Online publishers are increasingly relying on ad networks to offload unsold advertising space, but are the lower sales rates hurting their bottom line?
A new benchmark study by Interactive Advertising Bureau and consulting firm Bain & Company shows that reliance on ad networks is causing price cuts in advertising sales. The "Digital Pricing Benchmarking Study," released yesterday, found that Ad network usage increased from 5% of sold inventory in 2006 to 30% in 2007.
But the discounted rates at the ad networks are causing problems for publishers who want to sell inventory at full price.
Intermediaries have led to higher sellout rates, but lower CPMs. This, in conjunction with news last week that once thriving online ad growth is slowing, doesn't bode well for online advertisers. Writes the LA Times:
Now, with the IAB study saying that intermediaries account for around 25% of sold display impressions but comprise less than 2 percent of revenue, things are looking a bit grim.
The upside is that premium ad space will still be sought out, despite excess real estate being sold off at deep discounts. Advertisers would still prefer to pay a premium to get their content seen by quality readers at sites like The New York Times or The Wall Street Journal, but the discounted network rates will continue to exert pressure on premium vendors, and could eventually pull down the high end rates. This could be staved off, but like the future of banner ads, things are no longer looking so bright.
Photo: Flickr/khoogheem
