AdBrite, which runs an ad network of around 85,000 relatively small sites, has begun selling banner ads on those sites on a pay-per-click (CPC) basis.

AdBrite serves around 800 million ad impressions per day which reach 90 million people in the U.S. The company expects that half of its ads will be sold on a pay-per-click basis within six months.

Display ads have traditionally been used for brand advertising, so, if successful, the move may further entrench the Internet as more of a direct response medium than a brand awareness medium.

Source: Erick Schonfeld, “As Demand For Display Ads Soften, AdBrite Introduces Cost-Per-Click Banners”, TechCrunch, November 24, 2008

Startup company, SnapAds has created an ad service that dynamically adjusts the appearance of banner ads over time to maximize engagement and increase clickthroughs.

A three day trial of the service saw a campaign for a film experience an increased clickthrough rate of 1,922 percent.

To use SnapAds, advertisers simply provide a special Photoshop file containing a number of specially-tagged layers (containing the art and text assets that can potentially be displayed in their ad) and rules about which elements may and may not appear at the same time.

Subject to these rules, SnapAds displays ads with random combinations of the assets and then, over time, identifies and serves those ads which generate the most clicks. According to SnapAds’ co-founder David Rusenko, a fully refined ad takes around one million impressions. The system, however, will continue to optimize a banner indefinitely.

Source: Jason Kincaid, “SnapAds: Survival Of The Fittest Meets Madison Avenue”, TechCrunch, November 25 2008

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

According to ad-optimizing firm, The Rubicon Project, the average amount advertisers pay publishers to display ads per 1,000 impressions (CPMs) dropped 11 percent from the second to third quarter of 2008. This is based on the experience of The Rubicon Project’s clients, consisting of 307 ad networks and 1,300 publishers.

Ad rates were down 3 percent quarter-on-quarter at social networks and 8 percent quarter-on-quarter at young adult sites. Strangely, news and reference sites actually saw a 36 percent quarter-on-quarter increase.

Meanwhile, the Rubicon Project says that venture capital investment in ad networks dropped from $800 million in the third quarter of 2007 and $400 million in the second quarter to just $241 million in Q3.

Source: Nicholas Carlson, “Ad Net Rates Dropped 11% In The Third Quarter,” Silicon Alley Insider, November 3, 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

In a recent Search Engine Watch article, David Szetela provides invaluable advice for organizing the keywords in your pay-per-click (PPC) campaign.

If you’re involved in PPC advertising, David’s articles (and all his articles) are a must-read. In summary, his three (3) tips are as follows:

1. If a keyword has received more than 500 impressions, but no clicks, pause or delete it. It is adversely affecting the relevant ad group’s quality score.
2. If a keyword has had 150-200 clicks but no conversions, pause or delete it. It’s not converting and is undermining your return on investment (ROI).
3. If a keyword gets just one conversion, keep it. If, after generating 30 or more conversions, the cost-per-conversion is still too high, lower the bid price. BUT if the cost per conversion is lower than your target, you might find that raising the bid price is worth it because you should see even more conversions.

Source: David Szetela, “Judging PPC Performance: Focus on Conversions, Part 2″, Search Engine Watch, October 6, 2008

Yet another big ad publisher is seeking to enlist small and mid-sized businesses (SMB) to advertise on its network. News Corporation-owned MySpace has released a self-serve media buying system for small advertisers called MyAds, which is available at advertise.myspace.com.

Essentially, the ad platform, currently in beta, allows anyone to bid between $25 and $10,000 for performance-based display ads on the site. MyAds also comes with ad templates for advertisers to use and includes a basic analytics package that reports on impressions, click-throughs, and a campaign’s running cost.

Although it may sound as if MySpace is jumping onto the SMB bandwagon in light of dropping corporate ad budgets, MyAds has officially been in the works since November 2007.

Source: Zachary Rodgers, “MySpace Launches MyAds: ‘HyperTargeting’ for Small Biz”, The ClickZ Network, October 13, 2008

At least one social network knows how to make money: LinkedIn, the social network for business professionals.

Presumably because of both its desirable member base - professional and affluent - and the network’s ability to target them, LinkedIn has experienced enormous demand from companies wanting to advertise on the network. So much so that it’s able to charge CPMs (cost per thousand impressions) for display ads that start at $30 CPM and text ads from between $12 and $20 CPM. This is when most social networks are lucky to get $1 CPM.

Demand from advertisers appears to have prompted LinkedIn to launch its own ad network. It will also work ad network Collective Media (which targets high-end media sites) to let other select sites target its users when they visit those partner sites.

LinkedIn has 27 million registered users, far behind the 100 million Facebook has worldwide. But, TechCrunch points out, it’s not about quantity… it’s about quality.

It seems that LinkedIn’s ‘quality’ 27 million users offers advertisers a much more valuable audience - with members having an average household income of $110,000, 64 percent male, an average age of 41, and 49 percent ‘decision makers’.

Presumably advertisers expect to achieve a greater return on investment (ROI) money by advertising to these people rather than the members of other social networks.

Source: Erick Schonfeld, “LinkedIn To Launch Its Own Ad Network”, TechCrunch, September 14, 2008

Internet display advertising impressions dropped by 13 percent from May to June. Data by Nielsen Online reveals that display ad impressions per industry were down in 10 out of the 14 industry categories tracked.

In terms of the biggest declines, display ad impressions in June were down 31 percent in web media, down 30 in retail goods and services, and down 29 percent in health.

On the other hand, display ad impressions were up a whopping 94 percent in software, up 30 percent in hardware and electronics, and up 20 percent in telecommunications. These big gains in the software, hardware, electronics and telco areas were not, however, enough to make up for the declines elsewhere.

Results like these are likely to vary according to seasonal factors, so aren’t necessarily good or bad. It’s often preferable to compare the results in a given month with those in the same month the year before. However, other studies indicate that online advertising budgets, like their offline counterparts, are being tightened… so the overall decline may continue…

Source: ClickZ, “Advertising Placements by Industry and Top Sponsored Links, June 2008″, ClickZ, August 12, 2008

A new benchmarking study by the Interactive Advertising Bureau (IAB) and consulting firm Bain & Company, indicates that publishers may be underselling their ad inventory as they increasingly rely on ad networks to sell ad impressions.

The IAB sponsored “Digital Pricing Benchmarking Study,” released yesterday, found that publishers sold 30 percent of their ad impressions via ad networks in 2007, up from just 5 percent of all ad impressions in 2006. But while ad networks may be pleased with this massive 600 percent increase in usage of their services, a “quick fix” approach by publishers to dump excess ad inventory onto ad networks may actually be hurting both groups.

Publishers typically see their ad rates cut by up to 90 percent when they sell though ad networks. But this isn’t inevitable. According to the IAB and Bain & Company, if publishers and ad networks developed better working relationships, they could together bring about higher CPMs and greater ad revenues for all.

Publishers and ad networks both achieved increased ad revenues in 2007 – an increase of 30 percent per annum for publishers and an increase of 50 percent per annum for ad networks. But with tougher economic times constraining ad budgets in 2008, such growth levels are far from guaranteed going forward. By working more closely together to manage inventory and ad sales, publishers and ad networks are better able to maintain their revenue growth momentum.

Source: Douglas Quenqua, “Study: Publishers Slashing Prices to Dump Excess Inventory”, The ClickZ Network, Aug 12, 2008