking online advertising as a lean startup. From my talk given at 500 Startups on May 8, 2012.

1. ADVERTISING HACKS
PAID TRAFFIC FOR LEAN STARTUPS
Ilya Lichtenstein
500 Startups
May 8, 2012

2. ABOUT ILYA
• Started buying traffic in 2007
• Grew my internet marketing business from $300 to six figure
profits in a year
• Founder of MixRank.com (Y Combinator, 500Startups)

3. AD CAMPAIGNS==STARTUPS?
• 80/20 rule baseline
• Returns governed by power law
• Disproportionate returns from winners “make the fund”
• Failure is the default state: All lose money in the beginning

4. THE GOAL

5. DATA FROM A REAL CAMPAIGN
SPEND: ~$35,000/MONTH
Month 1 Month 2 Month 3
Ad Groups 634 225 45
% Ad Groups w/ Traffic 28% 89% 100%
% Profitable Ad Groups 4% 12% 80%
Net Profit/Loss -$26,300 -$17,201 $7,829

6. HOW DO YOU SCALE 100X
FROM
$50/DAY TO $5,000/DAY?

7. EASY.
BUILD 100X MORE
CAMPAIGNS.

8. PAID TRAFFIC IN 2012
• Highly fragmented (resistance to consolidation)
• Very inefficient (misaligned incentives)
• Not a free market (price manipulation by everyone)

9. THE KEY TO HACKING THE
MARKET
• Arbitrage low value traffic into high value traffic
• Get it cheaper OR monetize better
• New business models help (ex. Zynga, Zoosk, ZocDoc)

10. ASSUMPTIONS
• Some traffic is underpriced (inefficiency)
• Diverse traffic sources bring diverse results (fragmentation)
• Big wins will pay for failures (power law)

11. ACTIONS
• Find cheap, scalable traffic sources(but not too cheap!)
• Test faster than the competition
• Many small experiments rather than few big ones
• Track everything!

12. GOOD TRAFFIC SOURCES
FOR STARTUPS
• Self-serve platforms (Google, AdCenter, Facebook)
• Transparent ad networks and exchanges
• Direct media buys on smaller sites
• Low cost/no cost partnerships
• Fast build->track->iterate loop
• Jump start organic channels(ex. StumbleUpon,TapJoy)

13. BAD TRAFFIC SOURCES FOR
STARTUPS
• Competing with brand advertisers
• Any site with a media kit
• Any site with a sales team
• Anyone who will “optimize for you”
• Big commitments

14. HOW TO SCALE FAST
1.Test many diverse audiences and traffic sources quickly
2.Focus on the ones that show promise
3.Track everything and never stop optimizing

15. THANK YOU!
WWW.MIXRANK.COM
BLOG.MIXRANK.COM
@MIXRANK
ILYA@MIXRANK.COM