The dis­play land­scape his­tor­i­cally has been a publisher’s mar­ket where the sup­ply side largely dic­tated the CPM prices that adver­tis­ers had to pay. As adver­tis­ers were iso­lated from each other in this model, price sav­ings in the form of lower CPMs as a result of low demand for given inven­tory was harder to come by.

Enter the dis­play exchanges which are try­ing to recre­ate the suc­cess­ful model of bring­ing an auc­tion based sys­tem for dis­play inven­tory as exists for Search. This is where adver­tis­ers com­pete (now with option in real time for some inven­tory) via their bids for inven­tory which is based on their propen­sity to pay given their respec­tive ROI or Busi­ness Goal met­rics. Pub­lish­ers can put their unsold dis­play inven­tory on the exchange for adver­tis­ers to bid in a sim­i­lar vein that adver­tis­ers in Search bid on keywords.

One of the crit­i­cisms from the pub­lisher side of the mar­ket is that now the new mar­ket­place has put much greater power on the adver­tiser side and as such CPMs would go down a lot effect­ing their online rev­enues and abil­ity to put out qual­ity content.

The Google (for­merly Dou­bleClick) Ad Exchange (AdX) is a good place to see how CPMs for the Dis­play Inven­tory have trended in 2010. It is a bet­ter place to assess a wider mar­ket trend­ing than the Right Media Exchange (RMX) due to a large pro­por­tion of their inven­tory com­ing from Yahoo! owned properties.

In Fig­ure we show on AdX, the EF US client trends for CPMs in 2010. We have not included real-time bid­ding inven­tory in this chart due to the fact it hasn’t been avail­able pub­lisher wide through all of 2010 on AdX.

Fig­ure 1: EF US Client CPM Trends — Google AdX

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As you can see, since the mid­dle of the sum­mer, CPMs have dou­bled through Novem­ber as ever more adver­tis­ers are enter­ing the dis­play mar­ket­place. Direct response adver­tis­ers who pri­mar­ily spend their mar­ket­ing dol­lars online on search, email and affil­i­ate adver­tis­ing and brand adver­tis­ers who have tra­di­tion­ally spent their money on offline chan­nels like TV and print have entered the dis­play mar­ket in 2010 in increas­ing numbers.

With the increased num­ber of par­tic­i­pants of the adver­tiser side of the Dis­play mar­ket and the improve­ment in opti­miza­tion tech­nol­ogy in dis­play and track­ing across chan­nels, the demand for qual­ity con­tent to meet ROI and busi­ness goals will con­tinue to grow in. There­fore, the con­cern on the pub­lisher side for lower CPMs could be off­set by the increased demand from ever­more mar­ket par­tic­i­pants look­ing to take advan­tage of the new oppor­tu­ni­ties in the dis­play channel.

Chris Jacob

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