Oh, the CPMs outside are frightening… If you’re an advertiser, you’ve probably seen it. CPMs go up outrageous amounts, and your leads start to slow down. If you’re a retailer, sure you’re seeing sales, but at what cost? Why does this happen every year? Let’s explore how bidding algorithms work and how you can keep your budget under control in December.
AI-powered bidding is one of the most popular use-cases of AI for advertising, be it programmatic or social, but it can be hard to wrap around how it really works. Sure, you can put in your limits, what you don’t want to pay by CPM or what you don’t want to pay by click, and your DSP will just stay within that, but there’s so much more that goes on behind the scenes in the bidding algorithm.
The most prominent or widely known bidding algorithm is called “real-time bidding.” Real-time bidding refers to the way algorithms bid, optimize and place ads for advertisers. This all happens in a matter of seconds. The simple breakdown of how this works is as follows:
Some algorithms can be customized, but usually they live and breathes within the DSP that runs it. For example, Google’s Smart Bidding can be set to 4 different strategies: maximize conversions, target CPA, Target ROAS and maximize conversion value.
The positives are that the advertiser themselves do not have to place or make deals manually, saving time and effort. The negatives are the exact opposite. Since there is no one viewing what the bid floor is per publisher, some organizations may feel that the bidding algorithms lack transparency in cost. Another big downside is that an algorithm can’t optimize out of anomalies. For example, Holiday CPMs go up, therefore the algorithm may not be able to optimize within your CPM limits.
Consumer Acquisition predicts that CPMs will increase between 30-40% between Black Friday and the Holidays across social. This is a trend that reoccurs every November/December.
CPMs rise during the holidays because there is more competition and more advertisers who are willing to pay more for placements. Advertisers are spending more money and with a similar amount of publisher space, it jacks the costs up. It’s like when California has a bad grape season, so grapes are more expensive for a year: supply and demand.
The biggest advice we can give is to start your prep earlier. We’ve put together a comprehensive guide on Holiday Advertising.
Also, if you are not a retailer or selling a product, it’s recommended to monitor your budgets and assess your past performance during the holidays. You can also test into a new advertising format. On-Stream has lower CPMs and 2.3X higher CTR than display.
Yes! Expand your ad placement opportunities. By doing this, you’ll not only increase the ROI on your videos, you’ll help to grow inventory during the holiday season. If you have videos on your site, you can do this without adding more mid-roll ads. Increase your revenue with one line of code from CatapultX.
Happy Holiday Advertising!
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