As we enter into 2022, the January blues are imminent. After the exciting and lucrative holiday season, the results in the first quarter of the year are doomed to turn our smiles upside down. Seasonality is a powerful driver for ad revenue fluctuations and publishers are better off understanding the principles behind it. Various factors such as advertising budgets, consumer buying intent, events that bring higher traffic, all play into the final results. This article will explain what seasonality is, how it influences ad revenue and how publishers can prepare in order to optimize their performance during each part of the cycle.
What is Seasonality?
Google defines seasonality as any predictable fluctuation or pattern that recurs over the calendar year and further divides it into cultural, commercial, and ad-hoc events. Cultural seasonality is caused by annual holidays and celebrations such as Christmas and Ramadan. Commercial seasonality revolves around events such as Black Friday/Cyber Monday. Examples of ad hoc events that cause seasonality are the Olympics, elections, and even certain notorious TV productions. It is important to take your audience into consideration and what influences their behavior so that you can take advantage of opportunities around seasonality. During seasonality peaks, advertisers are willing to buy more inventory and/or pay more for it. This drives RPMs up. At the same time, users are more likely to browse the internet during such periods, which drives traffic and impressions up. These factors both contribute to seasonality effects in publisher revenues.
Quarterly seasonality trends and how to act
Advertisers usually plan their spending on a monthly and/or quarterly basis. Publishers observe the effect of this in their revenues, meaning the beginning of the month/quarter typically has lower revenues, contrary to the end of the month/quarter. Additional spikes in ad spending are seen around holidays and other recurring or ad hoc events, which we mentioned in the previous chapter. Let’s see what are the specifics for each quarter of the year.
Q1 (January, February, March) trends
January is usually the slowest month of the year when we talk about ad revenue. After the holidays at the end of the year, all budgets – both advertisers’ and users’ are all spent out, respectively CPMs drop, too. Consumption decreases and most brands choose to focus on strategy setting and testing new campaigns with limited costs. February may see a lift around the Super Bowl, Valentine’s day, and March for St.Patrick’s day, and bring CPMs back to their usual levels.
What to focus on in Q1
Overall, the January slump is the perfect time for publishers to make changes to their website, test new approaches, experiment with new ad units, ad placements, and ad formats. Give private marketplaces a try, if you haven’t yet. You may want to lower your price floors to increase fill rates and get a higher number of deals for your inventory. Keep up your content quality to get users to stay on your website longer and invest time and resources in bettering your SEO practices. If you want to make any technical changes or redesign your website, Q1 is the perfect time for this as the impact on your revenue will be the lowest, just avoid the holidays in this quarter that we mentioned above.
Q2 (April, May, June) trends
For many advertising agencies, June is the end of the financial year. They try to spend all their allotted budgets in Q2 and therefore are willing to pay higher CPMs and typically up their spend compared to Q1. This means higher RPMs and better revenues for publishers. However, seasonality trends are influenced by many factors and are not constant. For example, during Q2 2020, ad spending significantly dropped (almost by half compared to 2019) due to the effects of COVID-19 on the global economy.
What to focus on in Q2
If you made any significant changes to your price floors during Q1, you may now want to increase them somewhat to take advantage of the improved user engagement and traffic during this quarter. Get rid of low-performing ad formats and sizes that you were testing and focus on those with high ad viewability. You may try to renegotiate any ongoing deals with advertisers and/or agencies you have. Don’t make any major changes to your site during big holidays such as Easter, and/or any other relevant events to your audience (examples are Mother’s Day, Father’s Day, Memorial Day). You may want to refresh any well-performing piece of content around those dates to boost your performance.
Q3 (July, August, September) trends
Q3 is characterized by the summer slump, which is most notable in July (although not as bad as the January one). Advertisers typically use this period to readjust their budgets and develop new strategies for the pretty big (spend-wise) next quarter. RPMs slowly start to pick up in August and September with Back to School campaigns and preparations for Q4.
What to focus on in Q3
During Q3 you will likely want to readjust your price floors several times, without making any aggressive moves. During the July slump, it’s best to drop them a bit, but you may start increasing them again before the Back-to-school campaigns mid-quarter. In order to prepare for Q4, you’d also want to optimize your inventory by testing various ad placements, sizes, and formats. Just like Q1, Q3 is also a good time to try PMP deals if you haven’t yet. Keep your site in good shape around any holidays relevant to your audiences, such as US Independence Day (July 4) and Labor Day (September 5, 2022).
Q4 (October, November, December) trends
The last quarter of the year is the most exciting one. Due to the many holidays celebrated during this period, user queries increase dramatically, and so does advertising spending. The competition for user attention and among advertisers is pretty high and publishers are in a great position to maximize their revenue. Ad spends and RPMs are at their highest during this period, coupled with an increase in search traffic due to the multiple shopping-related events and holidays, such as Black Friday, Christmas, and Diwali.
What to focus on in Q4
This is by far the most exciting quarter for publishers, and definitely the most rewarding one. This is also the time that publishers should focus on all the details and try to make the most of the opportunities at hand. Let’s get the obvious changes out of the way – increasing your price floors and optimizing ad viewability. You should also make sure your website is performing well on all devices and page latency is minimized. Any private auctions you have should be adjusted by 200-300% to make sure you won’t be selling below Open Auction bid levels. Try to leverage your partnerships and expand them if possible. Any small changes would likely have a larger impact during this quarter, so plan carefully and act diligently.
During the last couple of weeks of the quarter, you may already start getting ready for the Q1 drop and plan your strategy.
Pay attention to your website’s page speed. It factors into many aspects of successful monetization. It’s a ranking factor in search engines, it also influences your fill rates and ad viewability scores. And this is valid throughout the entire year. It can help you stay ahead of the competition during high times and retain healthy yield levels through the seasonal slumps.
Seasonality is an important driver for ad revenue fluctuations and it is crucial for publishers to understand the factors that influence it. Some of them are valid for all players in the ad tech world (such as advertiser budgets), and others are specific to your audience (such as relevant holidays and events). While the numbers you see in your January reports may seem a little disappointing, knowing that it’s a normal occurrence that won’t last forever might help you focus on the things that you can actually improve during this period.