PROSAD

How does PRofit Optimizing Search Engine ADvertising work

We are two researchers from Goethe University Frankfurt and our primary motivation is to add scientific knowledge to all the discussions around self-service advertising programs such as Google AdWords. You as the advertiser need to provide some details on your keywords. You might not know the exact size of all required values, but you can easily enter different values and compare results. These comparisons might take some time, but just compare this effort to all the problems that you face if the keywords are not profitable for you.

PROSAD uses a bidding decision model that links bids to profits and therefore reveals which bid maximizes profit

The advertiser's bid is the decision variable, which is weighted by ad quality (so-called Quality Score). The weighted bid then determines the ad rank, which affects the number of clicks that the ad receives. The advertiser's acquisition costs per conversion equal the ratio of the bid to the conversion rate (conversion rate = number of conversions/number of clicks, often assumed to be constant, though it could depend on the rank). The number of conversions also is affected by the number of users, the clickthrough rate (= number of clicks/ number of searches), and the conversion rate. Finally, the difference between the profit contribution per conversion and the acquisition costs per conversion (also called CPO = Cost per Order), multiplied by the number of conversions, yields a keyword's profit after acquisition costs (transactional profit).

Publication

If you would like to know more about PROSAD, we recommend you to read the following article

Skiera, Bernd / Abou Nabout, Nadia (2012): "PROSAD: A Bidding Decision Support System for PRofit Optimizing Search Engine ADvertising", Marketing Science, 32(2), 213-220, Finalist in the Gary L. Lilien ISMS-MSI Practice Prize Competition.

Marketing Science

Video

If you would like to know more about PROSAD, we recommend you to watch the following video.

MIT Video

calculate your optimal bid

Prof. Dr. Bernd Skiera

Bernd Skiera is chaired professor of electronic commerce at Goethe-University in Frankfurt, Germany.

Bernd Skiera

Prof. Dr. Nadia Abou Nabout

Nadia Nabout is Professor of Interactive Marketing & Social Media at Vienna University of Economics and Business (WU Wien), Austria

Nadia Abou Nabout