### Question

Topic: Student Questions

## 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.

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?

### RESPONSES

• Posted by Jay Hamilton-Roth on Accepted
• Posted by mgoodman on Accepted
Do you have a fixed budget, or can you spend more to take advantage of lower pricing? You only pay for clicks, right?
• Posted by Shelley Ryan on Moderator
Hi Everyone,

I am closing this question since there hasn't been much recent activity.

Thanks for participating!

Shelley
MarketingProfs