Question

Topic: SEO/SEM

How To Maximize Revenue (ctr)?

Posted by Anonymous on 250 Points
I'm trying to figure out a pricing problem for ads.

Definitions

Click : when a user clicks on an advertisement. only a portion of users click on ads.

Impression: the times an advertisement are displayed to users.

Order : when an person purchases after clicking on an ad. Only a fraction of users who click on ads purchase.

Scenario

The goal is to maximize absolute profit.
Ad slot 1 has a cost per click of $3.75, a click through rate of 1.75%
Ad slot 2 has a cost per click of $2.50, and a click through rate of 1%
Ad slot 3 has a cost per click of $0.75, and a click through rate of .25%

12% of people who click on the ad make a purchase. The profit margin is $50 every time someone places an order.

Questions

1. At what click through rate for slot one would a person not care between slot 1 and slot 2?

2. What is the cost per order of the purchases gained by moving from slot 3 to slot 2?

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RESPONSES

  • Posted by Jay Hamilton-Roth on Member
    Is this your homework assignment?
  • Posted by mgoodman on Moderator
    Do you have a fixed budget, or can you spend more to take advantage of lower pricing? You only pay for clicks, right?

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