Digital advertising is getting harder.
The last few months have ripped back the curtain as many e-commerce firms, so dependent on the crack of paid social, saw their results decline dramatically, unable to maintain momentum or even simply hold steady. While economic conditions have undoubtedly played a role, the sheer speed at which so many fortunes have changed speaks to a fundamental problem with their strategy.
I’ve been exposed to the inner workings of many e-commerce firms, and what separates the good from the great is strategy.
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Many firms had been able to flourish in spite of poor processes — upload the shoddy creative or heavily optimised products into Facebook or Google, set a purchase conversion objective, then let the machine find customers who were ready to buy. This slapdash approach has been eroded to the point where it can no longer be relied upon and for most, it flat out no longer works.
Of the dozens of ad accounts I’ve looked at this year, there has been a collective digging in of heels; what worked over the last two years should still be working now, even in light of hard evidence that those days are gone. I still see a steadfast commitment to exclusively using purchase objectives, mixing cold and warm audiences, and using the same creative for both (among others) every single day.
When asked why, the reason I usually get is: “That’s how you optimise for the algorithm.”
In the same way that over the last 10 years Google has made SEO more about humans and less about gaming an algorithm, I believe this change is coming for the programmatic advertising space and that is a great thing.
Too much emphasis in the advertising space has been put on optimising algorithms; tricky tactics like rapidly duplicating ads or boosting budgets, that give you a short-term advantage but lead you right back to where you were before. I’ll even admit these tactics can generate promising-looking numbers — impressions are up and so is reach, the ads are working so the problem must be somewhere else — but it is all a façade.
As an e-commerce practitioner, I’m often called out for wanting to use other objectives other than a purchase conversion.
The argument that you should only ever use purchase objectives is based on the theory that your ads will only show to people that are likely to buy, therefore reducing wastage. This is short-sighted and ignores the fact that you still need to reach people who may not even know they want your product yet so that you are in their consideration set when they are ready to buy. In other words, raising brand awareness.
The former is optimising, the latter is strategy.
Growth is another example. How do you grow your business? The surefire way to grow your business is to acquire new customers. Yet if you’re optimising advertising toward your return on ad spend ROAS (you can read my thoughts on attribution here), you would naturally end up limiting your focus to potential customers who are already somewhere in your funnel (i.e. already have some propensity to buy). While this may work short term, in the long run your new customer numbers will eventually slow, putting your business into stasis.
Now ask that question a different way. Instead of, ‘how do you grow your business?’, you should be asking, ‘how do we keep acquiring new customers?’. While ROAS may be something you keep an eye on, the most important number you look at each week is your new customers and customer acquisition cost.
Optimisation versus strategy.
Does your advertising have a strategy to attract and engage humans, or are you optimising for a machine?
This article was first published by Ecom Nation.