Question

Each advertiser is bidding $3 CPM. Is this a good idea? For which advertiser it makes sense and for which it doesn’t? Fill out the blank parts of the chart and provide reasoning.

	Advertiser 1	Advertiser 2	Advertiser 3
CTR	0.8%	0.7%	0.6%
Conversion Rate	2.3%	3.1%	1.9%
Profit per conversion	$15	$20	$30
CPM	$3	$3	$3
CPC
CPA

Answer 1

ANSWER

(a) CTR is the level of advertisements clicked per number of impressions.

Henceforth out of each 1000 impressions (which will cost $3), 8 of them will be clicked.

Thus, Cost per click (CPC) = Total expense of snaps/Total number of snaps = $3/8 = $0.375 per click

(b) Cost per Action (CPA) is the expense caused by a publicist in changing over a client (making a deal).

From (a), 8 promotions will be clicked, out of which change will be of 0.184 customer(s) (2.3%)

From (a), 8 notices will be clicked, out of which transformation will be of 0.184 customer(s) (2.3%)

CPA = Total expense brought about in playing out the activity/Total number of activities performed

= $3/0.184 = $16.304 (approx.) per activity (deal)

(c) CTR is the level of promotions clicked per number of impressions.

Thus out of each 1000 impressions (which will cost $3), 7 of them will be clicked.

In this way, Cost per click (CPC) = Total expense of snaps/Total number of snaps

= $3/7 = $0.4285 (approx.) per click

(d) Cost per Action (CPA) is the expense brought about by a promoter in changing over a client (making a deal).

e) CTR is the level of advertisements clicked per number of impressions.

Consequently out of each 1000 impressions (which will cost $3), 6 of them will be clicked.

Along these lines, Cost per click (CPC) = Total expense of snaps/Total number of snaps

= $3/6 = $0.5 per click

(f) Cost per Action (CPA) is the expense brought about by a publicist in changing over a client (making a deal).

From (e), 6 notices will be clicked, out of which transformation will be of 0.114 customer(s) (1.9%)

CPA = Total expense acquired in playing out the activity/Total number of activities performed

= $3/0.114 = $26.316 (approx.) per activity (deal)

CLARIFICATION

This is anything but a smart thought for Advertiser 1 since his expense of procurement (CPA) surpasses his benefit per change. He/She will bring about a total deficit of $1.304 per transformation.

This is DEFINITELY a smart thought for Advertiser 2 since his benefit for each transformation surpasses his expense of securing (CPA). He/She will bring about a net benefit of $6.175 per change.

This is DEFINITELY a smart thought for Advertiser 3 since his benefit for each transformation surpasses his expense of procurement (CPA). He/She will bring about a net benefit of $3.684 per change.