ER 019: Facebook Ads – Cold Traffic, Acquisition Cost, Strategy
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This is The Ecommerce Roundup, Podcast 19, today is November 3, 2017, I’m your host Bryan, and here’s the ecommerce news roundup for this week –
- Facebook ads for ecommerce
- Wall Street Segment
Facebook ads for ecommerce
Obviously if you’re in ecommerce, you have to be running ads. The first ads you must run are Amazon ads.
I do think people way over complicate advertising on Amazon. It’s pretty straightforward. There really are no tricks and silver bullets. And with the ability to use software tools like Seller Labs’ Ignite, it’s much easier to manage them. Gone are the days when you had to spend hours in Excel to optimize your ads. AMS ads still take a bit longer to work with than Sponsored Products, but eventually you’ll hit a point where you’re doing what you can with Amazon ads and keeping your campaigns in maintenance mode doesn’t take much time. What do you do then?
Go off Amazon. And go to Facebook.
In my opinion, Facebook is the best ads platform right now. The reason is because of the targeting options they allow you to do.
Making custom audiences, lookalike audiences, and being able to pixel someone and then get your message right back in front of them is very powerful.
I have to admit that Google, and with that YouTube, also has retargeting and gives you the ability to build audiences, but it’s not nearly as easy to use as Facebook, and that’s another reason I like Facebook. When I log into my adwords account I’m just confused about what to do. Facebook is intuitive and easy to learn. Please Google if you’re listening to this make adwords easier to use.
Also, we know people are spending a lot of time on Facebook. I don’t think people are hanging out on Google like they are on Facebook. On Google you find what you’re looking for and move on. Facebook is where you go to find people hanging out.
As a side note, YouTube is also a place where people go to hang out. I think that after Facebook, the second best place to advertise right now is YouTube. YouTube is the 2nd biggest search engine in the world after Google, and the targeting options with YouTube are awesome. However, I’m not going to talk about YouTube right now.
My advice is to first master Facebook Ads, and then go to YouTube next once you’re comfortable on Facebook.
So now let’s talk about Facebook ads.
This topic came up this week because I know a bunch of ecommerce entrepreneurs who have hired Facebook ad consultants to run their Facebook ads for them.
And their results have been less than stellar to say the least.
However, in defence of these Facebook ad consultants, I think these ecommerce business owners had misplaced expectations.
They assumed that they’d be able to get sales from cold traffic at a profitable price, and I think a lot of that is just wishful thinking.
So my message to you today is to stop thinking Facebook ads operate like Amazon ads. They don’t. Amazon ads do make money immediately. Facebook ads don’t. And I think that should be your mindset.
Now, let me qualify what I’m saying here, because of course some Facebook ads do make money immediately.
Which make money? Facebook ads that target or retarget hot and warm leads do make money. Dynamic product ads do make money.
The problem is that for most people those lists are relatively small unless you’re a big company. Even if you get 100,000 visitors to your website pixeled every month and you have customer lists in the thousands, those lists are not big for Facebook. You’re going to wear out those list fasts if you run ads to them everyday.
Also, I just have to mention lookalike audiences here. The ability to build lookalike audiences on Facebook is awesome and powerful, but they are still primarily cold audiences. Lookalikes should never be treated like hot and warm leads, and you shouldn’t think that they will perform like leads.
But, here’s the bottom line with Facebook ads –
You can make money from your Facebook ads from cold traffic if the lifetime value of your customer justifies it.
Let’s do a couple mental experiments to spell this out.
The best internet information marketers typically get Facebook leads from cold audiences, which are usually webinar registrations, for somewhere between $5-$10 per signup.
Now, while signing up and watching a webinar for an hour is a lot of time to give up, giving an email address over is pretty easy and not much to give. It’s a lot easier to give an email address than to give your credit card to buy something. For someone to actually buy something, even if it’s a little bit amount of money, it still way more to ask than just asking for an email address. So let’s double the cost and assume that in the best case scenario you can get cold traffic to buy your products for $10-20. Let’s call this best case.
Let’s do a second exercise.
A great ecommerce site converts 3% of people to a sale.
Let’s say you are getting clicks for $1 on Facebook, which could happen but it’s likely it’ll cost you more, but let’s stay with $1 per click for now.
If you get 100 clicks, then that’s $100 in ad spend. But if only 3% of visitors buy, or 3 people. How much money will you make? If you’re average sale is $20, then you’re getting $60 in revenue for your $100 ad spend. That’s not great. And in this scenario, you’re getting a sale for about $33. Let’s call this a realistic conservative case.
Now, what if your conversion rate is 2% and your cost per click is $2? Then all of a sudden you’re getting a sale for about $50 in ad spend. Yikes. Let’s call this worst case.
So, we can make a rough estimate that best case you could get one sale from ads with cold traffic at $10 in ad spend and worst case you can get one sale with cold traffic at $50 in ad spend.
But, there are many variables involved here so of course this is an incomplete analysis. Yes, your Facebook audience targeting makes a huge difference. Yes, your ad creative makes a huge difference, and your results may vary. You might have found an amazing audience that resonates with the message in your ad and you could be killing it. If you are congratulations, and keep doing what you’re doing.
For the rest of us, let’s be realistic. Let’s make a very rough estimate and say that you can acquire a customer from cold traffic on Facebook from anywhere between $10-$50. Admittedly, this is a huge range, but it helps to paint the target.
Is your customer lifetime value worth more than what it costs to acquire a customer with cold Facebook traffic?
This is a question that only you can figure out with the numbers related to your business.
If ads to cold traffic makes financial sense for your business, then by all means run them.
However, I like to go upstream instead.
Don’t go for the sale, go for the easiest lowest hanging fruit. Go for the email address. And build the relationship with your potential customers through email first, then ask them to buy.
With this method you can simultaneously build your brand, your audience, your influence, and your customer base. You can also use collected emails to build more Facebook custom audiences faster. It’s far cheaper to get email signups instead of a purchase from cold traffic.
Will you lose out on immediate sales if you do this? Maybe.
But if that’s a concern send an automated email with a link to your product after they sign up. Or on the email thank you page show your product off with a special offer so they can get it right away.
It’s conventional wisdom that a company sometimes needs multiple touch points with a potential customer before getting a sale. So play that long game of getting touch points and building the relationship instead of going in for the kill right away.
The odds of someone scrolling through their Facebook feed, then seeing your ad, resonating with it, and realizing they need it right now which will then make them go buy it immediately are small.
One other thing. When you get someone on your email list you can make Facebook custom audiences to advertise directly to that person. So when you send out an email to them you can also send them a Facebook ad at the same time and get them twice, or at least increase the chances that they’ll at least see something from you.
So if you’re thinking about running Facebook ads to cold traffic I’d encourage you to examine if this is the right move for you.
If you have the capacity, you should be testing all sorts of ads and offers on Facebook. You should be running ads to cold traffic to see if you get any conversions. But you should also be running ads designed to collect email addresses so you can see if those are better for your business.
Don’t expect a Facebook ads consultant to come in and magically give you money. If anyone makes any guarantees to you then run from them.
All great ads professionals are great scientists. They are constantly creatively experimenting and seeing what works and what doesn’t so they can improve and adjust for next time.
If you’re new to this podcast I’ll tell you right now that my favorite thing to do is run giveaways and drive traffic to them with Facebook ads. Anyone can run a giveaway, not matter what you’re selling.
If you’re a consultant you can give away free consulting. If you’re selling homes you can give away a free estimate.
Be creative and don’t be spoiled because of how easy Amazon ads have been up until this point. With Facebook ads you’re playing a different game. And I think the game is best played if you look at it like you’re doing virtual networking rather than direct sales.
Wall Street Segment
Let’s talk about Shopify. They reported earnings this week and beat estimates. Stock should shoot up right? Nope. It went down. There are still issues and doubts about the company due to a company called Citron Research thinking that Shopify is a fraud that will be investigated by the Federal government.
I think a lot of Shopify investors out there just bought the stock because of its momentum this year and don’t really have a clue about its business or with what’s happening in ecommerce in general.
I still disagree with Citron’s short report and don’t think Shopify is a fraud. I think for now the stock is a buying opportunity. But it’s interesting to note that Shopify can’t shake Wall Street’s fears over one report. It just goes to show you how the stock market is so fragile and dependent on people’s expectations and fears.
I’ve heard that it takes like 7 positive reviews to negate one negative review on Amazon. I don’t remember where I heard that of if it’s even true, but the point is clear. One negative report can destroy tons of positivity. That’s a good life lesson there, right?
Also, Amazon recently told businesses that sell non-perishable grocery items on Amazon.com that it was lowering the fee it charges them on items priced at $15 or less. Amazon previously charged 15 percent on all grocery items, but will now charge only 8 percent on the lower-priced goods for at least the next year.
This is good news for sellers and bad news for grocers. I’m not saying that now Amazon will own grocery. But with Amazon making moves to change the economics of grocery items it’s encouraging for sellers to see that Amazon understands the marketplace dynamics, and is making an effort to make accommodations.
So that’s it for today. Thanks for listing.
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Until next time, keep selling and keep growing.