Q4 effect

The fourth quarter is when retailers make their year, and they advertise accordingly. From October budgets swell, peaking around Black Friday, Cyber Monday and the weeks before Christmas. Then in January spending falls back abruptly.

For an arbitrageur, Q4 is a tug of war. On the selling side, more advertisers with bigger budgets push up bids on the search feed, so RPC tends to rise, especially in shopping-related verticals. On the buying side, the same advertisers crowd the auctions on social and native platforms, so CPM and CPC rise too. Whether the spread improves depends on the vertical and on how well the operator's keywords match what advertisers are chasing that season.

Three practical points. Costs can spike within days around the big shopping dates, so limits and automation rules need to be in place. Larger Q4 spend means a larger cash-flow float, collected in January and February. And the January fall catches operators who mistake seasonal strength for a permanent improvement and enter the new year with budgets set for December's prices.

An example

Say in November RPV rises 25% from $0.27 to $0.3375 while CPC rises 40% from $0.20 to $0.28. Profit per visit shrinks from $0.07 to about $0.06 despite higher revenue: ROI falls from 35% to about 20.5%.