Category: startup

Startup Advertising Spend Calculator

I was considering advertising our latest AppSumo Bad Ass developer bundle on Stack Overflow. I called them up and was told the CPMS were $6.25 and minimum spend was $1,000.

I realized I need a way to make decisions about whether that’s a good deal or not.

Here’s the spreadsheet I used based on their data. I figured you could use it as well in deciding which ad campaigns are the best for you.

Get it for yourself.

Key things to always ask when doing your advertising.

  • What is the ctr of the ads?
  • What is the unique visitor to impression ratio? 100,000 impressions doesn’t mean 100,000 saw it.

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15 Responses to “Startup Advertising Spend Calculator”

  • Berry
    November 22nd, 2010
    9:58 am

    oooohh.
    Super handy.
    Thanks.

    I almost spent $1,200 to advertise in an RSS feed. Turns out most feed readers don’t display their ad. So their claim of 9,000 readers may be true, but that’s not how many would even SEE my ad…

  • noname
    November 22nd, 2010
    11:43 am

    What do CTR and CPM stand for?

  • Ankur Jain
    November 22nd, 2010
    11:56 am

    Noah,

    I didn’t understand how you calculated the return (-$2.79) in your spreadsheet above.

    Here is what I follow from your numbers:

    Cost of ad campaign: $1000
    Number of converted user on your site: 0.86
    Expected revenue / converted user: $14.63 (from your spreadsheet)
    ————————————————————
    Net revenue: $12.6 (=0.86*$14.63)
    ————————————————————

    If I understand correctly, net ROI will be +$12.60 -$1000 = – $987.4. Am I missing something here?

    -Ankur

  • Jos3ph
    November 22nd, 2010
    12:22 pm

    Users == Paying Customers, right?

    Maybe I’m missing something in the way you break this down, but if you spend $1000 & Get 58 visitors you’ve spent $17/visitor like the chart shows.

    If 1.5% of visitors convert to sales, that’s 1-2 sales, & B16 is expected revenue rather than expected revenue per user. Where am I wrong?

  • Noah
    November 22nd, 2010
    1:03 pm

    ctr is click through rate so the % of people that click on your ad.

    CPM is cost per thousand. so if your ad gets shown 1000 times (NOT to 1000 people) how much that will cost you.

  • Noah
    November 22nd, 2010
    1:05 pm

    ankur the expected net is 14.63, not an additional .86 of that.

  • Tracy Hall
    November 23rd, 2010
    11:58 am

    Noah;
    Ankur and Jo3eph are correct in concept, if not in calculation. For “each” $1000 spent on this campaign, given your numbers, you will realize 0.86 paying customers – or put another way, it would take a $1161.67 ad spend to expect to gain ***one*** paying customer.

    This makes your rate of return $17 – $1161.67 per new customer – or a loss of ($1144.67) PER NEW CUSTOMER.

    Running your numbers backward (i.e. starting from $17 revenue per customer, 1.5% conversion rate), you can only afford at BREAK EVEN to spend $0.26 per click-through, which means a CPM of $0.09 – which means your $1000 could have over 10,000,000 impressions to garner 57 paying customers about $1000 revenue…

    I could send you the spreadsheet snippet, if you like…

  • Noah
    November 23rd, 2010
    12:03 pm

    Tracy,

    Nice catch. On a per customer basis it works but on an overall campaign basis we would need to add in details about # to break-even. I sent you access to the google doc. Feel free to update and I’m glad we have some readers from MIT :)

  • Tracy Hall
    November 23rd, 2010
    12:43 pm

    Noah;

    I’ve updated the spreadsheet, including modifying your portion to show the “return on campaign”, as well as calculating impressions from spend and CPM.

    I also added the “breakeven CPM” calculation, using the revenue-per-paying-customer, conversion rate, CTR and impressions/user

    As a user/business owner, I would (and have) run the break-even CPM first, then looked for opportunities cheaper. **IF** you cannot find CPM cheaper for your target demographic, then your only recourse is either (a) increase your conversion (noting a limit of 100% on that :D ) or (b) your revenue/paying customer. Simple as that.

    Tracy Hall

  • Justin Thiele
    November 23rd, 2010
    4:58 pm

    CTR is calculated on the total number of impressions not the number of people. So it’s not accurate to take:

    (Impressions/Pageviews per persion) * CTR

    to find New Visitors

    Instead you should just do:

    Impressions * CTR = New Visitors

    Assuming there aren’t many people committing click fraud, this should be fairly accurate.

    This changes the acquisition to 7.2 new paying customers instead of 1.03.

    That puts your cost of a new customer at ($1000/7.2) = $138, which is still alot.

    To make it worth it, you’d need to figure out how to make an ad that attracts a higher CTR on StackOverflow and increase the conversion rate on AppSumo.

    Of course, this doesn’t take in account the lifetime value of a customer.

  • Wickram
    November 25th, 2010
    4:27 am

    Hi Noah,

    You can try other advertising options. You can attract more visitors to your blog by advertising on Google content network. Select your list of sites using Google ad planner & use demographics targeting to get max roi for minimum spends. Experiment with $200 on Facebook ads. I’m sure you can get maximum roi by using following demographics targeting.

    Age : 25 -35
    Interests : Stackoverflow, mention few other core devloping sites
    Education : Computer Engineering
    Location : San Francisco

    Thanks,
    Wickram

  • Jens
    November 26th, 2010
    5:30 am

    I agree, several things seem to be wrong.

    I have recalculated this and come to the following scenario:

    https://spreadsheets.google.com/ccc?key=0AuG20rCgGWL4dEVpNzlyY2tTWm9oT2lmMW55cmMzVFE#gid=0

    Please edit this if you think this is wrong.

    Jens

  • Espree
    November 30th, 2010
    1:27 pm

    This is awesome! Thanks. And thanks Tracy for adding to it as well :-)

    Perfect timing. Last week I was working on this mind map for myself in to decide which project I want to focus on in the new year – Heres the link – https://www.mindmeister.com/70314608?title=monetizing-any-project-make-10-000-a-month-with-minimal-effort

    It’s a basic step by step breakdown of how to know how much a project idea will monetize before going full force. I got it from a report Tim Ferriss created so it is definitely not my own thinking. Just being that numbers isn’t my thing I had to write it out in an action based methodology for me to be able to implement. aka mind map :) Hope it helps.

  • SF
    December 3rd, 2010
    3:09 pm

    Your advertiser link to free international calls is throwing a security warning as well.

  • Brian
    December 8th, 2010
    3:43 pm

    Hi, Brian here again.

    I’ve just read about the ‘marketing spend spreadsheet’ and while I can only think what a generous person you are, with the very best of intentions, I wonder if you will allow me to offer your readers a couple of Excel-based auto-calculators that I developed for my own business. One will show the true cost of any marketing spend you have done in the past (and the results are terrifying when seen this way) while the other one is a Planning Tool so you can calculate to spend a balanced sum and know what to expect back.
    I will send them to Noah and hopefully he will post them up for free distribution.
    I’m planning an auto break-even projector soon too, which should be handy for newbies planning a new business I would think..
    Hope these can get to you and are found useful…I would love to get some feedback.
    cheers, Brian

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