Case Questions for Measuring ROI on Sponsored Search Ads
Instructions:
This exercise is to be completed individually. You may discuss the assignment in a group, but
each person should complete the exercise separately.
Please provide a clear, concise, and well organized essay that addresses at least the following
questions. You are free to address other issues in the case as well. The intent of the assignment
is to have you think critically about the marketing problems faced in the case. It is important
that you consider both sides of the argument when you answer these questions. Analyze the
quantitative material, if any, in the case to support your answers. Spend most of your time in
defining and defending your recommendation for what should be done.
Good answers may require assumptions of facts that may not be presented in the case. You
are welcome to make these assumptions, but please state these assumptions and briefly justify
why that are reasonable. Also, you may use whatever resources you can locate to provide
further information about this industry or the web in general. Please reference your sources.
Your response must be typed, double spaced, with one-inch margins, and a 10 to 12 point
font size. This writeup must not exceed 3 pages in length. You may attach exhibits, tables,
and/or graphs to support your arguments. These supporting materials must be referenced in
the text and do not count toward the 3 page limit.
Required:
e-Marketing focuses on making marketing more “accountable”. In other words, we want to use
quantitative analysis to direct our marketing expenditures and to get the best possible return from
these investments. A common metric for doing this is Return on Investment (ROI). ROI is the ratio
of return (=Return – Investment) to Investment. In our problem the investment is the cost of the
advertising, and the return is the profits earned from the advertisement. Please read the case
“Measuring ROI on Sponsored Search Ads” and answer the following questions.
1. What would happen if sponsored ads are removed from the website? How many would
click through to the website anyways?
2. Repeat Bob’s ROI calculation of 320% for sponsored search advertising for branded
keywords on Google. What assumptions is he making? Are these assumptions possibly
incorrect? Please explain your reasons.
3. What analysis can you do from the data to get a better ROI calculation for sponsored search
advertising for branded keywords on Google? Please explain any assumptions you make
based on the discussion in the case, conduct the proposed analysis and report the ROI you
have calculated. (Hint: Consider looking for a natural experiment that would tell you what
would happen if you did not invest in the advertisements.)
