The money: unit economics quiz
RPC, ROI, break-even, estimated versus final revenue, clawbacks, payment terms and why scaling eats margin. Twelve questions on whether the numbers really add up. intermediate · 12 questions
Question 1 of 12Score 0
A feed report shows $300 of revenue from 500 clicks on sponsored results. What is the RPC?
All questions with answers
- A feed report shows $300 of revenue from 500 clicks on sponsored results. What is the RPC?
Answer: $0.60. RPC is revenue divided by monetised clicks: $300 / 500 = $0.60. The $1.67 trap comes from dividing the wrong way round. - You spend $1,000 on traffic and earn $1,300 in revenue. What is the ROI?
Answer: 30%. ROI is profit divided by cost: ($1,300 - $1,000) / $1,000 = 30%. 130% is the ROAS for the same numbers, and 23% is the profit margin (profit divided by revenue). Three different ratios, one set of figures. - What is the break-even point of a campaign?
Answer: The point where revenue exactly equals cost. At break-even point you neither make nor lose money. Knowing the break-even cost per visitor tells a buyer the most they can pay for traffic before a campaign turns into a loss. - What is the difference between estimated and finalised revenue?
Answer: Estimated is the early figure shown in reports; finalised is what remains after the search engine's quality checks and deductions. Estimated revenue is provisional. Finalised revenue is the amount actually owed once invalid clicks and other deductions are removed. Planning on the estimate as if it were cash is one of the costliest mistakes in the business. - What is a clawback?
Answer: Revenue that was reported and is later taken back, usually for invalid or low-quality clicks. A clawback removes revenue after the fact, often weeks later, while the money spent on traffic is long gone. Traffic sources do not refund you when the feed claws back: the two sides of the trade are separate contracts. - A provider pays "Net 30". What does that mean?
Answer: Payment arrives about 30 days after the end of the period in which the revenue was earned. Net payment terms set how long you wait for money. Net 30 means roughly a month after the earning period closes, so revenue from the first day of a month can take about two months to arrive. It is a timing term, not a percentage. - Why does a growing arbitrage business need working capital?
Answer: Because traffic is paid for now while feed revenue arrives weeks later. Ad platforms bill daily or on small thresholds, while feeds pay on net payment terms. The gap is the cash-flow float, and the faster you grow the more working capital it swallows. Profitable businesses can still run out of cash this way. - What usually happens to margin when a buyer raises a campaign's budget very quickly?
Answer: Cost per click tends to rise and traffic quality tends to fall, so the margin shrinks. Scaling pushes the platform to reach less interested people at higher prices. There are no bulk discounts in an auction. The same ROI at ten times the budget is the exception, not the rule. - What is the "Q4 effect"?
Answer: Advertisers spend more before the year-end holidays, which lifts revenue per click but also the price of traffic. In the Q4 effect, advertiser budgets peak around the shopping season, raising RPC. But everyone else is buying ads too, so CPC climbs as well, and January usually brings a sharp fall. Seasonality cuts both ways. - What is dayparting?
Answer: Running or bidding on ads differently by hour of day or day of week. Dayparting concentrates spend in the hours when the spread is best, since both traffic prices and feed revenue move through the day. It needs hourly data on both sides to be done properly. - A campaign has a ROAS of 130%. What is its ROI?
Answer: 30%. ROAS is revenue divided by spend, so 130% means $1.30 back per $1 spent, a profit of $0.30: an ROI of 30%. ROAS of 100% is only break-even, which is why quoting ROAS can make a campaign sound better than it is. - What does TAC stand for, and what is it?
Answer: Traffic acquisition cost: what is paid to bring visitors in. TAC is the money spent to acquire traffic. Subtract it from gross revenue and you get net revenue, the figure that shows what the business really keeps.