8 ms·

What is the average ROI on advertising by using google AdSense et. al? Advertising is an assumed cost of business for any medium to large company these days, b

by drones 3y ago

What is the average ROI on advertising by using google AdSense et. al? Advertising is an assumed cost of business for any medium to large company these days, but I feel there's a growing silent minority who slowly believe, slowly know, that advertising in the online space is unfeasible for a majority of products. Advertisers like google make so much money because online advertising is one of those things that is super easy to keep throwing more money at. I wonder how many companies would benefit from entirely ditching online advertising and pursue alternate methods like direct outreach or sponsored content. We might see 4,000-10,000 advertisements a day[1]. Do you remember two advertisements you saw today? Mere-exposure effect is the only thing going for it. Which may be fine if you're Coca-Cola, not so much if you run an online clothing store. [1]https://webtribunal.net/blog/how-many-ads-do-we-see-a-day/#:~:text=According%20to%20marketing%20experts%2C%20the,social%20media%20is%20an%20ad https://webtribunal.net/blog/how-many-ads-do-we-see-a-day/#:....

napo 3y ago
> direct outreach to key customers are you talking about b2b? I don't know what you have in mind. Sounds like you are suggesting companies should start calling me or knocking on my door instead of puting ads on google search results. That doesn't sound great.
- saulpw 3y ago
  How about giving out free samples in the supermarket? Going to a conference and talking with people? Busking at the farmer's market?
- drones 3y ago
  Yeah, edited my comment. Agreed that direct outreach is ineffective if you aren't b2b. If you're selling commercial products for a mass market, I think doing things like sponsored content might be more effective. If I'm selling products to businesses or a few customers, it's better to do outreach by attending industry events, talks etc... I think the cold approach still works.
  - ebiester 3y ago
    It’s all of the above for B2B. The cold call and email definitely makes some money - that’s why people do it. Ideally, they already know who you are when they get the cold call.
danpalmer 3y ago
There's no such thing as an overall average ROI. "Good" marketing, for a B2C company, is often defined as a 3x CAC/LTV ratio and 12 month payback. That means for every $1 you spend on advertising you make $3 in gross profit, and you get back $1 after 12 months. This is fairly healthy for many businesses, but some businesses may be looking for a 1 month payback, or may be looking for a 5x LTV. It's also possible to trade off LTV and payback, the latter may be more important for a fast growing business so that they're not tying up capital, and they may not yet have enough data to accurately predict 3 or 5 year LTV anyway. In reality though these things fluctuate all the time, you may have 2-5 marketing channels at a small company (e.g. FB, IG, Adsense, YT, direct mail, out of home, etc), of which some will be better and others will be worse, and you blend them together, changing proportions over time as channels change in effectiveness or cost.
- placesalt 3y ago
  What do 'CAC' and 'LTV' stand for?
  - johnkpaul 3y ago
    Customer acquisition cost and lifetime value
  - skyper 3y ago
    Customer Acquisition Cost LifeTime Value
  - inductive_magic 3y ago
    According to ChatGPT, in the context of gps post: "CAC" stands for "Customer Acquisition Cost." It represents the cost a company incurs to acquire a new customer, including all the costs associated with marketing and advertising. "LTV" stands for "Lifetime Value." It represents the total net profit a company expects to earn from a customer throughout their entire relationship with the company. This takes into account all the revenue a customer will bring to the company minus any costs associated with serving that customer over their lifetime.
yunohn 3y ago
> We might see 4,000-10,000 advertisements a day[1]. Yeah, that’s definitely false. At best 100+.
- lcnPylGDnU4H9OF 3y ago
  The article might be an interesting read for you. What you say is supported by their findings: > We only register under a hundred. And we pay conscious attention to even fewer.
  - xboxnolifes 3y ago
    I think some people just spend a lot less time on places that have the majority of those thousands of ads. They mention it mostly being from social media scrolling. Using an ad blocker and not scrolling through social media apps removes the vast majority of potential ads you would see.
- danpalmer 3y ago
  Depends what you count I suspect. Is the sign above a store front an ad? Kinda! Is a brand logo on a shirt an ad? In a way. Is the Netflix ident at the beginning of an episode an ad? Pretty much. All these things are considered by marketing departments, and while they might not always be explicit advertising, they do the same thing, building a brand image, associations, and mindshare. I'm sitting on my sofa and I can see 26 things that could be considered adverts, and my TV is off. Edit: >30. I haven't moved, just realising what a capitalist hellscape I live in. Thankfully my laptop stickers are facing away from me.
  - eszed 3y ago
    That's a really interesting exercise. I read this comment whilst standing in my bedroom, and counted seventeen of these ads / brand impressions in one 360 revolution. Two steps to my left, and I saw three more I couldn't from my previous position; two steps to the right, four. Jesus.
1123581321 3y ago
That’s why the PPC or PPE model is so appealing—you know that you’ve stood out from all the other messaging they saw that day, at least a little bit. Their own analytics or sales funnels take over to assign a value to the click to compare to what they paid. (That’s not to say everyone should be spending money on ads, that currently spends.)
hutzlibu 3y ago
"We might see 4,000-10,000 advertisements a day[1]. Do you remember two advertisements you saw today?" Thank god for adblockers and pity those who do not have one or do not know firefox on android still allows them.
- editional 3y ago
  Mobile phones are definitely what keeps the advertising industry alive, especially social media. In my opinion, thats a good thing for the majority of the population. Those who do not care about ads and tracking makes it so evasion still possible (to some extent)
  - bt4u 3y ago
    [dead]
- doctorpangloss 3y ago
  You can’t block ads in Facebook, Instagram or TikTok on mobile. Google places Android search ads. In app ads also cannot be blocked. It is a misconception that ad blockers significantly impact the ad market as a whole, obviously they impact Google and web advertisers though.
  - fnordpiglet 3y ago
    https://pi-hole.net https://pi-hole.net not work?
    - doctorpangloss 3y ago
      No. The in app ads in Meta properties are served from the same gateway as the rest of the API.
  - nilsherzig 3y ago
    Checkout "revanced" (the git repo) it contains a collection of "patches" for a lot of major apps. There are AdBlock patches for Instagram and TikTok. You can build the patched APKs on your phone using their manager app
move-on-by 3y ago
> Do you remember two advertisements you saw today? Maybe I’m in the minority, but I absolutely despise advertising. The only advertisements I ever remember are due to hating them more then the others for some reason- like being even more aggressive and in my face. There has to be some tipping point where advertising does more harm for the advertisers then good.
- jklinger410 3y ago
  > Maybe I’m in the minority, but I absolutely despise advertising This is like the most insane comment I've ever read
  - mhh__ 3y ago
    I for one welcome the slop on my feed. That being said I don't mind a well targeted technical advertisement e.g. trade magazines, new electronic components, and so on. On a less passive level the company my dad used to work for basically made a living selling marketing lists of people who they'd confirmed (via voice) were genuinely looking for (say) new solar panels.
  - HWR_14 3y ago
    Because he despises advertising or because he thinks it puts him in the minority?
  - carlosjobim 3y ago
    Then you should read more.
- beej71 3y ago
  I'm with you, but we are most definitely the minority. The vast majority doesn't mind them. I used to not mind them, feel like people were just supporting their sites, etc., but I was eventually pushed over the edge, lost it, and stopped using apps with ads I couldn't block, and started using uBO everywhere. (And stopped reading news because it's almost as bad for you as advertising.) So let's just call it my inability to see ads without feeling angry, and so I need a "psychological exemption". :) Since I'm just one of a few out there who does this, I figure content creators will survive. (I, too, am a content creator, but I distribute mine for free without ads. I make money with my day job.)
austin-cheney 3y ago
Here are the economics of ad spend from when I worked at Travelocity nearly a decade ago. For an e-commerce business the goal is what's called conversion, which is when a user makes a product purchase. The margins on conversion vary by product and product segment. At that time most people came to travel sites to book airfare and the travel sites just basically resold what the carriers had on their own sites plus a $7 service fee charged by the carriers. Hotels were more lucrative averaging a margin closer to $50 per purchase. Travelocity had figured out some pricing algorithm that dominated the industry for packages where packages were flight plus hotel and optionally rental car. I can't remember the margin for Travelocity packages but I want to say it was around $300 per purchase. The problem with conversion on e-commerce sites is time. The more expensive the product the more time the user will spend investigating a purchase. The more they will hop between various different competing web sites. Air purchases had a time realization of a few hours, hotels about a week, and packages were about 3 weeks. That means you do anything to induce increased conversion it will be 3 weeks before you should expect to see money in the bank, which complicates analysis of what went right and what went wrong. This means A/B testing becomes supremely important. Ad spend was the opposite across the board. Ad spend would always bring tremendous traffic to the site but almost never would it increase conversion. However once you have eyes on pages you can generate revenue by other means such as affiliate programs and certainly with ads on your own site. The most amazing thing about ads whether they bring people to your site and cost you money or they are on your own site and generate you money is that the money spent/realized occurs in real time. Suddenly your analysis becomes stupid simple. Ad traffic is dirty traffic though. Ads that cost you money rarely increased conversion and ads on your own site substantially detracted online traffic, by as much as 15% in a near term and much more gradually over a longer time horizon. The margins on ads is next to nothing so the more you invest in it the more you must invest in it to justify the both the spend and decreased traffic volume. This is what I would refer to as a drug addition. They had an immediate high, it was killing their business, and they only knew how to increase ad participation. Toxic.
seydor 3y ago
that's the problem with google's monopoly on advertising - we can't know
- spondylosaurus 3y ago
  Not at all true. Third-party analytics tools exist.
bennettnate5 3y ago
> Do you remember two advertisements you saw today? Thanks to uBlock, Newpipe and the like, I generally see less than two advertisements a week.
yashap 3y ago
I’ve been a pure software engineer for close to a decade now, but before that I was a data analyst/scientist working with a marketing team, including their paid ad ppl. We ran some legit experiments with ads, where we didn’t just count ppl who saw the ads then later converted (how Google, FB, etc. want you to “measure” impact), we compared them to actual control groups. We did find most types of ads to not be worth the $$. However, remarketing did seem to be worth it, at the time, for us. This is when you generate interest in your product through other avenues (organic content marketing, organic social media marketing, PR, attending industry events, etc.), then when ppl show some interest in your product (visit your website), but don’t convert, you cookie them and keep showing them ads all around the internet. These ppl are already legit interested, they’re gonna pay more attention to the ads, and keeping your product top of mind can be enough to get them over the line to conversion.
JimtheCoder 3y ago
"Do you remember two advertisements you saw today?" https://www.youtube.com/watch?v=x8iXj2vkpJI https://www.youtube.com/watch?v=x8iXj2vkpJI You will remember at least one...
Vagantem 3y ago
Author of article here. I don't think there is an average but as a child comment mentioned, you'd usually aim for 3x return on your ad spend. But it really depends on your product. If you're selling expensive B2B solutions the customer journey will look very different to a consumer product - direct ads might be a terrible idea because no business clicks on a facebook ad and then decides to invest in an expensive enterprise software. You might be better off investing in content, make a custom landing page for that lead, account based marketing etc - and not do any AdSense. But yes, you do have to evaluate your marketing mix and channels against your customers purchase journey. Will write more about that in the upcoming posts :)

by drones 3y ago

napo 3y ago

> direct outreach to key customers are you talking about b2b? I don't know what you have in mind. Sounds like you are suggesting companies should start calling me or knocking on my door instead of puting ads on google search results. That doesn't sound great.

saulpw 3y ago
How about giving out free samples in the supermarket? Going to a conference and talking with people? Busking at the farmer's market?
drones 3y ago
Yeah, edited my comment. Agreed that direct outreach is ineffective if you aren't b2b. If you're selling commercial products for a mass market, I think doing things like sponsored content might be more effective. If I'm selling products to businesses or a few customers, it's better to do outreach by attending industry events, talks etc... I think the cold approach still works.
- ebiester 3y ago
  It’s all of the above for B2B. The cold call and email definitely makes some money - that’s why people do it. Ideally, they already know who you are when they get the cold call.

danpalmer 3y ago

There's no such thing as an overall average ROI. "Good" marketing, for a B2C company, is often defined as a 3x CAC/LTV ratio and 12 month payback. That means for every $1 you spend on advertising you make $3 in gross profit, and you get back $1 after 12 months. This is fairly healthy for many businesses, but some businesses may be looking for a 1 month payback, or may be looking for a 5x LTV. It's also possible to trade off LTV and payback, the latter may be more important for a fast growing business so that they're not tying up capital, and they may not yet have enough data to accurately predict 3 or 5 year LTV anyway. In reality though these things fluctuate all the time, you may have 2-5 marketing channels at a small company (e.g. FB, IG, Adsense, YT, direct mail, out of home, etc), of which some will be better and others will be worse, and you blend them together, changing proportions over time as channels change in effectiveness or cost.

placesalt 3y ago
What do 'CAC' and 'LTV' stand for?
- johnkpaul 3y ago
  Customer acquisition cost and lifetime value
- skyper 3y ago
  Customer Acquisition Cost LifeTime Value
- inductive_magic 3y ago
  According to ChatGPT, in the context of gps post: "CAC" stands for "Customer Acquisition Cost." It represents the cost a company incurs to acquire a new customer, including all the costs associated with marketing and advertising. "LTV" stands for "Lifetime Value." It represents the total net profit a company expects to earn from a customer throughout their entire relationship with the company. This takes into account all the revenue a customer will bring to the company minus any costs associated with serving that customer over their lifetime.

yunohn 3y ago

> We might see 4,000-10,000 advertisements a day[1]. Yeah, that’s definitely false. At best 100+.

lcnPylGDnU4H9OF 3y ago
The article might be an interesting read for you. What you say is supported by their findings: > We only register under a hundred. And we pay conscious attention to even fewer.
- xboxnolifes 3y ago
  I think some people just spend a lot less time on places that have the majority of those thousands of ads. They mention it mostly being from social media scrolling. Using an ad blocker and not scrolling through social media apps removes the vast majority of potential ads you would see.
danpalmer 3y ago
Depends what you count I suspect. Is the sign above a store front an ad? Kinda! Is a brand logo on a shirt an ad? In a way. Is the Netflix ident at the beginning of an episode an ad? Pretty much. All these things are considered by marketing departments, and while they might not always be explicit advertising, they do the same thing, building a brand image, associations, and mindshare. I'm sitting on my sofa and I can see 26 things that could be considered adverts, and my TV is off. Edit: >30. I haven't moved, just realising what a capitalist hellscape I live in. Thankfully my laptop stickers are facing away from me.
- eszed 3y ago
  That's a really interesting exercise. I read this comment whilst standing in my bedroom, and counted seventeen of these ads / brand impressions in one 360 revolution. Two steps to my left, and I saw three more I couldn't from my previous position; two steps to the right, four. Jesus.

1123581321 3y ago

That’s why the PPC or PPE model is so appealing—you know that you’ve stood out from all the other messaging they saw that day, at least a little bit. Their own analytics or sales funnels take over to assign a value to the click to compare to what they paid. (That’s not to say everyone should be spending money on ads, that currently spends.)

hutzlibu 3y ago

"We might see 4,000-10,000 advertisements a day[1]. Do you remember two advertisements you saw today?" Thank god for adblockers and pity those who do not have one or do not know firefox on android still allows them.

editional 3y ago
Mobile phones are definitely what keeps the advertising industry alive, especially social media. In my opinion, thats a good thing for the majority of the population. Those who do not care about ads and tracking makes it so evasion still possible (to some extent)
- bt4u 3y ago
  [dead]
doctorpangloss 3y ago
You can’t block ads in Facebook, Instagram or TikTok on mobile. Google places Android search ads. In app ads also cannot be blocked. It is a misconception that ad blockers significantly impact the ad market as a whole, obviously they impact Google and web advertisers though.
- fnordpiglet 3y ago
  https://pi-hole.net https://pi-hole.net not work?
  - doctorpangloss 3y ago
    No. The in app ads in Meta properties are served from the same gateway as the rest of the API.
- nilsherzig 3y ago
  Checkout "revanced" (the git repo) it contains a collection of "patches" for a lot of major apps. There are AdBlock patches for Instagram and TikTok. You can build the patched APKs on your phone using their manager app

move-on-by 3y ago

> Do you remember two advertisements you saw today? Maybe I’m in the minority, but I absolutely despise advertising. The only advertisements I ever remember are due to hating them more then the others for some reason- like being even more aggressive and in my face. There has to be some tipping point where advertising does more harm for the advertisers then good.

jklinger410 3y ago
> Maybe I’m in the minority, but I absolutely despise advertising This is like the most insane comment I've ever read
- mhh__ 3y ago
  I for one welcome the slop on my feed. That being said I don't mind a well targeted technical advertisement e.g. trade magazines, new electronic components, and so on. On a less passive level the company my dad used to work for basically made a living selling marketing lists of people who they'd confirmed (via voice) were genuinely looking for (say) new solar panels.
- HWR_14 3y ago
  Because he despises advertising or because he thinks it puts him in the minority?
- carlosjobim 3y ago
  Then you should read more.
beej71 3y ago
I'm with you, but we are most definitely the minority. The vast majority doesn't mind them. I used to not mind them, feel like people were just supporting their sites, etc., but I was eventually pushed over the edge, lost it, and stopped using apps with ads I couldn't block, and started using uBO everywhere. (And stopped reading news because it's almost as bad for you as advertising.) So let's just call it my inability to see ads without feeling angry, and so I need a "psychological exemption". :) Since I'm just one of a few out there who does this, I figure content creators will survive. (I, too, am a content creator, but I distribute mine for free without ads. I make money with my day job.)

austin-cheney 3y ago

Here are the economics of ad spend from when I worked at Travelocity nearly a decade ago. For an e-commerce business the goal is what's called conversion, which is when a user makes a product purchase. The margins on conversion vary by product and product segment. At that time most people came to travel sites to book airfare and the travel sites just basically resold what the carriers had on their own sites plus a $7 service fee charged by the carriers. Hotels were more lucrative averaging a margin closer to $50 per purchase. Travelocity had figured out some pricing algorithm that dominated the industry for packages where packages were flight plus hotel and optionally rental car. I can't remember the margin for Travelocity packages but I want to say it was around $300 per purchase. The problem with conversion on e-commerce sites is time. The more expensive the product the more time the user will spend investigating a purchase. The more they will hop between various different competing web sites. Air purchases had a time realization of a few hours, hotels about a week, and packages were about 3 weeks. That means you do anything to induce increased conversion it will be 3 weeks before you should expect to see money in the bank, which complicates analysis of what went right and what went wrong. This means A/B testing becomes supremely important. Ad spend was the opposite across the board. Ad spend would always bring tremendous traffic to the site but almost never would it increase conversion. However once you have eyes on pages you can generate revenue by other means such as affiliate programs and certainly with ads on your own site. The most amazing thing about ads whether they bring people to your site and cost you money or they are on your own site and generate you money is that the money spent/realized occurs in real time. Suddenly your analysis becomes stupid simple. Ad traffic is dirty traffic though. Ads that cost you money rarely increased conversion and ads on your own site substantially detracted online traffic, by as much as 15% in a near term and much more gradually over a longer time horizon. The margins on ads is next to nothing so the more you invest in it the more you must invest in it to justify the both the spend and decreased traffic volume. This is what I would refer to as a drug addition. They had an immediate high, it was killing their business, and they only knew how to increase ad participation. Toxic.

seydor 3y ago

that's the problem with google's monopoly on advertising - we can't know

spondylosaurus 3y ago
Not at all true. Third-party analytics tools exist.

bennettnate5 3y ago

> Do you remember two advertisements you saw today? Thanks to uBlock, Newpipe and the like, I generally see less than two advertisements a week.

yashap 3y ago

I’ve been a pure software engineer for close to a decade now, but before that I was a data analyst/scientist working with a marketing team, including their paid ad ppl. We ran some legit experiments with ads, where we didn’t just count ppl who saw the ads then later converted (how Google, FB, etc. want you to “measure” impact), we compared them to actual control groups. We did find most types of ads to not be worth the $$. However, remarketing did seem to be worth it, at the time, for us. This is when you generate interest in your product through other avenues (organic content marketing, organic social media marketing, PR, attending industry events, etc.), then when ppl show some interest in your product (visit your website), but don’t convert, you cookie them and keep showing them ads all around the internet. These ppl are already legit interested, they’re gonna pay more attention to the ads, and keeping your product top of mind can be enough to get them over the line to conversion.

JimtheCoder 3y ago

"Do you remember two advertisements you saw today?" https://www.youtube.com/watch?v=x8iXj2vkpJI https://www.youtube.com/watch?v=x8iXj2vkpJI You will remember at least one...

Vagantem 3y ago

Author of article here. I don't think there is an average but as a child comment mentioned, you'd usually aim for 3x return on your ad spend. But it really depends on your product. If you're selling expensive B2B solutions the customer journey will look very different to a consumer product - direct ads might be a terrible idea because no business clicks on a facebook ad and then decides to invest in an expensive enterprise software. You might be better off investing in content, make a custom landing page for that lead, account based marketing etc - and not do any AdSense. But yes, you do have to evaluate your marketing mix and channels against your customers purchase journey. Will write more about that in the upcoming posts :)