What is an advertising fee ratio?
Your advertising fee ratio measures your advertising fees as a percentage of your revenue. A lower percentage means less of your revenue is spent on advertising fees. A higher percentage means more of your revenue is spent on advertising fees.
How is my advertising fee ratio calculated?
Your advertising fee ratio is calculated as:
Total advertising fees / total revenue
For example, if your total advertising fees in the period were 120 and your revenue was 1,000, your fee ratio would be:
120 / 1,000 = 0.12
Your advertising fee ratio is presented as a percentage, so 0.12 becomes 12%.
How can I compare my advertising fee ratio to industry averages?
Link My Books benchmarking feature allows you to compare your advertising fee ratio with other businesses of similar size selling on the same channel.
On the bell curve, you will see the median, lower quartile and upper quartile figures. These represent how other businesses in your cohort are performing.
Your result is shown in comparison to these industry averages and is placed into one of the following 4 quartiles:
A lower advertising fee ratio is better as this means less of your revenue is being spent on fees.
Tips to improve your advertising fee ratio
Ultimately to lower your advertising fee ratio you need to increase your revenue or lower your advertising fees or both.
Reducing your advertising fee ratio is crucial for optimising your marketing budget and improving overall profitability. Here are 10 tips to help you lower your advertising fee ratio (written by Chat GPT):
1. Set Clear Advertising Goals:
Define specific and measurable goals for your advertising campaigns. Having a clear objective will allow you to focus your efforts and spend on strategies that directly contribute to revenue.
2. Regularly Review and Adjust Campaigns:
Continuously monitor the performance of your advertising campaigns. Identify high-performing campaigns and allocate more budget to them, while pausing or optimising underperforming ones to minimise wasted spend.
3. Target the Right Audience:
Refine your audience targeting to ensure your ads are reaching the most relevant audience. Utilise the targeting options provided by advertising platforms to narrow down your audience and increase the likelihood of conversions.
4. Use Negative Keywords:
Employ negative keywords in your paid search campaigns to prevent your ads from showing up in irrelevant searches. This can help you avoid clicks from users who are unlikely to convert, reducing unnecessary spending.
5. Optimise Ad Copy and Creatives:
Regularly test and optimise your ad copy and creatives to improve click-through rates and conversion rates. Compelling and relevant ads can lead to better performance, allowing you to achieve your goals with less spend.
6. Explore Lower-Cost Platforms:
Consider diversifying your advertising efforts by exploring lower-cost advertising platforms. Some smaller or niche platforms may offer more cost-effective options, especially if they reach your target audience effectively.
7. Utilize Retargeting Campaigns:
Implement retargeting campaigns to re-engage users who have previously visited your website but didn't convert. These campaigns are often more cost-effective as they target users already familiar with your brand.
8. Negotiate with Ad Platforms:
Reach out to your advertising platform representatives and negotiate better rates or discounts based on your advertising volume. Some platforms may be willing to work with you to keep your business.
9. Implement Bid Strategies and Automation:
Use bidding strategies and automation features provided by advertising platforms to optimise your ad spend. Automated bidding can help you adjust bids in real time based on performance data.
10. Track and Attribute Conversions Properly:
Ensure that you have accurate tracking and attribution in place to measure the true impact of your advertising efforts. Understand which channels and campaigns are driving the most valuable conversions so you can allocate your budget more effectively.
Regularly analyse your advertising performance metrics, experiment with different strategies, and adapt your approach based on data to achieve a lower advertising fee ratio while maximising your return on investment.