The Economics of Digital Advertising: How Business Profitability Changes When Advertising Scales

Purpose of the article. The article considers key issues of digital advertising effectiveness, including the relationship between costs and profitability in the process of scaling advertising campaigns. The research methodology is comprised of a systematic method, comparative analysis, and theoretical methods (analytical-synthetic, classification, systematisation, and generalisation). Results. The article considers contemporary trends in the development of digital advertising in the context of scaling. The present study analyses the relationship between a decrease in ROAS (return on advertising costs), an increase in costs and an increase in net profit. It was determined that a decline in return on advertising spend (ROAS) when scaling advertising campaigns is a common occurrence. This is due to the fact that the efficacy of the campaign may be diminished due to market saturation and the necessity to expand the target audience. While attracting users who are less knowledgeable about the product or brand may be more costly, it is nevertheless essential in the context of scaling advertising campaigns. It has been demonstrated that an increase in advertising costs does not necessarily result in a proportional increase in profit from these advertising campaigns. The necessity for informed management decisions to optimise digital advertising is well-documented, and this process involves conducting campaign audits to identify new opportunities, personalising advertising communications and using A/B testing to determine the most effective combinations, and personalising advertising to find new target audience segments. Practical implications. The study demonstrates that scaling digital advertising is a pivotal stage for any business if costs are optimised to maintain a high level of profitability. Value/Originality. The article proposes an innovative approach to the effectiveness of advertising in terms of scaling, which takes into account the expansion of campaigns to new audience segments, the expansion of advertising channels and strategies, the modelling and forecasting of ROI (return on investment) and ROAS for each stage of scaling in order to predict a possible decrease in effectiveness and adjust the strategy over time. It also focuses on the value of the product for the client.