Gawker
Prices in the online advertising's world bargain bin are cratering. PubMatic, a consultancy which helps website owners shop for the highest-paying ads, says that average rates for its largest publishers have dropped from $0.38 per thousand pageviews to $0.18. Some fret that this is the sign of an economic slowdown. I doubt it. More likely, it's a reflection of the glut of inventory available, and the failure of an ad-selling business model. Google has excelled at selling ads by computer, matching the most profitable ad to the right webpage. But Google takes a hefty cut of sales, and few others have matched its success at targeting ads.
The business of brokering ads is failing advertisers and publishers. Advertisers don't want to spray their ads across the Web; they want to target them to the right audiences. Publishers, meanwhile, would like to see their products earning uninsulting rates. But what is sold cheaply is valued little.
The ad networks which automate the sale and placement of ads have mostly managed to cut prices. Meanwhile, publishers with ever-expanding website audiences are increasingly desperate to get something, anything for their pages, setting off a deflationary spiral. What we have here is not a sign of recession but the functioning of the law of supply and demand. Targeting, the supposed holy grail that will save automated online-ad sales, has so far shown only a modest improvement in returns.
For PubMatic, publishing these numbers may prove a mistake. They don't show the benefit of shopping around for the best rate; they show that handing over one's advertising inventory to a third-party broker is invariably a mistake. For salespeople who sell online ads the old-fashioned way, on the other hand, PubMatic's numbers are the closest thing to a full-employment act I've seen.
