Do publishing woes increase revenue at ad networks?

The overwhelming supply of display advertising online has had a downward effect on price. But new research shows that ad rates at ad networks has risen since the start of 2009.

Is that good news or bad for publishers? Well, it depends on how you look at it.

According to PubMatic's Online Ad Pricing Brief, the price of banner and box ads sold by third-party brokers like advertising networks have risen 35% in the first six months of 2009. In contrast, Pubmatic's ad pricing index fell in every quarter of 2008, registering a 50% drop for the whole year.

Pubmatic blames the proliferation of social media and new formats for lowering prices throughout 2008 by flooding the market with new ad types and formats. But the study attributes improved targeting and results to the increased rates this year.

According to PubMatic's study, the data suggest "online ad pricing is turning the corner, possibly leaving the worst days behind us."

However, the increased rates at ad networks could be a result of publishing woes.

Razorfish's VP of media tells ClickZ "Since many publishers are struggling -- and failing -- to sell inventory directly to advertisers, Baehr notes they're instead forced to dump it onto networks. Those more premium ad impressions are inherently more valuable, from a branding standpoint, than what's typically available on networks and exchanges."

Publishers may have a contentious relationship with ad networks, but when they fail to sell their own inventory online, they often rely on the networks to sell it and increase their revenues. And the less inventory that inhouse teams sell, the more goes to the networks. While publishers have been sending remnant ads to networks for years, as the economy worsens and their sales rates go down, more expensive inventory could be heading to the networks.

Compared to a year ago, June's ad price index is still down, and PubMatic concedes that the increases this year could be due to publishers sending more expensive, unsold ad content to the networks.

Rajeev Goel, CEO of PubMatic, tells ClickZ: "It's definitely a possibility that better quality inventory is being sold thru networks. Take Yahoo. What they're not able to sell directly they now push into the Right Media exchange."