Online advertising ROI or return on investment is a major consideration for anyone focused on response rates more than branding.
Response and branding are the two primary benefits of any advertising campaign.
ROI is difficult to track for branding because the results are not always immediate or directly measurable.
That is not the case with response, which can be immediate in the online environment.
What is Online ROI?
he investment part of return on investment is a combination of all hard and soft costs for the campaign. A hard cost would be the advertising because it is directly measurable and identifiable.
A soft cost would be labor if it is done internally because it is more difficult to track the total labor of a project on the part of a person who has other projects and tasks.
The return part of online ROI usually is measured in terms of revenue or audience.
Revenue and audience are easy to track, so the results can be analyzed and the campaign adjusted if necessary.
ROI Example
s an example, let’s say a Web site wants to promote itself. The site has three revenue streams — its own ads from clients or third party sources, some transactional options such as an e-commerce application, and affiliate links.
The site runs a campaign of contextual ads costing $1,000 on one or more of the major search engines.
At an average cost of 50 cents a click, the campaign generates 2,000 visits.
The math is simple. Break even on just the advertising — and not any labor costs — is $1,000 or a 100 percent online advertising ROI from visitors who click on the site’s ads, make a transaction or make a purchase after clicking through on an affiliate link.
Such a return is hardly a success, but at least it covers the advertising cost.
The more accurate way to track the return is by looking at the labor involved in setting up and managing the campaign.
The ROI looks only slightly worse if the total labor was one hour at $25 an hour, which might be achieve by focusing on only one or two high-volume keywords.
The ROI looks much worse is the total labor was 20 hours at $25 an hour.
At that point, break even is $1,500.
What is a Good Advertising ROI?
study by Nielsen Analytic Consulting showed that the average ROI for marketing that generated sales within three months of the investment was $109 returned for every $100 spent or a 9 percent ROI.
But the ROI for online was $218 returned for every $100 spent or a 118 percent return.
If only the stock market had those kinds of results.
Keep in mind that Nielsen is citing an average. Campaigns may deliver well above or well below that average.
Factors determining results include:
- Time of year
- Audience target
- Effectiveness of landing page