Archive for online advertising

Keeping an eye on the weather

As retailers of waterproofs, our sales are definitely affected by the weather. This is especially true during the Irish summer months. If we have a prolonged spell of wet weather our sales will generally increase. If the sun shines for a few days our sales will more than likely drop.

Managing our online advertising spend during the summer months can be an interesting task. If the weather is really nice for a few days I normally decrease the daily spend on Google Adwords – sometimes turning it off altogether for a few days of really sunny weather.

I have also been experimenting again with Facebook ads recently. I have set up a few different ads and have been turning them on and off for periods over the last few weeks depending on the day’s weather. Here’s one of them:

FBad

The tool that I find really useful in managing these ads is the Met Eireann Rainfall Radar.

The Rainfall Radar is updated every 15 minutes and shows an accurate picture of the rainfall pattern over Ireland. The colour codes show the intensity of the rainfall and it can be animated on the Met Eireann site to show the progression of the rain in the last few hours. Here are a few examples:

radar 4

It’s raining over most of the country. Decision: Turn the Facebook Ad on for the day.

radar5

It’s mostly fine throughout the country. Decision: No Facebook ads running and reduce the spend on Adwords.

The overall Met Eireann site is very easy to use and provides accurate weather information, forecasts and statistics. I am sure that they expect farmers and fishermen to use their information to decide on their course of action but they might be surprised to learn that an online retailer also makes use of their information to make important business decisions.

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Latest Facebook Ad Campaign Results

We did another campaign on Facebook for our January Sale. It was run over a period of 7 days. The ad looked like this.

facebook-ad-2

The landing page for the ad was our home page and after the 7 days the stats looked like this:

Impressions: 116,744

Clicks 170

Click Through Rate %: 0.15

Cost Per Click: $0.16

Total Cost: $26.78

Looking at Google Analytics I see that we received one conversion from the campaign. The bounce rate was also quite high at 44.27%.

Conclusion:

The cost per sale of $26.78 was high – much higher than the cost per sale for our Google Adwords. As we found in our previous campaigns, Facebook Ads are not great for conversion to sales as users are not in a shopping mode at the time. They are good for getting traffic to your site and for brand awareness.

I’m going to try another experiment with Facebook Ads again soon. For the next campaign I’ll attempt to get signup to our newsletter and maybe incentivise by offering entry in a prize draw. I expect that the conversions for signups will be higher than conversions for sales. It will make an interesting experiment anyway and I will publish my results here.

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Measure Return on Investment on your Online Ads

The great thing about Online Advertising is that you have all the data to measure the Return on Investment (ROI) of the campaign. This is a huge advantage over offline advertising in a newspaper or magazine where this level of measurement is just not possible. For an ecommerce business, the best way to measure the ROI is to calculate the Cost per Sale i.e. how much you are paying to get one sale from the online advertising campaign. The method I user to calculate this is outlined below.

 pd-on-google

In a recent post Seth Godin says that being able to measure the cost per sale negates the idea of having a set advertising budget. As long as you can acurately measure the cost per sale of the online campaign and compare it to a threshold based on your average order size the investment can in effect be unlimited.

I had previously posted about trying out a Facebook Ad campaign back in October and comparing it to our ongoing Google Adwords campaign. I gathered lots of data at the time but didn’t calculate the Cost per Sale. So in the Christmas shopping period I ran another Facebook Ad campaign and here is how I worked out the cost per sale for it and for Google Adwords.

1. Get the average Cost per Click

This can be obtained online from Google Adwords and Facebook Ads Manager. The cost per click for our campaigns was:

Google Campaign:  €0.30

Facebook Campaign: €0.42

2. Get the Percentage Conversion to Sale

Get this from Google Analytics.

Google Adwords Conversion Rate = 3.03%

Facebook Ads Conversion Rate: 1.35%

3. Calculate the Clicks to get a Sale (CTGAS)

Calculate this from the Conversion Rate. For example if the conversion rate was 5%, this would mean that the Clicks to get One Sale is 20. Or to put it another way – on average for every 20 clicks we will get one sale. So for the conversion rates above:

Google  Adwords CTGAS = 33

Facebook Ads CTGAS = 74

The formula is CTGAS = (100*Coversion Rate as a Percentage)/100

4. Finally Calculate the Cost per Sale

This is calculated by multiplying the Clicks to get a Sale by the Cost per Click

Google Adwords: 0.3 * 33 = €9.09

Facebook Ads: 0.42 * 74 = €23.68

Analysis – are they worth it?

For PuddleDucks our average order size is approximately €60. From this, we need to ask oursleves how much we are happy paying for a sale from the online ads – taking into account 1) markup and profit 2) covering operating costs 3) you may get repeat orders from the initial sale 4) you may get word of mouth orders from the initial sale. This is a soft number and I have decided that for us it’s €14. That means that if the cost per sale of our online campaign continues to come in under €14 we’ll continue to run it. In Seth’s blog post he says that Amazon had a similar threshold of $33 – but we’re a little smaller than Amazon!

On this criteria our Google Adwords campaign will continue but the Facebook campaign will not. During 2009 I will continue to measure our cost per sale for Google Adwords and keep trying to keep it as low as possible by changing keywords, adjusting cost per click, changing landing pages and the ad text. I’ll also try out Facebook Ads again on a limited basis and see if I can get the Cost per Sale down.

More thoughts on Facebook Ads: 

They will always have a higher cost per sale than Google Adwords due to the mode that the user is in at the time of click. For Google they are in a search mode – looking for a product or service. For Facebook Ads the user is going through their normal Facebook stuff when they happen to see the ad. So the Facebook Ad is akin to Banner Advertising really – although it is better targeted than normal banner advertsing due to the demographic selection you get when setting up the ad. So Facebook Ads will show a better ROI than Banner Ads but not as good as Google Adwords.

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