Online Ad Prices Continue To Reflect Weak Economy

Internet ad revenue declined by 0.7% in the first quarter of 2008 from the previous quarter--but at $5.8 billion, still represented the second-highest total on record, the Interactive Advertising Bureau said Tuesday.

Revenues in the first quarter not only nearly matched the fourth-quarter 2007 total of $5.9 billion, but also ran 18.2% ahead of first-quarter 2007, the IAB said.

"The cyclical fourth-quarter to first-quarter drop in traditional media advertising spend, combined with an overall economic slowdown, resulted in a not-so-unexpected first-quarter slowdown in the growth of online advertising," said David Silverman, a partner at PricewaterhouseCoopers, which helped assemble the figures.

Further evidence of a slowdown in online ad spending came from the second monthly PubMatic AdPrice Index (www.adpriceindex.com), described by creator PubMatic as an industrywide measure of online ad network pricing for publishers. Overall online industry monetization in May fell by 0.7% from April after the previous month's 23% drop.

The PubMatic AdPrice Index did show significant increases in spending for social networking and gaming sites--with eCPMs increasing by 66% and 51%, respectively, from April to May. Monetization for sports sites in May remained relatively level, but spending for entertainment, news and technology sites continued to decline by 11%, 13% and 22%, respectively.

"June's AdPrice Index shows that online advertising rates continue to reflect an overall weak economy; however, we did see improvements for certain segments," said Rajeev Goel, cofounder and general manager of PubMatic, speaking at OMMA Publish New York. "While social networking and gaming sites did show some increase in monetization, the two verticals remain volatile and continue to monetize at lower rates than other, smaller verticals."

The PubMatic AdPrice Index is based on data from more than 3,500 publishers and billions of ad impressions.

Among large, medium and small Web sites, large Web sites (100 million page views a month) showed the biggest improvement in May with a 16% increase from April, from 18 cents to 21 cents. This was probably a result of the significant spike in social network and gaming ad pricing, which generally fall into the large-size category, per PubMatic. Medium-sized Web sites (1 million to 100 million page views per month) remained consistent, having a less than 1% change from April, while smaller Web sites (less than 1 million page views per month) suffered a 12% downturn from the previous month, according to PubMatic.

Among the verticals, social networking showed the greatest increase--with monetization increasing 66%, from 19 cents in April to 32 cents in May, slightly below the vertical's peak of 34 cents in March. Gaming monetization increased by 51%, from 66 cents in April to $1.00 in May, reported PubMatic.

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