Why Ad Rates Tend to Drop Start of Year and What You Can Do Now

In any industry, there are certain patterns of business that recur over time. The online advertising industry is no different. While certain times of the year bring revenue records and skyrocketing ad rates, like Black Friday, there are other times of the year that witness dips, including the beginning of the calendar year. As we approach January, we can expect to see dips in ad rates since we have seen them historically at this time of year over the last 5 years. However, because we can anticipate them, we can be poised to combat them and understand what to look for in our data to avoid any revenue panic. We understand that publishers take their website revenue very seriously, as it can be a source of livelihood for many people, so we want to give you tips to follow during seasonal dips like this upcoming one.

This blog explains why we see dips in revenue at consistent intervals, how to best prepare yourself for these dips, and why you shouldn’t be too worried about these dips.

Quickly navigate through the blog by clicking on the following section headers: 

• What is ad seasonality?
• Why do ad rates fall in Q1?
• Why we aren’t worried about this
• What you can do

Want to watch a video on ad seasonality? Check out our episode on Ezoic Explains:

What is ad seasonality?

Within the online ad revenue index, you can visibly see certain spikes and dips that repeat at given intervals, almost like a heart rate monitor of the online ad industry.

Simply defined, ad seasonality is a word we give to the fluctuation of ad rates throughout the year. When different major events happen, like Black Friday for example, ad rates spike across the online ad industry. In other time periods, ad rates can fall, but this is “seasonality” because we expect it to happen with the flow of the year. Similarly, certain niches might see certain topics or keywords rise or fall in popularity depending on the time of year. For instance, in the summer, maybe there would be more searches for specific lawn care terms. Or in the winter, more searches for holiday recipes.

Understanding seasonality unlocks it as an opportunity to grow your site. If you can ride the waves of the year and understand what happens with keywords and ad rates in your niche, you can optimize your site to earn the most possible.

As you can see in the graphic below, there is a large spike every Q4 (labeled as “December,” although the single highest spike is typically Black Friday each year). Then, like clockwork, Q1 begins and the fall in ad rates is considerable.

Why do ad rates fall in Q1?

The explanation for dropping ad rates has to do with one main player in the advertising ecosystem. 

As we’ve previously explained in our blog “Understanding the Advertising Ecosystem and How Your Site Can Benefit,” there are three main players in the advertising game: the user, the publisher and the advertiser. The key to ad rates and what happens to them when Q1 hits is related to the advertiser and its habits.

In the general advertising industry, many decisions are made on budgets in advance. Many budgets are distributed on a monthly or yearly basis. When this happens, it’s common to see falls in ad rates at the end of the month, and again at the end of the year.

To understand this, it helps to put yourself in the position of the advertiser or marketer. If I am in charge of online advertising for a popular shoe brand, I probably know how my numbers typically look each month, so I have certain times of the year I spend more on advertising. It is also possible that I have agreements with ad agencies and pay them on a monthly, quarterly, or annual basis. This would explain why the money runs out at the end of the month, end of the quarter or end of the year. 

Logistics decisions for businesses are often made at these regular intervals, across many brands. With the Q4 to Q1 decision specifically, we are talking about annual budgets and the end of holiday shopping. 

With many brands’ advertising budgets, the logic is to spend the money or risk an advertising budget getting cut the next year. With this in mind, they often spend up a lot of extra remaining money on online ads toward the end of the year, with it being easily justified by the holiday season. Naturally, when January rolls around, there isn’t as popular of a consumer spending event to advertise for (for most industries). 

Why we aren’t worried about this

When a change happens every year, and we are prepared for it, it is much less daunting. We know, far ahead of time, that ad rates are likely to drop in Q1. For two reasons, we really aren’t worried about this. First, because even if publishers think their earnings are dropping more significantly, they aren’t. Second, because this is a normal aspect of the industry and a bounceback can be expected.

We also know that publishers get worried when they see drops, and this is understandable. Each year, however, we hear publishers complain that the drops seem “abnormal” or “bigger than usual.” In 99% of cases, this is not the case. 

Year over year, not only do publishers’ earnings rise, but online ad rates rise as well. (This year saw the highest record of all time on Black Friday, marking a new index ‘100’ that day.)

When publishers are earning more, the earnings drop they see is bigger in magnitude. It is, however, typically the same percentage. 

Second, as we stated before, we know this happens every year, but we also know that starting later in the year, around February or March, the ad rates will begin to climb back up.

What you can do

While we aren’t worried about these ad changes, we also want to give tips on how to best weather the storm.

1. Do not make significant site changes on or near January 1.
   1. If you are already worried about the drop in revenue you will see, it is best not to make other significant changes to your site near that date. If you make a change and see a revenue drop, it will be difficult to identify if there is a legitimate reason for the EPMV drop besides the seasonality.

This infographic gives some insight into other factors that can impact EPMV besides seasonality.

2. Make sure you are taking advantage of the best content and keywords
   1. Before Q1 arrives, take a deep dive into your Big Data Analytics. Do you have any evergreen content that stopped ranking? Do you have any content relative to January that you can create or revamp? 

If you can keep your cool and stay the course, your site will bounce back in no time after these changes.

More content on seasonality to check out:

• Blog: How to Maximize Your Q4 Ad Earnings
• Blog: How to Change EPMV On Your Website
• Blog: Why Website Ad Revenue Goes Up or Down (EPMV and RPS)
• Blog: Why Do Ad Rates Drop In July? (CPMs)
• Blog: The Percentage of Annual Revenue Publishers Make Per Quarter
• Webinar: Optimizing Placeholders for Q4 with Ezoic’s Plugin (PST – California)