New to PPC, can you explain what a margin is?

[Lukinzz]

Is he possibly referring to the profit margin from the ads?

Most ad people use ROAS return on ad spend as a metric. i.e., how much did you spend vs how much did you make?

[Power_of_Atturdy]

Traditionally Margin refers to your profit or loss after your cost.

Let’s say you have a campaign that spent $1,000 and the value of what you sold from those ads beings in a revenue (conversion value) of $1,200. Then, in this case your Margin is +$200, or a profit of $200. This is an overly simplistic example, but hopefully it helps.

[OddProjectsCo]

Margin is the profit made after a sale. If you sell a product for $100, and the cost of goods and labor to get that product is $70, then you made $30 in profit margin. Sometimes it’s said as “we have a 30% margin” or “we make 30 points on the sale” – that all means $70 COGS and $30 profit on a $100 item.

That number drives the advertising budgets because advertising is an expense that comes out after the products are created to sell. So someone spending $30 to get that sale is effectively breaking even (scaling revenue but not profit). If they spend under $25, they are scaling both revenue and profit. If they are spending over $35 to get the sale, they are losing money.

Keep in mind it’s VERY different from ROAS. In platform, you’ll see the above scenarios as:

– $30 to make $100. 3.3x ROAS
– $25 to make $100. 4x ROAS
– $35 to make $100. 2.85x ROAS.

A PPCer who doesn’t understand the clients profit margin and larger objectives will likely view any of the above ROAS numbers as potentially a win (you made money more than you spent!) even when only the ROAS over breakeven (3.3x) is truly healthy growth.

There are nuances (customer lifetime value is often used in place of single-sale, especially in repeat-purchase categories) but that’s the basic approach.