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Forrester Reduces Its Forecast for Online Ad Spending

CPMs Will Rise Over the Next Five Years, But Overall Dollars Will Grow More Slowly

By Published on . 3

For squeezed publishers, a bit of good and bad news: CPMs will rise more than 75% over the next five years. But overall growth of the online display advertising market will grow more slowly than expected, according to an estimate from Forrester.

Average CPMs -- the rate advertisers pay for 1,000 impressions -- will rise 76% to $4.68 by 2017 from $2.66 in 2012, according to a survey of 232 marketers conducted by the research firm. Forrester includes text advertising (which typically has a low CPM) in its display number, along with traditional banners, rich media and video.

That's the good news. The bad news is that this CPM increase will be largely driven by adoption of the "viewable impression" standard, where advertisers pay only for for ads that are visible on the screen. For a lot of publishers this will mean fewer impressions, which could offset some of the CPM gains. Indeed Forrester's estimate assumes a 17% compound annual growth rate in overall online ad revenue, down from the 20% it predicted last year.

"We're definitely taking the stance that the viewable impression standard is going to happen," said Joanna O'Connell, Forrester analyst and co-author of the report.

RTB brings lift
Rates for digital advertising bought and sold through exchanges will grow a bit faster, more than doubling to $6.64 in 2017 from $3.17 today, as more marketers embrace the efficiency of real-time bidding as they become more educated about the space, creating new demand in the process.

Credit: Source: Forrester Research, Inc.

Today there is still a lot of confusion among marketers and agencies about the demand-side technologies that allow real-time auctions for ad space. "There are still a lot of buyers out there who would be hard-pressed to describe what a DSP is ," Ms. O'Connell said.

As a result of increased demand, total display advertising spend through exchanges will hit about $8.3 billion in 2017 in the U.S. and make up about 30% of total display spending, compared with 16% this year, Forrester estimates.

At the same time, Forrester is cutting its five-year forecast of overall display spending 13% thanks to a shift of some buying from portal ads to less expensive ads on social networks -- namely Facebook.

Not surprisingly, the research firm is bullish about online video, estimating that video advertising spending will triple to more than $9 billion in 2017, as monthly views of ad-supported long-form video grow 32% annually.

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CORRECTION: An earlier version of this article said that rates for digital advertising sold in real time through exchanges would grow to $6.64 per 1,000 impressions and that total display ad spending through real-time bidding would reach $8.3 billion in the U.S. in 2017. Those figures cover all impressions sold through exchanges, not just those sold through real-time auctions.

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