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One of the key sources of VK revenue is online advertising. In 1H 2022 its share accounted for 40% of total revenue. Advertising solutions help our clients reach users at every stage of the sales funnel, at any time and in any location. They can be used to find new customers through promotion in VKontakte, Odnoklassniki or other VK resources as well as in the partner network. Also, businesses may increase brand awareness and sales through DOOH, digital video- and audio advertising in supermarkets throughout Russia or via advertising on Smart TVs.

Advertising allows our multimillion audience to get free access to diverse content across our platforms with personalized offers from brands. In this IR blog, we will describe factors that determine the cost of promotion on VK resources and in our advertising network, metrics used by advertisers, and how we are developing our advertising business.

More information about our advertising business you can find in the presentation on our website.

What factors determine the cost of advertising?

This parameter depends on several factors:

• The size of the audience that regularly visits our platforms;
• The time that users spend on our resources. Combination of these parameters determines the amount of ads we are able to show on VK resources and in its advertising network;
• The price an advertiser is willing to pay for an ad impression.

The main part of our advertising revenue is generated in the advertising auction, where the price of each ad impression is determined in real-time. The more advertisers aim to show ads to users, the higher is the price of the bid.

What metrics do advertisers use to measure campaign effectiveness?

Advertising may be divided into Branding (18% of the online advertising market in Russia in 2021 according to ARIR) and Performance (82% of the market):

• The objective of Brand advertising is to introduce the brand/product/service to as many people as possible. The key metric here is the campaign’s reach (i.e. the number of people who see the ad) and the frequency of contact with an ad by the user. Such type of advertising is popular among FMCG, home appliances and electronics or pharmaceutical companies, among others;
• The objective of Performance advertising is to attract clients to websites, mobile apps or advertiser groups in social networks and encourage them to make a conversion (for example, to place an order, call the sales department, make a purchase, etc.). The key metric here is the amount of targeted actions for the definite budget. Performance advertising is popular among e-commerce companies, financial institutions, online entertainment and games business and others.

Approach to development of our advertising solutions

We are focused on ongoing improvement of effectiveness of brand and performance advertising on our platforms, so that companies of all sizes can achieve their goals at every point of the marketing funnel. The algorithms of our advertising platforms allow to predict the probability of clicks on ads, the number of app installs and other target events. They allow our clients the opportunity to increase ad conversions and improve ROI (return on investment) of their marketing campaigns. Overall, in order to develop our advertising technologies, we focus on these goals:

1. Launch of new advertising formats in attractive market segments such as video ads, e-commerce ads, mobile apps promotion and others;
2. Development of further automatization instruments that work on the basis of algorithms and allow advertisers to increase conversions at an optimal cost;
3. Simplification of advertising tools targeting small, medium and microbusinesses, with more than 3 million of them present across our platforms.

Hence, VK advertising business has the following key further development drivers:

• Further increase of share of online advertising within the broader advertising market over the coming years given the ongoing businesses migration to online;
• Design and development of brand and performance advertising solutions;
• Automatization and simplification of advertising instruments.

For further information please contact:

Investors
E-mail:ir@vk.team

Press
E-mail: pr@vk.team