Most publishers have an ad revenue drop in the first quarter of the year. If you are also seeing a drop in your ad revenue, in this article, we will see preventive measures to manage ad revenue slumps.
After experiencing a fruitful festive season around November and December, publishers have to deal with the January revenue drop. In this month, publishers across the globe experience fluctuations in revenue, often on the downside.
Not only media publishers but video publishers (YouTubers) and eCommerce also experience the same. This makes January revenue drop (or January Slump), a common seasonality effect in ad tech.
Reasons Behind the January Slump
While it could be difficult to pinpoint the exact reasons behind the January slump, here are the three major factors affecting ad revenue around this month:
1. Traffic Decline and Low Impressions
Towards the end of the holiday season—with Thanksgiving, Christmas, and New Year in a row—users’ browsing, online shopping, and gift-purchasing behaviours get back to normal.
This sudden change in browsing behaviour results in a noticeable decrease in traffic. Consequently, the decrease in website traffic also takes a toll on the impression count.
Simply put, the advent of January puts an end to the festive season, thereby reducing the purchasing interest of users. If you have experienced the same, your Google Analytics account should show you the details of traffic changes.
2. Fall in Fill Rate
Generally, publishers are recommended to increase their floor prices in order to improve earnings during the holiday season. However, towards the end of the holidays, publishers should also keep in mind to readjust the floor price of their ad inventory.
If floor prices are mishandled, it leads to a decrease in ad fill rate as inventory price might not seem justified to buyers.
This happens mainly because of the decrease in demand for ad inventory, as users are less engaged and, accordingly, buyers prefer to go easy on their advertising budgets (we’ll discuss this later in this post).
3. Decrease in CPM
Even if publishers slash down their floor prices after the holiday season, the ad revenue doesn’t necessarily show an upward trend. This is because of the CPM drop in January that happens during this seasonal effect.
A drop in the CPM rate cancels out most of the efforts made by publishers. No matter the improvements that are made to the inventory, chances are, the profits might not be the same as in Q4, with the market not offering the same CPM.
Impact of Advertiser’s Budget Allocation
With the start of a new year, advertisers and marketers also start by allocating new budgets for upcoming projects and tasks.
In order to make their budgets last longer, advertisers play cost-effective when it comes to advertising spending. It is important to note that a slight decline in an ad publisher’s revenue not just happens in January but in the starting month of any quarter.
Usually, most businesses start their year by devising new strategies for better profits. The planning of these strategies often takes time before getting executed. Resultantly, they prevent advertisers from executing the campaigns, further affecting the publisher’s ad earnings in parallel.
In a nutshell, advertisers allocate a minimum budget in January, making it a low-earning month for publishers. And they decrease the CPM rates on their campaigns, making publishers either sell their inventory at a lower price or show unfilled impressions.
Is Everyone Losing Money?
Yes. If compared to Q4 earnings, publishers see a significant decrease in their ad revenue.
Here is a graph showing ad revenue fluctuations:
Notice the decrease in revenue in the month of January?
Last year’s January slump was further affected because of COVID.
We calculated this by evaluating the monthly eCPM of the publishers in our network based on the data collected from almost 4 billion ad impressions.
Here, the relative index shows the ratio of the average eCPM of each month from January onwards to December divided by the maximum eCPM for all 12 months times 100.
Relative Index = (Avg. eCPM / Max. eCPM) * 100
Using the relative index metric, you can see the change in monthly earnings of publishers, with respect to their maximum earnings, to get a better idea about a decrease in January revenue.
Preventive Measures for Publishers
Ad revenue slump starts in January and shows a major impact in the starting weeks. The first suggestion for publishers should be to stop panicking.
A drop in ad revenue may seem scary at first. However, publishers should treat it as a seasonal trend which should resolve with time once the slump clears.
Meanwhile, here are measures publishers can take to avoid further damage to the revenue and generate more profit:
1. Try Setting a Lower Floor Price
As mentioned above, readjusting the floor prices can help you increase fill rates on your website. A high floor price must have given you ideal returns in December, but that may actually harm your inventory in January.
Most advertisers reduce the amount spent on ad campaigns. Therefore, by reducing floor prices, you can get an increased number of deals, avoid unfilled impressions, and stabilize your revenue drop.
2. Experiment with Private Marketplace (PMP) Deals
Automatic auctions are a boon for publishers without a doubt, but PMP deals can add significant value to your inventory.
With PMP deals, the whole process will become more transparent, and you will be able to invite advertisers that are actually interested in buying your inventory. This, in turn, will result in higher eCPM.
3. Continue With Relevant Content
Yes, there is a decrease in the traffic and fill rate. However, soon the traffic and revenue will start to stabilize. Hence, to keep your users engaged, you’d need to continue feeding them with relevant and quality content. This is needed to gradually increase and improve engagement and hence the ad revenue.
4. Optimize the Inventory
Other than readjusting the floor price, you should also test out the number of ad units and their placements for a better fill rate. Lastly, go for the trending ad sizes and layouts.
Various advertisers use this time to come up with new strategies, and as a publisher, you can do the same.
Experiment with different ad placements and ad units on your websites so that you will know what works best. This can be of help for optimizing revenue in the following months as well.
5. Improve Website SEO
This includes content quality, website health, and keyword optimization. During the slump, you can’t afford to lose ranking keywords. As a practice, monitor your current rankings and introduce more keywords to your database to keep up with the search engines.
6. Optimize your Header Bidding Setup
Header bidding enables higher competition on publishers’ inventory. It helps them reach out to buyers across the globe and sell their inventory at a greater value.
Furthermore, publishers can also compete among different auctions, like running Open Bidding and header bidding, to avoid unfilled impressions. It’s clear that header bidding has numerous advantages, but in order to take advantage of it, publishers should also focus on enhancing its performance.
Opting for managed services and using Prebid as a wrapper is a couple of solutions for doing the same. In addition to this, you can also choose to go for server-side header bidding to reduce latency on your website.
7. Try Ad Refresh
Ad refresh is a tricky solution. While it has been found that static inventory works better than reloading inventory, ad refresh can still be of help if users are spending a lot of time on your website.
However, before implementing it, you should consider user engagement. If you end up using ad refresh for websites where engagement is low, it can harm your revenue generation in the long run.
8. Incorporate Web Interstitial Ads
We have already stated that optimizing inventory is a good way to mitigate the damage caused due to the January slump. Adding web interstitials to your offerings can help you in achieving the same.
These ad units were launched by Google recently and can increase your revenue significantly. You should consider best practices before implementing these ad formats to get better results.
9. Consult Ad Ops Professional
There can be a lot of moving factors in revenue optimization, like ad layout optimization, to understand while keeping up quality content and SEO. In such a case, publishers should consider ad ops experts for assistance. An ad ops expert will constantly monitor the website and improvise as per the coming demand, all for better monetization.
January slump is a completely normal pattern, and it would be best for publishers not to worry about it too much. We advise publishers to use this time of the year to experiment with innovative solutions and come up with new strategies. This will help them to get improved results in the long run.
For the time being, however, you should focus on the tips provided above to make sure that you get as better returns as possible.
Looking to manage ad revenue drops? Let’s get in touch with our experts!