Key takeaways
- Each channel has a return and a risk.
- Low correlation lowers total risk.
- Risk tolerance sets the split.
Gather the inputs
For each channel, take the average weekly ROAS and its standard deviation from six months of data. Estimate how often the channels rise and fall together.
A worked split
Search averages ROAS 3.5 with a standard deviation of 0.8, social 4.2 with 1.6 and email 2.8 with 0.5. With correlation 0.3 and moderate risk aversion, the best split is about 65% search, 25% social and 10% email, for an expected ROAS near 3.6.
Combine with saturation
The split ignores diminishing returns. After choosing it, check each channel's saturation curve and cap spend where the marginal return falls below target.
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Channel Portfolio Optimizer How to split budget across channels, with risk?
Questions about Paid Media Math
Why not put everything in the best channel?
One channel concentrates risk and usually saturates, so returns fall as you scale.
How often should I rebalance?
Quarterly, or after a big change in a channel.
Key terms
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