This assessment has nothing to do with cost-per-click advertising and the issue of click fraud (which is a bear in hibernation). It has everything to do, however, with online display advertising and the fact that it is bought and sold based on ad unit impressions and not on a publisher's projected and/or measured total audience, like other media.
Online publishers figured out early and often they could get away with placing multiple ads on a single page viewed by a single set of eyes to help increase their sites' revenue potential. So instead of selling pizzas for $12 bucks a pie, they set out to sell eight slices at $1.75 per, hoping to make $14 instead. And during the boom, advertisers could not get their hands on enough slices. But when demand decreased, publishers continued to cut their page views into even more slices while charging less per slice. As a result, each slice delivered less taste to the advertiser while making the user literally sick of pizza.
Having trouble digesting this problem? Then look no further than New York City's Time Square. How can billboard companies continue to justify the value of being one flashing-blinking blip in that ocean of clutter? The Internet has become one gigantic Time Square, which is why advertisers continue (at an alarming pace) to place less and less value on the exposure they purchase, while overemphasizing the importance of the performance of their campaigns while holding publishers accountable for this performance. This is the table publishers set by continuing to decrease the value of the exposure they sell.
There is no sign this strategy of serving multiple advertisers to a single set of eyes is going to reverse itself (I counted 16 display ad units of various sizes on the home page of the New York Times as I wrote this). So while overall online spending continues to inflate, the value of the ad exposure being purchased continues to plummet.
As my old boss Irving Plonskier taught me, don't point to a problem unless you can offer a solution. So here is what online publishers can do to help themselves before it's too late to do so: collectively strip down their page views to two or three ad units and then sell them exclusively as a roadblock page impression. So one page view would equal one collective impression for one single advertiser.
This would result in far fewer "slices" sold, so overall spending will come down significantly. In the short term, publishers will likely make less money while increasing the value of the exposure they do sell. This would then decrease the burden they bear for a campaign's performance, because advertisers will literally be able to see the value of the ad exposure beyond the click activity generated.
This would also decrease the available inventory for sale and greatly reduce the amount of unsold inventory that hampers pricing. CPMs would then likely rise again, due to this limit in supply, and spending would climb back up -- but this time everyone, including the consumer, gets a better-tasting product. So who loses in this scenario? The ad networks that have made a living feeding off this original publishing miscue.
Chris Anderson, former chairman of a company where I used to work, once made a passionate speech to us explaining we were not in the advertising business; we were in the consumer attention business. Until online publishers dramatically clean up their sites by eliminating clutter to the point where only one advertiser occupies a single page view to ensure they can deliver on this consumer attention, publishers will continue to be forced to justify the exposure they sell by the actions of those they reach -- and that's not a pretty picture.