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2011 Capital Markets Day
New Advertising Sales Structure
Yulia MoskvitinaChief Commercial OfficerChief Commercial Officer
Strong Track Record of Advertising Revenue Growth…Strong Track Record of Advertising Revenue Growth…
75 8US$ mln
215.4
424.9 75.8
40 9
48.7 US$ mln
2005 2010
16.6
2005 2010
40.9
2008 2010
357% ad revenue growth since launch in 2005
97% ad revenue growth within 5 years
19% ad revenue growth since pre-crisis 2008
…by monetizing unique audiences which advertisers desire to reach…by monetizing unique audiences which advertisers desire to reach
1
Growing Market Shares Through Increasing Combined Power Ratio Growing Market Shares Through Increasing Combined Power Ratio
1 2
1.5xpower ratio
10%13%12%
19%1.2xpower ratio Complimentary channels in portfolio
Strong brands of CTC Media channels10%
g
Audience quality
Bundled sales
2004 2010
CTC M di "All 4 " A di Sh
Bundled sales
Ad options beyond classic spots
Hi hl f i l t d k ti dCTC Media "All 4+" Audience ShareNational Ad Market Share
Highly professional trade marketing and promotion to advertisers
Power ratio = National TV advertising market share/All 4+ audience share
2
Stable Consumer Goods Client Base With Both MultiStable Consumer Goods Client Base With Both Multi--National and Local AdvertisersNational and Local Advertisers
1 Food 26%
FY 20101
2 Cosmetics 19%
3 Other goods and services 13%
4 Pharmaceuticals and vitamins 10%
5 Appliances 7%
6 Telecoms 5%
7 Detergents 5%7 g
8 Personal care products 5%
9 Beverages 4%
10 Beer 4%10 Beer 4%
11 Auto and finance 2%
100%
3
Russian TV Advertising Sales Structure before 2011Russian TV Advertising Sales Structure before 2011
Advertisers
Advertising Agencies
d e se s
2 major sales houses:
Fast evolutionary
Video International AlkasarGazprom-Media /
Media Sales Houses: Fast evolutionary development of recently emerged TV ad market in Russia
CTC Media:
National ad inventory was sold by VI since 1999, regional – since 2006
4
Amendments to Advertising Law Amendments to Advertising Law –– A Challenge Turned into An OpportunityA Challenge Turned into An Opportunity
Q i k dNovember 2010 –
Quick and decisive
response to regulation
July 2010 –decision on internal
new agreement with VI is signed
regulation change led to
optimized sales efficiency
internal sales house is made
F ll 2010
Spring 2010 – Booz&Co
hi d J J l
September 2010 –Everest Sales i t bli h d
Fall 2010 –start of negotiations with advertisers forwas hired June-July
2010 –more clarity about the
is established advertisers for 2011
December 2009 –surviving the “first shock”
future market structure
5
New Deal with VI Ensures Continued Support from the Largest Player… New Deal with VI Ensures Continued Support from the Largest Player…
C ti i l d fi d d i bl l tM i i d • Compensation includes fixed and variable elements – complex structure
• Effective VI compensation of 10-12% of total reported Russian advertising sales (13% previously)
Main services and consulting agreementg
• 12% gross sales commission (15% previously) • Commission will be netted off from revenues
Direct sales agreement for Commission will be netted off from revenues
• Revenues from direct VI sales will not exceed 4% of our total Russian ad sales
agreement for regional sales to
local clients
… and is accretive in terms of reduced cost of sales … and is accretive in terms of reduced cost of sales
6
Advertising Sales Structure from 2011Advertising Sales Structure from 2011
Advertising Agencies
Advertisers
Advertising Agencies
Media Sales Houses:Internal Sales Houses:
Video InternationalGazprom-Media / AlkasarEverest Sales RTR-Media
7
Benefits of Internal Sales HouseBenefits of Internal Sales House
More control over the sales process
Lower cost of l % f
Mastering i t l ti sales as % of
revenuesinternal expertise
in direct sales
Individual approach to each
client and customized
Bundle sales with additional
options, including customized offerings
Working directly
p , gnon-FTA
Working directly with advertisers
and media agencies
8
2011 Sales Structure: National & Regional Ad Sales to Moscow2011 Sales Structure: National & Regional Ad Sales to Moscow--Based ClientsBased Clients
CLIENTS
Телеканалы Ad ti
CHANNELS
Телеканалы -Advertisers-Advertising agencies
Vid I t ti lVideo International
Up to 96% of Russian ad sales directly through Everest Sales
9
2011 Sales Structure: Regional Ad Sales to Local Clients2011 Sales Structure: Regional Ad Sales to Local Clients
Телеканалы
CHANNELS’Regional Stations
Video International Subsidiaries
Local sales
Distribution of inventory between Moscow-based and regional clients
Signing deals with clientsSales directors of CTC Signing deals with clients by VI local branchesMedia regional stations
1.Pre-sale2.Control of the deals3.Trade marketing Regional sales to local
Not more than 4% of Russian ad sales through Video International
g gclients
10
What Gives Us Confidence in the Success of Our New Sales Structure?What Gives Us Confidence in the Success of Our New Sales Structure?
Strong sales team
Established relations with major advertisers
We continue to build our sales capabilities
Incorporating best practices with the help of Booz&Co
Continued alliance with VI and benefitting from their expertise, IT platform, back-office support and analytics
Three TV channels with complimentary audience profiles
11