Moore’s law: states that the number of transistors in a dense integrated circuit doubles
approximately every two years → digital possibilities grow exponentially.
Lecture 2 - online advertising
Compensation methods: advertisers pay the content provider for the advertisement space
- Depends on size, position, audience size etc.
Cost per mile (CPM): amount that you pay for 1.000 ad impressions
Cost per click (CPC): amount that you pay per click on an ad
Cost per action/acquisition (CPA): amount that you pay if people click and take a certain action
- For example, buy the product (affiliate) / subscription
Data needed:
- Amount of impressions: 100.000
- Amount of clicks: 1.500
- Amount of conversions: 75
- Total campaign costs or CPM
- Purchase generates 25 euros
Was this a successful campaign?
- Click through rate: 1500/100.000*100%=1.5%
- Clicks / impressions * 100%
- Conversion rate: * 100% = 5%
- Conversion / clicks * 100%
- CPM: If you know one click costs then x 1000. Or if you know the total costs and the
amount of clicks then per 1000.
- CPC: = 0.67 cent
- Total campaign costs / clicks
- CPA: 1. = 13.33
- Total campaign costs / conversions
- ROI: (25 - 13.33) / 13.33 x 100%= 87.5%
- Gross profit - costs / costs
- Total cost of the campaign: CPM: 10 (every 1000 impressions cost 10 euros) 10/1000
(every impression) *100.000 (total impressions)) = total cost of the campaign = 1.000
- One impression cost * amount of total impressions = total cost of the campaign
Sponsored search: paid for
Organic search: naturally popped up at the top (due to keywords)
- Can be optimized using Search engine optimization (SEO) and advertising (SEA)
- Algorithms decide on a ranking for each keyword
- Well written, content is good, external links that link to you, good technical side,
monitor the performance well.
,Search ad bidding
- Advertisers bid for certain keywords, they bid what they are willing to pay
- Only have to pay the amount to outbid person 2
- The position of the ad and the costs are based on the quality score
- 1. expected click through rate, 2. quality of the page and 3. relevance of the ad
- Bid, quality score and the impact of the ads format = ad rank score
- Ad with the highest score gets the first position
- The amount to be paid is just enough to maintain the rank
- Costs vary, brand names are cheaper than ‘car insurance’
Paper by Agarwal, Hosangar and Smith (2011): what impact has the rank on click through rate ,
conversion and profit (ROI).
- Click through rate highest for non branded keywords with a high rank
- Conversion rate is higher for branded searches, especially with a lower rank
- = people click spontaneously on the first link, lower links are clicked more consciously
- Because of these opposite effects, everything is quite stable
- Because the costs for a high rank are very high, it is best to aim for the mid-lower range
- These are more profitable
PROSAD model: automated system for keyword bidding
- Tries to find the best bid per keyword so that the profit is optimized
- But: study by Skiera and Nabout (2013) stated that PROSAD resulted in lower bids and
lower rankings, lower click through rates and a decrease in conversions.
- But this does result in a positive ROI because the costs are way lower
- This bidding was always in a fixed rate (CPM) a certain cost per 1.000 impressions
- Now it is per individual ad impression (Real time bidding)
- A person visits the website
- Sends cookie info to the ad platform
- Auction takes place where advertisers place a bid
- Winning bid wins, which sends the ad to the user
- All in 100-200 milliseconds
Banner advertising effectiveness:
1. You see it, click it, visit
2. You see it, remember it, visit later
- Might also be a negative impact
Retargeting: When visited a specific website, banners from similar websites are shown
- Based on search history → more effective
- Or, the decision was already made → do not add much to likelihood to purchase
, Four types of retargeting:
1. Contextual retargeting: displaying brand and evocative image
a. When person first visits the website
2. Behavioral retargeting: displaying brand and evocative image
a. When person already has visited such a website
3. Generic retargeting: displaying brand and evocative image
a. When a person already has visited THIS website
4. Dynamic retargeting: displaying ad reflecting consumers prior product search
a. When a person already has visited THIS website
Generic vs. dynamic: Lambrecht and Tucker (2013) study: customers from a travel website that
looked at a certain travel hotel were exposed to:
a. Generic retargeting: ad from the travel website with logo and no specific hotel
b. Dynamic retargeting: ad with the visited hotel and three similar hotels
Generic ads are more effective when customers are not browsing in the travel category that day
- May be because less far in the path to purchase, don't have preferences
After visiting the review site dynamic targeting becomes more effective
- All related to path of purchase stage
Lecture 3 - online customer journey
Online reviews: Findings from a study: reviews from critics have positive influence in the week
the movie was released
- Reviews from amateurs have a positive impact the week after the movie is released
- Both kinds have positive impact
PCW: price comparison website
- Receive money from the vendors listed
- Pay per click
- Pay per action
- Banner advertising
- Flat periodic fee
- Decrease in search costs and increase in transparency → increase price competition
and decrease profit margins. (especially for homogeneous products)
High discounts:
- Advantage: attracting more new customers (you will be ranked higher at the PCW)
- Disadvantage: acquisition costs increase, negatively impacting the short term profitability
per customer. And, attracting more price sensitive customers that are more likely to
chum.
Is there an optimal discount level? → measured with CLV Customer lifetime value
approximately every two years → digital possibilities grow exponentially.
Lecture 2 - online advertising
Compensation methods: advertisers pay the content provider for the advertisement space
- Depends on size, position, audience size etc.
Cost per mile (CPM): amount that you pay for 1.000 ad impressions
Cost per click (CPC): amount that you pay per click on an ad
Cost per action/acquisition (CPA): amount that you pay if people click and take a certain action
- For example, buy the product (affiliate) / subscription
Data needed:
- Amount of impressions: 100.000
- Amount of clicks: 1.500
- Amount of conversions: 75
- Total campaign costs or CPM
- Purchase generates 25 euros
Was this a successful campaign?
- Click through rate: 1500/100.000*100%=1.5%
- Clicks / impressions * 100%
- Conversion rate: * 100% = 5%
- Conversion / clicks * 100%
- CPM: If you know one click costs then x 1000. Or if you know the total costs and the
amount of clicks then per 1000.
- CPC: = 0.67 cent
- Total campaign costs / clicks
- CPA: 1. = 13.33
- Total campaign costs / conversions
- ROI: (25 - 13.33) / 13.33 x 100%= 87.5%
- Gross profit - costs / costs
- Total cost of the campaign: CPM: 10 (every 1000 impressions cost 10 euros) 10/1000
(every impression) *100.000 (total impressions)) = total cost of the campaign = 1.000
- One impression cost * amount of total impressions = total cost of the campaign
Sponsored search: paid for
Organic search: naturally popped up at the top (due to keywords)
- Can be optimized using Search engine optimization (SEO) and advertising (SEA)
- Algorithms decide on a ranking for each keyword
- Well written, content is good, external links that link to you, good technical side,
monitor the performance well.
,Search ad bidding
- Advertisers bid for certain keywords, they bid what they are willing to pay
- Only have to pay the amount to outbid person 2
- The position of the ad and the costs are based on the quality score
- 1. expected click through rate, 2. quality of the page and 3. relevance of the ad
- Bid, quality score and the impact of the ads format = ad rank score
- Ad with the highest score gets the first position
- The amount to be paid is just enough to maintain the rank
- Costs vary, brand names are cheaper than ‘car insurance’
Paper by Agarwal, Hosangar and Smith (2011): what impact has the rank on click through rate ,
conversion and profit (ROI).
- Click through rate highest for non branded keywords with a high rank
- Conversion rate is higher for branded searches, especially with a lower rank
- = people click spontaneously on the first link, lower links are clicked more consciously
- Because of these opposite effects, everything is quite stable
- Because the costs for a high rank are very high, it is best to aim for the mid-lower range
- These are more profitable
PROSAD model: automated system for keyword bidding
- Tries to find the best bid per keyword so that the profit is optimized
- But: study by Skiera and Nabout (2013) stated that PROSAD resulted in lower bids and
lower rankings, lower click through rates and a decrease in conversions.
- But this does result in a positive ROI because the costs are way lower
- This bidding was always in a fixed rate (CPM) a certain cost per 1.000 impressions
- Now it is per individual ad impression (Real time bidding)
- A person visits the website
- Sends cookie info to the ad platform
- Auction takes place where advertisers place a bid
- Winning bid wins, which sends the ad to the user
- All in 100-200 milliseconds
Banner advertising effectiveness:
1. You see it, click it, visit
2. You see it, remember it, visit later
- Might also be a negative impact
Retargeting: When visited a specific website, banners from similar websites are shown
- Based on search history → more effective
- Or, the decision was already made → do not add much to likelihood to purchase
, Four types of retargeting:
1. Contextual retargeting: displaying brand and evocative image
a. When person first visits the website
2. Behavioral retargeting: displaying brand and evocative image
a. When person already has visited such a website
3. Generic retargeting: displaying brand and evocative image
a. When a person already has visited THIS website
4. Dynamic retargeting: displaying ad reflecting consumers prior product search
a. When a person already has visited THIS website
Generic vs. dynamic: Lambrecht and Tucker (2013) study: customers from a travel website that
looked at a certain travel hotel were exposed to:
a. Generic retargeting: ad from the travel website with logo and no specific hotel
b. Dynamic retargeting: ad with the visited hotel and three similar hotels
Generic ads are more effective when customers are not browsing in the travel category that day
- May be because less far in the path to purchase, don't have preferences
After visiting the review site dynamic targeting becomes more effective
- All related to path of purchase stage
Lecture 3 - online customer journey
Online reviews: Findings from a study: reviews from critics have positive influence in the week
the movie was released
- Reviews from amateurs have a positive impact the week after the movie is released
- Both kinds have positive impact
PCW: price comparison website
- Receive money from the vendors listed
- Pay per click
- Pay per action
- Banner advertising
- Flat periodic fee
- Decrease in search costs and increase in transparency → increase price competition
and decrease profit margins. (especially for homogeneous products)
High discounts:
- Advantage: attracting more new customers (you will be ranked higher at the PCW)
- Disadvantage: acquisition costs increase, negatively impacting the short term profitability
per customer. And, attracting more price sensitive customers that are more likely to
chum.
Is there an optimal discount level? → measured with CLV Customer lifetime value
