As any publisher knows, CPMs can move up and down.  While they are increasing, publishers are content, but when they go down, it can be very unsettling for publishers.  Today, there are few deals available for publishers at guaranteed rates while the overall online ad market is seeing some strong headwinds that are severely impacting CPMs.  In this post, we are going to provide some insight to why publishers may be seeing giant swings in CPMs and what they can do about it.

It’s hard to listen to the financial news without hearing the term liquidity.  There are two definitions of liquidity.  The first one refers to the ability of turning an asset into cash.  The other type of liquidity is defined by how much an asset can be bought or sold in a market without moving the price.  The more active buyers and sellers are in the market, the more liquidity, which helps keep prices stable.  If anyone buyer or seller leaves or enters the market, the price should remain stable in a liquid market.  Right now, I think the overall ad market is experiencing a liquidity crisis.  Advertisers are leaving the market in droves, destabilizing prices.  Once a decent campaign ends, there aren’t enough buyers ready to fill the inventory as it opens up.  The growing gap between active campaigns is causing the fluctuations in price.  In the current advertising market, larger ad networks with better liquidity will offer publishers more consistent payouts, while small ad networks are more likely to have large fluctuations in pricing with spotty buys.

What can publishers do?

First, publishers should consider establishing relationships with large horizontal ad networks like Google AdSense and Advertising.com.

Second, publishers should look at the fill rates of their smaller or specialty ad networks and consider decreasing the amount of inventory they are allocating to them while at the same time tightening up the frequency caps to one to two impressions per 24 hours.

Third, publishers should examine their international traffic and make sure that they have ad networks capable of filling the inventory.

We also recommend using prudent judgment when it comes to adding ad networks to your overall mix.  It’s unlikely that adding many additional ad networks will help stabilize earnings if publishers are already filling their inventory with reasonably frequency-capped runs.  Instead, it can add to the complexity of managing inventory and have an overall negative impact on earnings.

This entry was posted on Wednesday, January 14th, 2009 at 12:17 am and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.