Estimate profit-per-conversion before advertising expenses

    Jane’s e-commerce site sells a wide variety of bicycle equipment. She wants to estimate her profit-per-conversion for each ad group to get a sense of which ad groups are immediately profitable in the short term. Which formula best estimates Jane’s profit-per-conversion before advertising expenses?

    • (Avg CPC) * (Conversion Rate)
    • (Avg Profit per Order) * (Conversion Rate)
    • (Avg Revenue per Order) * (Profit Margin)
    • (Total Profit) / (Total Revenue)

    The correct answer is:

    • (Avg Revenue per Order) * (Profit Margin)

    Explanation: Profit need to be calculated without ad expenses. It means conversion rate and cpc will not be considered in formula while calculating profit per conversion.

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