A note in the MediaPost column discusses the recent rise in revenue for marketers advertising in search engines …
“Marketers who purchased listings on search engines saw revenue nearly triple in the three days after Thanksgiving, according to data released Friday by DoubleClick. The average daily revenue attributable to paid search for the three-day weekend following Thanksgiving was up 242 percent from daily revenue during the third quarter, according to DoubleClick’s analysis of aggregate data from Performics, its search marketing unit.”
The MediaPost column states that the amount of customers that converted from paid listings rose by 98% and that the number of users who clicked on paid listings rose by 85%, but what does that mean? Below, I’ll show you a real world example.
Interpreted… The number of users that converted from paid listings only actually increased by 13% over the amount of visitors that found the site from paid listings. My example below clears this up …
Paid Listing Real World Example:
Site xyz.com normally has 100 visitors per day from Paid Listings
They Convert at 2%
Their avg cost per visitor is $.25
Average Sale From Paid Listings $50.00
Total Average Cost Per Day = 100 x .25 = $25.00 cost of clicks per day
Average Number of Sales Per Day = 100 x .02% = 2 Sales/Day
2 Sales/Day x $50.00 = $100 in Sales on $25 of Ad Spend
Baseline Return on Investment:
$100 sales / $25.00 (cost of ppc) = 400%
If we use the numbers above and the stats from MediaPost you’ll get the following …
Example:
Traffic Increase of 85%: 100 visitors x 1.85 = 185 visitors/day
185 visitors x $.25 (avg cost per click) = $46.25 cost of clicks per day
2% Normal Conversion Ratio x 1.98% (increased) = 3.96% new conversion rate
New Totals Based On Increased Traffic & Conversion Ratio
185 visitors x 3.96% conversion ratio = 7.3 sales
7.3 sales x $50 avg. sale amount = $365 in revenues
New Return on investment:
$365 sales / 46.25 (cost of ppc) = 789%
Obviously these numbers are suppose to make it easier to understand what the Thanksgiving weekend numbers really mean. On average, sites using ppc were going from a 400% ROI to 789% ROI for that weekend [using the above numbers as an example]. Not too shabby. What does that mean? People who used ppc the Thanksgiving weekend made a lot more sales than they normally did on the same amount of ad spending.
Jason Dowdell is a technology entrepreneur and operates the Marketing Shift blog.
