Non-premium display advertising (often known as "remnant" inventory) is likely to remain the highest-growth segment of online media over the next five years, with the greatest potential to create significant opportunities and market dislocations, say ThinkEquity analysts William Morrison and Robert Coolbrith.
Premium display includes graphical display advertising inventory sold through a direct sales force such that ad placement, impression volume, and time-frame within which the advertisement will run are guaranteed.
Non-premium display advertising is sold without specific time-frame or placement guarantees, typically by a third party. Historically, there has been an order of magnitude to 20 times price differential between premium and non-premium channels.
"On a percentage basis, we expect non-premium display to be the highest-growth category in online media, through a combination of significant volume mix shift and pricing growth versus other media types," they argue.
Also, look for big changes in the ecosystem. Online advertising exchanges should eventually come to dominate the inventory aggregation function traditionally performed by online advertising networks, although some networks' proprietary inventory aggregation channels should remain relevant in niche and high-value market segments, ThinkEquity says.
Likewise, ad network and ad agency and even publisher business models should increasingly converge. Among other things, the major Internet media companies (Google/Doubleclick, Yahoo!, Microsoft, and AOL/PlatformA) are likely to continue consolidating and
capturing the overwhelming majority of the non-premium market.
Exchanges increasingly are being used as inventory aggregation platforms with traditional horizontal ad networks(ValueClick, Advertising.com, Tribal Fusion) increasingly abdicating their supply-side aggregation role and acquiring media directly on the exchanges and “meta ad networks” (MediaMath, Varick Media Management, X+1) that are focused on data,
optimization, and arbitrage, ThinkEquity notes.
The premium CPM (cost per thousand) advertising segment has been losing market share to performance-based advertising (typically to non-premium inventory) since 2001, with the share shift accelerating during the past three years, ThinkEquity says.
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