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In a paid search campaign on Google, All American Airways (AAA)…  In a paid search campaign on Google, All American Airways (AAA) paid Google $1 per click in order to increase visits to its new website with a set of promotional ticket prices. Google showed the ad to 10 million people. The click through rate (CTR)  was 3%, and the transaction conversion rate (TCR)  was 2%. 20% of the people who clicked on the Google paid search link shared the information with a friend through email or other channels (who had not seen the Google ad), and the “word-of-mouth” (WOM) CTR and TCR were 10% and 3%, respectively. AAA also advertised on Facebook (at $0.75 per click) with a guessing game, where an individual, say, John, had to guess what his friends (up to 5 friends, must be members of the AAA Frequent Flyer Program) liked the most about AAA. Assume that the attention given by the friends to John is 0.3; that is, there is a 30% chance that they would visit the AAA website to verify John’s responses after knowing that John had answered some questions about them. If friends verify, John get 1,000 miles per friend, while each friend gets 500 miles for verification. Both John and his friends may buy air tickets as well during their visit to the website. The Facebook ad was seen by 3 million users, and had a CTR of 10% and a TCR of 1%. Assume that each Facebook user who clicked on the ad answered questions regarding five friends and notified them through Facebook messaging. 1% of friends who visited the AAA page to verify also bought tickets.  Folks who answered questions got it right 100% of the time (maybe they took the trouble to tell their friends what they had answered about them, but AAA did not care; the objective was to get the friends to visit the site in the name of verification!). AAA guesstimated its cost to be $5 for every 25,000 free miles it gave. Assume that the average ticket price was the same (=$500) regardless of the type of ad or traffic. Calculate the following ratios (i) Return on advertising for Facebook / Return on advertising on Google, (ii) Return on advertising for WOM traffic / Return on advertising for “direct” traffic, and (iii) profit for Facebook WOM traffic / profit for Google WOM traffic. What can you conclude based on the analysis? Show all calculations. (15 points)Note: Return on Advertising = (Revenue – Cost) / Cost  Engineering & Technology Computer Science

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