BAIN/IAB Digital Pricing Research - Sobering Facts For Online Publishers

Last month the IAB published a study it conducted with Bain Consulting on the pricing differentials between inventory purchased from publishers directly and inventory purchased on those sites through networks.

The figures show what most of us knew all along -- that the price paid for ads on publishers are much higher if you buy direct than if you buy via a network.

But the figures are pretty amazing. Check out these couple of slides:





The key figure if you wanna focus on one is that while publisher direct CPMs were in the $12-$18 range, the price realized by the publisher for network inventory ranges from 60 cents to $1.10, or only 6-11% of the direct CPM.

For many publishers, the amount of revenue being sold via networks has climbed dramatically as they are pressured to generate more revenue per page. But this vast differential points to a number of challenges for publishers -- how long will advertisers pay such an enormous premium for inventory as networks become more and more conscious of the need to ensure quality?

Now, of course there are a lot of reasons to buy direct -- for one you can develop a presence on pubs that truly offer the best audiences and credibility. There is a difference between buying Forbes.com and buying a business channel that might conceivably include...this blog, were I offering advertising on my pages.

How do publishers respond to this differential? Well, I think there are a number of ways:

1. Ensure pub direct inventory is better -- better locations, above the fold, maybe technologically better.

2. Ensure that they can sell a reasonable amount of any incremental inventory before they create it. Adding a new banner position to a page is only so valuable if it will end up being 99% sold by networks.

3. Work with networks to help them increase the value they are getting and sharing for your pages.

4. Work with networks that will get you more revenue per placement. There really are differences and networks that offer higher quality standards, for example, are more likely to genrate more revenue.

5. Explore vertical networks as a means of driving higher CPMs. Many times verticals can get more for topical inventory.

One organization that I think can offer great lessons to publishers is the AMA. Doctors are in limited supply and thus their fees can be higher. In a sense, demand exceeds supply. Compare that to teachers, especially in state with low certification requirements, where hurdles for accreditation are low and thus wages are lower.

The IAB has a set of their own recommendations that you should check out. But this is a really groundbreaking set of info -- a wake up call for our industry that you should peruse.

Thanks for reading, and don't forget to write.