Learnings from $20M Ad Spend Series: Why Brands Cannot Scale With Facebook Ads

So, in this post, I will talk about why e-commerce brands struggle to scale their business with Facebook ads and what the common mistakes that almost everyone makes are.

Let's start, shall we?

1) Complicated ad account structure

We audit at least dozens of ad accounts every month, and the things we see, are just mind-boggling.

Just recently, we saw an account with six campaigns, 2 of them were TOFU - ABO campaigns with 10 + ad sets, each spending $30 a day to interest lookalike audiences.

Then, two other campaigns where they had CBO and again all the same ad sets, same ads, just spending the money on CBO.

That's literally lighting money on fire.

The fifth and sixth campaigns were retargeting campaigns, retargeting people worldwide; the funny thing is, the primary target audience is the US.

There is no need to run multiple campaign ad account structures.

Unless you are selling in multiple countries in different time zones.

For example, the US has its own campaign, and the UK has its campaign.

There is no need to have retargeting campaigns unless you have 1000 SKUs, you can run a retargeting catalog campaign and remind them to complete a purchase, but that's literally at 3-5% of the whole daily budget.

It takes a lot of work to optimize these multiple campaigns.

The campaign structure needs to be simplified for ads to be effective.

If you are selling in one country, then run just one campaign.

Imagine how hard it is for media buyers to create reports for multiple campaigns and ad sets that spend money; it could be a better use of time.

2) No Ad Testing

You cannot scale ad accounts if you don't do weekly creative tests.

Creating new creatives has never been easier; all the phones above $500 have decent cameras, where you can shoot videos of your product and photos of your product and even edit the photos or videos inside the phone with apps.

Most of our best-performing ads have been shot with an iPhone.

Auditing dozens of ad accounts, the successful ones always test new creatives weekly; the amount depends, there is no golden number, but it's at least more than 5 new creatives a week.

All the accounts that have the highest CPA are running only a few ads, and some of the brand owners don't even notice it because their product is so good that they get sales anyway, even from word of mouth.

Also, for those who ask, what is the best performing creative? Should I test only videos? Which creative generates the most sales?

The answer - All of them.

I've seen accounts that spend $20k a day and run only UGC videos. They have mastered the way to create ugcs.

For those accounts literally, the next step is mastering static image creation to attract new audiences' eyes.

If you have friends and family, ask them how they consume content on Meta.

Are they reacting to video ads or image ads?

Some people always watch all video ads that they see.

Asking this question will give you an idea of what type of content you need to create.

3) No focus on new customer acquisition.

Many brands who are stuck also don't prospect ads to unaware, problem-aware, solution-aware audiences.

If your ad set frequency is higher than 1.6, guess what? You are mostly doing retargeting, and your ads are not reaching new audiences.

To grow, you must reach new audiences.

You can go to your ad accounts and look quarterly at your reach, impressions, and frequency numbers.

Check where you have spent the most budget. What's the frequency there? If you see a frequency over 20, congratulations, you have wasted some money on an audience that should have bought from you anyway.

Then, open up the website and pull up your quarterly sales, new customers, and overall customer numbers.

The quarter where you will have the biggest reach will also have more new customers. I shouldn't even mention this, but sometimes it's just that simple to look at these numbers.

There is absolutely no need to spend thousands of $ on retargeting audiences that you can reach with your email or social media posts.

Suggestion - Look at your frequency, if it's higher than 1.5, you need to create ads that attract new audiences. Your prospecting ad sets should have a 1.2 frequency max.

4) Not knowing their numbers.

This applies to those who are selling more than just one product.

If you only look at your daily ROAS and nothing else, there is a surprise waiting for you when you analyze these numbers.

Grab a tracking sheet, and create these columns:

Facebook ad spend | Google Ad spend ( if you have some, bassically create a collum for each channel that you are spending money ) | Website revenue | New Customer Revenue | Total orders | New customers.

We consider Facebook ads as an acquisition channel. Therefore each month you should acquire new customers.

Calculate your NC ROAS = Total New Customer Revenue/Total Ad Spend

If your NC ROAS is not above 1.1, you are overspending your retargeting audiences.

NCROAS or New Customer ROAS is an indicator of how efficient your marketing ecosystem is at generating accretive revenue, as opposed to reactivating returning customers.

Everyone talks about their customer split i.e., we had 60% of returning customers and 40% of new customers.

A 60/40 is an ideal split, but it’s not about a new and returning customer percentage split, as much it’s about how much that new customer and returning customer spent in relation to how much was spent to convert them.

Ultimately, the majority of your paid media budget should be spent on prospecting and bringing new blood into the fold.

Brands that don't track their NC ROAS and New Customer CPA are literally running around like blind chickens.

Just recently, we audited an account that had 80% of its monthly revenue from returning customers.

Yes, they still were spending tens of thousands on meta.

When they calculated their nc roas, their jaws dropped, realizing they had wasted all of their net margins and more on advertising to existing customers.

To avoid this track daily :

• your overall cpa
• new customer cpa
• your ecosystem roas ( some call it MER, blended ROAS)
• new customer ROAS

Track this quarterly

• purchase frequency
• 90-day customer LTV
• 90-day net marginLack of direction and what needs to be done to grow.

If you don't test ads weekly and track metrics daily, you can't have a clear direction on where to go with your brand.

Even when you are tracking everything and when you start tracking everything, you will see a lot of problems.

I suggest attacking one problem per month, if you have a new customer acquisition problem, focus solely on that until it's fixed.

Then move to the next problem - making the customers who purchase from you worth more.

E-commerce and every lead gen business comes down to numbers. Track, find the most important problem to solve now and solve it.

Then move to the next one, don't do 5 things at once, it's like a chicken running around without its head.

I hope you found this valuable,

Thanks for reading.

Jānis Dzalbe has made this post, if you need help in building your store, check our website https://ecomhub.agency/ and book a free consultation!