For example, Wikinvest has a detailed account of Google's own TAC explantion and justification. From this text, it is clear that even though Google benefits from a strong market position, they regard payments to affiliates (generating traffic) to be a vital part of their traffic acquisition strategy.
So, that's one component that can be listed under TAC cost calculation. Here are a few more:
- pay per click (or pay per action) campaigns;
- paid inclusion in search engine directories;
- banner and click based advertising.
These are the old standards, in more recent discussions of online traffic acquisition costs, social media has become increasingly prevalent. For example, when some organisations come to define traffic acquisition costs, they find that they need to include:
- paid tweets;
- paid content (i.e. blog entries, forum posts, etc.)
- creation of free resources to attract traffic (eBooks, newsletters, etc.)
The question is - when do these traffic acquisition costs examples become just another form of marketing or advertising, and when are they valid components of the TAC calculation?
As Investopedia notes in their definition of traffic acquisition cost, it has a direct affect on profitability, and is worth tracking as a component of total advertising costs. Expressing it as a percentage, whilst maintaining a consistent definition is key in understanding TAC evolution over time.
This is important to any business that relies on traffic to survive, and investors keep a close eye on TAC evolution as a way to measure the performance of an online company.
Entrepreneurs need to keep a close eye on TAC evolution as well, as it may well point to issues in their online marketing strategy that need to be fixed.
While there are no hard and fast rules, hopefully this brief discussion of the components of traffic acquisition cost calculation has helped understand the importance of this complex metric.
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