ROI on ad spend

The return on investment (ROI) for ad spend can be categorized using the four outcomes from a confusion matrix. This quantity is defined as the ratio between the total return and the total cost. If this quantity is greater than 1, it indicates the total return was greater than the total cost and vice versa. In this exercise, you will compute a sample ROI assuming a fixed r, the return on a click per number of impressions, and cost, the cost per number of impressions.

The pandas module is available as pd in your workspace and the sample DataFrame is loaded as df. The arrays y_test (target values of testing set) and y_pred (predicted target values) are available for use. Additionally, DecisionTreeClassifier from sklearn.tree is available.

This exercise is part of the course

Predicting CTR with Machine Learning in Python

Exercise instructions

Compute the confusion matrix and get the four categories via flattening the matrix using .ravel().
Calculate the total return (using r) and total cost (using cost) by using quantities from the four categories.
Calculate the total ROI.

Hands-on interactive exercise

Have a go at this exercise by completing this sample code.

# Compute confusion matrix and get four categories
conf_matrix = ____(y_test, y_pred)
tn, fp, fn, tp = conf_matrix.____

# Calculate total return, total spent, and ROI
r = 0.2
cost = 0.05
total_return = ____ * r
total_cost = (____ + ____) * cost 
roi = ____ / ____
print("Total return: %s, Total cost: %s, ROI: %s" %(
  total_return, total_cost, roi))

Edit and Run Code

This exercise is part of the course

Predicting CTR with Machine Learning in Python

IntermediateSkill Level

5.0+

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Chances are you’re on this page because you clicked a link. In this chapter, you’ll learn why click-through-rates (CTR) are integral to targeted advertising, how to perform basic DataFrame manipulation, and how you can use machine learning models to predict CTR.

Exercise 1: Introduction to click-through rates Exercise 2: Beginning steps Exercise 3: Feature exploration Exercise 4: First evaluation of data Exercise 5: Overview of machine learning models Exercise 6: Logistic regression for breast cancer Exercise 7: Logistic regression for images Exercise 8: A second toy model Exercise 9: CTR prediction using decision trees Exercise 10: Model implementation Exercise 11: A first CTR model Exercise 12: Beyond only accuracy

This chapter provides the foundations for exploratory data analysis (EDA). Using sample data you’ll use the pandas library to look at columns and data types, explore missing data, and use hashing to perform feature engineering on categorical features. All of which are important when exploring features for more accurate CTR prediction.

Exercise 1: Exploratory data analysis Exercise 2: A first look Exercise 3: Checking for missing values Exercise 4: Distributions by CTR Exercise 5: Feature engineering Exercise 6: Analyzing datetime columns Exercise 7: Converting categorical variables Exercise 8: Creating new features Exercise 9: Standardizing features Exercise 10: Log normalization Exercise 11: Understanding standardization Exercise 12: Standard scaling

It’s time to dive deeper. Find out how you can use measures of model performance including precision and recall to answer real-world questions, such as evaluating ROI on ad spend. You’ll also learn ways to improve upon those evaluation metrics, such as ensemble methods and hyperparameter tuning.

Exercise 1: Applications of metric evaluation Exercise 2: Four categories of outcomes Exercise 3: Evaluating four categories Exercise 4: ROI on ad spend

Current Exercise

Exercise 5: Model evaluation Exercise 6: Precision and recall Exercise 7: Baseline Exercise 8: Classifier comparison Exercise 9: Tuning models Exercise 10: Regularization Exercise 11: Cross validation Exercise 12: Model selection Exercise 13: Ensembles and hyperparameter tuning Exercise 14: Understanding hyperparameter tuning Exercise 15: Random forests Exercise 16: Grid search

Profits can be heavily impacted by your campaign’s CTR. In this chapter, you’ll learn how deep learning can be used to reduce that risk. You’ll focus on multi-layer perceptron (MLP) and neural network models, and learn how these can be used to capture the complex relationship between variables to more accurately predict CTR. Lastly, you’ll explore how to apply the basics of hyperparameter tuning and regularization to classification models.

Exercise 1: Introduction to deep learning Exercise 2: Understanding MLPs Exercise 3: Beginning model Exercise 4: MLPs for CTR Exercise 5: Hyperparameter tuning in deep learning Exercise 6: Hyperparameter tuning in MLPs Exercise 7: Varying hyperparameters Exercise 8: MLP Grid Search Exercise 9: Model evaluation Exercise 10: F-beta score Exercise 11: Low precision and high AUC Exercise 12: Precision, ROI, and AUC Exercise 13: Model review and comparison Exercise 14: Model comparison warmup Exercise 15: Evaluating precision and ROI Exercise 16: Total scoring Exercise 17: Wrap-up video