A common question among publishers, is why there are certain performance fluctuations over the year both traffic- and revenue-wise. For many, these changes appear random. This leads to having a tough time trying to evaluate the state of the business and making informed decisions. Luckily, there are common reasons behind the fluctuations, and today we’re here to explore why and when these changes occur, how to prepare for them, and how to read your data correctly.
For the most part, revenue deviations are the result of two factors – consumer behavior and advertiser budgets. As you might expect, companies have a limited amount of funds dedicated towards promotion. It can vary depending on the type of company and scale. In any case, advertisers always attempt to optimize spending to get the highest ROI. This usually means going full throttle at times when they can land the most sales and pausing campaigns in the downtime. You can use it in cases, such as further budget planning, business development, etc. When dealing with advertisers directly, this is usually communicated on a regular basis. By doing so, the publishers have an idea of what to expect.
When it comes to programmatic, things are less transparent as there’s no channel of communication between buyer and seller. Plenty of vertical-specific events can influence traffic and ad revenue. Yet, let’s take a look at some universal trends that impact the industry on the whole.
Perhaps the biggest part in the periodic performance shift is played by financial quarters (or fiscal quarters) and how businesses are structured in regard to these. In case you’re not familiar with the term – there are 4 financial quarters, each one representing a three-month period and acting as a basis for reporting and the paying of dividends. For now, when we mention Q1, that would mean January, February, and March.
Q1 through Q4
If you look at your yearly reports, you will certainly find your performance in the beginning of the year to be significantly lower than at the end. This shouldn’t come as a surprise. For most industries, the first few months of the year stand for a massive decrease in sales. It is also reflecting in the overall ad spend. In contrast, Q4 is considered to be the strongest, with budgets and competition being at their peak. For most publishers, there’s a steady increase in performance from the beginning of the year leading up to December, with some minor exceptions. For some publishers, there may also be individual spikes at times due to industry related events. And these usually stack on top of the existing trend instead of being a replacement.
The last quarter of the year is when publishers are seeing the biggest profits. That’s primarily because it’s the time of Christmas and Black Friday. Advertisers are aware that this is when they can take advantage of holiday shopping and ramp up sales, so as the competition for inventory increases – CPMs and fill rates do as well. Additionally, there are a lot of products and services that are intentionally planned for release at about this time. And it results in multiplying the effect.
Changes within quarters
Publishers will usually see certain fluctuations within quarters as well, with an observable dip at the start of each one. This is because budgets are often planned for and reset at the end of each period. It means that campaign volumes take a while to replenish and performance may not be up to par in the beginning of January, April, July, and October.
As already mentioned, some publishers can also experience peaks in performance which don’t relate to the overall trend. In most cases, these are founded in certain events specific to the industry, which the website’s content is focused around. Let’s say you’re in the Mobile & Tech vertical. You’re probably going to see quite the boost in autumn, as there are a lot of product releases at that time each year. Meanwhile, summer months are usually slow with purchases in consumer electronics being at their lowest.
At the same time, travel blogs can be quite profitable in the spring. Simply because hospitality and tourism advertisers are targeting consumers planning their upcoming summer vacations. Of course, advertisers target audiences based on their recorded interests, instead of just the website they’re on. But contextual advertising is still more effective in landing sales. Thus, it’s important for publishers to be aware of their consumer base and track important events, which can affect monetization.
Prediction and preparation
In a nutshell, media owners should always keep a historical record of their performance over the last few years. It is highly important to identify when they’re being most profitable. There can certainly be differences over time, but most of the fluctuations are periodic and can be easily predicted.
This information can be quite useful when trying to plan changes and deploying new products. You probably wouldn’t want to jeopardize revenue at the exact point when you’re most profitable. The monetary effects of website changes scale up exponentially when implemented at the wrong time. That is why publishers usually schedule big re-works and releases for the slower months – preferably January. That’s certainly a good practice, however, the opposite can also be done to secure larger profits. A common method is to start putting together deals and test new designs in the weeks leading up to Black Friday for example. By doing so, you can make sure your ad strategy is at its max once the day comes.
How to read your data
For all the reasons we just mentioned, it’s crucial for publishers to learn what their data means. It’s perfectly natural to be adverse to performance dips, but you should try to stay objective. Try to understand that consistent growth happens over larger periods of time, instead of on a day-to-day basis. When you are evaluating the success of the business, a good way to approach it is to compare current data, with the same set from last year in that exact same time bracket. Also make sure to consider all factors that can give you distorted expectations, such as changes to traffic, design, partnerships, etc.
Finally, make sure you’re focusing on the right metrics as some can be deceiving. For example, an increase in CPM accompanied by an overall decline in revenue is ultimately a bad thing. It can easily be confused as a positive development if one’s not careful enough to look at the data methodically.
In order to make an accurate assessment of your website’s performance, you should be familiar with the trends typical for your niche. Preferably, compare stats at least a year back, and factor in quarterly demand fluctuations, changes in your traffic, page layout, industry trends and events, as well as your current monetization strategy. If you are ever in doubt about the reasons why your performance may not match your expectations, don’t hesitate to get in touch with us.