The holiday season ends with advertisers pausing their holiday campaigns. The effects of which are immediately noticeable in publishers’ earnings.
Publishers firing up their computers to check earnings early in January often get a nasty surprise. Many niches experience lower CPMs. Even the traffic in January is lower than at any other time of the year.
Understanding the Problem
With any drop in revenue, the starting point is to understand the problem. Your revenue can drop due to one of three things happening:
Drop in Ad Requests
Sudden drops in ad requests around the start of January usually relate to traffic changes and this is easily checked against analytics. If traffic has dropped and that drop reflects changes in previous years your main option is to wait it out.
Do check the other causes as well though, as traffic drops are often accompanied by other problems. Year-on-year traffic comparisons in Google Analytics are good first checks.
Drop in Fill Rate
Fill rates can drop in January if floors aren’t adjusted to reflect seasonal buying patterns. Whilst you might be able to fill impressions with a $5 floor in December, you might not be receiving the bids to support that same rate in January.
If that happens your fill rate will drop and you need to decide whether to accept that, add additional demand or lower your floor prices.
This issue should only impact publishers imposing floor prices through Ad Exchange, and their other networks via the AdSense ad-balance tool. If none of these are used, then the fill rate should be maintained automatically as the price drops. Speaking of which…
Drop in CPMs
Even those sites that maintain the number of impressions served can experience significant January revenue drops as CPM rates drop thanks to lower advertiser bids. CPMs are generally lower at the start of every quarter but can be particularly harsh in January.
Of the three factors, this is the issue impacting most publishers in January. Publishers in niches with high first-quarter demand, such as fitness or travel are generally protected, but most publishers do see a decline in rates as advertiser spending drops.
Why do Advertisers Spend Less in January?
The rate publishers receive for each impression is governed by auction. More advertiser making strong bids supports high rates, but any drop in that “auction pressure” leads to rates being suppressed.
The start of January sees two patterns coming together: The Post-Holiday slump and the quarterly buying cycle.
The Post-Holiday Slump
Ad spending in Western markets peaks in November/December as advertisers try to capitalize on the high conversion rates during the spending spree surrounding Thanksgiving, Black Friday, and Christmas. Budgets are ramped up and then cut suddenly again as the spending frenzy ends.
Come January, the budgets are often far more conservative to balance the spending of the previous quarter as well as to reflect the decreased sales opportunity of the new season. Fewer bids and lower bids conspire to cause many CPMs to tumble.
The Quarterly Buying Cycle
January 1st isn’t just the start of a new year, but of course, a new quarter too, and ad spending follows a quarterly cycle throughout the year. Advertising budgets are frequently set quarterly and campaigns end at the end of the quarter, reducing demand come the first of the month.
Throughout the year the first day of a quarter is often plainly visible looking at CPM drops resulting from this buying cycle. See this article for more about quarterly buying cycles.
What To Do If Your Ad Revenue Drops In January
It’s worth saying that these patterns don’t affect every publisher, but they are widespread. With many publishers experiencing the “double-tap” of lower traffic and lower CPMs, the revenue hit can be substantial.
Whilst the seasonal cycles are outside of publishers’ control, there are a few recommended steps if you are hit by such a drop.
Lower your floor price:
Just like most publishers, you might have increased the floor price for your inventory to attract high-paying bids. However, with the end of the holiday season, you should lower the minimum bid price.
Otherwise, you will end up showing blank ad units on your pages – wasting impressions in the process.
Use this opportunity to test and make changes:
Lower revenue can make it a good time to make changes with lower risk. Try new placements or new demand. Roll out some new content that might reverse the traffic patterns, and run ad-serving and content experiments.
Look for opportunities to improve SEO
Improve content quality, website health, and keyword optimization. You can’t afford to lose ranking keywords during a slump. To keep up with the search engines, monitor your present ranks and add new terms to your database as a habit.
Don’t panic!
Big, scary drops in January aren’t nice, but they aren’t unusual either. This is a common pattern. It doesn’t necessarily mean anything is broken or that you need to roll out drastic changes (that might interfere with recovery).
Conclusion
CPM drop during January is quite normal. Most publishers experience the slump.
We at, OKO, recommend our publishers monitor the pattern for a few weeks. Generally, by end of Q1, the trends seem to normalize and publishers start noticing an increase in CPMs.
If you can still confused and need expert guidance, then feel free to reach us.
