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No, and here's why. The goal of selling your software is to make profit, so that's what you maximize. Let's look at some examples for comparison. Alice and B
by URSpider94 17y ago
No, and here's why.
The goal of selling your software is to make profit, so that's what you maximize. Let's look at some examples for comparison.
Alice and Bob are both selling software. Their per-copy expenses are $1.
Alice advertises on AdWords for $.10 per click, and has a 10% conversion rate. So, her cost per sale is $2 ($1 cost + $1 AdWords). She sells each copy for $3, making $1 profit. She sells 100 copies per month, making $100.
Bob advertises on AdWords for $.199 per click, and has the same 10% conversion rate. His cost per sale is $2.99 ($1 cost + $1.99 AdWords). He sells his software for $3 per copy, making $0.01 profit.
Homework questions: how many copies per month does Bob have to sell to make more profit than Alice? Is it likely that an increase in AdWords bid from $.10 to $.19 will drive that kind of difference in click-throughs?
- joelhaus 17y agoThe goal is to reach your optimal profit point; where an increase in expenditures would result in a decrease of overall profits. For adsense, this requires careful/constant measurement/iteration. More here: http://en.wikipedia.org/wiki/Profit_maximization#Marginal_cost-marginal_revenue_method http://en.wikipedia.org/wiki/Profit_maximization#Marginal_co... Good article for the adsense illiterate though.
- bemmu 17y agoI think we had a different interpretation of the situation, but let me know if I got something horribly wrong below, because I'd love to know before going out and doing the mistake in the real world. Note I said _bidding_ 99.999% of profit. If Alice makes $1 profit when she bids $.10, then even if she bids $1.10 she would still get all those $.10 clicks and make her $100 profit, but additionally would get some other profitable clicks as well. Does this make sense, or am I misunderstanding something?