In December of last year, Roistat conducted market research to compare the return on investment performance among popular advertising channels (search vs. display).
People showed a lot of interest in our research, so we decided to expand our dataset to cover the entire 2017 year.
Everyone wants to make more and spend less, but this is next to impossible without conducting an ROI analysis. Roistat does end-to-end analytics for business owners and their advertising agencies. These analytics are based on the client’s CRM sales data and factor in things like advertising expenses, revenue, bounce rates, and ROI.
Clients often ask us what constitutes a “good” performance and what advertising channel they should choose in order to increase their revenue. That’s why we decided to evaluate the return on investment (ROI) for various types of internet-based advertising.
At first, we included social network ads in the study, but our participants invest 95% of their budgets in contextual ads on search and content (display) sites. Therefore, we analyzed the ROI in detail for contextual ads and compared the impact that search and content ads have when using popular advertising systems.
Here are the results for those that want to get straight to the point:
- Any ad may bring in revenue if the campaign is set up correctly. Without running end-to-end analytics, it’s difficult to determine what an ad channel’s ROI is and draw correct conclusions.
- Overall, businesses get a greater return on their investment from search ads in comparison with display ads (but this isn’t to say that display ads are useless; they also serve an important purpose, as we’ll see).
- When we compared Yandex.Direct and Google AdWords, it was obvious that search ads work pretty well on both systems, but Yandex.Direct remained the leader on the Russian-language internet. On content (display) sites, Yandex.Direct also took the lead. Based on that, we can conclude that the majority of advertisers have not optimally configured their Russian Google Display Network ads.
We used a sample of two thousand random advertisers. The data we analyzed covers the entire 2017 year.
On March 1st of this year, we collected this data on revenue by ad channel. So if a business has a two-month transaction cycle, then they have to wait till February to see their revenue from ads served in December.
We use this formula to calculate the return on investment:
ROI = ((revenue – costs – ad expenses ) / ad expenses) * 100%
In our research, we calculated the ROI in these three ways:
- We totaled up revenue and expenses to get the overall ROI across all channels.
- We calculated each channel’s ROI individually and figured out the arithmetic mean.
- We calculated the median ROI since major advertisers might skew the average. Half the advertisers’ ROI was less than that number and half was more.
Because we didn’t want atypical data to distort the overall picture, we excluded advertisers in the top 5% by ROI, as well as those in the bottom 5%.
Notes about the calculations
- We used the Last Nondirect Click attribution model. That means that revenue from a transaction only gets linked to the ad source that initiated the user’s final session. For example, if a user clicks on an ad, but then visits a site from another channel and makes a purchase, that purchase data is linked to the second channel.
- Not all advertisers track their ad performance or calculate ROI, so we don’t claim that our data represents the undisputed last word on the matter. Nevertheless, we took a lot of measures to make sure our sample wasn’t distorted. Only advertisers who had advertising expenses and revenues from transactions on ad channels were included in the study. However, our monthly ROI calculation was not always based on the same advertisers (since not everyone has expenses and revenue every month and some businesses work on a seasonal basis). This caused some slight jumps in the research results.
- When we compared the effectiveness of the two contextual ad systems, we only factored in advertisers from the sample who were using Yandex.Direct and Google AdWords at the same time. That way, neither system had the advantage of having more users.
First we analyzed the return on investment from various types of ads.
Given that advertisers in the sample only invested 5% of their budget in social ads, we decided to limit our analysis of ROI to search and display ads going forward.
ROI on search: Yandex.Direct vs. Google AdWords
We calculated three ROI indicators for each ad system:
Here are the ROI dynamics for search ads by month:
Both platforms paid off, but the ROI for Yandex.Direct search ads was higher than that for Google AdWords.
We also looked at what percent of users took in more revenue from Direct search ads as opposed to Adwords search ads. If we look at the entire research period, 61% of advertisers gained more from Yandex.Direct search ads.
As we’ve seen, advertisers do see a positive ROI on average. Based on our data, this return is greater for advertisers using Yandex for their Russian language ads.
We can’t emphasize enough how important it is to set up your ad channel correctly. By disabling ineffective keywords and adding keywords that relate semantically to effective ones, you will start attracting more targeted traffic.
In our next installment, we’ll take a look at what Roistat’s research reveals concerning content (display) ads.