Online Ad Prices Dropping: Good For Blogs, Bad For Big Players


Dave Morgan, founder of the soon-to-be acquired Tacoda ad network, argues that online CPMs are decreasing, and that it’s not a bad thing — for some players.  This trend was very evident last quarter, when major online companies (old media and new) attributed weak revenue to the growth of third-party ad networks.

Online revenue growth for big publishers has gone from 25-40% annually to moderate to flat increases in the last few quarters, Morgan says, for three reasons:

• Time spent online is no longer increasing, but is fragmenting across multiple activities: Email, games, shopping, etc.

• Advertisers are increasingly moving dollars to “non-premium” buys, including ad networks and blogs that serve wide audiences more cheaply than big sites do.

• Big publishers have already jammed their pages with as many ads as possible, and can no longer increase their top line simply by adding more units:

It is no secret that while advertisers over the past two years have been shifting more and more of their ad budgets online, the volume of high-quality ad inventory…has not been increasing at the same rate. Instead, the largest sites have been increasing the rates on their best pages as well as forcing advertisers to take large volumes of untargeted non-premium inventory… This forced the online ad buyers to… manage online media buys across many more companies and many more sites.

Not only did more money flow through ad networks, much more money flowed directly to smaller sites. Given that the advertising business is becoming more focused on ROI, and there are more alternative channels for media and marketing expenditures, the fact that raising rates and reducing quality in the name of artificial scarcity is failing as a strategy shouldn’t surprise anyone.

Conclusion: Continued hard times ahead for certain big publishers, like, say, CNET. And good news for blogs, other long tail publishers and ad networks. Morgan runs an ad network, of course, so the argument is self-serving. But it jibes with everything else we’re hearing.

Also see: Implications of Ad Inventory Glut, on AOL, Yahoo, and Start-Ups