What a year it’s been, both here at the Rubicon Project and across our industry. As we witnessed among publishers leveraging the REVV platform and recorded in a few of our past market reports – the industry has continued to see growth in advertising spend throughout the year. In Q2 alone, the Rubicon 20 Index, a measure of performance across a number of factors (including CPM, revenue and traffic volume) on a roster of twenty of the Web’s most heavily-trafficked properties, rose 47 percent since the start of 2010. And this trend has been echoed by numerous industry research firms. The Interactive Advertising Bureau (IAB) recently released a report with PriceWaterhouseCoopers, finding ad revenues up by 17 percent in Q3, reaching $6.4 billion.
Looking ahead to 2011, eMarketer predicts total U.S. online ad spend will reach $27.2 billion, which is no surprise. With the market innovations we and our industry peers continue to deliver to the industry, we firmly believe that overall display market is becoming more efficient and effective. As such, we expect marketers to continue to drive more dollars toward display advertising in order to reach hundreds of millions of consumers around the world.
That said, factors both new and old will affect Q1 spend. Historically, seasonal market factors influence online advertising revenue most significantly between Q4 & Q1 as holiday campaigns close out, budgets for the New Year take time to ramp up and the overall market tends to drop in January. We anticipate this will be true again in 2011.
There are certainly economic factors that will impact online advertising revenue in Q1, and while we’re optimistic, we can’t pretend to know exactly what’s coming. Between our strong partnerships and direct access to over 600 ad networks, exchanges and DSPs that access audience and inventory through the REVV Marketplace, we know many advertisers have not yet set their Q1 budgets for 2011 – potentially slowing already reduced first quarter spending.
On the flip side, reports continue to suggest that brands are moving dollars away from traditional media and onto the more measurable online access points to publisher inventory, including real-time bidding (RTB). For these reasons, no one knows what kind of impact we may see in Q1. The number of demand partners in the marketplace has nearly doubled year over year, which could also make the seasonal Q1 decline less impactful. All those variables aside, it is possible that in the early part of the quarter some publishers will experience diminished fill rates and CPM rate drops. In years past, an upward tick begins midway through the quarter; the same will likely be true in 2011.
As a partner to more than 350 premium publishers and the developer of REVV, the technology platform that powers the largest display ad marketplace in the world, the Rubicon Project is taking steps to ensure continued revenue growth for publishers in the new year. Through the REVV Marketplace, premium publishers are exposed to the maximum number of demand channels possible – which will help drive higher revenue. And different from previous years, publishers may also minimize the seasonal impact of Q1 by leveraging Protected RTB™ 1.1 technology as an additional demand channel.
The graph below expresses, with 2.5 years of historical pricing data captured through the REVV Yield Optimization platform, the seasonal impacts of CPMs throughout the year. All variables remaining constant (traffic fluctuations, user session length, RTB, ad types and sizes, advertiser block lists, geography and other macro-economic variables) January is clearly the lowest paying month of the year trending upward for the remainder of the year and ending on a high note in December with CPM’s at 53% higher than January. Additionally, while ad spend is lower at the beginning of each quarter, there is consistent upward pressure driving CPMs higher quarter over quarter.