If you sell advertising on your website – whether indirectly by running Google Adsense or ads from another ad network on your site, or by selling ad insertions directly to advertisers – you’ll want to know about the average CPM (cost per thousand impressions) you can expect to receive or charge.

CPM rates are typically associated with display advertising, but if you don’t think they relate to advertising sold on cost per click (CPC) or cost per acquisition (CPA) basis… think again.

One of the highlights at the Web 2.0 Summit last week was the presentation given by Mary Meeker, uber-analyst at Morgan Stanley.

You can check out her video presentation at TechCrunch (see link below), but let me give you a very high level summary of her ‘state of the Internet’ address:

E-commerce sales growth is flattening out, while general retail sales growth has declined sharply;

Growth in all forms of advertising – including online advertising – has dropped; and

Online ad inventory is growing… while CPM rates (cost per thousand impressions) are declining (a classic case of prices going down due to supply outweighing demand).

Source: Erick Schonfeld, “Mary Meeker’s View Of The World In 50 Slides”, TechCrunch, November 6, 2008

Prices for display ads sold through networks have dropped for the second quarter in a row, dipping below $0.30 on average, according to PubMatic.

Data from PubMatic’s AdPrice index indicates that the average effective cost-per-thousand impressions (CPM) for display ads has declined to $0.27 – down by 27 percent from the average CPM in the first quarter of 2008.

Ad network CPM rates seem to have dropped across the board. CPMs on news sites dropped by 36 percent to $0.36, while those on entertainment sites dropped by 27 percent to $0.33, gaming sites dropped by 26 percent to $0.48, CPMs on business and finance declined by 22 percent to $0.86, and CPMs on social networks declined by 22 percent to $0.21.

Small websites continue to command higher than average ad network rates, with sites attracting less than one million page views per month charging an average CPM of $0.61. However, this average CPM also reflects a decline – of 29 percent – since the first quarter.

According to Zachary Rodgers, writing in The ClickZ Network, the fall in CPM prices is the result of a number of factors, including “the glut of social network ad inventory, the rise of vertical ad networks, and doubts about the branding effectiveness of traditional IAB standard ad formats.”

He also notes that the changes may also be due to PubMatic using more accurate price data!

Source: Zachary Rodgers, “Ad Network Display Prices Continue to Fall”, The ClickZ Network, October 15, 2008