Just the Right Bullets

by Joe Mandese, Jan 29, 2008, 3:02 PM

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Google may dominate search, but when it comes to online display advertising — the kind of branded ad messages that are the bedrock of Madison Avenue — Yahoo is far and away the medium’s leader. According to an OMMA analysis of data from Nielsen Online, JPMorgan and other industry sources, Yahoo accounted for nearly 20 cents of every dollar spent by online advertisers in the U.S. last year. With about $1.4 billion in annual display advertising revenues, Yahoo commanded more than 19 percent of the so-called “online graphical advertising” marketplace, and is bigger than its next closest competitor, News Corp.’s myspace.com, by a margin of nearly three-to-one. With numbers like that, we’d yodel, too.

Add in the sales of the other top players — MSN, AOL and MSNBC — and the top five publishers account for just under 40 percent of the total U.S. online display advertising marketplace. But is big necessarily better? And how do you possibly compare the massive advertising reach of Yahoo’s average of 109 million monthly unique users to the relatively niche audience base of CBS SportsLine’s 5.9 million? Well, that’s exactly what we did, and the results are revealing.

In an effort to create some common denominators for comparing the advertising value across an array of top online publishers, we computed their average CPM (cost per thousand) by dividing their average unique user base by their annual advertising revenues. The result: Yahoo does command an impressive CPM of $12.65 — good enough to hold its own against a major broadcast TV network — but at $21.79, CBS SportsLine’s average CPM is nearly twice Yahoo’s and more akin to what you’d find on a highly targeted cable network, like, say, ESPN.

And while relative costs are obviously important from an advertiser’s or an agency’s perspective, OMMA went a step further to look at the actual advertising yield each top publisher drew from every online page view they delivered. Those results are equally revealing: When divided by its massive 33.4 billion monthly average page views, Yahoo yields a revenue-per-thousand views (RPM) of just four cents, one-fourteenth the value of a targeted, high-end site like forbes.com (56 cents per thousand page views). 

You’ll find some surprising comparisons, like the fact that scurrilous online publisher The Drudge Report commands a CPM ($10.36) that is a third greater than nytimes.com’s ($7.81). Whatever fits is now more valuable than what’s fit. Go figure. Please keep in mind that the estimates we’ve compiled aren’t gospel, but from a directional point-of-view, they’re a pretty good indicator of how Madison Avenue truly values the inventory of the industry’s leading publishers.

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