Exercise related to Measuring the effectiveness of online advertising for the IMC course.

Measuring the effectiveness of online advertising Consider a ctitious food delivery service, called Altern. Altern decided to run a series of advertisements on Instagram for period of 4 weeks. Altern has to deal with some fierce competitors including Deliveroo, Uber Eats, and Zomato. Through online advertising, the startup hoped to boost orders through its platform. Specically, the Instagram ad showcased Altern's services and allowed users to get a direct access to the AppStore or Google Play to download the app. The Instagram business sales representative explained that CPMs (cost per thousand) vary and were affected by many factors, but with the target sites and population Altern had in mind, they could expect an average of AED 25 for a thousand impressions. After the four-week period, Altern observed that the ad was seen on Instagram by 613693 unique users for a total of 2,120,350 impressions, which means that in average, each user saw the ad 3.5 times. When Altern's executive team decided to run ads on Instagram, they anticipated to be able to measure the effectiveness of the campaign by designing an experiment. The experiment involved randomly assigning Instagram users to a test or a control group based on cookies that uniquely identify each user visiting the Facebook-owned social media platform. Users in the test group saw the ad showcasing Altern's service. Users in the control group were shown a public service announcement that is unrelated to Altern's service. Based on unique IDs, Altern was able to track which users eventually downloaded the Altern app. Users were spread across experimental conditions according to the table below: Test Count Control group Real Ad Total Converted (i.e., Not converted 105425 420650 586075 downloaded the Altern app) Converted 7050 30553 87618 Total 112475 501218 613693 The company estimated that given the average fee of AED 4 collected by Altern for every order through its app and given the variable costs associated with one order, a converted user is worth about AED 2. Questions: 1. How much more money did Altern make by running the campaign {excluding advertising costs) 2. What was the cost of the ad campaign? Calculate the ROI of the campaign. Was the campaign protable? 4. What was the opportunity cost of including a control group; how much more could Altern made without a control group? 5\