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Doing calculations for Adwords

[ Edited ]
Visitor ✭ ✭ ✭
# 1
Visitor ✭ ✭ ✭

I need helping doing this calculations:

 

A Korean mobile app game brand has expanded to the US. The brand needs to launch a Adwords app campaign. The campaign marketer knows the following:

- Objective: drive app installs and acquire new users
- Target: 18-35 Android users living in the US
- Facebook SDK: implemented (No app event has been implemented yet.)
- Average CPI for game apps in the US: $6
- Average lifetime value of a user: $11

The marketer ran a test campaign for mobile app installs on Adwords and acquired the following information:

- Average CPM: $13
- Impression to click conversion rate: 5%
- Click to app install conversion rate: 15%

The marketer is aiming for 250% ROAS and wants to acquire at least 9,000 new users.

How much budget should the marketer allocate on app install campaigns on Adwords?

1 Expert replyverified_user

Doing calculations for Adwords

Community Manager
# 2
Community Manager

Hi Pedro,

 

Is this an AdWords exam question?

 

Please note that it is against the Community Guidelines to ask for help on specific exam questions.

 

Cassie

Doing calculations for Adwords

Visitor ✭ ✭ ✭
# 3
Visitor ✭ ✭ ✭

Hello Cassie,

This is not a question of any exame of Google Smiley Wink

Can you help in the question?

Thanks in advance,

Regards,

Pedro

Doing calculations for Adwords

Follower ✭ ☆ ☆
# 4
Follower ✭ ☆ ☆

Hi Pedro,

According your requirements and the test campaign, the budget for your campaign in adWords should be between 15,6K and 39,6K.

 

Reason to justify these money.

- You need 9k app installs, according test campaign you'll need 1.200 CPMs (15.600 $)

- Of course, you need to confirm these impressions are available for your target

- Other side, your client estimates a 250% ROAS. If lifetime value estimation is 11$ for 9k installations, the limit for Campign Cost is set to 39,6K $.

 

Don't hesitate to reply if you think i'm absolutly wrong ... 

 

Doing calculations for Adwords

Visitor ✭ ✭ ✭
# 5
Visitor ✭ ✭ ✭

I'm a little lost. How did you get those calculations of 1,200 CPMs?

Doing calculations for Adwords

Visitor ✭ ✭ ✭
# 6
Visitor ✭ ✭ ✭

Hi Jonathan,

 

I'm not the greatest in math and I struggle with it sometimes. I also, think i took the long way of calculating than David.

 

1,200,000 million Impression / 1000CPM =1,200 

- So you do the breakdown from here

1,200,000 x Impression to click conversion rate: 5% x Click to app install conversion rate: 15% = 9,000 installs

 

$13 CPM x 1,200 = $15,600

 

If they want to reach the threshold of 250% the max they would spend is 39K

 

basically they looking to make close to $100K for about 9K installs.

Doing calculations for Adwords

Follower ✭ ☆ ☆
# 7
Follower ✭ ☆ ☆

Thats right...

 

I must say, i always make this kind of numbers for the client but...
(nothing matters before a 'but')...

 

They don't care ... clients (managers) have their own numbers in mind so most of the times i use these numbers to figure out (and justify) the efficiency for the campaigns.

 

i.e.
According to the briefing given by the client, investment needed is 50k € ... but the client's investment estimation is 10k € ... campaign will be efficient at 20%...

ROI for campaigns is may be easy calculated at the end of the campaign but (again)...very difficult for justifying before launch...

 

Those who use dealing with clients ... will know what i'm talking about ...

Doing calculations for Adwords

[ Edited ]
Visitor ✭ ✭ ✭
# 8
Visitor ✭ ✭ ✭

Hey, I've just taken this practice test and I've found a really simple solution.

 

ROAS is basically (Revenue/Ad Spend) x 100%, and the intended ROAS was 250%. So to lay it out, the current formula is 

(Revenue/Ad Spend) x 100% = 250%

(Revenue/Ad Spend) = (250%/100%)

(Revenue/Ad Spend) = 2.5

 

Average lifetime value of each user is $11, so for 9K users, their accumulated lifetime value, or in other terms, revenue, would be 9,000 x $11 = $99,000.

 

Knowing that:

(Revenue/Ad Spend) = 2.5, and Revenue is $99,000,

(99,000 / Ad Spend) = 2.5

99,000 / 2.5 = Ad Spend

Minimum Ad Spend Needed = $39,600

 

This would be the correct answer if the question asked, "What is the budget needed to perform a ROAS-oriented campaign?" But this question is asking for the budget needed for an app install campaign, where the ROAS is no longer significant at this moment. So, using the relevant information we have from the experiment...

 

Impression --> Click Conversion = 5%, 

Click --> App Install Conversion = 15%.

 

We need 9K users, but we'll need to show ads to more people due to the 5% and 15% conversion rate. So how many people do we actually need to show the ads to? 

 

We go through the app install conversion filter first, the 15%. 9,000 / 0.15 = 60,000.

We need 60,000 clicks to get 9K installs.

Then, we still need to increase the impressions because only 5% of viewers actually click on the ad before they can install it; 

So, 60,000 / 0.05 (the 5%) = 1,200,000.

 

To check, from 1,200,000 views, only 5% will click. So number of clicks = 1,200,000 x 0.05 = 60,000 potential users.

From 60,000 potential users, only about 15% will actually install after clicking. So number of installs = 60,000 x 0.15 = 9,000.

 

In total, we need 1,200,000 impressions before we can get 9K installs. That's 1,200K impressions, and Cost per Thousand Impressions from the question is $13.

 

Total cost required for the app install campaign? $13 x 1200 = $15,600.