Ad Network CPMs Less than 10% of Online Publishers' Direct-Pricing, Finds New IAB/Bain Study

Online display advertising sold through ad networks is generating costperthousand CPM revenue of 060 to 110 for several major publishers vs 10 to 20 CPM in directsold display advertising A new IABBain Digital Pricing Study being released this week by Bain ampamp Company available for free download at wwwmyersreportcom reports that quotwhile it39s still too early in the game to measure the full impact of ad networks on online pricing growth in marketer use of ad networks will likely lead to erosion of premium CPMs if publishers maintain their current behaviorquot quotThe growth of ad networks is rapid influenced by large marketers stepping into the mediumquot commented John Frelinghuysen a partner in Bain ampamp Company39s Global Media Practice in an exclusive interview with JackMyers Media Business Report Ad networks represent the fastest growing category in online advertising today with ad network sales for publishers participating in the IABBain study growing from five percent of their sales in 2006 to 30 in 2007 As greater cost efficiencies are made available to them brand marketers and agency media buyers are increasing their online spend and allocating an increasing share to ad networksThe important new report which is being closely studied by the IAB and participating online publishers as well as agencies and marketers suggests that the industry will move toward quotenhanced ad network targeting and inventory management resulting in higher price realization on premium inventory from publishersquot and that quotfurther scaleup and potential consolidation of networks should enable higher marginsquot Download the full report at no cost at wwwmyersreportcomBain believes there is a market and demand for inventory that has a contextual and focusedinterest orientation says Frelinghuysen and this will lead to a more premium content orientation Ad networks will evolve he suggests to serve the needs of marketers whose objectives are focused on brand building and content environment quotNetworks that are able to curate and provide consistency in content environment will be relevant to marketersquot he explains The opportunity is for publishers to quotdevelop and nurture secondary channels that are vertically oriented are consistent in their content offerings and are more supportive of brand objectives From the perspective of publishers39 revenue interestsquot he adds quotif ad networks can generate a secondary premium market it could be very valuable for both the ad networks and the publishersquotAmong the key findings of the IABBain pricing study the growth of ad networks in 2007 was driven primarily by increased monetization of publishers39 existing traffic and publishers continue to have substantial unsold inventory Publishers39 success in increasing their sellout levels for display advertising resulted from their making more inventory available to ad networks However with realized CPMs averaging under 1 monetization value has been limited While ad network intermediaries account for an estimated 25 of total inventory sold they comprise only two percent of display revenue Publishers39 goals to increase their sellout levels appear linked to greater use of ad network intermediaries and therefore to lower CPMsThis reality Frelinghuysen acknowledges has led ESPN and other major sites to reconsider their use of ad networks and some publishers have either launched or are exploring the launch of vertical ad networks they control in order to create a secondary channel that delivers consistent content at more efficient amp8211 but still premium CPM price points quotPublishers need to think about ways to develop other channels that would link and aggregate premium inventoryquot he points out quotSales executives realize they should review how much inventory they are producing and if they are churning out too much inventory they might need to have multiple secondary channels maybe even buying ad networks or launching ad networks They need to respond to different sets of customers and different expectations of price points they have to serve againstquotWhat does this mean for ad networks Frelinghuysen39s sense is that quotad networks have not been in the position where they needed to bid for more premium ad inventory and may not have yet sorted out how to integrate premium inventory as an advantage to themquot He suggests that publishers and ad nets are now having this dialogue and are in the process of defining their respective pointsofview on their future relationships But the report adds the lack of available inventory management and optimization data hinders publishers39 ability to develop basic ad sales strategies The Bain ampamp Company report recommends that publishers quotdevelop proactive strategies for managing inventory and better tools for yield managementquot This includesamp183 quotEnhancing service offerings to supportdifferentiate premium business and evaluate reducing inventory levelsamp183 quotDevelop and closely manage relationships with multiple secondary channels amp8211 including horizontal ad networks vertical networks and other 39specialty39 networksamp183 quotEvaluate entry into ad networks andor partnering approaches with other publishers for sales of 39value39 inventoryquotFor additional coverage on this study click hereThe IABBain Digital Pricing Study is available for free download at wwwmyersreportcom Bain ampamp Company39s John Frelinghuysen can be contacted at johnfrelinghuysenbaincom

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Ad Network CPMs Less than 10% of Online Publishers' Direct-Pricing, Finds New IAB/Bain Study

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