Are you losing money on your online ads? Some people may want to think that online advertising is akin to a gold mine: You simply raise your ad budget to get a directly proportional increase in your revenue with the same return on ad spend (ROAS). But you’ll want to look a little closer to find the truth.
In fact, you may actually lose money unnecessarily by advertising online without even realizing it. Let’s take a deeper look at the situation so you can figure out whether this applies to you.
Does More Ad Budget Equal More Revenue?
Scaling ads is the new “it” thing in online marketing. But can we really scale so easily? If your ROAS is now at 3.5, you are getting 3 1/2 times as much revenue as your ad spend. So why not just double the ad budget and make twice the money out the other side? First, simply increasing the ad budget won’t do that.
Second, and most importantly, just because you see the numbers rising doesn’t mean your ad is generating new customers and extra revenue. What exactly does that mean? The following example will make it clearer.
Advertising Budget Better Spent On Charity
Let’s say your company gets some Google Ads. You get somebody to analyze and scale your strategy. They find out that the top search query for your brand is your brand name. So, using your brand name as one of the tags for your ads seems like the biggest bang for your buck. Sure enough, people are clicking like mad on that advertising snippet and buying things in your shop. You might think the ads are working well. All the graphs in the performance diagrams are going through the roof.
But what is the first organic search result for the search query? Is it your website? So, actually, you didn’t get good customers from your ad. You paid unnecessarily for customers that would have clicked and bought anyway.
So instead of scaling, you spent a bunch of money for nothing. How many times is this happening? Could it also be happening with your social media advertising?
A Bitter Pill To Swallow: Selection Versus Advertising Effect
At the height of the ad spend, advertisers hide behind the ad analytics stat sheet while waiting for the customer to criticize the spend in relation to its revenue. It’s no wonder that whenever there are “solid numbers,” we cling to them in order to prove our point. But if we are after performance and not defending our egos, we have to look at the selection and the advertising effect.
The selection effect describes all the people who saw your ad but would have converted anyway. Contrary to that, the advertising effect depicts all the people that converted as a result of seeing your ad.
So let’s get this straight: When a lot of your customers fall into the advertising effect group, you are doing real, profitable advertising. If you find out that a lot of your customers come by way of the selection effect, you are only doing one thing: Donating money to the ad platform and reducing your profits.
All That’s Left In Any Way Is Advertising Space
It’s hands down much better to not do online ads at all than to just squander your budget. But the offline marketing world is no saint either. You don’t know much about anything. You can’t:
Differentiate selection or advertising effect (other than doing polls, but how many people even answer those survey calls?).
Clearly track where your leads come from.
So, if you are asking me, I’d rather take the painful realization that my ads are costing me unnecessarily and reconcile it rather than not have any reliable metrics and just use the “shut up and take my money” ad budget strategy.
Now, let’s go back to that initial sentence in the paragraph: Yes, it’s better not to waste money. But you are also missing a big piece of the cake if you let the opportunity pass. So, what to do? We have to do it professionally.
The Remedy: Attribution And Conversion Lift Studies
If you want to stop paying for leads that were already running toward you with their wallets wide open, you have to incorporate attribution in your analytics. There you differentiate exactly where a lead came from, so you know if it is really an extra lead.
The same thing applies to conversion lift studies where you can double-check the value of your conversions and see the effect of your ad in detail. Both of these measures require a skilled professional, so be sure to find somebody you trust. However, if you want to do something right now, I also have measures to suggest that are easy to implement.
What can you start implementing today without hiring an agency/expert?
These three steps will help you measure your numbers correctly and find out if your ads are really having the effect they should.
1. Set up Facebook Attribution. The first step is to set up Facebook Attribution in your Business Manager and connect the ad platforms you are currently using (e.g., Google Ads, Pinterest, DoubleClick).
2. Use the Test and Learn tool to set up a Facebook Conversion Lift Study and Brand Lift Study in order to measure your incremental conversions and brand lift.
3. Use UTMs across all of your marketing channels. Compare the numbers from different analytics systems (Google Analytics, Adobe Analytics) to the ads managers (Facebook Ads Manager, Google Ads Manager, Pinterest Ads Manager) and also your attribution tool. You will get a good grip on the consensus between all the numbers and therefore have the most reliable outcome.
I hope this article helped make you aware of the fact that online advertising can be detrimental if done poorly. But if you use the right analytics and assess the situation carefully, you can save yourself a lot of trouble and money.