MARK3054 Lecture Notes - Lecture 10: Pay Per Click, Adwords, Online Advertising
Topic 10: Online Advertising and Pay Per Click Analysis
Advertisement Personalisation (different items, versions, orders) Basis? Customer characteristics,
search history, purchase history, location, time, weather
Search Engine Advertisement Payment History:
1. Pay by number of impressions
2. Pay per click (platform has an incentive to improve)
Conversion: Site design is important, mobile is important
Terms:
CTR (click through rate)= click/impressions
CPC (cost per click)
Conversation Rate = people buy/people visit i.e. clicks
CPA (cost per acquisition)
Google’s AdWords Auction:
Generalised Second Price Auction (GSP) as First Price Auction causes unstable bidding and for
bidders to not bid true amount.
1. Determine your max profitable cost per acquisition (i.e. max profit)
2. Determine your conversion rate
3. Calculate value per click
4. Adjust bids so value per click= incremental cost per click (ICC)
ICC = cost of incremental clicks/number of incremental clicks
Cost of higher bid – lower bid /number of higher clicks – lower clicks
If value per click < ICC, lower bid
If value per click > ICC, increase bid
However, issue is that:
1. Does not account for competitors
2. ICC result is very sensitive to small changes in data
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Topic 10: online advertising and pay per click analysis. Customer characteristics, search history, purchase history, location, time, weather. Search engine advertisement payment history: pay by number of impressions, pay per click (platform has an incentive to improve) Conversion: site design is important, mobile is important. Conversation rate = people buy/people visit i. e. clicks. Icc = cost of incremental clicks/number of incremental clicks. Cost of higher bid lower bid /number of higher clicks lower clicks. If value per click < icc, lower bid. If value per click > icc, increase bid. However, issue is that: does not account for competitors.
