Online ad networks have been getting a lot of hype over the last couple of years. But many of these companies have been relying on sales deals with brands and ad agencies to build revenue -- and not relying so much on measurable, reliably reported customer responses to ads. Now that the general U.S. economy is doing relatively worse and brands are cutting back on their advertising budgets, ad rates are staying flat -- or dropping. Pubmatic, a company that sorts and places the most valuable ads onto web sites from across competing ad networks, has released a monthly report today, showing that online ad rates for publishers have basically stayed level over the last three months.
ECPM measures how much a site earns by taking the total earnings for an ad that runs on a site, dividing it by the number of impressions the ad receives, and multiplying that number by one thousand; it is industry shorthand for how much an online ad is worth. The Pubmatic report reflects net web site publisher ad monetization through ad networks. It excludes both the revenue share that ad networks kept, and ads sold directly by publishers to advertisers and ad agencies. Sites with fewer than one million monthly page views dropped from $1.13 in May to $0.81 eCPM last month. Being bigger means having an already fairly inexpensive inventory -- sites with between one and 100 million monthly page views rose from $0.33 to $0.46, and sites with more than 100 million monthly page views rose from $0.21 to $0.23. While small sites took a hit, so did most of the categories in Pubmatic's index of web sites. News May: $1.10 June: $0.48 Gaming May: $1.00 June: $0.80 Social networks May: $0.32 June: $0.27 Technology May: $0.65 June: $0.63 Entertainment -- the only vertical that went up May: $0.29
(You can find more details from the report here.)
Entrepreneur-blogger Andrew Chen recently posted some thoughts along these lines, but he concludes with this upbeat note worth keeping in mind:
For ad networks that have relied on sales to make money, now is the time to look at building out technology that can actually make advertising more valuable. Of course, many companies have various claims about how well they can target ads based on the context of a web page, or on the behavior of a user. A recession will sort out who can and who can't really accomplish such feats -- without violating users' privacy, of course.