IAB Reveals Digital Pricing Benchmarking Study: Overall Ad Revenues Increase
Overall publisher revenues through ads are increasing. Ad Networks have suddenly become a major part of the online advertising landscape (They weren’t trust me). The Interactive Advertising Bureau and Bain & Company released their digital pricing benchmarking report that suggests all these and a lot more for anyone interested in making money through advertising online.
The study was conducted to benchmark and explore the impact of online ad intermediaries (good ol’ ad networks) on ad rates, profitability and ad inventory management for publishers. And it revealed some interesting and surprising (to me) facts.
According to the study, publishers on an average experienced 20 – 30% growth in their revenues compared to last year. And more importantly, the use of Ad Networks by publishers grew from a paltry 5% to a substantial 30%. The study essentially suggests that a lot of publishers are increasingly using Ad networks to make something out of their unused ad inventory that don’t sell through direct advertising.
Interestingly this draws an unpleasant picture of excessive inventory created by publishers, much more than the actual demand as pointed out in the study report. On another tangent it also hammers another nail in the coffin of Page Views based advertising. The focus according to me would now gradually shift to quality of content rather than the quantity even with established online publishing houses.
Publishers pursuing page views and creating more inventory for the sake of creating more, are in fact devaluing their brand and ad pricing. This is illustrated very well in the report and evident from the growth of ad networks. Usually ad networks can get advertising done on premium publication brands for nearly 80 to 90% less than the direct ad prices quoted by the publishers themselves.
This is obvious because they leverage on the play of numbers added to the fact that publishers themselves provide cheap and non selling inventory to the networks. The result however, is that more and more advertisers are running towards ad networks because they pitch the value for money card to digital marketers. And the demand for direct advertising falls resulting in drop in ad prices.
The report provides an excellent study of other habits that lead to such devaluation of ad prices and the impact of advertising middlemen in tightening the proverbial noose on high value direct ad sales.
The study also provided various recommendations to improve brand value and thereby the ad price for publishers. It called for a greater team work between networks and publishers in delivering on quality and thereby promoting the brand premium. For ultimately, with or without ad networks, publishers have to provide conversions to advertisers to sustain and grow ad based revenues.
Other key findings from the benchmarking study include:
- Overall, online publisher revenues grew by a healthy 32% in 2007 versus 2006, yet ad network revenues grew more rapidly (in excess of 50%), as marketers boosted online spending.
- High demand for premium video inventory resulted in CPMs 2-3 times greater than display ads on average.
- Most publishers in the study lack information to closely measure the impact of cross-platform sales, though most indicate focus on using cross-platform to drive volume, not price.
According to the release, the study methodology included executive interviews and in-depth analysis of proprietary company data, including direct, ad network and cross-platform sales, pricing (CPMs) and impressions volume for seven leading online media publishers. The selection criteria included having leading brands, publishing premium content, and selling advertising on a national basis.
Sherrill Mane, senior vice president, Industry Services of the IAB, concluded, “What this benchmark study tells the industry is that there is a need for more sophisticated yield management on the part of premium publishers, for stronger partnerships between publishers and ad networks, for development of best practices, and more focus on the value of interactive advertising.”
The entire report can be downloaded from www.iab.net/digital_pricing_research
Thumbnail courtesy MichelleB
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