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Big Skinny Case Study

In: Computers and Technology

Submitted By k4kartik
Words 1902
Pages 8
Sponsored Search Strategy

We believe that Big Skinny should continue to advertise via sponsored search ads. Based upon the Cost per Click model presented to us in Exhibit 4 in the case study, the numbers show that they are able to generate a fair amount of revenue.

If we evaluate the data within Big Skinny’s CPC model, we can determine the cost and revenue as follows -

Cost = Impressions x CTR x CPC
Cost = 42,986 x 4.8% x .54
Cost = $1,114.20

Revenue = Impressions x CTR x Conversion Rate x Revenue Per Conversion**
Revenue = 42,986 x 4.8% x .05 x $20 Revenue = $2,063.40

** The value of $20 for Revenue Per Conversion is being assumed for this exercise. For one, CEO Kiril Alexandrov is quoted as saying “for $20, your wallet will be that thin forever” in the case study. Additionally, after searching their website, the vast majority of wallets listed on their website are being sold for more than $20. Therefore, $20 is used as a bare minimum price for each wallet sold. Even with that in mind, you can see that the revenue is almost double that of the cost. Taking into consideration that a certain number of the wallet sales will most likely be more than $20, the revenue will be larger in reality. This proves that their sponsored search advertising campaign is generating revenue. With that said, we can’t confirm that it is profitable since we weren’t provided with cost of manufacturing and distributing the product.

One keyword that Big Skinny might want to decrease their bid on is “leather wallet.” Although they have 12,335 impressions and 103 clicks, their CPC is $20.26. If you compare that CPC with all of the others, the next most expensive CPC is almost half of the price at $10.53. Also, they don’t sell leather wallets. They do...

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