My career in online has been so long that I can remember when standard
CPMs were measured in the multiples of tens of pounds. This was a
happy time when inventory was in relatively short supply compared to
the amount of people who wanted to buy it. No one Googled as it hadn’t
been invented, and nobody said Yahoo’ed as that would have been silly.

Of course those happy days couldn’t last, too much money chasing too
few available ad slots was only one of the causes of the dot.com
crash, but advertisers had long memories of how much they’d paid for
how little return hence why display advertising remained in the
doldrums even after the overall market had begun to recover. Inventory
levels were still however relatively scarce and ad networks
underdeveloped, meaning that if you wanted to reach the audience of a
particular type of site, you’d usually have to buy it directly from
them.

Dedicated sales forces had a vested interest in keeping the rates and
page yields high, as limited inventory would mean that higher page
yields were required to hit target. With networks still in their
infancy, sites were able to sell based on the traditional methods of
access to audience with CPMs reflecting the percieved quality of the
audience.

Following the twin explosions in home broadband and internet access at
work however, inventory levels of sites began to exponentially
increase. This left many sites with more inventory than they could
directly sell, especially as campaigns were often booked in advance
and it was difficult to predict accurately how much would be available
on a monthly basis.

In order to protect rates many media owners shied away from doing
cheap direct deals, knowing that a rate once cut would be permanently
lowered. Fortunately ad networks were more than happy to step into the
breach and take this remnant inventory off of the media owners hands.

This at first was a win/win situation with media owners ensuring that
they got something for every impression and the ad networks able to
demonstrate an enviable reach to the market. Here in the UK, networks
such as eType, Adviva, Adrevenue, Mediabrokers (now DrivePM) as well
as American imports such as Advertising.com and VC Media began to make
bigger and bigger inroads into the publisher landscape.

Inevitably with networks reach growing, and offering significantly
lower CPMs, coupled with available inventory rising much more quickly
than marketing budgets CPMs across the board began to fall. Networks
with their reach across multiple sites were able to offer audience
demographics equivilant to sites directly and generally a larger
audience share and single point of purchase.

Whilst sites still maintained direct sales forces, the share of
inventory given to network buys increased. The growth of mega portals
such as Yahoo! and MSN also increased the amount of options available.
With networks also now buying from each other to fill the gaps in
their relationships, the share of the audienced reached by the top
tier networks began to look eerily similar (check out the comscore
results for the UK top 5 networks to see what I mean.)

With a few blips this trend has continued with an almost perfect
market springing up for display inventory, meaning that downwards
pressure on CPMs for many has continued. Add into this mix the growth
of media exchanges, the move towards performance based advertising
this, has broken the link for many sites between rising inventories
and expanding revenues.

Many media owners now find that their once precious inventory is now
devauled, and the specialness of their audience moot when targeting,
profiling etc can find similar demographics easily elsewhere. To cap
it all, the effectiveness of display as a branding medium is now being
questioned, with the result that display advertising revenue is in
decline (in Britain at least,) whilst overall online spend continues
to increase.

There have been some moves to break the trend of increasing
commoditization, with some media owners sacking their ad networks and
the Microsoft Media Network’s decision not to sell to it’s
competitors. How much affect this will have remains to be seen, what
is I think probable is that display will remain in the doldroms for
some time to come.

Rob Kelly

Md of on-e Website Monetization Solutions