Online advertising showing signs of economic wear?

By Caroline McCarthy – May 13, 2008 2:31 PM PDT

Online advertising is starting to feel the effects of a tepid economy, industry analysis firm PubMatic said in a release Tuesday.

(Credit: CNET Networks / Josh Lowensohn)

Based on data from "billions of ad impressions" and several thousand online publishers in its AdPrice Index, PubMatic asserted that clicks per thousand monetization rates (CPMs) dropped between March and April, using it as an indicator that the economic slowdown has begun to hit the online ad industry. Large Web sites (over 100 million monthly page views) are feeling the pain, the firm said, with monetization dropping 52 percent from 38 cents in March to 18 cents in April. Medium-size Web sites didn't change much over the same time period. Smaller ones (fewer than 1 million monthly page views) actually showed an improvement in monetization, rising from $1.18 CPM in March to $1.29 in April.

But overall, PubMatic found, monetization has dropped 23 percent. The problem may be the rise of social-media advertising, which major figures in the tech industry have admitted yields weak click-through rates. PubMatic's results said that CPMs plunged 47 percent, from 37 cents in March to 19 cents in April.

Here's another potential culprit: PubMatic has only been releasing monthly AdPrice Index reports for two months. Tuesday's results are consequently a comparison between months one and two. The firm's methods are still young enough so that error could be playing a role; we'll have to see if the numbers are showing the same trends later in 2008.

But PubMatic isn't the only one. In March, market research firm eMarketer lowered its online ad spending forecast for the year.

Originally posted at The Social