http://adexchanger.com/data-driven-thinking/roi-vs-roas-which-is-the-better-metric-for-digital-advertisers/
Article by Tim Mayer
I don't agree with the article's assumption. I'd say that customer acquisition and market growth as a goal is overrated because there is very little loyalty out there. So, a strategy that is willing to grow a customer base at a loss is foolish most of the time imo. I mean, it is all well and good when you are just spending VC money, but eventually a company needs to do real profit and loss math if they want to stay in business.
A company needs to look at the ROI when measured against gross profit, not just revenue. It doesn't matter how much the sale amount is, it matters how much the merchant gets to keep. That's what you have to way against on the spend side. I know this all sounds obvious, but you'd be surprised how often this isn't thought about.
In the trenches I treat each keyword and match type as its own entity, and look at the EPC vs the CPC, taking into account the total spend and the gross profit for that particular keyword. I calculate these numbers by the tens of thousands and adjust the bids accordingly. It is all really basic, but you need to measure the right stuff and have the right goals.
The only stat that matters is the one the ATM tells you. Always be playing the ATM machine algo.
Right, and I get that when other people are paying the bill you should do what they want, but in the PPC space there is so much emphasis on customer acquisition and market growth that it seems like real return on investments is hardly talked about.
One time I was talking to a Google rep about CPC vs EPC when measured against gross profit and it was like I was from a different planet. I think the industry is use to people burning money.