Index Suggests Ad Prices Stabilized in May

The most recent Pubmatic Ad Index shows online ad rates were essentially flat from April to May, dropping 0.7 percent for the month. That may come as good news to some publishers, given it follows a serious drop the previous month and offers some evidence social network inventory may be commanding a slightly higher price.

PubMatic, a Palo Alto, Calif.-based company that automates and optimizes ad-serving decisions, introduced its index a little over two months ago. The index is based on data collected from more than 3,500 publishers of varying sizes and interpreted by analysts.

The index showed a 23 percent dip between March and April, then claimed the decline was evidence that the economic downturn in the U.S. was beginning to impact Internet ad spending. That claim was refuted by some who contended the dip was simply the result of the cyclical nature of advertising budgets.

Although the index showed no further significant dip this time, Pubmatic general manager Rajeev Goel re-stated the company’s belief that lower ad prices suggested online ad spending was being affected by the economy.

“It wasn’t just a handful of publishers for each vertical, but a significant majority of publishers that saw a decrease in monetization,” said Goel. “So that’s what led us to the conclusion that the economic slowdown is continuing to affect [online ad spending], though conditions haven’t gotten worse.”

The other major finding of the May index was that monetization among social networks increased by a whopping 66 percent, from 19 cents in April to 32 cents in May. Also among verticals, gaming monetization increased by 51 percent, from 66 cents in April to 99 cents in May.

Goel said the leap in gaming monetization could be linked to last month’s release of Grand Theft Auto IV. “There was a significant marketing spend connected to that,” he said. The rise in social network spending, he said, was a result of “a lot of experimentation going on” in the category.

One blogger, Mike Nolet of MikeOnAds.com, challenged the social networking numbers as proof that the Pubmatic Index was based on flawed methodology, particularly too small a sample size. “Seriously — you think a 66 percent increase in social networking monetization is reflective of the industry? Strongly doubt it,” he said by e-mail.

In response, Goel said that Pubmatic routinely made adjustments for the size of its sample.

“The way we control for that is we only report on verticals where we have sufficient sample size,” he said. We track 40 to 50 verticals total but only share data on five, and those are the verticals where we feel that there’s enough of a sample size to be statistically valid. That is definitely something we look at and control for.”