After a fruitful festive season (Q4) that has generated the highest revenue in the entire year, publishers experience a sudden drop at the beginning of the year (Q1). Don’t feel that it’s a bad start looking at the January revenue drop. It’s normal in ad tech. In this post, we’ll take a closer look at what’s causing the Q1 decline in ad requests, fill rates, CPMs, and revenue. We’ll also show you how to combat the Q1 ad revenue slump.
The post-holiday hangover
During the festive season with Black Friday, Thanksgiving, Christmas sale, advertisers want to make the most of it, as the potential conversion rates for an ad spend would be much higher. As a result, they have exhausted their budgets during November and December months. To compensate for that, advertisers tend to clamp down on ad spend in January and most of Q1.
Drop in ad request
Ad requests are directly proportional to pageviews and sessions. Generally, users tend to surf pages a lot during the festive season to get the best offer/deals, like online shopping/purchasing, etc. During this period, page views and sessions generated per each user would be much higher, compared to their average during previous months. After the holiday season, this spike subsides and returns to normal or could even be lower than their monthly averages. This behavior ultimately has a direct impact on the number of ad requests generated from a publisher’s site.
Drop in CPM
Advertisers and buyers lower their spending in anticipation of the change in user’s behavior and tend to bid lower on ad impressions during Q1. During this time, most of their advertising budgets get revised based on the conversions/ROI received during the holidays. This directly translates to the lowering of inventory worth from their perspective, which causes the overall slump in CPM/bids.
Now that you have a better idea of why ad revenue drops during Q1, what can you do about it?
It’s time for a quick change, consider adjusting floor prices
A well-known strategy is to increase floor prices during the holiday season (November-December). Now that we’re well past that, the obvious step would be to revise floor prices and lower them based on the bidding approach of Advertisers/Buyers. With high floor prices, drained out buyers would channel out the bids even before participating in an auction. Bringing down floor prices would ensure the overall fill rate doesn’t slide down also if it means lower valued bids. Balancing these two metrics, floor prices, and fill rate would be the best initial approach, to pull up the overall performance/revenue.
Explore revenue sources by onboarding new demand partners
The best way to increase your inventory worth is by adding more competition to your ad stack. Test out new demand partners or negotiate better terms on deals. If you’re not running Header bidding yet, it would be a great time to test it out. Header bidding adds competition to your ad auctions.
For an overview of how Header bidding might help you boost performance, this article is a good read: https://www.monetizemore.com/blog/header-bidding-a-to-z-publisher-guide/
Check if there are any other reasons for the drop
- Compare the drop in revenue by analyzing historical data, for the last two years and check if the percentage of the overall decline is abnormally high
- Check if there are any new policy violations on the page
- Check if there is any change in your audience demographics and user spread.
Experiment with the layout of your site
If you would like to change the ad placement or experiment with a new site layout, this would be the best time for it. As previously mentioned, traffic is usually less during Q1, which makes risking losing revenue lower when compared with testing during peak performing months.
Seeing ad revenue decrease after a great Q4 in Q1 is never something any publisher enjoys. Unfortunately, it’s part of the ad revenue seasonality in the world of digital advertising. Remember to adjust your floor prices, test out new demand partners, run header bidding, and dive deeper into ad revenue drops to combat the Q1 slump. If you don’t know how to adjust floor pricing or optimize your ads accordingly, why not let the ad optimization experts take care of it for you? Sign up to MonetizeMore and let us help you beat the Q1 slump and maximize ad revenue!