Optimize inter-channel capital flows using institutional portfolio management principles. Allocate marginal budget based on efficiency curves, qualified volume capacity, and diminishing returns analysis.
Marginal return allocation optimizes where to deploy the next pound of budget based on each channel's current efficiency and remaining capacity. The algorithm prioritizes channels that can deliver the most qualified conversions at the lowest incremental cost.
Unlike simple CPA-based allocation, this method accounts for diminishing returns—as you increase spend in any channel, efficiency typically decreases. The goal is to find the optimal balance point across your portfolio.
This mirrors institutional portfolio management where capital flows to assets offering the highest risk-adjusted returns at the margin.
Every channel has capacity constraints and diminishing returns. The lowest CPA channel might already be near saturation, meaning additional budget would drive CPA significantly higher.
Smart allocation considers: current efficiency, remaining headroom before saturation, and the rate at which performance degrades with increased spend. Sometimes a higher-CPA channel with more capacity delivers better marginal returns.
This prevents the common mistake of over-investing in channels that appear efficient at small scale but become expensive when scaled.
Maximum volume represents the qualified conversions available in that channel before hitting saturation. Estimate based on: search volume data (for Google), audience size (for Facebook), or historical performance curves.
Google Search: Use keyword research tools to estimate total available impressions and apply realistic conversion assumptions.
Facebook/Meta: Use audience insights to estimate reachable population with your targeting.
LinkedIn: Consider total addressable professional audience matching your criteria.
Start conservatively—it's better to underestimate capacity than over-allocate to channels that can't deliver qualified volume at scale.
This calculator optimizes for conversion volume at given CPA levels. If your channels deliver different conversion values, you should weight the CPA inputs by relative value.
For example, if LinkedIn converts lead to customer at 2x the rate of Facebook, treat LinkedIn's CPA as effectively half the reported number when inputting data.
Advanced allocation should incorporate Customer Lifetime Value (CLV) weighting, but this simplified model focuses on efficient conversion acquisition assuming comparable quality across channels.
Monthly rebalancing for strategic allocation shifts, weekly monitoring for tactical adjustments. Channel efficiency curves change with seasonality, competition, and creative performance.
Avoid daily rebalancing based on short-term fluctuations—this can disrupt algorithm learning and create unnecessary volatility. Focus on sustained efficiency changes rather than noise.
Major reallocation should occur when: channels hit capacity constraints, CPA efficiency shifts persist for 2+ weeks, or new channels are introduced to the mix.
Yes, but in reverse order. When cutting budget, remove spend from the least efficient channels first while protecting the highest-performing segments. This minimizes impact on total conversion volume.
The same marginal analysis applies: which pounds of spend are delivering the worst return? Cut those first, maintaining investment in channels operating efficiently below capacity.
Budget cuts require more caution than increases—you can't easily reverse lost momentum in high-performing channels.
This simulator applies institutional portfolio management principles to media allocation. Rather than static budget splits, we optimize for marginal returns—where each additional pound generates the highest qualified conversion yield.
Diminishing Returns Modeling: The algorithm accounts for capacity constraints and efficiency degradation as channels scale. This prevents over-allocation to channels that appear efficient at current spend levels but become expensive when saturated.
Portfolio Optimization: True media mix optimization balances current efficiency with incremental capacity, ensuring sustainable performance as budgets scale. This disciplined approach prevents the boom-bust cycles common in reactive budget management.