Let’s accept the truth – CPM fluctuates, and there can be no specific reason behind it. It is also true that these fluctuations often happen during specific times of the year and can have a significant impact on the publishers’ ad revenue.
Knowing the underlying causes behind the fluctuations in CPMs enables publishers to predict the shifts before they occur. This article will explore how the CPM changes throughout the year, the most common trends, and how publishers can optimize their programmatic ad stack to make up for dwindling CPMs during low-performing months.
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CPM and Seasonality
CPM refers to “Cost per Mille” and translates into cost per thousand ad impressions. As one of the most common pricing models, CPM represents the amount a publisher gets from the advertisers for every thousand views on the ad served on their website.
Factors like ad format, size, viewability, traffic, geography, device, seasonality*, and many more play an important role in deciding the CPM. While publishers can get high CPM by optimizing specific attributes like ad formats, viewability, etc., there are others, like seasonality, over which publishers have no control.
*Seasonality refers to any predictable trend or variation that occurs at the same time on a YoY basis. Since the events occur regularly, it is easy to predict their arrival.
Across the industry, publishers experience CPMs rise and fall during some specific periods within a year. This phenomenon is called CPM seasonality.
What Causes CPM Seasonality?
CPM seasonal trends are significantly impacted by advertisers’ budgets and users’ behavior. Advertisers tend to invest more during the most profitable times of the year and generally towards the end of quarters. Similarly, digital footfall increases during holidays like Christmas or special commercial events like Black Friday.
During holidays, users are more likely to buy new products. Because of such traffic surges, advertisers find a large volume of high-intent users to display the ads to. Since the users are already in the mood to make purchases, advertisers get better than average results from their ads during such seasons. Hence the competition among advertisers increases and the CPMs shoot up. Billions of dollars are spent just via the e-commerce channel during festive seasons.
Similarly, advertisers tend to readjust their budgets at the start of a quarter or month. Thus, ad spending decreases, resulting in lower CPMs.
Why Should Publishers Care About CPM Seasonality?
Understanding seasonal trends help publishers make better decisions and prepare early. For example, based on the patterns, publishers can pre-plan their content calendar, experiment with different revenue streams, or optimize their website.
Knowing the patterns of CPM fluctuations also enables publishers to determine whether they are occurring due to seasonal changes or an internal fault within the website. Knowledge about the cause can save publishers much time.
Let’s understand this in detail. As is the trend, publishers usually expect to see growth in ad revenue during Q4. With several cultural events like Halloween, Thanksgiving, Black Friday, Cyber Monday, Christmas, etc., falling within the quarter, the surge in online traffic and, thus, demand is evident. This means any publisher witnessing slow or no revenue growth during the quarter is incurring opportunity costs.
The knowledge of seasonal trends here thus will help publishers look for the shortcomings within their optimization strategies or revenue streams. It also helps publishers to prepare ahead of the seasonal fluctuations and mitigate their effect on revenue.
CPM Seasonal Trends to Consider
Seasonal CPM patterns emerge throughout the year. Here are some of the most common trends we have observed:
Advertisers generally have quarterly marketing budgets. At the beginning of a quarter, they are cautious about their spending. But as the end of the quarter approaches, companies try to exhaust their budgets to ensure no opportunity is being missed. Due to this tendency, the beginnings of the quarters have low CPMs that keep increasing as the quarter ends. Moreover, as mentioned above, each quarter has specific holidays and events that affect users’ shopping preferences and CPMs as a result.
For some advertisers, Q4 is considered the last quarter of the fiscal year, while for some, it is Q2. As these advertisers step into the new fiscal year with a tight budget, the CPMs often drop. So, Q1 and Q3 are usually the lowest-performing quarters, with CPMs rising in Q2 and skyrocketing in Q4*.
*Festivals also have their part to play here.
What Publishers Can Do to Keep up With Quarterly Trends?
Maximize floor price
Q4 is the perfect month for maximizing floor price. Publishers should increase their floor price successively over the quarters and then again over the years. For example, if a publisher sets an average floor price of $0.5 in Q1, this should be consecutively increased to $1 in Q2, $1.5 in Q3, and $2 in Q4. And again, as per the prevalent market, the floor price should start at $0.55 or $0.60 in the new Q1.
However, publishers should always keep a sharp eye on the ad fill rates while increasing or decreasing their floor price. The fill rate decreases as publishers increase the floor price. Publishers must keep increasing the floor price until the revenue increases and stop as soon as they notice a decline in the revenue. Floor prices must be kept high during Christmas and Black Friday.
Prepare Ahead for Q1
As the quarter ends, the impending slump of Q1 looms closer, with buyers readjusting their budgets and preparing new campaigns for the new year. So, along with maximizing their ad revenue during the golden quarter, the publishers must also start implementing strategies to reduce the impact of Q1 CPM dips. The tips for managing CPM seasonal fluctuations mentioned below would come in handy as January approaches.
The January Slump
Advertisers exhaust their spending budgets in the preceding months to January. There are no big festivals in January, causing CPMs to dwindle and technically bringing into effect what is known as the “January slump.” It is also the beginning of the quarter and the financial year. All these reasons make January the slowest month of the year for publishers.
What Publishers Can Do to Keep up With January Slump?
Reduce floor price
Q1 calls for a reduction in floor price after the increase in Q4. Publishers should start reducing floor price by at least 50% and observe its effect on fill rate and page RPM. If the numbers remain unsuitable, adjusting the floor price by an increment or decrement of $0.05 until the best results are achieved is advisable.
Be mindful of blocking rules
Reviewing and removing specific advertiser blocking rules that heavily impact inventories’ demand can help increase revenues, especially during Q1. Instead of blocking an entire category, publishers can only explore irrelevant sub-categories to their websites and block those. Here’s how to do it with Google Ad Manager.
Optimize Ad Refresh
Smart ad refresh is another way to increase revenues. When the CPMs are low, increasing the number of impressions by refreshing the ads can compensate for the loss in revenue. Publishers can deliver more ads to the same users’ through products like Active Exposure Time (AXT). Intelligent ad refresh products like AXT ensure that ads are refreshing only for users actively engaged with the content. Showing ads only to engaged users provides remarkably high viewability while significantly increasing revenue.
January also allows publishers to acquire traffic at economical prices. Publishers can run house ads to promote their newsletters and membership programs for revenue diversification. Below is an example of a house ad running on The CEO Magazine.
Source: The CEO Magazine
Optimize ad units and placements
Publishers should experiment with different ad formats, like out-stream and instream videos and sizes, that improve CPMs. This ensures that more ad sizes are eligible to compete in the auctions, maximizing ad fill rates. Further, video ads allow readers to consume content more quickly than text or images.
Publishers can also increase their revenue during the slump through optimized ad placements. The strategic placement of ads on the website helps in getting increased CTR, which further increases the CPM in the long run.
Publishers may experience a rise in CPM during the weekends. But the changes are primarily minuscule. Since users spend more time on the internet on weekends than on weekdays, the advertising side is slightly more active, leading to a slight rise in CPMs.
What Publishers Can Do to Keep up With Weekly Trends?
- Make no changes in floor price: Weekly trends have a temporary impact on CPM. Since such seasonal fluctuations are minuscule, the optimizing floor price for weekly variations is neither worth the effort nor the risk.
- Experiment with the content: Publishers can have a series of articles to attract more weekend traffic. Here’s how Forbes does it:
Commercial Events Trends
Certain commercial events like Amazon Prime Day, Boxing Day, Black Friday, Cyber Monday, etc., have a massive impact on the CPMs. Commercial events are highly promoted shopping events during which brands offer hefty discounts on their products. As readers rush to online sources for research and purchase, advertisers aim to push out more ads to attract these users. This increases the demand for ad inventories and hence, overall ad revenue.
We have compared a few websites from our US and UK publishers network to see how significantly the eCPM rises and falls within the weeks in and around Black Friday weekend.
What Publishers Can Do to Keep up With Commercial Events?
- Create commercial content for affiliate revenue: Pieces of content that help people with their buying decisions can help publishers generate additional affiliate revenue. Since people are already looking for products to buy, chances are high that they will click on links redirecting them to recommended products. Product reviews and lists of best products to buy are examples of content perfect for affiliate revenue. Here’s how BBC Good Food does it:
- Take advantage of Amazon’s Unified Ad Marketplace: Publishers should integrate Amazon’s Unified Ad Marketplace with their header bidding setups. Being one of the most players in the AdTech world, Amazon is likely to outbid most demand partners a publisher might have – especially during commercial events.
While the above-discussed seasonal CPM trends are experienced by most publishers, there can be many more trends depending on factors like niche and geography.
Direct deals are the best solutions to deal with such fluctuations. Also, publishers are advised to have a few direct deals planned for every quarter. For example, a clothing brand may start an end-of-season sale between June and July, and a smartphone brand may launch new phones during specific months of the year. All such events are good opportunities to sign direct deals and minimize the effects of seasonal fluctuations.
Header Bidding: An all-time Solution for Higher CPM
No matter what season it is, header bidding will always help publishers in increasing their CPM. Header bidding helps publishers get access to several demand sources. This, in turn, helps publishers increase their CPM and maximize their ad revenue while navigating through the seasonal ups and downs. Even if publishers do not sell a large chunk of their inventory on the open web, they should still try header bidding during the slow months.
Publishers should always be prepared for CPM seasonality. When the traffic, CPM, and revenues are low, and there is nothing left to do, publishers can constantly shift their focus to less urgent activities that considerably impact website performance. Publishers can work on improving the site’s UI, strengthening the website’s SEO, experimenting with content, or improving the site’s speed. They can also improve ad viewability and experiment with different ad positions that can potentially increase ad revenues.