The amount Web publishers can charge advertisers for every thousand impressions of their ads -- a rate called the CPM in industry jargon -- is off by about 20% industry-wide. Worse, that's with publishers only selling around 30% of their inventory, down from 60%.
Some say the ad networks are to blame. Essentially, the argument goes: Publishers can't sell out their inventory, so they turn to ad networks, which sell remnant ads at a 89% to 94% discount. Agencies and advertisers can't resist the discount and begin to buy their way onto premium sites through ad networks only. This drives down the amount of inventory publishers can sell on their own and increases their reliance on ad networks. The vicious cycle continues.
The message behind this argument is: publishers must ween themselves off ad networks or their ad rates will eventually crash 90%.
So why don't publishers stop using ad networks and sell only premium inventory? Because then agencies and advertisers would just buy somewhere else.
These days, ad buyers and their clients are less concerned about the content their ads are served against, and more want to pay as little as they can to put their ads in front of demographically-defined audiences.
Why pay a $25 CPM to reach that wealthy, 50-year-old, Boston-area living, Mercedes Benz-owner on NYTimes.com when you can pay a $.60 CPM to reach the same guy five minutes later when he's reading a five-year-old article on stockjocksofwallstreettheblog.com's archives?
In this world, advertisers don't buy publishers' content, they buy their audiences. In this world, if sites share an audience, they are the same.
What does this mean? For starters, lower ad rates like we're seeing.
But it is particularly bad news for all advertising-supported Web publishers who spend any resources at all making their content better than any other publisher's in any way that does not correspondingly attract a larger audience.
In this world, spending in such a way -- on more informative, more accurate, or more entertaining content that does not also drive traffic -- is as wise an investment for ad-supported Web publishers as hanging a $2.4 million Monet on a factory wall is for General Motors.
To belabor the metaphor: those publishers who want to be in the business of hanging Monets on their walls cannot rely on advertisers as their customers. They would be better to sell subscriptions to readers, not impressions to advertisers.
Paging the New York Times (NYT).
For everyone else, this world demands a focus on aggregating traffic -- from demographics that marketers seek to put their ads against -- as cheaply as possible.
See Also:
Holy Crap, Search Advertising Actually Shrank In Q4 (GOOG)
