Mark:
Actually, I'm spending exactly the right amount of money. The law of diminishing returns says that the optimial amount of money to spend on advertising is 50% of your profits.
generally, so as long as you're not spending more than 50% of your profits on advertising, you're not spending too much, and in fact, you might want to increase what you're spending.
That does assume however that every advertising dollar you spend increases your sales by the same amount.
I advertise on cgtextures.com for example, and there google tells me I'm not receving 85% of the impressions I could be receiving... But since that site shows a banner with every texture a user clicks, showing my ads 100% of the time would show the same ad to the same user ten times, when once might be sufficient. And indeed, from what I could tell from crunching my sales figures, spending more than $8 a day advertising on that site would actually reduce my profits.
But when it comes to Pay Per Action, you can't spend too much. I was paying 50%, the optimal amount, only when a sale was made. So if I ended up spending $2000 a month that just means I sold a hell of a lot of copies (though that never happened) and therefore made $2000 in profit.
For pay per impression style campaigns though, or pay per click, like the cgtextures site, it comes down to adjusting the advertising revenue up and down until you find the sweet spot where you're spending 50% of your profits on advertising. That's the point where your profits are maximized.
There's a mathematical formula which proves that, but I don't remember it.
Actually, I'm spending exactly the right amount of money. The law of diminishing returns says that the optimial amount of money to spend on advertising is 50% of your profits.
generally, so as long as you're not spending more than 50% of your profits on advertising, you're not spending too much, and in fact, you might want to increase what you're spending.
That does assume however that every advertising dollar you spend increases your sales by the same amount.
I advertise on cgtextures.com for example, and there google tells me I'm not receving 85% of the impressions I could be receiving... But since that site shows a banner with every texture a user clicks, showing my ads 100% of the time would show the same ad to the same user ten times, when once might be sufficient. And indeed, from what I could tell from crunching my sales figures, spending more than $8 a day advertising on that site would actually reduce my profits.
But when it comes to Pay Per Action, you can't spend too much. I was paying 50%, the optimal amount, only when a sale was made. So if I ended up spending $2000 a month that just means I sold a hell of a lot of copies (though that never happened) and therefore made $2000 in profit.
For pay per impression style campaigns though, or pay per click, like the cgtextures site, it comes down to adjusting the advertising revenue up and down until you find the sweet spot where you're spending 50% of your profits on advertising. That's the point where your profits are maximized.
There's a mathematical formula which proves that, but I don't remember it.