The first ever initiative to build an index to measure online advertising price movements is the PubMatic AdPrice Index www.adpriceindex.com It is a broad-based measure of ad network pricing information based on anonymous data from over 3,000 publishers who work with PubMatic for ad network and ad layout optimization services.
The PubMatic AdPrice Index revealed surprising weakness in monetization for the vast majority of Web sites. Large Web sites fared the worst while small Web sites managed to maintain their monetization rates. eCPMs for large Web sites (more than 100 million page views per month) dropped dramatically by 52% from 38 cents in March to 18 cents in April. Medium Web sites (1 million to 100 million page views per month) were nearly flat, with monetization dropping from 34 cents in March to 33 cents in April. Small Web sites actually managed to improve their monetization, increasing from $1.18 in March to $1.29 in April.
PubMatic pricing data reflects net publisher monetization via ad networks and excludes ad networks' share of ad spends as well as inventory sold directly by publishers to ad agencies or advertisers. PubMatic computes the aggregate Index through data for all web sites using weighting of 65% large Web sites, 20% medium Web sites, and 15% small websites based on an estimate of overall traffic in the online publishing market. The pricing data reflects the pricing of text and banner inventory sold to ad networks only, and does not include inventory sold directly to advertisers. The data reflects net publisher monetization, not gross advertising spend or the money paid by the advertiser to an ad network
According to the index, average monetization dropped by 23%, from 49 cents in March to 38 cents in April. Among the verticals, Social Networking led the plunge with monetization dropping 47%, from 37 cents in March to 19 cents in April, below January lows of 22 cents. Entertainment monetization dropped 17%, from 40 cents in March to 33 cents in April. Gaming and Sports were down marginally (4% and 5%, respectively). Technology remained relatively flat at 83 cents in April vs. 82 cents in March, but is still below January highs of 92 cents. In April 2008, 77% of Small Web sites garnered net publisher eCPMs from ad networks of under $1.00, compared with 95% of Medium Web sites and 100% of large web sites. Across all Web sites, the range of eCPMs was $0.002 to $18.45.
There is a view among industry experts that these price movements may be possibly indicating weakness in display advertising led by general economic slowdown. Mixed results from the likes of Yahoo and Time Warner indicate that online publishers may be getting less money for the ad space they sell. More and more advertisers are opting for automated targeting and delivery through cheaper advertising networks instead of buying directly from expensive publishers. Sanford C. Bernstein & Company analyst Jeffrey Lindsay opines that recession fears might actually be a boost to some media companies, such as those depending on automated advertising systems like search. In a moderate or even quite severe downturn, online advertising actually improves, because people switch their advertising budgets out of traditional advertising formats - TV, radio and print - and move more online because it's got higher performance, it's cheaper and it's more measurable, feels Lindsay.
So Why Are CPMs Declining? According to Gerry Bavaro, the high CPMs commanded by large "premium inventory" sites equate to what ad sales teams can convince marketers to pay. This is one reason why premium sites such as Forbes and ESPN have in-sourced their sales accusing performance ad networks and ad exchanges of "commoditizing" their premium inventory. However, advertisers are increasingly moving towards a network and exchange route with more inventory, and we are rapidly moving towards a world where advertisers and publishers will meet at the CPM that they each will agree on. We will see a market where the price of media is not arbitrarily set by anyone, but is set by the market. Search engines are driving this trend, and as the "big three" ramp up development of bid platforms for more of this media, we will continue to see online advertising become a commodity whose prices will continue to be driven down by buyers and networks. The trend looks unstoppable.
Why Is Social Media Suffering? When we piece the Pubmatic numbers with another report by eMarketer, which has revised projected growth for social media advertising from 163% growth in 2007 to just 55% this year, we may being to question whether social media is truly an advertiser-friendly medium? This is especially so given the task-oriented, profile-fiddling mindset of users operating there. Or, should there be an alternate approach to monetize social media? Gerry Bavaro feels that the primary strategy for social media should be empowering customers to act as brand/product ambassadors using the media of branded tools (widgets, branded profile pages, blogs, etc.) that foster dialogue, awareness, and sharing (viral activity). This may mean – more customized and integrated media solutions to enhance interactivity and enrich the brand experience such as sweepstakes, online quizzes, interactive game shows etc.
Bottom line – publishers must go down the performance and measurability route – and this trend is being accelerated by the broader economic situation. Search may still end up taking a larger share, because, in the current situation, even the best performance networks/exchanges with their scale and targeting capability, do not possess the buyer interface of a Google – self-serve, no-frills, one-stop experience. Last thing – there are already proven case studies on how one can successfully run ‘Brand’ campaigns on search. In addition, marketers are also discovering the immense value of PPC campaigns by using the data and analytics to influence their offline campaigns.
According to PubMatic Co-founder and General Manager Rajeev Goel - top publishers are adopting three key strategies to overcome the current pricing situation: 1. Increased diversification, by working with more than one adnetwork to maximise pricing opportunities 2. Increased segmentation of content and categories to appeal to specific marketer focus 3. Globalization to expand beyond regional shores and earn international revenue (Google just declared that more than 50% of its revenue in the most recent quarter came from its international operations).
2 comments:
Are the large websites under monetised due to increases in low value page views or the markets paying less of high value content?
Is the numerator falling or deoniminator growing?
I think conclusions are drawn in this blog post without an understanding of the question above.
Hi, thanks for the comments. In economic terms, value is the worth of a commodity, product or service attributed by the 'market'. In marketing terms, value refers to the relationship between the consumer's expectations of product quality to the actual amount paid for it.
Clearly, there is a proliferation of content on the web, and this means increased page views. However, the value of these pages is going to be determined by the market, and by the marketers who are charged with fiduciary responsibility of delivering ROI.
In the past, media was bought and sold in a closed and opaque market, often through bi-lateral negotiations. What we are witnessing today, is the shift towards a more transparent and efficient market for media buying and selling, which is setting a 'market' price.
In case of large websites, the pubmatic index suggests that pricing is undergoing a downward correction, while in the case of smaller websites prices are correcting upwards. This can be tied to the selling models of the two categories. While the large websites primarily work with in-house sales team, smaller websites tend to work with the adnetworks and exchanges. Large websites monetize only a low percentage of remnants through networks and exchanges. The Pubmatic index tracks pricing trends of remnant inventory only, and not the prices of inventory sold by in-house sales teams that are not market determined. Ergo, one could argue that only the value of remnant inventory at large websites is declining, while that of smaller websites is increasing. What we are witnessing is a dramatic shift in the way media is being priced, and this means the value of publisher inventory being attributed by the 'market'.
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