Last updated on June 2020
We’ve always discussed how it’s important to understand how seasonality affects CPMs in order to effectively benchmark, forecast, and predict revenue. As we move into July and August, publishers in the northern-Atlantic regions, like North America and Europe, may have expected to experience one of their weakest quarters of the fiscal year, but with COVID-19, all bets on typical seasonality patterns are off. There’s no need to panic however — seasonal slowdowns are a common occurrence in the advertising industry.
Where do advertisers spend their money?
Advertisers in these regions increase their spend for major events like Black Friday, Christmas, Super Bowl Sunday, and after the booming success of Amazon Prime Day in July of 2019, it will surely be included in years to come. They also tend to spend the least amount of money in the first month of the quarter, and the most in the last month of the quarter. As a result of this, publishers will see corresponding decreases and increases in CPMs. Essentially, advertisers spend the most when consumers are more likely to make purchases, and consumers aren’t spending significantly in the summer months. Here are the main reasons for the summer slowdown:
- Lack of major events – Compared to other months, there are no significant consumer holidays that would result in an increase in ad spend. Although the Fourth of July is a popular holiday, consumers don’t necessarily have a need to shop for it.
- More vacations – Many consumers use summer to spend quality time with family and friends rather than spending it on goods or services. Since there are fewer users to advertise to, there’s a loss of competition, driving down ad spend and CPMs.
- Lowered ad budget – Due to this yearly trend, advertisers generally lower their ad budgets in Q3. Decreased ad spend equates to decreased CPMs. Advertisers will budget accordingly by redirecting spend to prepare for the next quarter which can be more profitable.
When we throw in the wrench-in-our-proverbial-works that is COVID-19, these seasonality effects become even more relevant. Brands are staying away from committing large quantities of their ad budgets until they can be relatively certain that they’ll see a return on that investment. For industries like Travel, Health & Fitness, Real Estate, and Sports, brands may be electing to hold all ad spending until closer to the holiday season when spending is reasonably assured and anticipated, even in the face of pandemic related changes.
We’re doing our best to keep everyone updated regarding COVID-19 and the effects we’re seeing in the industry. Did you miss our Q1 update? Or our monthly updates for April and May? Make sure to check them out!
How advertisers spent their money (year-over-year)
As you can see in Figure A (below) comparing 2017 and 2018, July and August experience some of the lowest CPMs of the year. CPMs increase into September and leading into Q4. Ideally, the money that was lost in Q3 is made up in Q4.
Figure A: CPM Index for June to December in 2017 and 2018.
Looking at data that’s more current, we can see the same seasonality trend — though less dramatic — occurs in 2019, with a noticeable uptick in CPM values in July, a result of Amazon Prime Day. The thing to note in 2020 is that the lowest CPM months actually occurred in March and April as a result of the pandemic, which by seasonality should have been months that showed higher CPMs than January or February. June and July of this year will likely look quite healthy by comparison! Also, since Amazon Prime Day for 2020 has been postponed, we can’t expect July of this year to be as healthy as it was in 2019. We will keep you up to date regarding these trends as they unfold as the year continues.
Figure B: CPM Index for June 2018 through to June 2020.
Recommendations and insights
Previously, we recommended that publishers curate their content related to travel and summer-focused topics to mitigate the decrease in CPM, but with COVID-19 shuttering most travel destinations and having consumers looking at a staycation, this advice may not be prudent. Instead, publishers can begin promoting summer-oriented staycation and domestic travel content to try to improve their user base to get more lucrative summer advertising campaigns. Travel and summer-focused publishers may see decreases in daily revenue because of changes in travel plans. Keep in mind that we may still see the traditional dip in CPMs in the first part of July due to the reset of marketing budgets that starts off a new quarter. But, they’ll still likely see an overall CPM increase over the month of July in comparison to the months of March and April as borders start to open back up and flights to travel destinations resume through June, July and into August (hopefully!).
These seasonality trends are more prevalent in Western cultures where the school year is between September and June. Seasonality differs between regions and the societal norms within the culture. South-East Asia, for example, has different holidays and events and so their seasonality would coincide with that. The effects of COVID-19 however, have been more global — so expect CPM decreases around the world and across industries.
Even with an optimized ad stack, there are limited actions we can take to get consumers to return to their devices and their usual spending habits during the summer months. The good news is, it’s a short period of time relative to a full year! Consider diversifying your ad formats with things like Sortable Video, and improving your overall site traffic in order to mitigate both the seasonal drop in CPM, as well as the effects of the pandemic. Also, if you haven’t already, make sure that your ads.txt file is up to date or you may be missing out on valuable revenue. Better yet, if you’re already with Sortable, make sure to contact your customer success representative and ask about our Hosted ads.txt product where the lines always stay up to date!
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