Web Publishers: Are You Ready for Your Ad CPM Rate to Drop 30% in 2008?

Jan 18th

Carl Fremont of Digitas thinks their might be online CPM rate contraction in 2008. Google helped provide one form of CPM contraction when they changed what part of an AdSense ad block is clickable. Markus Friend said that knocked his CTR down by about 60%.

Markus Friend also highlighted that Google controls about 40% of the (heavily consolidated) ad market:

90% of Advertising revenues are made by the top 50 sites and the top 10 sites take 70% of that, with google taking 40% of all Online US advertising.

This CPM compression is going to cause many late movers to crank out content with more ads on it, further lowering their CPM and direct readership until they are financially insolvent. But then again, the web could use another bust cycle to clean up the meaning of the word "content". Shoddy intrusive ad networks like NetAudioAds should not be featured as the next big thing in the WSJ.

In a recent interview, Nick Carr said he expects the ad consolidation trend to continue

It's the aggregators that are the big winners, at least in economic terms, not the legions of individual contributors.

Over the past 20 years, we've seen that the automation provided by computer systems has tended to concentrate wealth in the hands of a small slice of the population. I expect that trend will only accelerate in the years ahead. If you're one of the digital elite, you've got it made. If not, the prospects are less bright.

What is the solution for publishers? How do prevent yourself from being absorbed by the commons? Develop meaningful relationships, be remarkable, and sell direct. Hugh on owning an idea:

Social Markers are a prime form of social shorthand, that people use to STAKE OUT the ecosystem they're occupying. So why do I find this such a useful term for marketers? Because obviously, if your product is a Social Marker in your industry ecosystem [the way the iPhone is in the mobile world, or Starbucks is in the coffee world, or Amazon is the book world, or Google is in the search world, or Whole Foods is in the supermarket world, or Virgin is in the airline world, or English Cut in the bespoke world etc etc] you will have an AMAZING competitive advantage to call your own.

And if the product your company makes is not a Social Marker, I guess the first question would be, "Why the hell not?" Quit your job and start over.

One of the easiest ways to claim an idea is to turn its launch into an event, and differentiate it from everything else you are doing. Buy the matching domain name if you can. :)

Bonus cool link: Bill Slawski mentioned a Yahoo! patent about moving away from the random surfer model to a user sensitive PageRank. Now if they could only apply some good ideas in the SERPs. And no, this does not count. :)

Published: January 18, 2008

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Comments

January 18, 2008 - 3:14pm

Although Internet seems more democratic than offline markets, at the end of the day the 90/10 rule is always present: 10% of websites will earn 90% of money. And I think that the differentiation between the 10% - 90% is based on the right knowledge: right marketing, right networking, right timing...

January 19, 2008 - 8:56pm

I am surprised that I have not seen more about this. I experienced a 30% drop in late November and continue to have a lower eCPM at Google.

I at first attributed this to the fact that many of my sites relate to the home improvement niche. I figured that advertisers were probably not spending as much in the winter. This may be a factor, but it does not explain the fact that year over year averages are down. I think the change in the way Google has set up their ads has probably made a difference.

Yet, I can see how Google's change might create better conversion rates for the advertisers.

Perhaps the drop in revenue for publishers will eventually be compensated for by advertisers having a better return on their advertising dollar and consequently push bids up on keywords across the board. These things have a way of equalizing themselves.

McGelligot

January 19, 2008 - 9:25pm

More publishers creating more pages to compete for the same impressions coupled with ad burnout will keep driving CPMs down. A year ago a friend told me how he was making as much as the year prior with AdSense with 3x the traffic.

January 19, 2008 - 11:08pm

I've noticed a similar 30% drop on from adsense as well.

January 20, 2008 - 10:10pm

Here is the problem as I see it: Publishers think that their business model is to display as many ad impressions and/or ad clicks as possible (take a look at UPI.com if you think only spammy made-for-adsense publishers are thinking this way.)

On the advertising side of the business, I love this.

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