Adding Value To Display Advertising

February 17th, 2009 by Nick Gonzalez

What does display advertising have in common with Zimbabwe? Apparently a great deal, acording to Martin Peers at the Wall Street Journal.

Peers cites expanding inventory as the culprit behind declining CPM rates.

But weak demand is simply highlighting the more fundamental oversupply problem — and pressuring prices. The cost per thousand views of display ads on big Web sites sold through ad networks — rather than sales forces of individual sites, which usually handle premium inventory — fell 54% in the fourth quarter compared with the year earlier, estimates PubMatic, which offers online services to publishers.

Conditions are getting worse. IAC/InterActiveCorp, which sells ads on sites like Evite and CollegeHumor.com, said earlier this month that display revenues were down nearly 50% in January.

I have two points to to add: tracking overall CPM rates as an indicator for the industry is misleading, and supply isn’t the problem with display advertising.

First, there are really two different CPM rates on the internet: ad network rates, and rate cards sold by in-house sales teams. Ad network rates are commodity prices whereas rate card prices are linked to publishing brand names. Yes, they’re related, but blending the two is like talking about the effect of leather prices on Louis Vuitton handbags.

Overall display spending is a more important metric, and it has dipped about 6% in Q3 2008. This was primarily driven by a decline in financial services marketing (big surprise, I know). Automotive and entertainment categories grew.

What does become concerning is the movement of ad budgets between ad network and rate card spending. Are marketers shifting their spending from higher priced name brand publishers to bulk buying on ad networks? I haven’t been able to find any data to let me know.

And this leads me into my second point. Supply isn’t the problem, it’s the value add. Publishers need to let go of the idea that they have limited inventory. There is simply limited page real estate, but inventory is effectively infinite. And on that real estate, publishers need to differentiate their advertising options by providing a compelling value add over ad display networks.

SocialMedia.com does this for our publishers by creating a social experience marketers can’t buy through Right Media Exchange. There will be other startups as well. I suggest publishers think of how their site can add value to marketers as well.

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This entry was posted on Tuesday, February 17th, 2009 at 12:35 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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