If your ads work, if you can measure them and they return more profit than they cost, why not keep buying them until they stop working?
And if they don’t work, why are you running them?
The time-tested response is that you’re not sure, that ads are risky, that you can’t tell. And for some sorts of products and some sorts of ads, you’ll get no argument from me.
Digital ads are different (or they should be). You should know cost per click and revenue per click and be able to make a smart guess about lifetime value of a click. And if that’s positive, buy, buy, buy.
How effective is that full page ad in that industry magazine? How many people actually see that billboard? How many people actually pick up and read your brochure? These are questions that, too often, assaulted the faith of ad buyers everywhere.
Of course, all of that changed with the web, where we can measure the cost of every click, every conversion, every customer. It makes the newspaper ads and movie posters seem hilariously antiquated. When we talk to ad reps on behalf of our clients, we’ve always got an exact cost-per-conversion in mind. If they can’t offer services below that cost, we don’t advertise with them.
Seth mentions that for Amazon.com the magic cost-per-conversion number was $33 and that Amazon would always buy ads if that number could be met.