As inevitably as night follows day, the debate about paywalls started in earnest during early 2009, a few months after the collapse of Lehmann Brothers, and several months after online display advertising stopped growing.
Publishers have spent the past year obsessing about paid content. Yet in the meantime, something wholly inevitable and largely unnoticed has happened to online advertising. In the UK, the market entered recovery mode in Q309. During Q409, combined search and display revenues surged by 10.4%.
Double-digit growth (or something close to it) may even prove sustainable. In the US, eMarketer forecasts that online display will grow at 8.2% this year — faster than search.
Is something similar happening to online display CPMs? Last year, conventional wisdom insisted that the price publishers could charge advertisers for reaching 1,000 users had collapsed on a permanent basis, thanks to a vast influx of cheap display inventory. In a pro-paywall column written last month, the FT’s John Gapper laid out the contours of disaster:
Rates for online display ads have been falling steadily as competition has proliferated, with most sites now finding it hard to get more than $4 per 1,000 impressions on their pages (or $14m for the 3.5bn hits on all US newspaper sites monthly).
Yet other sources contradict this view, suggesting a recovery in pricing power. It’s particularly interesting that this evidence comes from the ad networks, who were blamed so aggressively in the first place for bringing vast amounts of new inventory on to the market.
Forrester offers a similarly surprising forecast for US online display advertising. Between 2009 and 2014, the analyst firm suggests, expenditure on online display will more than double, to $16.9bn.
Forrester forecasts that online display expenditure will grow by annualised average of 17% during the same period. Once again, that’s faster than the growth expected of search (15%).
Of course, these are just forecasts. There are plenty of publishers who still dismiss the long-term potential of online display (including, for example, Meredith Corporation, the US magazine publisher).
Notably, Google’s advertising exchange — a trading platform for advertisers and media owners — appears to be gaining traction. There’s even a suggestion that real-time bidding for inventory on ad exchanges forces up the price of impressions. Google — and its rivals — have always claimed that this would be the case. Perhaps soon, we’ll start to see hard evidence.
This apparent revival of online display comes at an awkward moment for those who are devoting all, or most, of their energy to erecting paywalls.
A trade-off exists between selling online advertising and building up paid content revenues. You can choose to do both. But you cannot hope to maximise revenues from both.
Perhaps paywall publishers will soon find themselves grappling with more than the challenge of getting readers to open their wallets. Soon enough, they may also have to fend off criticism that the recovery in online advertising revenues has passed them by.