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The problem with this kind of accounting is that it doesn't consider whether the ad was really necessary to make a sale in the first place. With a lot of brand

The problem with this kind of accounting is that it doesn't consider whether the ad was really necessary to make a sale in the first place. With a lot of brand keyword advertising, companies are paying for people to click an ad when they were already looking for your website anyway. So spending $3 on that customer is not a $27 profit but rather a $3 loss....

nl 7y ago
While buying your product name (or your competitor) is sometimes the case, this isn't the main source of volume in your pipeline. And it's still a $27 profit, even if it is possible you could have saved money. Most of the time a well-optimised PPC pipe looks for specific (non-brand) keywords and buys them, not just the product name.
- jeltz 7y ago
  While I agree that ads often are very effective, no it is just a $3 cost in some cases. Your ads can cannibalize on tge revenue from other, possibly cheaper, channels.
- jakobegger 7y ago
  Lets say it costs $3 to acquire a customer on average. And your margin is $30. That sounds good. Now do an experiment. Stop your ads. Do your sales go down 100%? In that cost the $3 cost was definitely justified. Do your sales go down 50%? That means you actually paid $6 to acquire a customer, not $3. Still sounds like a reasonable deal since you still make $24 profit, but other channels might be more profitable. Do your sales go down 10%? Then only one in 10 customers actually converted because of the ad, and you are paying $30 to acquire a customer and it would be better to stop the campaign. Google is just showing ads to people that would buy your stuff anyway. (Side note: I think this is a big problem with retargeting. You are paying to show ads to people that are already very likely to buy your stuff -- or even worse, who have bought it already. But conversion rates are really high!) (To be fair, this is speculation and not based on experience with adwords. My only experience with adwords was a $100 campaign I made a few years back with promotional credit that resulted in no conversions)

nl 7y ago

While buying your product name (or your competitor) is sometimes the case, this isn't the main source of volume in your pipeline. And it's still a $27 profit, even if it is possible you could have saved money. Most of the time a well-optimised PPC pipe looks for specific (non-brand) keywords and buys them, not just the product name.

jeltz 7y ago
While I agree that ads often are very effective, no it is just a $3 cost in some cases. Your ads can cannibalize on tge revenue from other, possibly cheaper, channels.
jakobegger 7y ago
Lets say it costs $3 to acquire a customer on average. And your margin is $30. That sounds good. Now do an experiment. Stop your ads. Do your sales go down 100%? In that cost the $3 cost was definitely justified. Do your sales go down 50%? That means you actually paid $6 to acquire a customer, not $3. Still sounds like a reasonable deal since you still make $24 profit, but other channels might be more profitable. Do your sales go down 10%? Then only one in 10 customers actually converted because of the ad, and you are paying $30 to acquire a customer and it would be better to stop the campaign. Google is just showing ads to people that would buy your stuff anyway. (Side note: I think this is a big problem with retargeting. You are paying to show ads to people that are already very likely to buy your stuff -- or even worse, who have bought it already. But conversion rates are really high!) (To be fair, this is speculation and not based on experience with adwords. My only experience with adwords was a $100 campaign I made a few years back with promotional credit that resulted in no conversions)