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Internet Advertising Bureau and Bain on pricing in online ad markets

For folks who are working in the online advertising space, see below for a great summary on the dynamics between ad networks and publishers. There's a full document from the IAB and Bain.

Here's the the Executive Summary: Overall, 2007 was a strong year for the seven participating publishers

  • Average revenue growth of 32%, with CPM increases for several participants
  • Growth in ad impressions served and in sell-out (after secondary channels)
  • High demand for premium video inventory trading at 2-3X display CPMs

At the same time, use of ad networks increased dramatically, from 5% of sold inventory in 2006 to 30% in 2007

  • Ad networks were used to monetize significant unsold display inventory
  • Publishers under considerable pressure to realize all revenue opportunity

    Average realized CPMs on ad networks ranged from $0.60-$1.10, versus $10-$20 in direct-sold display inventory, or only 6-11% of direct pricing

Importantly, the study revealed significant publisher challenges in managing pricing and yield

  • Lack of longitudinal sales data to measure trends – overall, by account and by channel
  • Limited staff resources and tools in place to optimize CPMs and inventory yield
  • Several participants lacked data on ad network volumes and pricing

It is still too early in the game to measure the full impact of ad networks on online pricing and revenue share

  • Large marketers still rapidly shifting budgets to online – “all boats rising”
  • Publisher use of ad networks still too recent to see “cause and effect”

    However, growth in marketer use of ad networks will likely lead to erosion of premium CPMs if publishers maintain current behavior

For publishers, two key implications:

  • Need to better support the value of premium inventory – through more innovative offerings and/or reducing units available
  • Need to actively manage secondary channels, both to maximize yield and to safeguard strategic position

The ability of ad networks to increase CPMs and share gains with publishers also appears critical to creating win-win relationships

  • Enhanced ad network targeting and inventory management resulting in higher price realization on premium inventory from publishers
  • Further scale-up and (potentially) consolidation of networks should enable higher margins

Bain IAB Digital Pricing ResearchUpload a Document to Scribd
Read this document on Scribd: Bain IAB Digital Pricing Research
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