Rocket Fuel Inc. was founded in March 2008 with a vision of transforming the digital advertising industry through big data and artificial intelligence. In 2016, TaskaBella approached Rocket Fuel to run a marketing campaign for a newly released handbag. Clara Demidenko, the representative from Rocket Fuel Inc., said they could expect to pay an average of around $7 for a thousand impressions. TaskaBella estimated that given the price tag of $100 on the handbag and the variable costs associated with a unit, a converting user is worth about $40.

At first, the perspective numbers looked very promising to TaskaBella. However, Adam Burrup, a TaskaBella digital marketing manager, pointed out that since the manufacturer already had a strong social media presence, many consumers may buy the new handbag as a result of word-of-mouth, after hearing about it from friends. Therefore, it would be important to know the extent to which conversions can be attributed to the advertising campaign. Demidenko pointed out that one of Rocket Fuel Inc.s primary objectives in the campaign is to provide evidence that the ads do make a difference. They do so by carving out a small portion of users reached during the campaign to form a control group. Users in the control group will be shown a public service announcement (PSA), such as wildfire prevention or Mothers Against Drunk Driving, instead of the ad in the exact same size and position on the page. By randomly selecting which user is in the control group and which user is exposed, they can then measure how much difference advertising makes. TaskaBella and Rocket Fuel settled on a control group size of twenty percent.

The trial campaign ran from November 2016 to February 2017. The ads were first loaded into Rocked Fuels content delivery network by an operations associate, which enables the quick displaying of the ads anywhere in the world within milliseconds. Rocked Fuel receives a hashed cookie ID, which allows it to anonymously identify the user in its system, along with many other parameters about the ad size and content. For each campaign, users that have been assigned to the control group are not actually served a campaign ad, but a PSA.

By the end of the campaign, 1 million impressions were served at an average CPM of $7. Based on data from previous campaigns run with other providers, 40% of the impressions are actually seen by users. Out of the 320,000 users who were in the treatment group and saw the advertisement, about 320 bought the new handbag, which means the conversion rate is 0.1%. For users in the treatment group but who didnt see the advertisement, the conversion rate is 0.01%; and for users in the control group, the conversion rate is 0.026%. Demidenko is asked to present the analysis results to TaskaBellas managers.

Was the campaign profitable? Please calculate the ROI (return on investment) of the campaign?