No one argues against the idea that there’s something wrong with the display advertising market. Not only do CPM rates for display ad inventory pale next to search CPMs, but the total advertisers’ spend on search engine marketing is higher than the total on display, in spite of the fact that internet users spend a tiny fraction of the time they spend online on search sites.
That was before the credit crunch. In the ensuing months, display CPMs have plummetted further, whilst their search cousins have enjoyed continuing growth. If anyone needed pursuading before that something was wrong with display, they don’t now.
Where people disagree today is why display advertising sucks and hence what the remedy is.
A common misconception: display advertising sucks because the market is fragmented and opaque
The argument runs as follows: display advertising sucks because the market is fragmented and opaque. Advertisers cannot be bothered to deal with large numbers of small and medium websites, so concentrate their spend on a handful of top sites, or buy across ad networks. They overpay for large sites which attract similar advertisers, and underpay for smaller sites / network buys, because they have no real idea what they’re buying on. (And so are unwilling to spend a lot on it.) This sucks for advertisers, because they either overpay, or lack visibility, and all but the largest publishers whose inventory sells at below its “true” value.
The solution? More effective ways of matching buyers and sellers, either in the form of bigger ad networks (e.g. Platform A, AdSense), exchanges (e.g. OpenX, RightMedia) or algorithms to optimize which ad network an ad is sold to (e.g. Pubmatic, Rubicon). Companies with this goal in mind have raised vast sums of money from VCs keen to take a percentage of the uplift if these solutions can drive a rise in CPM rates so that display looks more like search.
Sadly, there are more fundamental problems with the display ad market
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