• by Laurie Sullivan  @lauriesullivan, November 3, 2008

Despite advertisers' cuts to traditional media budgets and a slowdown in the rate of growth, the total dollars spent on Internet advertising will continue to increase, according to a report from the Rubicon Project to be released today.

The report suggests that millions of dollars are being shifted from traditional advertising budgets into online, and that Web advertising has become a global industry that is less subject to any one country's economy.

Visitors from other countries make up about 40% of Web traffic on U.S. sites--and more than half of global online spend comes from countries other than the United States, said Frank Addante, CEO and founder of the Rubicon Project, Los Angeles. "Advertisers are still spending money where eyeballs aren't," he said. "This is why we think online will continue to grow in terms of total dollars, though the rate will decrease. Also, we're less dependent on just one market because we're seeing a lot of growth in the U.K. and Asia."

While it is unlikely that most publishers will plant stakes and open local sales offices worldwide, Addante said ad networks that are focused on international traffic and/or based outside the U.S. will have a future role in reaching advertisers.

As for third-quarter ad spending, a dig through the Rubicon Project's data reveals average CPMs trending downward--particularly in verticals geared toward entertainment, where average CMPs dropped 17%; music, 14%; and young adults, 8%, sequentially. Many sectors, however, either trend upward or have held second-quarter pricing. For news and reference, CPMs rose 36% in the third quarter; and technology was up 35% sequentially.

Ad networks' performance last quarter varied by type. Behavioral networks affected by the negative publicity surrounding data collection practices and consumer privacy saw average CPMs fall from the previous quarter, while some of the larger networks experienced price increases.

The numbers for overall ad spend were not bad, and measurement tools appear to create some of the misconception, Addante said. "CPMs are the wrong metric to gauge success, because we are an industry where supply--measured in ad space--is growing so much faster than demand, measured in spend," he said. "They should look at revenue. If publishers are smart, though I'm not saying they're not, they would decrease supply. If they decrease supply for excess inventory, rates will rise."

Addante called Google on the table, suggesting that the search engine does an excellent job of keeping the number of ads it runs in check. Search queries don't always display ads on the right side of the page.

Globalization, however, will require Web-based technologies to support the move and increase the quality of ads and content, and move to more automotive systems to buy and sell ads. Aside from the report, the Rubicon Project unveils the Ad Quality Protection Program, a software as a service (SaaS) platform, to ensure that publishers do not serve up inappropriate ads on their sites. Ad quality has become a major problem plaguing publishers. As the rise in ad networks continues to fragment the industry, issues range from competing products on the same Web page or shaky audio clips, to Viagra ads on sites for children.

An artificial intelligence technology, dubbed helix, supports the Ad Quality Protection Program. The intelligent algorithms in the technology scan ad pixels to detect and flag inappropriate advertisements based on image content, learning from each image processed.

The program offers a dashboard where publishers can view data to make decisions following the screening process on whether to push the ad through to the site. Addante said about 20,000 ads have been frozen that if gone unchecked would have been viewed by consumers as many as 40 million times. The service also offers ad tag screening, certification, pre-screening, and a dedicated account management team.

The Rubicon Project matches billions of ads with unsold space on publisher sites each month. Testing the application for the past two to three months are about 100 of the Rubicon Project's 1,300 publishers including Gannett, McLean, Va.; and Salon.com, San Francisco; WashingtonPost.com, Washington, D.C., Webshots.com and ZoomInfo.com.