Revenue Optimization

What Publishers Should Know About the January CPM Slump

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After weeks of aggressive bidding to buy inventory – at sky-high prices against cutthroat competition – during previous year’s holiday season, the New Year dawns bright and beautiful upon media buyers who are all kinds of broke.

When little money flows in the supply chain, those on the other end of it – publishers who already give up massive chunks of ad spend to supply and demand side vendors – end up receiving loose change for their inventory.

The phenomenon is called seasonality and January CPM slump is the most prevalent pattern. Depending on how far the website’s earnings drop, it may well be enough to give publishers heart palpitations.

Ad Revenue is Only as Good as Ad Spend

It’s unlikely that publishers’ own advertising stack is suddenly malfunctioning. Ad sales at this time of year simply reflect the market and there’s not much happening on that front.

This early in the year, marketers are busy reviewing strategies, planning campaigns, and generally trying to keep up with the mountain of work that’s piled up during the holidays,” says Sanjot Singh, Associate Director of Programmatic Partnerships at Affle. “When there are fewer buyers bidding with scrapes that survived the year-end/holiday season media-buying blowout, more inventory is available per dollar. Consequently, the CPMs drop to pennies and fill rates are abysmal.”

This state of affairs can last up to two to three weeks, up until February, or the whole quarter, depending on your niche and your market. The slump itself is more dramatic for some than others. In US, CPMs for retail ads are the highest in Q4 and take the deepest plunge in Q1, stabilizing by mid-February.

Image Source: AppNexus 2017 Holiday Buyer Guide

CPMs for most advertising categories experience similar drops (>40%). The exceptions are niches like Finance, which sees 12-20% drop in CPMs compared to previous quarter. The category is also one of the few that are barely affected by holiday season frenzy.

Image Source: AppNexus 2017 Holiday Buyer Guide

Desperate Times, Drastic Measures

Small-to-medium publishers – who sell inventory almost entirely through programmatic – bear the worst of the brunt of the Q1 slump.

Smaller teams usually have revenue goals to meet,” says Subrat Tyagi, Customer Success and Ops Specialist at AdPushup. “The brand-name media houses can manage to draw in advertising bucks on and off programmatic platforms simply because brand-marketers prioritize their inventory.

This leaves the door open for gimmicky third-party vendors to get malicious ad codes running on websites. “We see plenty of ‘vendors’ reaching out to programmatic-only publishers this time of year offering to cut ‘direct deals’. In exchange for fixed CPMs, they provide an ad code that they insist needs to be ‘put directly on the page’. More often than not, this code turns out to be the cause of malicious redirects,” says Subrat.

Other less-experienced publishers resort to aggressive measures and inadvertently mess up their UX in order to compensate. “We have seen publishers increase their ads to content ratio and stack ads to jack up impression count,” says Abhinav Choudhari, Customer Success and Ops Specialist at AdPushup. “The benefits don’t tend to last, but the side-effects do. In practice, these tactics destroy the UX – often irreparably – and adds “skyrocketing bounce rate” to the list of publisher’s troubles.”

Some media-sellers may also be tempted to inflate pageviews with click farms – a practice which would have particularly disastrous consequences this year. After 2017’s brand safety uproar, buyers have armed themselves with IVT (Invalid Traffic) and fraud detection measures to prevent wastage of precious ad dollars on domains with high bot traffic.

Brand safety will be one of the decisive restraints on media buying for global/brand-marketers in 2018. Publishers resorting to measures like click farms may end up losing whatever revenue they made. In more severe cases, higher than usual (5-10%) levels of IVT on the domain can get you permanently blacklisted as ‘fraudulent’ and barring your entry to top-tier demand sources.

On Dealing with Early-January CPM Slump

We asked seasoned publishing/ad ops professionals about the best ways to maintain positive cash flow/vibes during the Q1. They shared what they do during the dismal quarter, in exchange for anonymity:

Obsessing about stacks and revenue won’t help matters,” says one dev/ops executive. “Our CPMs are 3-4 times lower in Q1 than Q4, but that’s just how the market works for our niche (going by the previous years’ patterns). We switch to house ads instead of letting malicious ads through for $0.01 CPM, and shift focus to development, testing, and optimizing.”

A sell-side programmatic executive says, “Vertical networks/ local hyperlocal agencies have seasonal high CPMs. We turn them up during our high-earning seasons and revert back to the highest tier demand sources we have. Think Google AdSense, DoubleClick AdX, AppNexus, etc.

We switch to native (Taboola and Outbrain) because of their fill,” says one ad ops executive. “There’s not much else going on, so our team works on outreach to higher-tier demand sources for programmatic partnerships and agencies for direct or PG deals. Our CPMs begin to pick up after mid-January, so we just power through the first couple of weeks.

This is the time to look into the impact of GDPR on your publishing business,” says a UK based publisher. “If you have a sizable EU audience, you obviously can’t leave things be. Work out the changes you’ll have to make in your front-end to conscientiously collect data from European audiences. Make sure the platforms this data goes through (networks and exchanges) are GDPR compliant as well so you’re in the clear.”

We reiterate our advice to publishers – run an Ad Experience Report for your domain and fix violations that turn up in current ad layouts. With Chrome block’s release so close at hand, there are plenty of loose ends to fret about and fix on site and ad layouts if you intend to still keep earning ad revenue from Google Display Network after February 15th.

The slowest season of the year is also the best time to make broader changes in site layout and hosting without fear of cinching up the revenue stream. So recuperate, test, and optimize. And above all, be patient. Before you know it, the slump will be over and your revenue will begin to pick right back up.