Display ad prices drop 50% in Q4

Display ad prices drop 50% in Q4 Pubmatic released a report covering the massive drop– Q408 average CPMs are at 26 cents.  Before folks claim economic peril, let’s consider a few other factors.  The mix of inventory for ad network has shifted dramatically to social, which has historically terrible CPMs.  From a weighted average perspective, it’s hard to say exactly the impact, but we know that 4 of the top 10 sites out there are now social and that social traffic recently passed adult as the largest category.  And the reason that social network have bad traffic is not necessarily because of a young demographic.  The more pages that users consume on a site, the lower the frequency they click on ads.   If heavy users are consuming 60 to 100 pages per day on a social network, as opposed to 6 to 10 pages on other sites, you cannot expect ad clicks to increase in linear proportion to pageviews.

What I’d like to see is gross earnings by site quarter over quarter.   Internet advertising is such that we have a growing audience of users consuming more pages per session– thus CTR will continue to slide.  And if revenue per click is constant, you can’t help but see eCPM (what publishers are earning per thousand impression) and CPMs slide.  My hunch is that gross earnings per site are flat, as opposed to down 50%.  Falling CPMs is both normal and good.

About Dennis Yu

Dennis Yu is the CTO of BlitzMetrics. He is an internationally recognized lecturer in Facebook marketing, having been featured in The Wall Street Journal, New York Times, LA Times, National Public Radio, TechCrunch, Fox News, and CBS Evening News. He is also a regular contributor for Adweek's SocialTimes column. Dennis has held leadership positions at Yahoo! and American Airlines. He studied Finance and Economics from Southern Methodist University and London School of Economics. Besides being a Facebook data and ad geek, you can find him eating chicken wings or playing Ultimate Frisbee in a city near you. You can contact him at dennis@blitzmetrics.com, his blog, or on Facebook.

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