Report Predicts Higher Graphical Ad CPMs, More Growth for Search and Ad Networks

  |  January 3, 2008   |  Comments

JPMorgan analyst report blames non-premium ads on social networks for low CPM rates in 2007.

In a 312-page report offering predictions on everything from online ad revenues to e-commerce trends and the virtual worlds for kids, the JPMorgan equity research team said it expects the online graphical ad market to improve and raised its global search revenue estimate to $30.5 billion from $26.2 billion.

In the report, "Nothing But Net," JPMorgan analyst Imran Khan and his team said "blended CPM pricing bottomed out" in 2007, partly due to the glut of non-premium ad space made available through social networking sites like MySpace and Facebook, but predicted an improvement in 2008 as technology matures.

"Social networking sites, as a general rule, have not been able to command very high advertising rates for their page view inventory," Khan states in the report. "As time goes on, however, we believe social networks will develop better targeting and monetization of their page view inventory. Given the wealth of personalized information available to the sites, there are powerful avenues for improved monetization, although the technology remains fairly nascent."

The report stated the increase in global search revenue will be due to paid search growing internationally, and a general increase in Web usage and price inflation. It also stated Google is still the clear leader in the space, with a 73 percent dollar market share, but that it may fall to 71 percent by the end of 2008 due to improvements at Yahoo and as AOL and Ask have renegotiated their Traffic Acquisition Costs (TAC) rates.

The report also predicted that the U.S. graphical advertising market will grow 19.9 percent and that the global ad market will grow 22.1 percent in 2008. The expected growth is attributed to improved targeting techniques, the rise of ad exchanges and a continued increase in time spent on social networking sites. The report also predicted a surge from the 2008 Presidential race, as political interest groups and candidates spend online.

As Internet users continue to spend their time on multiple sites, blogs, social networks, games and other online activities, ad networks and ad exchanges will attract more spending and acquisitions, according to the report, which finds advertisers are struggling to reach their target audience and can no longer count on larger portals alone.

"In the ad network and ad exchange space, we expect the need for scale to lead to continued consolidation and M&A activity, although perhaps not at the scale we have witnessed in [2007], most sizably with the DoubleClick and aQuantive transactions," the report states.

The report also cited the nascent area of virtual worlds and advertising, specifically noting the purchase of Club Penguin by Disney. It predicted a strong growth area for kid oriented virtual worlds, but less of a rosy future for adult oriented sites.

"We are bullish on sites for children. Virtual worlds present parents an opportunity to let their kids play online and interact in a closed environment that is perceived as safe, especially when sites are operated by companies with trusted brands," it states. "We think sites aimed at adults have yet to prove mainstream appeal."

ClickZ Live Chicago Join the Industry's Leading eCommerce & Direct Marketing Experts in Chicago
ClickZ Live Chicago (Nov 3-6) will deliver over 50 sessions across 4 days and 10 individual tracks, including Data-Driven Marketing, Social, Mobile, Display, Search and Email. Check out the full agenda and register by Friday, Oct 3 to take advantage of Early Bird Rates!

ABOUT THE AUTHOR

Matthew G. Nelson

COMMENTSCommenting policy

comments powered by Disqus

ClickZ Today is our #1 newsletter.
Get a daily dose of digital marketing.

COMMENTS

UPCOMING EVENTS

Featured White Papers

IBM: Social Analytics - The Science Behind Social Media Marketing

IBM Social Analytics: The Science Behind Social Media Marketing
80% of internet users say they prefer to connect with brands via Facebook. 65% of social media users say they use it to learn more about brands, products and services. Learn about how to find more about customers' attitudes, preferences and buying habits from what they say on social media channels.

An Introduction to Marketing Attribution: Selecting the Right Model for Search, Display & Social Advertising

An Introduction to Marketing Attribution: Selecting the Right Model for Search, Display & Social Advertising
If you're considering implementing a marketing attribution model to measure and optimize your programs, this paper is a great introduction. It also includes real-life tips from marketers who have successfully implemented attribution in their organizations.

Resources

Jobs

    • Recent Grads: Customer Service Representative
      Recent Grads: Customer Service Representative (Agora Financial) - BaltimoreAgora Financial, one of the nation's largest independent publishers...
    • Managing Editor
      Managing Editor (Common Sense Publishing) - BaltimoreWE’RE HIRING: WE NEED AN AMAZING EDITOR TO POLISH WORLD-CLASS CONTENT   The Palm...
    • Senior Paid Search & Advertising Manager
      Senior Paid Search & Advertising Manager (Smarty Had A Party) - St. LouisCompany Description: A warm, loving, [slightly wacky] startup, we view...