"It's not surprising that it's been trending down, but what is surprising is the size of the drop," says Rajeev Goel, president and co-founder of PubMatic. "What we don't know yet is whether the trend is due to increasing capacity on the supply side, or to the fact that the economic malaise is beginning to find its way into the online ad industry."

Goel says more time and data is needed to know whether the downward trend in online display prices is due to a downturn in spending online, or to fluctuations in supply and/or seasonality in the online advertising marketplace. PubMatic only began tracking online display advertising in the fourth quarter, so all of its trend data to date has been sequential, and not year-over-year comparisons.

What makes PubMatic's data different than other online ad price indices is that it is based solely on display advertising, and does not factor in other online advertising formats such as paid search. PubMatic derives its data from a survey of more than 5,000 Web sites of varying size and composition, including both broad-based and vertical publishers. The data represents their ad revenue yield per page generated via advertising networks, and excludes premium advertising display sold directly by a publishers' own sales force.

Another key finding from the report is that every vertical category, with the exception of Technology (which was flat), experienced declines in their average display page prices.

Interestingly, the value of ad inventory for small-sized publishers fared best--and on average, was more than triple the average page CPM of large-size sites: 61 cents versus 18 cents, respectively.

"Small sites continue to monetize their inventory better than large sites, especially as it relates to advertising networks," says Goel, adding that this is likely due to the fact that small sites offer much more targeted audiences than large publishers, and that the "homogenous" nature of their audience enables online display ads to perform better.

Even so, the average CPM per online display ad page fell even for small sites from $1.24 in the fourth quarter of 2007 to 61 cents in the third quarter of 2008.

Among vertical categories, entertainment sites performed worst, generating a CPM of only 33 cents per display ad page in the third quarter of 2008. Goel says PubMatic isn't sure why pricing in the entertainment category is so weak, but theorized that it may have to do with an expansion in the supply of online display advertising inventory from entertainment sites.

It's unclear how much of a barometer the new report will be in terms of predicting the future health of the online display advertising marketplace. In addition to the seasonality that will be revealed when PubMatic releases its fourth-quarter 2008 report three months from now, Goel says there are other factors that are difficult to account for--especially how the overall economic downturn will specifically impact online advertising.

"One of two things will happen," he says of the economic turmoil. "It will either put downward pressure on online advertising, or it may begin to shift traditional ad dollars into online advertising. We will have to wait and see what actually happens."

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