Background information for Questions #1 through #5:

Terra.com advertises its products using paid (sponsored) search engine ads on Google and Bing. Recently, a scheduled 12-week sponsored ad campaign was successfully carried out on Bing, but in the case of Google was suspended at the beginning of Week 10 due to a technical problem.

The marketing research team at Terra.com wants to know the ROI on sponsored search ads for branded keywords on Google. Some analysts on the team suspect that not all traffic coming through sponsored ads is due to sponsored ads, since consumers are generally able to get to Terra.com by clicking on organic links rather than sponsored links (or by typing the website URL directly into their browsers).

To address the question about ROI, below are audited weekly traffic (i.e., clicks) from Google and Bing by origin of click for branded keyword searches:

Table 1: Weekly traffic from Google by origin of click (for branded keywords searches only)
Week	1	2	3	4	5	6	7	8	9	10	11	12
Sponsored	36400	35600	36200	36600	35500	36000	36500	35400	35800	0	0	0
Organic	145600	142400	144800	146400	142000	144000	146000	141600	143200	152500	150000	147500
Total	182000	178000	181000	183000	177500	180000	182500	177000	179000	152500	150000	147500
Table 2: Weekly traffic from Bing by origin of click (for branded keywords searches only)
Week	1	2	3	4	5	6	7	8	9	10	11	12
Sponsored	4600	4800	4300	4400	4500	4900	4760	4440	4700	4408	3800	3800
Organic	18400	19200	17200	17600	18000	19600	19040	17760	18800	18800	18000	18400
Total	23000	24000	21500	22000	22500	24500	23800	22200	23500	22040	22080	22120

Assume that:

• Average cost per click for a sponsored ad = $0.60
• Average probability of making a purchase from Terras website = 12%
• Average margin (or profit) per conversion = $15
• Average margin (or profit) per click = .12 x $15 = $1.80

Assume that Terra employs the same strategies for both Google and Bing for targeting ads, choosing keywords to advertise on, and ad copies used, and the mix of potential customer visiting the companys website from both search engines is virtually identical.

1. Based on the traffic information contained in Tables 1 and 2, and following the approach outlined in class, what is the average weekly incremental traffic (i.e., # of clicks) due to (i.e., attributable to) the sponsored search ads for branded keywords on Google?

Answer (#): __________________

2. What is the average weekly cost ($) of the sponsored ads on Google? _________________

3. What is the average weekly profit ($) from the traffic due to the sponsored ads on Google before subtracting out the average weekly cost of the ads? __________________________

4. What is the average weekly profit ($) from the traffic due to the sponsored ads on Google after subtracting out the average weekly cost of the ads? __________________________

5. What is the ROI (%) on the sponsored search ads for branded keywords on Google? ______________