Are Ad Prices Up or Down? Turns Out It's Complicated

  |  July 24, 2009   |  Comments

PubMatic reports effective CPMs for online display ads sold through networks are increasing. Not every one agrees.

In a surprise finding this week, an ad pricing index observed that effective CPMs appear to be on the rise for inventory trafficked through ad networks. Ad technology firm PubMatic, which produced the report, found average eCPMs for inventory sold through ad networks and exchanges have risen sequentially each of the last five months, and have climbed 35 percent since their low point in January.

But what does that mean, really?

According to Pubmatic, the data suggest "online ad pricing is turning the corner, possibly leaving the worst days behind us." Driving that change, it believes, are technology and efficiency improvements that have added value to previously untargeted inventory.

"Efficiency is driving prices in the right direction," according to Rajeev Goel, CEO of PubMatic. Goel argues a new breed of buy-side optimization and behavioral ad companies -- firms like Turn, Blue Kai, and Media6Degrees -- are helping ad buyers create more targeted buys, raising prices on ad inventory in the process.

Adam Kasper, SVP and director of digital media at Havas-owned Media Contacts US, sees limited evidence for the argument that targeting technology is driving ad network prices higher.

"There's a lot more targeting technology available that makes me as a buyer want to pay more," he said. "We're adding more technology onto our network buys."

For about the past year he said Media Contacts has steadily increased its use of targeting methods in conjunction with ad network inventory. However, he maintains ad network prices continue to fall.

So does Sarah Baehr, Razorfish's VP Media. "I'm surprised to hear anything about prices trending up this year," she said.

Baehr has an alternative theory about why prices of ads sold through networks have ascended. She believes the trend may actually be a symptom of publishers' pain rather than a cause for relief. Since many publishers are struggling -- and failing -- to sell inventory directly to advertisers, Baehr notes they're instead forced to dump it onto networks. Those more premium ad impressions are inherently more valuable, from a branding standpoint, than what's typically available on networks and exchanges.

"By default there's more premium inventory going into the ad network realm that is more valuable than the other stuff," she said.

PubMatic's Goel acknowledges this could be part of what's pushing up prices in its report. "It's definitely a possibility that better quality inventory is being sold thru networks," he said. "Take Yahoo. What they're not able to sell directly they now push into the Right Media exchange."

Also important to note, though perhaps obvious, is that the price increases called out by PubMatic happened over a brief time frame. When compared with the year-ago period, last month's ad price index is actually down.

PubMatic did not release exact prices. It reserves that information for its customers' use.


Zachary Rodgers

Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects. 

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