It's now official: Online advertising rates for websites of all sizes and categories have gone through a significant decline in Q4 2008.

If you had been wondering what you have been doing wrong to have your advertising revenues decline month after month, relax. It's not been your fault.

According to the new AdPrice Index released by PubMatic, it has been the economic recession which has significantly influenced online advertising prices and rates for the last few months.

Photo credit: PubMatic

Bad news for online advertising rates also when it comes to specific vertical categories, which have also dropped from Q4 2007. The category Business & Finance underwent the biggest drop, falling from an average price of $2.13 in Q4 2007 to $0.83 in Q4 2008 – a 61% drop.

In this climate of general discouragement for ad revenues, good news come from the just ended holiday season which surprisingly showed no significant change from Q3 2007 to Q4 2008. Under such circumstances online ad rates appeared to remain steady and may actually see some price boost in the near future.

Here all the details:

The PubMatic AdPrice Index Q4 2008

Executive Summary

The data reflected in this report shows a significant decline in Q4 2008 online display ad pricing compared to Q4 2007 for all sizes of websites and all vertical categories, underscoring the fact that the US economy is in a recession and that the online advertising sector is not immune to it. However, the news isn’t entirely negative and shows some promise for the online advertising sector.

While the ad price averages across most sites also dropped in Q4 2008 from Q3 2008, the quarter-to-quarter drops were not significant by website size or vertical category; this may be an indicator that holiday ad sales helped stave off the consistent bigger drops that happened from quarter to quarter throughout 2008. Some vertical categories even showed improvement from the previous quarter.

It is clear that growth in online display advertising is slowing consistent with other advertising sectors, but not to the same magnitude. In the coming quarters the average pricing for display advertising may continue to drop consistent with seasonal cycles. However, with overall advertising budgets shrinking, the need for marketers to have more accountable advertising could bring more advertising dollars online in 2009 and start an upward trend as some vertical categories have already experienced.

Key Takeaways

• All sizes of websites (small, medium, and large) were down dramatically from Q4 2007; small, medium, and large sites dropped 52%, 23%, and 54%, respectively, from the previous year.




• All sizes of websites were also down from Q3 2008 to Q4 2008, but the drops were not significant, bucking the trend of larger drops from quarter to quarter throughout 2008; this may be an indicator that the online ad sector got just enough of a boost from holiday advertising to keep ad rates steady.




• Similar to sites by size, all vertical categories also experienced significant drops in their ad pricing from Q4 2007; the biggest drop by a vertical was Business & Finance, which fell from an average price of $2.13 in Q4 2007 to $0.83 in Q4 2008 - a 61% drop.




• Also similar to sites by size, no vertical categories dropped by a significant amount from Q3 2008 to Q4 2008, and some verticals even improved from the previous quarter; the Technology, Sports, Entertainment, Gaming, and Music verticals all had higher ad price averages in Q4 of 2008 than in Q3 of 2008.

Quarter-to-Quarter Trends by Website Size

Quarter-to-Quarter Trends by Website Vertical

Q4 2008 AdPrice Average by Size

Overall Ad Price Average (All Site Sizes)

• -48% from Q4 07
• -3.7% from Q3 08

Quarter-to-Quarter Pricing by Website Size

AdPrice Quarterly Average for Small Sites

• -52% from Q4 07
• 0% from Q3 08

AdPrice Quarterly Average for Medium Sites

• -23% from Q4 07
• -3.2% from Q3 08

AdPrice Quarterly Average for Large Sites

• -54% from Q4 07
• -5.6% from Q3 08

Q4 Ad Price Averages by Vertical

Quarter-to-Quarter Pricing by Website Vertical

AdPrice Quarterly Average for Business & Finance Sites

• -61% from Q4 07
• -3.5% from Q3 08

AdPrice Quarterly Average for Entertainment Sites

• -40% from Q4 07
• +15.2% from Q3 08

AdPrice Quarterly Average for Gaming Sites

• +31% from Q4 07
• +6.3% from Q3 08

AdPrice Quarterly Average for News Sites

• -36% from Q4 07
• -5.6% from Q3 08

AdPrice Quarterly Average for Sports Sites

• -54% from Q4 07
• -4.8% from Q3 08

AdPrice Quarterly Average for Social Networking Sites

• -8.7% from Q4 07
• +59% from Q3 08

AdPrice Quarterly Average for Technology Sites

• -41% from Q4 07
• +3.5% from Q3 08

AdPrice Quarterly Average for Music Sites

• -61.5% from Q4 07
• +3.4% from Q3 08

Segment Definitions

Small Web site segment: Less than 1 million page views per month.

Medium Web site segment: Between 1 million and 100 million page views per month.

Large Web site segment: Over 100 million page views per month.

Aggregate Index: Data for All Web sites is computed using a weighting of 65 percent large Web sites, 20 percent Medium Web sites, and 15 percent Small Web sites based on an estimate of overall traffic in the online publishing market.

(Note: The pricing data reflects net publisher monetization via ad networks and excludes ad networks' share of ad spends as well as inventory sold directly by publishers to ad agencies or advertisers.)

Originally written by Albert and Michele Madansky for PubMatic and first published on January 14th 2009 as "AdPrice Index - The Q4 2008 - The Original Online Ad Pricing Report".

About the Authors

PubMatic is an ad network optimization service that automates and optimizes ad inventory decision-making for professional web publishers.

Albert Madansky is a Ph.D., H.G.B. Alexander Professor Emeritus of Business Administration at the University of Chicago Graduate School of Business, and recipient of the 2005 American Statistical Association Founders Award.

Michele Madansky is a Ph.D., media and market research consultant, former VP of Global Market Research for Yahoo!

Photo credits:
Executive Summary - PubMatic
Key Takeaways - Bora Ucak
Small, Medium, Large Sites - Robyn Mackenzie
All other images by PubMatic