Ad revenue is declining simply because its not generating a sufficient ROI for advertisers. The Wall Street Journal ran a big story a few years back where they revealed 1/3rd of all internet traffic is bogus.
Turns out Russian and Eastern European (and many other countries like China) are using computer farms that have bots that crawl the internet all day, clicking away on ads all day long, driving up expenses for advertisers who receive nothing in return for their dollar. Publishers for those ads would receive payment for the ads then send a kickback to the bots.
We experienced this very issue back in 2012 when using GoogleAdWords for the first time. Your ads would get clicks, sometimes at a cost of as much as $4.50 to $5.00/click and the visitor would instantly bounce. What was happening was those using GoogleAdSense were buying ad clicks from bot farms and then pocketing the difference between what GoogleAdSense paid and what the bot farms charged. After $500 and no meaningful revenue we put the kibosh on it. A few months later, while talking with a colleague, they asked if we were still using GoogleAdWords because it had come up in a previous conversation. We said "no" and explained what looked like phony traffic. Their response was that, "Google AdWords was the worst decision of our life." Apparently they had signed some kind of 1-year third party contract to get ads for less per click than what we were paying, only to find out that in the long run the whole thing was a huge financial black hole that they could not get out of.
As our own story shows, ad fraud is rather rampant. We've read reports where some major websites had as much as 90% of their traffic as bots so they could give advertisers inflated statistics. Heck even Michael from staff mentioned (on the podcast) that there was a time on Prehistoric Tapastic where some creators were buying bot traffic to crawl their comics so the creator could pocket the difference between what the ad revenue program was paying and what it cost to buy the bots. Michael noticed that certain comics were getting huge traffic inflows but no Likes, Comments, or Subs (no engagement) and shut those creators down for abusing the system. Google gets upset these days when you buy bot traffic and your AdSense account can get flagged and ads terminated. Had Michael not shut those creators down, Tapastic could have been flagged and lost all ad revenue.
Back in the day, ads used to be charged out at CPM which is the cost for 1,000 impressions. $10 CPM was fairly common pricing. In the halcyon days of display ads, there was a fairly high click thru rate so paying $10 CPM made sense because it had a decent ROI for an advertiser. Unfortunately, publishers got crafty and started to do shady things like create 1 pixel by 1 pixel ads that would load on a page but would be impossible for the viewer to see but they still were paid for since the contract was for impressions and an impression was what they were delivering ("letter of the law but not the spirit") so it was technically legal. Click thru rates started to fall. To compound that problem, as internet users became exposed to more and more to ads they became desensitized to them, further driving down click thru rates.
With so many trash impressions, advertisers started not wanting to pay for CPM but CTR. Suddenly those 1px by 1 px ads weren't worth anything, so publishers had to come up with another way to generate revenue, so they started buying clicks.
With so many clicks being $0 revenue bots, eventually advertisers started to just give up on running ads. (We had a conversation once with someone from Microsoft's ad department (Bing ads?) who got a little too drunk and said something along the lines that display ads are a waste of money.) With fewer and fewer interested advertisers, but the same amount of supply of ads, ad prices eventually had to fall due to supply and demand economics.
To make things even worse, of the 66% of non-bot traffic out there, more and more internet users felt that they shouldn't have to see ads because it slows down their consumption of free content (paid for by ads). So they started installing ad blockers in record numbers. What an ad blocker does is it shows as an impression on the publisher's end, but shows nothing on the users's end, so again the advertiser is getting nothing for their marketing dollar. Which in turn drives down the value of ads even more.
Estimates are that approximately 1/3rd of all internet users now use ad block. And another 1/3rd of all traffic is bots. Which means out of 1,000 impressions only 333 are "good impressions". The rest is trash, which is why you see Michael stating that "ad revenue is a race to the bottom" (podcast and/or forum post). The average click thru rate of a display ad today is .10% which is 1 click in 1,000 impressions.
Before DeviantArt shut down their ad service, you could buy profile clicks for $.04 CPM. On Project Wonderful you can get hundreds of thousands of impressions per day for $.007 CPM. Even on Google AdWords you can get clicks for as little as $.04/click.
So there you have it. Ads just aren't worth much because so few actual people see them or click on them.
Which makes us wonder how long Hiveworks can keep billing out $2 CPM or how LINE Webtoons can expect to be revenue neutral with their upcoming ads program.