Why have my ad revenues dropped?

If you are a publisher who cares about your website’s monetization, you no doubt always keep an eye on your ad revenues. Sometimes, when looking at your ad report, you may have noticed a drop in your revenues. And you’ve surely asked yourself: “Why have my ad revenues dropped?”. In this blog post, we will try to answer this question.

Summary

• Why ad revenues drop
• Seasonal variations
• What is the best metric to measure ad revenues?
• How can I improve my ad revenues?
• How can I find the right compromise?
  

Why ad revenues drop

Ad revenues may drop for several reasons. If you want to identify the problem, you should start by evaluating the duration of this negative trend. If the drop is only temporary, it might be caused by seasonal variations. On the other hand, if the drop lasts longer, it is probably due to structural issues on your website, or perhaps to choosing the wrong metric to evaluate your ad performances. Whatever the problem might be, it’s worth trying to solve it and improve your ad revenues.

Seasonal variations

One possible cause of a drop in your ad revenues could be related to seasonal variations. In specific periods of the year, advertising revenues could grow or drop due to a multitude of factors such as business trends and ad spending strategies.

These fluctuations are absolutely normal, and since they are seasonal, they are very easily identifiable. Normally, when brands plan their ad strategy, they divide the year into four quarters: January-March, April-June, July-September, October-December. The first and the third quarters are usually those in which publishers get the lower revenues, while the second and – even more so – the fourth quarters are the more profitable ones for publishers.

In the first quarter (Q1), revenues decrease for two reasons. First, consumers are often not willing to spend much money after Christmas. Second, brands typically use this period to launch new marketing strategies, products or advertising campaigns. Brands start this process by spending small budgets and buying a few ad spaces to perform initial tests, which will later be used to adjust the ad strategy. This leads to a drop in revenues for publishers just after the end of the year, which is a very profitable period, as we will discuss below.

Between April and June (Q2), things change. After the initial tests performed in Q1, brands are now ready to invest more money in ads. Furthermore, in some cases the end of June corresponds to the end of the fiscal year, requiring brands to spend their entire budget by the end of the month. This results in more revenues for publishers.

The third quarter (Q3) is similar to the first one: new semester, new strategies. Moreover, brands tend to spend less in this period in order to keep their budgets for the last months of the year. In many countries, Q3 also coincides with the summer months when a lot of people are away on holiday and businesses are quieter, something which can also hit spending.

Finally, the period between October and December (Q4) is when most shopping happens, due to Christmas and Black Friday. Therefore, brands try to maximize their visibility by spending more money and buying more ads. For this reason, this is the period of the year when publishers get the highest ad revenues.

What is the best metric to measure ad revenues?

Using a good metric is key to measuring your ad revenues. Indeed, some metrics are more effective than others in providing a reliable picture of a website’s monetization performance.

Often, publishers use CPM (cost for a thousand impressions) to evaluate ad revenues. They make this choice primarily for convenience, as this is the metric most used by advertisers (indeed, it expresses “cost”, not “revenue”). CPM represents the price a brand pays to buy a specific ad unit. However, a high CPM does not always imply that a website is well monetized. A brand that pays a high CPM but only fills 50% of the available inventory may result in less earnings for the publisher than another brand that pays a lower CPM but with a higher “fill rate”.

As we discussed in a previous blog post, the best metric to measure ad revenues is Session RPM (revenue for a thousand sessions), that is how much a publisher earns from one thousand sessions on its website (a session is a set of user interactions with a website that take place within a given time frame).

Session RPM is a reliable metric because, in contrast to CPM, it takes into account the actual viewability of the ads. Furthermore, it gives a broad picture of ad revenues because it goes beyond the economic value of individual ad units. Finally, this metric is not influenced by external factors more strictly related to the number of sessions in which the website is viewed. Indeed, the number of sessions may depend on factors such as content, distribution and SEO. On the other hand, session RPM doesn’t consider the absolute number of sessions, reflecting exclusively the effect of the monetization and the user experience strategy.

How can I improve my ad revenues?

If you are using a reliable metric, and the drop in your ad revenues is not seasonal but long-lasting, then there are probably some structural issues with your website. In this case, you may need to evaluate the layout of your website, its user experience and its ad units.

For instance, there may be a problem with the viewability of the ads. Indeed, the effectiveness of an ad depends on its position on the website. In general, the more a unit is viewable on a webpage, the more it is likely to be noticed and clicked by users. If the position of an ad unit is not optimal, that ad will have poor viewabilty, and therefore advertisers will be less willing to buy it.

As explained in another blog post, viewability could be improved in many ways. For example, ad units could be placed in clearly visible parts of the website, such as in the “above the fold” area (the higher half of the page). Even the shape of the ad unit is important: normally vertical units are more viewable than the horizontal ones. And let’s not forget the device used to open the website, because the same ad unit could have a different viewability when accessed from PC or from a mobile device: therefore, it could be wise to develop mobile-responsive pages that resize according to the device.

While ad viewability is certainly important, publishers should also take into account the user experience of a website. User experience is of great importance for at least two reasons. First, offering a positive experience should keep the user on the website and make them come back in the future. On the contrary, choosing intrusive ad units or heavy-weight ones that have negative effects on load speed, could cause the user to exit the webpage quickly, even before the page is completely loaded and the ads viewed. Second, Google’s Core Web Vitals are built on user experience. As we discussed in a previous blog post, Core Web Vitals are metrics Google uses to evaluate the user experience of websites. When these “quality signals” are found, Google awards the websites with a better ranking on its search engine, hence increasing the chances of the website to be found and of its ads to be viewed.

How can I find the right compromise?

Finding the right compromise between maximizing ad revenues and offering a positive user experience is not always easy. That’s why Clickio offers digital publishers an all-inclusive solution for monetization, with access to multiple demand partners and automated A/B testing to help find the right balance.

Click here to find out more.