The Metric Are You Using the Right Metric to Measure Your Online Advertising? ClearSaleing Confidential Adam S. Goldberg Co-Founder & Chief Innovation Officer P: 800.592.0464 ext. 902 [email_address]

Don’t operate in a vacuum ClearSaleing Confidential 100 Pounds was a bargain to travel to the US Sales of Hoover products jumped People were buying Hoover products just to get the tickets Many customers became disgruntled because they never got their tickets Hoover spent $72 million flying 220,000 people 365,000 customers never received their tickets This ended up in court; Hoover vs. Sandy Jack 3 top European executives were fired from Hoover

100 Pounds was a bargain to travel to the US

Sales of Hoover products jumped

People were buying Hoover products just to get the tickets

Many customers became disgruntled because they never got their tickets

Hoover spent $72 million flying 220,000 people

365,000 customers never received their tickets

This ended up in court; Hoover vs. Sandy Jack

3 top European executives were fired from Hoover

Goal of advertising ClearSaleing Confidential A company may advertise to build their brand, gain new customers, gain market share, build awareness, introduce a new product, change their image, etc., but at the end of the day all of the reasons to advertise are to directly or indirectly produce more profit.

Which sample ad is the most effective? Sale Price: $1,000 Sale Price: $3,000 Sale Price: $3,000 Product: PN 2387 Profit Margin: 13% Profit ($95) Product: PDP 4250 Profit Margin: 18% Profit $165 Product: LG 37LP1 Profit Margin: 24% Profit $270 ClearSaleing Confidential Cost Per Conversion $225 Cost Per Conversion $375 Cost Per Conversion $450

The CTR Myth ClearSaleing Confidential A B C CTR 4% 3% 2% Orders 70 55 40 Revenue $21,000 $27,500 $24,000 Profit $2,100 $4,125 $4,800

How to calculate an ads projected value ClearSaleing Confidential A B C CTR 4% 3% 2% Impressions 300,182 300,182 300,182 Projected Clicks 12,007 9,005 6,003 Conv. Rate 1.75% 1.83% 2.00% Orders 210 164 120 Profit/Order $30 $75 $120 Projected Profit $6,300 $12,300 $14,400

CPA Myths Lowering CPA is always a good thing I should place my ad where I get the lowest CPA Setting an ‘acceptable’ CPA at the keyword level ensures profitability ClearSaleing Confidential

Lowering CPA is always a good thing

I should place my ad where I get the lowest CPA

Setting an ‘acceptable’ CPA at the keyword level ensures profitability

The lower my CPA the better? ClearSaleing Confidential Position CPA Avg. Order Profit 1 $44 $450 $40 2 $46 $420 $38 3 $27 $415 $43 4 $30 $405 $51 5 $34 $400 $55 6 $20 $385 $54 7 $21 $360 $51 8 $23 $300 $40

Where should I place my ad? ClearSaleing Confidential A B CPA $50 $25 CPC $1 $.50 Clicks 50,000 10,000 Conv. Rate 2% 2% Orders 1000 200 Revenue $300,000 $60,000 Margin 25% 25% Profit/Order $25 $50 Total Profit $75,000 $15,000

Wal-Mart vs. Louis Vuitton ClearSaleing Confidential Low Margin / High Volume High Margin / Low Volume

What is an acceptable CPA for this keyword? Keyword : Cuisinart Toaster Oven ClearSaleing Confidential 1. (sales prices)/4 = $122 avg. sale price 2. $122 * (avg. profit margin) = $30.50 3. $30.50 = breakeven CPA 4. breakeven CPA = acceptable CPA Will this CPA ensure profitability? Model Number Sales Price Cuisinart A $60 Cuisinart B $100 Cuisinart C $149 Cuisinart D $179

Keyword : Cuisinart Toaster Oven

Will this CPA ensure profitability? Avg. sales price less than $122 CPA is too high (unprofitable) Avg. sales price greater than $122 CPA is too low (profitable; but could be leaving money on the table) Avg. sales price of toaster sold is $122 and they buy more stuff CPA is too low (profitable; but could be leaving money on the table) They buy something other than a Cuisinart toaster * CPA is too high (unprofitable) CPA is too low (profitable; but could be leaving money on the table) * 44.12% of online conversions are unrelated to the ad they clicked on according to a WebTrends white paper titled “Sell More, Pay Less: Drive Conversions with Unrelated Keywords” ClearSaleing Confidential

Avg. sales price less than $122

CPA is too high (unprofitable)

Avg. sales price greater than $122

CPA is too low (profitable; but could be leaving money on the table)

Avg. sales price of toaster sold is $122 and they buy more stuff

CPA is too low (profitable; but could be leaving money on the table)

They buy something other than a Cuisinart toaster *

CPA is too high (unprofitable)

CPA is too low (profitable; but could be leaving money on the table)

* 44.12% of online conversions are unrelated to the ad they clicked on according to a WebTrends white paper titled “Sell More, Pay Less: Drive Conversions with Unrelated Keywords”

What’s in the cart is what matters ClearSaleing Confidential Breakeven CPA = $17.31 Product Revenue Margin CPA Profit Cuisinart A $60 25% $25 ($10) Cuisinart A $60 25% $25 ($10) Camera $95 15% $25 ($10.75) Cuisinart B $100 25% $25 $0 Average $78.75 22.5% $25 ($7.68)

Leaving money on the table ClearSaleing Confidential Product Price Conv. Rate 0 Setting a CPA based on assumed profit vs. true profit may cause you to pull the plug early and thus leave money on the table Model Number Sales Price CPC Conv. Rate CPA Cuisinart A $60 $.50 2.5% $20 Cuisinart B $100 $.50 2.0% $25 Cuisinart C $149 $.50 1.5% $33 Cuisinart D $179 $.50 1.0% $50

Better way to set a CPA Make no assumptions about what products a keyword will sell Implement tracking that reports on products sold vs. just revenue Apply true margins to each sale to determine true profit vs. using an assumed margin There are tracking technologies that do this automatically Determine the true avg. revenue and profit per order Set your CPAs at a level based on #4 that allows you to earn your desired ROI or ROAS Apply the lessons learned about Wal-Mart vs. Louis Vuitton to ensure you are earning the maximum profit Leave nothing on the table ClearSaleing Confidential

Make no assumptions about what products a keyword will sell

Implement tracking that reports on products sold vs. just revenue

Apply true margins to each sale to determine true profit vs. using an assumed margin

There are tracking technologies that do this automatically

Determine the true avg. revenue and profit per order

Set your CPAs at a level based on #4 that allows you to earn your desired ROI or ROAS

Apply the lessons learned about Wal-Mart vs. Louis Vuitton to ensure you are earning the maximum profit

Leave nothing on the table

ROAS Myths ClearSaleing Confidential Campaigns ROAS Profit 1-2 87.5% $1000 1-3 75.0% $1500 1-4 62.5% $2000 1-5 54.0% $2500 1-6 47.5% $3000 1-7 42.1% $3500

ROAS Myths ClearSaleing Confidential 0 Ad Budget ROAS Ad Budget Profit 0

Strategies for different days, times, and geographies ClearSaleing Confidential You should also use Profit/Click to determine if you need a different strategy during different hours of the day or for different geographies Day CPA Conv. Rate Profit Profit/Click Sunday $14 3.0% $500 $1.20 Monday $15 2.0% $2,200 $.90 Tuesday $18 2.0% $1,800 $.90 Wednesday $18 1.7% $2,400 $1.00 Thursday $17 1.6% $1,500 $.75 Friday $20 1.8% $1,000 $.30 Saturday $16 2.9% $450 $1.50 Best Worst

The Measure

Thank you! 6/05/08: The Measure - Are you properly crediting all of the ads in your customers Purchase Paths™? 6/26/08: The Method - Do you have a continuous improvement process for you online ad investments * All webinars will begin at 1:30pm EST ClearSaleing Confidential Adam S. Goldberg Co-Founder & Chief Innovation Officer P: 800.592.0464 ext. 902 [email_address]

6/05/08: The Measure - Are you properly crediting all of the ads in your customers Purchase Paths™?

6/26/08: The Method - Do you have a continuous improvement process for you online ad investments

* All webinars will begin at 1:30pm EST