MEASURING ROI FOR

SPONSORED ADS
PRESENTATION BY: GROUP 02

ROHIT RAO | MBA/0297/56 SAPTASHWA SARKAR | MBA/0208/55

HARITHA UNNIKRISHNAN | MBA/0423/56 ABHINAV | MBA/0161/56

TWINKLE CHOUDHARY | MBA/0398/56 NAZRIN M H | MBA/0197/56

PRACHI VERMA | MBA/0136/56 PRATHNA DISODIA | MBA/0286/56

CASE BACKGROUND

• Case Facts:
• Probability of customer making purchase = 12%
• Average margin per conversion = $21
• Cost per click for sponsored link = $0.60
• From the above data we can conclude that revenue per click is (0.12 x 21) $2.52.
• Bob’s calculations till this point seem correct. He goes on to calculate ROI using the following
formula.
• ($2.52 - $0.60)/($0.60) = 320%
THE ERROR

• Wrong assumption done here by Bob is that all clicks received from the sponsored link
can be attributed to the advertisement campaign alone.
• I.e. if the advertising campaign were not conducted, Bazaar.com would have lost all the
customers who accessed their website from the sponsored links.
• Checking for the accuracy of this assumption should establish the correctness of Bob’s
calculation.
• In order to do this, we check the data from weeks 10-12
10 when the advertising campaign
was active on Bing but not on Google.
SEASONALITY FACTORS CHECK

• We need to first confirm the presence of seasonality factors in the number of clicks. We
check the data for the advertising campaign on Bing. Graphs shown below plots the data
for Bing.
Sponsored Organic
4500 16200
16000
15800
15600
15400
4000
15200
15000
14800
14600
3500 14400
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
SEASONALITY FACTORS CHECK

• Looking at the data for Bing we can see that Total

there is not significant hike or drop in clicks 20200

over the duration of the advertisement 20000

campaign. The biggest hike/drop between 19800

19600
consecutive weeks being less than 2.2% of the
19400
average clicks over the duration for
19200
Organic, Sponsored as well as Total clicks. 19000

• This allows us to conclude that there is no 18800

seasonality factor between the weeks and we 18600

18400
can compare the clicks over weeks 10-12 with
18200
those of weeks 1-9. 1 2 3 4 5 6 7 8 9 10 11 12
GOOGLE ADVERTISEMENT CAMPAIGN

Organic
• There is no significant change in number of total 160000
clicks between the 9th and 10th weeks. There is 140000
120000
only a fall of 1.20%* in the number of total clicks. 100000
80000
This dip is expected. 60000
40000
20000
• There is a significant increase of 21.79%* in the 0
1 2 3 4 5 6 7 8 9 10 11 12
number of organic clicks between weeks 9 and
10 (with respect to the average number of Total
organic clicks between weeks 1 and 12). 165000

160000
• This increase indicates that a considerable part of 155000

sponsored clicks received would have been 150000

received as organic clicks if the advertising 145000

campaign had not been conducted. 140000

135000
1 2 3 4 5 6 7 8 9 10 11 12

*with respect to the average number of total clicks between weeks 1 and 12
CORRECT ROI CALCULATION

• Therefore, the no. of actual sponsored clicks considered in Bob’s calculations is

incorrect
• We can safely assume that the traffic that was earlier coming from Google Sponsored
search ads, has now been directed through Google organic search

Average
Weeks 1-9 10-12
Sponsored 31390 0
Organic 125199 148476
Total average 156589 145476
CORRECT ROI CALCULATION

• Thus, between weeks 1-9 and 10-12 12 the total traffic lost is (156589 – 145476) = 8113.
This was in fact the actual traffic that they were getting through the sponsored ads alone.
• The ROI calculation is thus modified as:
• Traffic through sponsored ads alone = 8113
• Investment = 31390 * 0.6 = 18834
• Return = 8113 * 0.12 * 21 – 18834 = 1611
• Therefore, Actual ROI = (1611/ 18834) * 100 = 8.55%