IQ News: Study: CPM Rates Drop As More Sites Seek Ads

As the number of Web sites seeking advertising continued to grow in 1999, CPM rates declined, reaching a temporary plateau. According to an online advertising report issued by AdKnowledge, a provider of Web marketing management services, the number of ad-seeking sites exploded from 1,424 in December 1998 to 3,347 in 1999, a gain of 135 percent. Growth in 1998 and 1999 combined to total 224 percent. Meanwhile, the average CPM rate decreased by 6 percent in 1998 and 4 percent in 1999, about 1 percent per quarter.
“The growth of Internet advertising in the last few years has been pretty phenomenal,” said Michele Schott, director of marketing communications at the Palo Alto, Calif.-based AdKnowledge. “The word is out: It works.”
The results of the Online Advertising 1999 Year-in-Review study reflected self-reported information provided by AdKnowledge’s database of more than 3,000 Web sites. Some of AdKnowledge’s customers include Web marketers eBay, PlanetRx,,, and SportsLine USA.
The boom in Web advertising and falling CPM rates point to a classic case of supply and demand.
Although the decline in CPM rates slowed somewhat in 1999, denoting a leveling off, Schott says the rates have yet to bottom out.
“It’s at a plateau,” she said. “It’s the nature of the beast. The rates are falling, falling, falling. Now, everybody is saying, ‘Let’s stop and take a look and see where we are at.’ “
The decrease in CPM rates was mirrored in almost every site category, with the notable exceptions of shareware and shopping/transaction sites. The upward momentum of CPM rates in these two categories reflects the progress in e-commerce during 1999.
With an increase in ad-seeking sites in 1999 also came an increase in rich media acceptance. The number of sites accepting each rich media format, such as Audio, Emblaze by Geo, Enliven by Narrative, Real Audio and Shockwave, rose by at least 25 percent in 1999. HTML became the dominant rich media type, with Java a close second.
Not only did sites accept a wide range of rich media formats, they also accepted a number of banner sizes. Although the 468×60 banner clearly has been accepted as the standard, sites continued to experiment with sponsorship size banners, such as 88×31, 125×125 and 120×90, among others.
“Very small sizes indicate that people are doing sponsorships and links,” said Schott.
AdKnowledge expects these trends to continue as advertising on the Web becomes increasingly mainstream.
“CPM will continue to decline,” Schott predicted. “The number of sites seeking advertising will continue to grow. E-commerce will continue to grow, and rich media will become more accepted.”