Understanding Performance Fluctuations Over Time

April 22, 2019
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A common question among publishers, especially in their early stages, is why there are certain fluctuations over the year both traffic- and revenue-wise. For many, these changes appear random, which 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, which 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, which is usually used for further budget planning, business development, etc. When dealing with advertisers directly, this is usually communicated on a regular basis so that publishers have an idea of what to expect. However, 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, but let’s take a look at some universal trends that impact the industry on the whole.

Seasonality

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. The first quarter is referred to as Q1, the second – Q2 and so on. It’s internationally accepted in corporate circles that Q1 begins in January, correlating with the calendar year, even though some governments may have a different start of the fiscal year. 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, since for most industries, the first few months of the year stand for a massive decrease in sales which is also reflected in 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, but these usually stack on top of the existing trend instead of being a replacement.

  • Holiday Season

The last quarter of the year is when publishers are seeing the biggest profits and 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, 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, which 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.

Vertical dependencies

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 and there are massive budgets being spent prior to launch. Meanwhile, summer months are expected to be slow with purchases in consumer electronics being at their lowest. At the same time, travel blogs can be quite profitable in the spring, as 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 in their field, that 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 and identify when they’re being most profitable. There can certainly be differences from one year to another, 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, as 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, which 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, making 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, with respect to the particular time it’s extracted at. It’s perfectly natural to be adverse to performance dips, but you should try to stay objective and understand that consistent growth happens over larger periods of time, instead of on a day-to-day basis. If you’d like to evaluate the success of the business, a good way to go about 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, which can easily be confused as a positive development if one’s not careful enough to look at the data methodically.

Conclusion

In order to be able to make an accurate assessment of your website’s performance, you should first be familiar with the trends that are 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.

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