When to invest in marketing(briefmix.com)
briefmix.com
When to invest in marketing
https://www.briefmix.com/startup/setting-objectives-kpis
198 comments
There's no such thing as an overall average ROI.
"Good" marketing, for a B2C company, is often defined as a 3x CAC/LTV ratio and 12 month payback. That means for every $1 you spend on advertising you make $3 in gross profit, and you get back $1 after 12 months. This is fairly healthy for many businesses, but some businesses may be looking for a 1 month payback, or may be looking for a 5x LTV. It's also possible to trade off LTV and payback, the latter may be more important for a fast growing business so that they're not tying up capital, and they may not yet have enough data to accurately predict 3 or 5 year LTV anyway.
In reality though these things fluctuate all the time, you may have 2-5 marketing channels at a small company (e.g. FB, IG, Adsense, YT, direct mail, out of home, etc), of which some will be better and others will be worse, and you blend them together, changing proportions over time as channels change in effectiveness or cost.
"Good" marketing, for a B2C company, is often defined as a 3x CAC/LTV ratio and 12 month payback. That means for every $1 you spend on advertising you make $3 in gross profit, and you get back $1 after 12 months. This is fairly healthy for many businesses, but some businesses may be looking for a 1 month payback, or may be looking for a 5x LTV. It's also possible to trade off LTV and payback, the latter may be more important for a fast growing business so that they're not tying up capital, and they may not yet have enough data to accurately predict 3 or 5 year LTV anyway.
In reality though these things fluctuate all the time, you may have 2-5 marketing channels at a small company (e.g. FB, IG, Adsense, YT, direct mail, out of home, etc), of which some will be better and others will be worse, and you blend them together, changing proportions over time as channels change in effectiveness or cost.
What do 'CAC' and 'LTV' stand for?
Apologies. CAC is "Customer Acquisition Cost" and LTV is "Life Time Value".
e.g. If I buy $100 of ad views and over all of those ads get 10 new customers, then my CAC is $10. If a customer on average spends $100 over their lifetime (typically defined as 3 or 5 years, but varies per business) on orders that cost me $70 to fulfil, then their LTV is $30 (Edit: as marketing is not included in gross profit).
e.g. If I buy $100 of ad views and over all of those ads get 10 new customers, then my CAC is $10. If a customer on average spends $100 over their lifetime (typically defined as 3 or 5 years, but varies per business) on orders that cost me $70 to fulfil, then their LTV is $30 (Edit: as marketing is not included in gross profit).
Would it not be $20, or does eve acquisition cost not factor?
Good question, but it doesn't (I've updated the comment).
The LTV is in terms of gross profit not net profit. It's the revenue minus the direct cost of fulfilling that revenue (cost of goods sold), so it would include: products, shipping, packaging, payment fees, staff time for handling, etc. It would not include: marketing, customer support (surprisingly!), R&D or creating the product, fixed costs such as offices, staff, etc.
I'm not quite sure what the best practice is on accounting for salaries of the marketing department. I think you wouldn't typically include full time employees managing marketing channels, but if you outsourced marketing to an agency you probably would account for the all-in cost to acquire customers via the agency, as they are almost their own marketing channel in a way. It really varies though, and I could be wrong on the best practice here.
The LTV is in terms of gross profit not net profit. It's the revenue minus the direct cost of fulfilling that revenue (cost of goods sold), so it would include: products, shipping, packaging, payment fees, staff time for handling, etc. It would not include: marketing, customer support (surprisingly!), R&D or creating the product, fixed costs such as offices, staff, etc.
I'm not quite sure what the best practice is on accounting for salaries of the marketing department. I think you wouldn't typically include full time employees managing marketing channels, but if you outsourced marketing to an agency you probably would account for the all-in cost to acquire customers via the agency, as they are almost their own marketing channel in a way. It really varies though, and I could be wrong on the best practice here.
It's $30 because people look at the ratio. That is, LTV/CAC is an important ratio that takes both into account.
It makes more sense if you think about it as a function that turns CAC into LTV.
It makes more sense if you think about it as a function that turns CAC into LTV.
Customer acquisition cost. Lifetime value.
I am not sure about whether the metrics above are benchmarks for CAC based on advertisement alone.
I am not sure about whether the metrics above are benchmarks for CAC based on advertisement alone.
CAC includes all costs, marketing and sales (implementation is part of COGS)
Some products (B2C) are marketing heavy. Others (B2B) are sales heavy. But they both get included
Some products (B2C) are marketing heavy. Others (B2B) are sales heavy. But they both get included
[deleted]
Customer acquisition cost and lifetime value
Customer Acquisition Cost
LifeTime Value
According to ChatGPT, in the context of gps post:
"CAC" stands for "Customer Acquisition Cost." It represents the cost a company incurs to acquire a new customer, including all the costs associated with marketing and advertising.
"LTV" stands for "Lifetime Value." It represents the total net profit a company expects to earn from a customer throughout their entire relationship with the company. This takes into account all the revenue a customer will bring to the company minus any costs associated with serving that customer over their lifetime.
"CAC" stands for "Customer Acquisition Cost." It represents the cost a company incurs to acquire a new customer, including all the costs associated with marketing and advertising.
"LTV" stands for "Lifetime Value." It represents the total net profit a company expects to earn from a customer throughout their entire relationship with the company. This takes into account all the revenue a customer will bring to the company minus any costs associated with serving that customer over their lifetime.
Remember not to trust ChatGPT with facts.
> "LTV" stands for "Lifetime Value." It represents the total net profit a company expects to earn from a customer throughout their entire relationship with the company. This takes into account all the revenue a customer will bring to the company minus any costs associated with serving that customer over their lifetime.
This seems subtly wrong from what I remember (though it's been like 6 years).
Gross profit not net profit.
Lifetime is "lifetime", you set a cap in years, it's not really the "entire relationship".
The latter one isn't as big of a deal because it gets stupid hard to track/measure that long anyways, but the former one is a pretty big deal.
This seems subtly wrong from what I remember (though it's been like 6 years).
Gross profit not net profit.
Lifetime is "lifetime", you set a cap in years, it's not really the "entire relationship".
The latter one isn't as big of a deal because it gets stupid hard to track/measure that long anyways, but the former one is a pretty big deal.
One might say that LTV/CAC ratio is the overall average ROI :)
How do you accurately measure these numbers? I suspect you don't.
Take the ACV, compound it with net churn to it to obtain LTV.
Add the cost of your sales and marketing and divide by the number of deals during that time to obtain CAC.
Then you can calculate both LTV/CAC and CAC payback.
Add the cost of your sales and marketing and divide by the number of deals during that time to obtain CAC.
Then you can calculate both LTV/CAC and CAC payback.
Doesn’t that have to assume that all deals came through advertising? In my case I find more and more sales are word of mouth or from organic search, but it’s very hard to measure (at least in B2B).
CAC is an aggregate measure, for all sales and marketing costs.
Per channel attribution is of course far more difficult, depending on the channel.
Per channel attribution is of course far more difficult, depending on the channel.
Author of article here - this is spot on! 3x CAC/LTV ratio and 12 month payback is often what you're aiming for.
there is no such thing as defined LTV/CAC ratio. That depends on almost every business.
"We might see 4,000-10,000 advertisements a day[1]. Do you remember two advertisements you saw today?"
Thank god for adblockers and pity those who do not have one or do not know firefox on android still allows them.
Thank god for adblockers and pity those who do not have one or do not know firefox on android still allows them.
You can’t block ads in Facebook, Instagram or TikTok on mobile. Google places Android search ads. In app ads also cannot be blocked.
It is a misconception that ad blockers significantly impact the ad market as a whole, obviously they impact Google and web advertisers though.
It is a misconception that ad blockers significantly impact the ad market as a whole, obviously they impact Google and web advertisers though.
https://pi-hole.net not work?
No. The in app ads in Meta properties are served from the same gateway as the rest of the API.
Checkout "revanced" (the git repo) it contains a collection of "patches" for a lot of major apps. There are AdBlock patches for Instagram and TikTok. You can build the patched APKs on your phone using their manager app
Thanks, I don't use those apps, but know people who can profit of it.
Also I really like the given email:
[email protected]
Makes it clear what not to write them (but I bet many still do).
Also I really like the given email:
[email protected]
Makes it clear what not to write them (but I bet many still do).
The truth is it is a net positive for most advertising for Android users to remove themselves.
Unless I'm mistaken, most ad blockers prevent a programmatic auction from even triggering, right?
Yes, the only one that doesn't AFAIK is adnauseum as that is their core value, triggering these ads to make it a loss.
Which is kind of shitty because (also AFAIK) you end up hurting the publishers who run those ads way more than the advertisers who place them or the ad platforms who facilitate buying and selling the ads... I'm pretty sure a lot of ad platforms will ask for their money back if they find out the publishers are serving ads that don't get seen by human eyes.
I don't know how much of that is true, but yes the intention is to cause disruption to ad systems that encourage data profiling and so groups involved from publishers to the auction owners will be distrustful of one another increasingly.
I use a DNS based ad blocker on Android which is very effective. It sometimes causes minor issues, but it works even outside the browser, blocking ads from apps that spam you at every turn.
> Do you remember two advertisements you saw today?
Maybe I’m in the minority, but I absolutely despise advertising. The only advertisements I ever remember are due to hating them more then the others for some reason- like being even more aggressive and in my face. There has to be some tipping point where advertising does more harm for the advertisers then good.
Maybe I’m in the minority, but I absolutely despise advertising. The only advertisements I ever remember are due to hating them more then the others for some reason- like being even more aggressive and in my face. There has to be some tipping point where advertising does more harm for the advertisers then good.
I'm with you, but we are most definitely the minority. The vast majority doesn't mind them.
I used to not mind them, feel like people were just supporting their sites, etc., but I was eventually pushed over the edge, lost it, and stopped using apps with ads I couldn't block, and started using uBO everywhere.
(And stopped reading news because it's almost as bad for you as advertising.)
So let's just call it my inability to see ads without feeling angry, and so I need a "psychological exemption". :)
Since I'm just one of a few out there who does this, I figure content creators will survive.
(I, too, am a content creator, but I distribute mine for free without ads. I make money with my day job.)
I used to not mind them, feel like people were just supporting their sites, etc., but I was eventually pushed over the edge, lost it, and stopped using apps with ads I couldn't block, and started using uBO everywhere.
(And stopped reading news because it's almost as bad for you as advertising.)
So let's just call it my inability to see ads without feeling angry, and so I need a "psychological exemption". :)
Since I'm just one of a few out there who does this, I figure content creators will survive.
(I, too, am a content creator, but I distribute mine for free without ads. I make money with my day job.)
Author of article here - this is quite interesting. I also despise advertising (which is why I'm now a developer..) and I think everyone hates advertising that is just badly targeted (does not interest you). And that is most of advertising - but if they find a person who has the problem their product can solve, then the ad is welcomed!
In my experience, many of us on HN have just disallowed FB & Google to really hone in on our needs and likes (ad blockers, disallowing cookies etc) so we see crap ads all the time. But many people I know don't do that, hence their ads are really about stuff they want to see and they don't mind the ads as much.
As an example, I now see many ads about new video games and new fine dining restaurants in my city. And I love that (compared to the other crap I often get). Because it lets me stay updated on new games and gives me inspiration on what I can cook.
So again, all ads are bad ads for everyone until they actually resonate with you - you might just haven't had one of those yet!
In my experience, many of us on HN have just disallowed FB & Google to really hone in on our needs and likes (ad blockers, disallowing cookies etc) so we see crap ads all the time. But many people I know don't do that, hence their ads are really about stuff they want to see and they don't mind the ads as much.
As an example, I now see many ads about new video games and new fine dining restaurants in my city. And I love that (compared to the other crap I often get). Because it lets me stay updated on new games and gives me inspiration on what I can cook.
So again, all ads are bad ads for everyone until they actually resonate with you - you might just haven't had one of those yet!
> Maybe I’m in the minority, but I absolutely despise advertising
This is like the most insane comment I've ever read
This is like the most insane comment I've ever read
I for one welcome the slop on my feed.
That being said I don't mind a well targeted technical advertisement e.g. trade magazines, new electronic components, and so on.
On a less passive level the company my dad used to work for basically made a living selling marketing lists of people who they'd confirmed (via voice) were genuinely looking for (say) new solar panels.
That being said I don't mind a well targeted technical advertisement e.g. trade magazines, new electronic components, and so on.
On a less passive level the company my dad used to work for basically made a living selling marketing lists of people who they'd confirmed (via voice) were genuinely looking for (say) new solar panels.
Because he despises advertising or because he thinks it puts him in the minority?
Then you should read more.
I’ve been a pure software engineer for close to a decade now, but before that I was a data analyst/scientist working with a marketing team, including their paid ad ppl.
We ran some legit experiments with ads, where we didn’t just count ppl who saw the ads then later converted (how Google, FB, etc. want you to “measure” impact), we compared them to actual control groups. We did find most types of ads to not be worth the $$.
However, remarketing did seem to be worth it, at the time, for us. This is when you generate interest in your product through other avenues (organic content marketing, organic social media marketing, PR, attending industry events, etc.), then when ppl show some interest in your product (visit your website), but don’t convert, you cookie them and keep showing them ads all around the internet. These ppl are already legit interested, they’re gonna pay more attention to the ads, and keeping your product top of mind can be enough to get them over the line to conversion.
We ran some legit experiments with ads, where we didn’t just count ppl who saw the ads then later converted (how Google, FB, etc. want you to “measure” impact), we compared them to actual control groups. We did find most types of ads to not be worth the $$.
However, remarketing did seem to be worth it, at the time, for us. This is when you generate interest in your product through other avenues (organic content marketing, organic social media marketing, PR, attending industry events, etc.), then when ppl show some interest in your product (visit your website), but don’t convert, you cookie them and keep showing them ads all around the internet. These ppl are already legit interested, they’re gonna pay more attention to the ads, and keeping your product top of mind can be enough to get them over the line to conversion.
That’s why the PPC or PPE model is so appealing—you know that you’ve stood out from all the other messaging they saw that day, at least a little bit. Their own analytics or sales funnels take over to assign a value to the click to compare to what they paid.
(That’s not to say everyone should be spending money on ads, that currently spends.)
(That’s not to say everyone should be spending money on ads, that currently spends.)
> direct outreach to key customers
are you talking about b2b?
I don't know what you have in mind. Sounds like you are suggesting companies should start calling me or knocking on my door instead of puting ads on google search results. That doesn't sound great.
are you talking about b2b?
I don't know what you have in mind. Sounds like you are suggesting companies should start calling me or knocking on my door instead of puting ads on google search results. That doesn't sound great.
Yeah, edited my comment. Agreed that direct outreach is ineffective if you aren't b2b.
If you're selling commercial products for a mass market, I think doing things like sponsored content might be more effective.
If I'm selling products to businesses or a few customers, it's better to do outreach by attending industry events, talks etc... I think the cold approach still works.
If you're selling commercial products for a mass market, I think doing things like sponsored content might be more effective.
If I'm selling products to businesses or a few customers, it's better to do outreach by attending industry events, talks etc... I think the cold approach still works.
It’s all of the above for B2B. The cold call and email definitely makes some money - that’s why people do it. Ideally, they already know who you are when they get the cold call.
How about giving out free samples in the supermarket? Going to a conference and talking with people? Busking at the farmer's market?
Here are the economics of ad spend from when I worked at Travelocity nearly a decade ago.
For an e-commerce business the goal is what's called conversion, which is when a user makes a product purchase. The margins on conversion vary by product and product segment. At that time most people came to travel sites to book airfare and the travel sites just basically resold what the carriers had on their own sites plus a $7 service fee charged by the carriers. Hotels were more lucrative averaging a margin closer to $50 per purchase. Travelocity had figured out some pricing algorithm that dominated the industry for packages where packages were flight plus hotel and optionally rental car. I can't remember the margin for Travelocity packages but I want to say it was around $300 per purchase.
The problem with conversion on e-commerce sites is time. The more expensive the product the more time the user will spend investigating a purchase. The more they will hop between various different competing web sites. Air purchases had a time realization of a few hours, hotels about a week, and packages were about 3 weeks. That means you do anything to induce increased conversion it will be 3 weeks before you should expect to see money in the bank, which complicates analysis of what went right and what went wrong. This means A/B testing becomes supremely important.
Ad spend was the opposite across the board. Ad spend would always bring tremendous traffic to the site but almost never would it increase conversion. However once you have eyes on pages you can generate revenue by other means such as affiliate programs and certainly with ads on your own site. The most amazing thing about ads whether they bring people to your site and cost you money or they are on your own site and generate you money is that the money spent/realized occurs in real time. Suddenly your analysis becomes stupid simple.
Ad traffic is dirty traffic though. Ads that cost you money rarely increased conversion and ads on your own site substantially detracted online traffic, by as much as 15% in a near term and much more gradually over a longer time horizon. The margins on ads is next to nothing so the more you invest in it the more you must invest in it to justify the both the spend and decreased traffic volume. This is what I would refer to as a drug addition. They had an immediate high, it was killing their business, and they only knew how to increase ad participation. Toxic.
For an e-commerce business the goal is what's called conversion, which is when a user makes a product purchase. The margins on conversion vary by product and product segment. At that time most people came to travel sites to book airfare and the travel sites just basically resold what the carriers had on their own sites plus a $7 service fee charged by the carriers. Hotels were more lucrative averaging a margin closer to $50 per purchase. Travelocity had figured out some pricing algorithm that dominated the industry for packages where packages were flight plus hotel and optionally rental car. I can't remember the margin for Travelocity packages but I want to say it was around $300 per purchase.
The problem with conversion on e-commerce sites is time. The more expensive the product the more time the user will spend investigating a purchase. The more they will hop between various different competing web sites. Air purchases had a time realization of a few hours, hotels about a week, and packages were about 3 weeks. That means you do anything to induce increased conversion it will be 3 weeks before you should expect to see money in the bank, which complicates analysis of what went right and what went wrong. This means A/B testing becomes supremely important.
Ad spend was the opposite across the board. Ad spend would always bring tremendous traffic to the site but almost never would it increase conversion. However once you have eyes on pages you can generate revenue by other means such as affiliate programs and certainly with ads on your own site. The most amazing thing about ads whether they bring people to your site and cost you money or they are on your own site and generate you money is that the money spent/realized occurs in real time. Suddenly your analysis becomes stupid simple.
Ad traffic is dirty traffic though. Ads that cost you money rarely increased conversion and ads on your own site substantially detracted online traffic, by as much as 15% in a near term and much more gradually over a longer time horizon. The margins on ads is next to nothing so the more you invest in it the more you must invest in it to justify the both the spend and decreased traffic volume. This is what I would refer to as a drug addition. They had an immediate high, it was killing their business, and they only knew how to increase ad participation. Toxic.
Author of article here. I don't think there is an average but as a child comment mentioned, you'd usually aim for 3x return on your ad spend. But it really depends on your product.
If you're selling expensive B2B solutions the customer journey will look very different to a consumer product - direct ads might be a terrible idea because no business clicks on a facebook ad and then decides to invest in an expensive enterprise software.
You might be better off investing in content, make a custom landing page for that lead, account based marketing etc - and not do any AdSense.
But yes, you do have to evaluate your marketing mix and channels against your customers purchase journey. Will write more about that in the upcoming posts :)
If you're selling expensive B2B solutions the customer journey will look very different to a consumer product - direct ads might be a terrible idea because no business clicks on a facebook ad and then decides to invest in an expensive enterprise software.
You might be better off investing in content, make a custom landing page for that lead, account based marketing etc - and not do any AdSense.
But yes, you do have to evaluate your marketing mix and channels against your customers purchase journey. Will write more about that in the upcoming posts :)
> We might see 4,000-10,000 advertisements a day[1].
Yeah, that’s definitely false. At best 100+.
Yeah, that’s definitely false. At best 100+.
Depends what you count I suspect. Is the sign above a store front an ad? Kinda! Is a brand logo on a shirt an ad? In a way. Is the Netflix ident at the beginning of an episode an ad? Pretty much.
All these things are considered by marketing departments, and while they might not always be explicit advertising, they do the same thing, building a brand image, associations, and mindshare.
I'm sitting on my sofa and I can see 26 things that could be considered adverts, and my TV is off.
Edit: >30. I haven't moved, just realising what a capitalist hellscape I live in. Thankfully my laptop stickers are facing away from me.
All these things are considered by marketing departments, and while they might not always be explicit advertising, they do the same thing, building a brand image, associations, and mindshare.
I'm sitting on my sofa and I can see 26 things that could be considered adverts, and my TV is off.
Edit: >30. I haven't moved, just realising what a capitalist hellscape I live in. Thankfully my laptop stickers are facing away from me.
That's a really interesting exercise. I read this comment whilst standing in my bedroom, and counted seventeen of these ads / brand impressions in one 360 revolution. Two steps to my left, and I saw three more I couldn't from my previous position; two steps to the right, four.
Jesus.
Jesus.
The article might be an interesting read for you. What you say is supported by their findings:
> We only register under a hundred. And we pay conscious attention to even fewer.
> We only register under a hundred. And we pay conscious attention to even fewer.
I think some people just spend a lot less time on places that have the majority of those thousands of ads. They mention it mostly being from social media scrolling. Using an ad blocker and not scrolling through social media apps removes the vast majority of potential ads you would see.
"Do you remember two advertisements you saw today?"
https://www.youtube.com/watch?v=x8iXj2vkpJI
You will remember at least one...
https://www.youtube.com/watch?v=x8iXj2vkpJI
You will remember at least one...
> Do you remember two advertisements you saw today?
Thanks to uBlock, Newpipe and the like, I generally see less than two advertisements a week.
Thanks to uBlock, Newpipe and the like, I generally see less than two advertisements a week.
that's the problem with google's monopoly on advertising - we can't know
Not at all true. Third-party analytics tools exist.
Time and again, people make the same mistake. Online ads work if you are selling a more-or-less commodity. If your product is a propane tank, paying for AdWords to be #1 whenever anyone googles "buy a propane tank" will generate leads (whether acquisition costs would make sense is another story).
If you have just designed an AI-powered robot for welding propane tanks, you won't get a single lead via AdWords. Your best bet is trade shows and sales people who know people inside companies that need to weld propane tanks.
If you have just designed an AI-powered robot for welding propane tanks, you won't get a single lead via AdWords. Your best bet is trade shows and sales people who know people inside companies that need to weld propane tanks.
> I once joined a company as a consultant - in the previous 12 months, they'd spent their entire $1,500,000 marketing budget on Google/Facebook ads. Using Hubspot we could track leads through the funnel and look at exactly how many customers this money had generated. The answer was 0.
This just doesn't pass the smell test for me. Places that are smart enough to have raised/made $1.5 MM just for marketing are generally smart enough to roll it out slowly, track conversions, and be adjusting ad content and ad placement along the way. You know, the absolute basics -- "AdWords for Dummies".
This makes as much sense as saying that a company spent $1.5 MM on five engineers for a year without a single line of code ever being written.
This just doesn't pass the smell test for me. Places that are smart enough to have raised/made $1.5 MM just for marketing are generally smart enough to roll it out slowly, track conversions, and be adjusting ad content and ad placement along the way. You know, the absolute basics -- "AdWords for Dummies".
This makes as much sense as saying that a company spent $1.5 MM on five engineers for a year without a single line of code ever being written.
I don’t know the specifics, but a company I worked at definitely decided to get ‘serious about ads’ by hiring a director of marketing and seemingly giving him an unchecked budget.
About 2 years later, he left the company. Very few - if any - customers were generated, but there was a sizable Google Ads spend.
I think the business owners had quite good luck with hiring talented people and letting them get to work, fairly hands-off. The guy spoke well and could quote many marketing gurus. I never found what he said to be particularly useful for the company, but I assumed he was getting results since someone was keeping him around.
I believe many owners of successful businesses have blind spots and need people they can turn to fill them. Sometimes that goes poorly.
Right now I’m fixing a similar snafu where I’m halving a not-insignificant AWS monthly bill for a company due to an ‘expert’ doing something very expensive. Like, 2 weeks of work will cut many developers annual salaries worth of AWS spend a year. Sometimes you get bad advice and you’re growing & making enough money that you can ignore the seemingly huge inefficiencies.
> This makes as much sense as saying that a company spent $1.5 MM on five engineers for a year without a single line of code ever being written.
I mean, if you change this to ‘functional line of code’ or ‘usable line of code’ I have definitely seen that occur with one or two developers over my career.
I don’t think it’s the norm, but I do think it happens.
About 2 years later, he left the company. Very few - if any - customers were generated, but there was a sizable Google Ads spend.
I think the business owners had quite good luck with hiring talented people and letting them get to work, fairly hands-off. The guy spoke well and could quote many marketing gurus. I never found what he said to be particularly useful for the company, but I assumed he was getting results since someone was keeping him around.
I believe many owners of successful businesses have blind spots and need people they can turn to fill them. Sometimes that goes poorly.
Right now I’m fixing a similar snafu where I’m halving a not-insignificant AWS monthly bill for a company due to an ‘expert’ doing something very expensive. Like, 2 weeks of work will cut many developers annual salaries worth of AWS spend a year. Sometimes you get bad advice and you’re growing & making enough money that you can ignore the seemingly huge inefficiencies.
> This makes as much sense as saying that a company spent $1.5 MM on five engineers for a year without a single line of code ever being written.
I mean, if you change this to ‘functional line of code’ or ‘usable line of code’ I have definitely seen that occur with one or two developers over my career.
I don’t think it’s the norm, but I do think it happens.
Hey there - author of article here. This story is 100% true, believe it or not. The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year. Hubspot showed that direct ads actually didn't work at all (mainly because they didn't really have PMF yet). Needless to say, that agency got fired pretty quickly.
Did the demo requests look like they came from legitimate companies, or just random gmail addresses? In the former case, your demo must have sucked. In the latter case the agency likely scammed you.
So the 2 leads we got were real - I think they downloaded some document on the site (hence we saw their email) but they never even booked a demo with the company. The other demos we received were real but they came in through SEO, not the ad spend.
Yeah, and writing this blog post is a major red flag for this company, no matter how you shake it out. Either they are lying, or grossly incompetent.
From what I understand, this is not a company, but the personal blog of a (former) consultant that worked for a company that had already spent $1.5mil when he took over. Given that context, the headline seems clickbaity as he wasn't personally involved, but whatever.
+1, it was definitely written by someone wise but the thin veneer of storytelling added makes you feel cheated instead of engaged/drawn along the post. Such an abrupt ending
Hey, author of article here - the parent comments are correct, I mealy consulted after they already spent this amount. I'm sorry if you felt cheated out of a story - I'm planning to write more about this later in the series but it didn't really fit the story about PMF & setting objectives so I could not round it out more in this one. But I've realised I might have to write a separate post just about this specific incident and what we did to bring the spend and results back on track. Thank you!
While this example is admittedly extreme, I think you’re severely underestimating the amount of bullshitters and charlatans that are able to secure VC funding.
Feels like a cope post and how much nobody cares about your product.
I spend $100 a month on Ads for a physical business and get 1 or 2 people in the door a month who tell me they saw my ad.
Can I get $10 mil in VC funding now?
I spend $100 a month on Ads for a physical business and get 1 or 2 people in the door a month who tell me they saw my ad.
Can I get $10 mil in VC funding now?
> Feels like a cope post and how much nobody cares about your product.
I struggle to see how one could read the article to the end and walk away with that sentiment.
I struggle to see how one could read the article to the end and walk away with that sentiment.
> But how do you know if your business is ready to invest in marketing? To answer this question, you'll need to understand if your company have some form of product market fit - PMF.
What is a "cope post"?
The article mentions a bad choice (not by the author) but moves on to talk about how to make better choices and never talks about the mistake again.
Did you read past the first paragraph?
The article mentions a bad choice (not by the author) but moves on to talk about how to make better choices and never talks about the mistake again.
Did you read past the first paragraph?
Yea it's not really a cope post, more throwing the previous people in charge of marketing/ads at the company under the bus. Rightly so imo, who the fuck cranks up spend to >$100k/mo without proper conversion tracking and stopping/changing if things are obviously wrong?
who cranks it up >$10k/mo without proper conversion tracking and retrospectives of the campaigns? This was a complete failure of leadership. If the first $10k didn't bring in any eyeballs (not to mention conversions), you need to change your strategy.
Those previous people probably got promotions in new role, as they had experiance with a $1.5 mill ad budget!
“Cope” is slang for what people used to call “sour grapes:” convincing yourself aloud that some negative circumstance isn’t really that bad or doesn’t really reflect on you.
But it feels like a cope post. So facts and reading of the article don’t matter here.
Do these customers spend >$100/mo plus enough to cover other expenses? If not then it's not worth the ad spend.
That's a neck.
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How I know the person who wrote this doesn’t understand user acquisition.
They give an example that their conversion rate on their website is (cue some heavy math /s) 0.16 % so if they want to acquire X customers they need to bring in Y traffic.
But of course anyone who has done even the most basic user acquisition knows that the way you achieve a visitor to your site is more important than the visitor. Customers who show up organically have a vastly higher conversion rate than the randos who show up from your ad, in fact many of them probably aren’t even going to be real so your conversion rate is going to nose dive as soon as you start using paid acquisition. Happens every time.
They give an example that their conversion rate on their website is (cue some heavy math /s) 0.16 % so if they want to acquire X customers they need to bring in Y traffic.
But of course anyone who has done even the most basic user acquisition knows that the way you achieve a visitor to your site is more important than the visitor. Customers who show up organically have a vastly higher conversion rate than the randos who show up from your ad, in fact many of them probably aren’t even going to be real so your conversion rate is going to nose dive as soon as you start using paid acquisition. Happens every time.
I wouldn't necessarily say organic is always better than paid, although that's a reasonable generalization. I think of it in terms of the yield curve - organic tends to be high quality but doesn't always scale. You drop your efficiency in the marketing media mix as you scale to reach a ROAS that meets the business need.
Hi there, author of article here - I definitely see your point. I might have been a bit to general here, it's like another poster here says, it's very much napkin math. Yes, "better leads" are ofc always better than randos - but these numbers are from of a made up business, not the company mentioned in the beginning so if we imagine that 90% of the users already comes form paid, then we might want to invest more in paid. And if organic, maybe we invest in content and SEO instead.
Overall, when setting objectives it is still very important to have some numbers to target - you can even change these targets later if it turns out there is a better way of getting those 1066 customers.
Overall, when setting objectives it is still very important to have some numbers to target - you can even change these targets later if it turns out there is a better way of getting those 1066 customers.
My point was that the model used was oversimplified so much that it was worthless and would fall at the first hurdle.
Your conversion rate is a function of the traffic. You can’t change the traffic without impacting the conversion rate.
I would estimate that you might need 10-1000x the traffic depending on the quality of the traffic in your paid campaign, so these aren’t little numbers these are huge oversights.
Your conversion rate is a function of the traffic. You can’t change the traffic without impacting the conversion rate.
I would estimate that you might need 10-1000x the traffic depending on the quality of the traffic in your paid campaign, so these aren’t little numbers these are huge oversights.
Agreed, but again it obv depends on the situation - and as this is a made up scenario, this might look very different for real companies. Maybe they want to focus on another conversion metric to get to 1066 customers altogether. I just put website visitors as it fits nicely with the strategies and examples I'm planning to talk about in following articles :)
This isn't very kind, in fact it's an outright personal attack. Worse, it misses the point, it's about making a quick back-of-the-napkin calculation as business consultant while making OKRs.
The problem with adding segmentation for more accurate calculations is there's always one more person who can sneer it's inaccurate because there wasn't enough segments. This type of person tends to move on from marketing / data science quickly, real world constraints are very frustrating to them
The problem with adding segmentation for more accurate calculations is there's always one more person who can sneer it's inaccurate because there wasn't enough segments. This type of person tends to move on from marketing / data science quickly, real world constraints are very frustrating to them
This is happening in the real world, not some imaginary world and so we must talk about real effects.
As soon as you turn on a torrent of paid traffic conversion rates go to shit. So your old conversion rate doesn’t work anymore and is just a random number that is an upper bound on your new conversion rate.
As soon as you turn on a torrent of paid traffic conversion rates go to shit. So your old conversion rate doesn’t work anymore and is just a random number that is an upper bound on your new conversion rate.
But you can drip your money into the ads and see if anything comes back. How could you run it for 12 months and 1.5M?
Doesn't even matter whether you have PMF, you can just use the direct feedback: ad was on for two weeks and nobody showed up, let's stop and think.
I've run little web shops and you always get some kind of interest. It might not pay back, but you wouldn't get zero.
Doesn't even matter whether you have PMF, you can just use the direct feedback: ad was on for two weeks and nobody showed up, let's stop and think.
I've run little web shops and you always get some kind of interest. It might not pay back, but you wouldn't get zero.
Hey there - author of article here. Took this from another comment I wrote:
The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year. Hubspot showed that direct ads actually didn't work at all (mainly because they didn't really have PMF yet). Needless to say, that agency got fired pretty quickly.
The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year. Hubspot showed that direct ads actually didn't work at all (mainly because they didn't really have PMF yet). Needless to say, that agency got fired pretty quickly.
Sounds like a combination of an unpolished product with insufficient demand and wrong business model. Users today don't want to pay XXX up front for a complicated product, they want a free tier where they incrementally learn about features.
I just looked up what I spend on Google Ads for a small campaign on SQL/AI related keywords for https://aihelperbot.com:
- $699.95 (part of a spend $400 to get $400 deal)
- 244K impressions
- 3.68K clicks
- 15 conversions
The conversions where "Begin checkout" events for a free trial period (I now run free tier). I don't know how many actually end up paying or cancel the free trial within the first week. Was it worth it? No. But I would consider advertisement once I reach a bit higher revenue. I talked to multiple newsletters who cater to my customer segment but it is still too expensive for since I am bootstrapping myself.
I just looked up what I spend on Google Ads for a small campaign on SQL/AI related keywords for https://aihelperbot.com:
- $699.95 (part of a spend $400 to get $400 deal)
- 244K impressions
- 3.68K clicks
- 15 conversions
The conversions where "Begin checkout" events for a free trial period (I now run free tier). I don't know how many actually end up paying or cancel the free trial within the first week. Was it worth it? No. But I would consider advertisement once I reach a bit higher revenue. I talked to multiple newsletters who cater to my customer segment but it is still too expensive for since I am bootstrapping myself.
And you also have to keep your products consumer journey in mind - the B2B selling cycle works very differently from e.g. B2C, direct ads might not work at all or should be used at a very specific part of the journey.
I've heard of similar things, like a team "turning on" Facebook ads and just leaving them running for a total of £1m, with almost nothing to show for it at the end.
I don't think many people understand just how much active management these things take. New ad content is needed all the time, new testing needs to be done, ad channels change in cost and effectiveness month to month and need balancing appropriately, targeting needs to be reworked.
I don't think many people understand just how much active management these things take. New ad content is needed all the time, new testing needs to be done, ad channels change in cost and effectiveness month to month and need balancing appropriately, targeting needs to be reworked.
Exactly, it is playing Battleship, not a money printing machine.
It happens more often than people think!
I wish this post were about the management failures that wasted the money instead of general pointers about marketing.
Would it be that interesting? "Management makes unquantifiable decisions based on feelings vs data" is hardly an interesting story.
If you summarize anything down to one sentence you can make anything sound uninteresting. The details and nuances are what makes things interesting. If the author makes the title of the post about wasting $1.5 million the post should be an interesting story about how that happened.
The complaint I’ve heard about Adsense over and over is that it can blow past your budget quickly. You can spend twice your budget in a month, spend the next few months trying to tune that, and end up out of your yearly budget by August.
The first step of recovery is admitting you have a problem.
It'd be great to seem more from the Exec class talk about identifying stupid crap like this blunder and doing something about it.
You almost never hear management talk about near misses. "We were going to buy that giant ERP for X millions but we did a weekend of reading and found out the vendor was two guys' etc etc.
This sort of waste has the risk of wrecking a business, putting multiple jobs and lives at risk etc. Yet, if some pleb on the shop floor is wasteful with company material or time, consequences almost instantly follow. It'd be great if this ended with, and then we made the money back by sacking the marketing team and hiring one person who had a clue.
You almost never hear management talk about near misses. "We were going to buy that giant ERP for X millions but we did a weekend of reading and found out the vendor was two guys' etc etc.
This sort of waste has the risk of wrecking a business, putting multiple jobs and lives at risk etc. Yet, if some pleb on the shop floor is wasteful with company material or time, consequences almost instantly follow. It'd be great if this ended with, and then we made the money back by sacking the marketing team and hiring one person who had a clue.
I would suspect it was "here is a marketing budget, go market" and someone who maybe didn't know better / much about marketing just spent it while nobody was paying attention. That might be a really short article.
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Hey, author of article here - I'm planning to write more about this later in the series but it didn't really fit the story about PMF & setting objectives so I could not round it out more in this one unfortunately.
But I've realised I might have to write a separate post just about this specific incident and what we did to bring the spend and results back on track!
But I've realised I might have to write a separate post just about this specific incident and what we did to bring the spend and results back on track!
I want to know what went into this $1.5mil waste of a campaign.
Not all campaigns are created equally. Running a bad campaign and then opining about marketing in general is like buying a single car off craigslist and then remarking on the features of a new Maserati.
Not all campaigns are created equally. Running a bad campaign and then opining about marketing in general is like buying a single car off craigslist and then remarking on the features of a new Maserati.
I used to sell homemade watercolor kits. I tried advertising in a bunch of places: Instagram, Reddit, Pinterest. I was targeting my audience pretty well but it just did not work.
I happened to mention this to someone in marketing at my company, and he said buying ads for a single product like that rarely works. Advertising is useful if I can direct potential buyers to a shop where I have a variety of art goods. Then the next time they need something art-related, they might visit my shop. But selling just watercolor kits I was better off making YouTube videos, making posts on Reddit, etc. My CPA was something like $35, and I was selling the kits for $29.99. I ended up selling them to friends and family, and giving a few as birthday gifts.
I happened to mention this to someone in marketing at my company, and he said buying ads for a single product like that rarely works. Advertising is useful if I can direct potential buyers to a shop where I have a variety of art goods. Then the next time they need something art-related, they might visit my shop. But selling just watercolor kits I was better off making YouTube videos, making posts on Reddit, etc. My CPA was something like $35, and I was selling the kits for $29.99. I ended up selling them to friends and family, and giving a few as birthday gifts.
Huge clickbait. Doesn't even address the answer of "how we got there", just tries to sell you on "how to market properly, my way".
How they got there is: They didn't set up analytics and ramped up ad spend way too fast.
How they got there is: They didn't set up analytics and ramped up ad spend way too fast.
Hey, author of article here - I'm sorry if you felt baited, I'm planning to write more about this later in the series but it didn't really fit the story about PMF & setting objectives so I could not round it out more in this one unfortunately.
But I've realised I might have to write a separate post just about this specific incident and what we did to bring the spend and results back on track!
Also, I'm just describing how I was taught to market stuff - I've worked with a wide array of startup and Fortune 500 companies and it has been quite formulaic for all of them. But obv there are more than one way to do so. I'm actually a developer now so don't do any consulting any more - merely writing this down for my own record and if it can help/inspire anyone else :) Thank you for reading!
But I've realised I might have to write a separate post just about this specific incident and what we did to bring the spend and results back on track!
Also, I'm just describing how I was taught to market stuff - I've worked with a wide array of startup and Fortune 500 companies and it has been quite formulaic for all of them. But obv there are more than one way to do so. I'm actually a developer now so don't do any consulting any more - merely writing this down for my own record and if it can help/inspire anyone else :) Thank you for reading!
As someone who feels allergic to the amorphous marketing talk I found this article refreshingly concrete. I like the idea of specific goals over just "marketing" that I usually hear.
You just enjoyed reading a made-up self-promotion piece from a marketing consultant, so perhaps good marketing works.
Hey there - author of article here. Story is actually not made up! However, I'm a developer now so don't do consulting any more.. Merely writing this down for my own record and if it can help/inspire anyone else :) Thank you for reading though!
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Thank you! Feel free to drop your email in the header of the site to know when I post my next article :)
I'm a professional B2B advertiser who specializes in growing start-ups. This article is kind of silly. It's like going to a start-up with a really bad engineering team and saying this is why engineering is useless.
I realise the headline story just is a jumping off point for the article, but it still begs the question: why did it take the company in question an entire year (and $1.5M) to realise their marketing wasn't working?
Now that's a story I'd like to hear.
Now that's a story I'd like to hear.
Hi there - author of article here. The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year. Hubspot showed that direct ads actually didn't work at all (mainly because they didn't really have PMF yet). Needless to say, that agency got fired pretty quickly.
I've realised I might have to write a separate post just about this specific incident and what we did to bring the spend and results back on track. Thanks!
I've realised I might have to write a separate post just about this specific incident and what we did to bring the spend and results back on track. Thanks!
Thanks for taking the time to answer. A separate post is a really good idea.
Marketing is not ads.
Marketing your product is placement. Was the product placed in the proper market, at the time where it would receive the most eyes? Was the product placed in the proper segment of the market? Was the placement during a time where the market was slowing?
Ads are only a tiny portion of marketing. The where, when, and how of marketing are just as -or even more- important for success.
Marketing your product is placement. Was the product placed in the proper market, at the time where it would receive the most eyes? Was the product placed in the proper segment of the market? Was the placement during a time where the market was slowing?
Ads are only a tiny portion of marketing. The where, when, and how of marketing are just as -or even more- important for success.
Author here - absolutely, fully agree! The full story of how this happened did not with with the overarching theme of objectives and KPIs so will have to write up a full story about this later. But the later posts in this article series will hopefully touch on all the factors you mention. Thanks for reading!
Thank you for sharing your story with us.
"We Spent $1,500,000 on Ads Without Getting a Single Customer" but they did get the top #1 spot on Hacker News so maybe that's all they wanted? Just wine about spending all this money (poorly) and make a post about it and get free advertising with a trip to the front page of Hacker News.
That is why I flagged it, as should you, and it should be removed from the site. It is low effort and misleading at best.
Hey there - author of article here. As the article mentions in the beginning, this is a spend that happened before I started consulting them - and the blog has nothing to do with the actual company.
Also, I'm a developer now so don't do consulting any more.. Merely writing this down for my own record and if it can help/inspire anyone else so not looking for free advertising. But thank you for reading!
Also, I'm a developer now so don't do consulting any more.. Merely writing this down for my own record and if it can help/inspire anyone else so not looking for free advertising. But thank you for reading!
And what would be the point of fake Internet points? Unless this leads neither to consumers
What's the value of a top HN post? Probably not $1.5MM. But not zero.
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I don't see how you can spend 1.5m and not see any return.
Sure spend 10k, if you don't see results, try something else.
I assume they have customers from elsewhere, so they must have a clue who their customers are.
I don't really get the venture capital model anyway. If my business is anything like anyone elses, it takes a few years to find out what actually works. You don't need millions to find that out, and you don't need millions in marketing until you've actually found that out.
As it is this is a story of a company not knowing what they're doing pouring 1.5m down the drain, and still don't know what they're doing.
Sure spend 10k, if you don't see results, try something else.
I assume they have customers from elsewhere, so they must have a clue who their customers are.
I don't really get the venture capital model anyway. If my business is anything like anyone elses, it takes a few years to find out what actually works. You don't need millions to find that out, and you don't need millions in marketing until you've actually found that out.
As it is this is a story of a company not knowing what they're doing pouring 1.5m down the drain, and still don't know what they're doing.
This is just a bait to tell you not to invest in marketing without knowing your customers (which is pretty obvious but many companies just don’t bother taking a good look at their customers.
it's actually mind boggling how bad the average marketing exec is at most tech startups, there's companies that have raised 10s of millions that have absolute garbage implementations for analytics and tracking. Lots of people just bluffing their way into high paying gigs and throwing money at ads to get results. Even massive companies like Uber and AirBNB threw away hundreds of millions because of dumb ad spend without proper tracking:
uber - https://news.ycombinator.com/item?id=25623858
airBNB - https://www.wsj.com/articles/airbnb-says-its-focus-on-brand-...
I'd hire an affiliate marketer who built their own website and grew traffic to make some money over the average VC backed marketing exec. Same goes for most big corporate marketing types, their skillset is worthless for a startup. Any person who has made $1 online from scratch would be better
uber - https://news.ycombinator.com/item?id=25623858
airBNB - https://www.wsj.com/articles/airbnb-says-its-focus-on-brand-...
I'd hire an affiliate marketer who built their own website and grew traffic to make some money over the average VC backed marketing exec. Same goes for most big corporate marketing types, their skillset is worthless for a startup. Any person who has made $1 online from scratch would be better
This is such a crazy take. They made Uber (a meme word) into a household name. It's like saying you disbanded 2/3 of your army after taking over the continent, and nothing happened. So they were useless all along! Well, try it next time without the army.
The article suggests cold emailing. Never use your main domain for sending outbound marketing stuff. It doesn't take many to categorize the emails as spam before the domain suddenly becomes blacklisted and unusable for not just marketing but anything. Your outbound emails will hit a distributed black hole.
Author here - this is 100% true! Always get another domain for your sales emails, warm it up with a email "warmup" service and off you go :)
Why didn't they stop and investigate after the first $10K or $50K? That ad budget is nuts.
Author here. The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year. Hubspot showed that direct ads actually didn't work at all (mainly because they didn't really have PMF yet). Needless to say, that agency got fired pretty quickly..
That sounds like the agency should be sued.
I don't even know what to say
Yeah, talk about mismanagement.
> This is why accelerators like YC prefer cold outreach / emailing prospects during the early days of your company - it's free.
It’s not free.
I’m not sure what the rest of the article says but if the rest of it is as good as the beginning…
> This is why accelerators like YC prefer cold outreach / emailing prospects during the early days of your company - it's free.
It’s not free.
I’m not sure what the rest of the article says but if the rest of it is as good as the beginning…
...it is free? It costs me nothing to send out an email.
Untrue. Takes time, energy, and a worsening of your email reputation when people mark you as spam and all your effort goes straight to the trash.
That's not the "cost" being discussed in the article, it's explicitly referring to dollar amounts, therefore the contextualized discussion is also about dollar amounts.
All of the things on the GP have a cost in dollar amounts. And your time has a very direct one that you can trivially get with a calculator.
Your time does not have a very "direct" dollar amount, this is false.
“How much would it cost for me to pay someone to do this?” is pretty close.
So is “how much could I earn in the same amount of time if I did something else?”
It may not be strictly direct but it sets bounds around the value of your time.
You could do cold outreach, or you could put yourself out on Uber or task rabbit and then put that money towards an ad campaign.
So is “how much could I earn in the same amount of time if I did something else?”
It may not be strictly direct but it sets bounds around the value of your time.
You could do cold outreach, or you could put yourself out on Uber or task rabbit and then put that money towards an ad campaign.
This presumes falsely that you can come up with accurate numbers for those questions, or that the overhead involved in managing people is then quantifiable concretely.
...it also presumes that any of that is actually realistic; I wonder what TaskRabbit's ToS is like re: confidentiality, for example.
"Hey TaskRabbit, pls develop my marketing strategy for my stealth startup, thanks!"
...it also presumes that any of that is actually realistic; I wonder what TaskRabbit's ToS is like re: confidentiality, for example.
"Hey TaskRabbit, pls develop my marketing strategy for my stealth startup, thanks!"
You’re making it way more complicated than it needs to be.
I wasn’t suggesting to use taskrabbit for marketing strategy. I was suggesting you look at the taskrabbit rate for a handyman and consider that something like the price floor for your hourly rate. That or Uber driving. Can you net $20/hr driving Uber? Ok, then you can drive Uber for 7 hours and then spend 2hr allocating that money to google ads. That’s the lower bound alternative to doing cold outreach.
I wasn’t suggesting to use taskrabbit for marketing strategy. I was suggesting you look at the taskrabbit rate for a handyman and consider that something like the price floor for your hourly rate. That or Uber driving. Can you net $20/hr driving Uber? Ok, then you can drive Uber for 7 hours and then spend 2hr allocating that money to google ads. That’s the lower bound alternative to doing cold outreach.
This is an abjectly terrible way to estimate the value of your time, for the reasons I already outlined, among many others.
I’m looking in the thread for your reasons and so far I can see accuracy of estimation and managing people as reasons.
You don’t need high accuracy to set bounds, and I don’t see how managing people is a factor.
It seems to me like the reasons you gave were based on your misunderstanding of the idea.
Maybe it is an abjectly terrible way to estimate the value of your time. Estimating the cost to send an email to be zero is worse.
You don’t need high accuracy to set bounds, and I don’t see how managing people is a factor.
It seems to me like the reasons you gave were based on your misunderstanding of the idea.
Maybe it is an abjectly terrible way to estimate the value of your time. Estimating the cost to send an email to be zero is worse.
Yep, all your outbound emails (even non-marketing ones) will hit a distributed black hole once you get blacklisted for spamming. Never use your main domain for marketing emails.
Only if you are counting your time as zero which is not a great idea as a founder.
But if you're a 'founder' of a non VC company, you have less money than time, so you're better spending your time budget than your money budget.
Of course the calculations if someone's throwing enough money at you that you can throw away 1.5m on marketing without results.
Of course the calculations if someone's throwing enough money at you that you can throw away 1.5m on marketing without results.
It costs you time. Time is money. Especially when you’re a founder with your hands full!
If you are doing it yourself, it costs you time.
If you want someone else to do it, it costs you money.
If you want someone else to do it, it costs you money.
what's the point of that pedantry?
Managing ad campaign takes time too.
Managing ad campaign takes time too.
"Something else also costs you" isn't a rebuttal to the statement that it isn't free.
I don’t think you’d find anyone saying an ad campaign is free. A grandparent comment is saying a coldcall/email campaign is free.
try it in europe, see how quickly free will bankrupt you
And your customers know that too.
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I don't understand how people can plan customer growth with OKRs like "get 666,250 additional visitors". Or "increase revenue by 8,000,000 by EOY".
First of all, why EOY? And where does that 8m number come from? It just seems so arbitrary. Why not set growth direction with some lower boundary, and have simple guidelines like "If you do X, you will probably slow customer acquisition, so avoid X when makes sense" and "If you do Y, you will probably speed up customer acquisition, so try to do Y when makes sense".
First of all, why EOY? And where does that 8m number come from? It just seems so arbitrary. Why not set growth direction with some lower boundary, and have simple guidelines like "If you do X, you will probably slow customer acquisition, so avoid X when makes sense" and "If you do Y, you will probably speed up customer acquisition, so try to do Y when makes sense".
Why year? Needs to choose _some_ timeframe, otherwise the KR is irrelevant. Businesses generally plan quarterly (3 month spans) and yearly (12 months).
You're free to use ranges in OKRs if desired.
Identifying rules / guidelines are "not even wrong" when writing OKRs, OKR = Objective + Key Result(s) usually a sentence each, in bullets.
It's better to focus on setting goals separately from setting rules, and humans being humans, you can't really identify a full set of rules that will prevent each and every form of unintended consequence
(also, note this is just fermi estimates in a blog post for a marketing consultant, they're focused on laying out a hypothetical, theres all sort of layers and interactions in a business)
You're free to use ranges in OKRs if desired.
Identifying rules / guidelines are "not even wrong" when writing OKRs, OKR = Objective + Key Result(s) usually a sentence each, in bullets.
It's better to focus on setting goals separately from setting rules, and humans being humans, you can't really identify a full set of rules that will prevent each and every form of unintended consequence
(also, note this is just fermi estimates in a blog post for a marketing consultant, they're focused on laying out a hypothetical, theres all sort of layers and interactions in a business)
I’m still wondering if they actually clicked through any of their ads. You know just to see if everything is actually working like it’s supposed to. Just like going to your companies website and filling out any of those forms found there. Then follow up if they work or not. Then maybe having a significant other clicking through the ads. To make sure things make sense to them. I mean if you’re spending the money on it might as well kick the tires.
> If you don't have any PMF, don't invest money in marketing
A couple problems.
1. This is just terrible advice.
2. Not all marketing is flashing rectangles. E.g. industry trade shows.
A couple problems.
1. This is just terrible advice.
2. Not all marketing is flashing rectangles. E.g. industry trade shows.
Author here - in my experience, industry trade shows are terrible money drains if you don't have PMF. They can be more expensive than many online ad campaigns! I had a client who spent Over $50K on going to one, with booth and everything - probably got around 50 leads and only a handful turned into customers.
That's true and I also realized that missed a negation in that sentence
What terrifies me about customer acquisition is that people's preferences are highly homogeneous. Sometimes even finding a group of 100 people to try out a product seems like a massive challenge. People these days don't like to try stuff from non-authoritative sources. People seem to have a lot of trust issues which causes them to seek out known brands/companies.
This article conflates advertising and marketing right from the get-go rendering most of its advice, at best, as quite limited. Blowing $1.5MM on ads with no result is a sign of no marketing at all.
Marketing is a two way process you should start right away -- "before starting", actually.
Marketing is understanding your market: who wants your product, who uses it, who decides that it should be used, and who pays for it (sometimes four different people), both at the micro (individuals) and macro (demographics, market lifecycle ("crossing the chasm"), external factors (changing environment)). And then why -- what matters to them? And only later in the process do you start to think of how you might reach them -- ads? What kinds? What tone do you set?
At the very beginning you want to get some idea of 1- would anyone at all actually ever use this and 2 - how many o of those people will there be on day 0 and how many in a few years?
The other thing you learn is how to design your product: what features actually matter, and for my SaaS how big a back end infrastructure will I need -- with multiple answers like in the first year and when it's time to scale. Lets' you design a small product with affordances for later, revenue-funded changes to make it scale. You don't need K8s on day 0, maybe never, or maybe someday so you design your MVP without supporting k8s but with it in the back of your mind. This all comes from marketing.
Many years ago I raised a $20MM A round (when $20MM was a lot of money and there were rarely seed rounds and no "pre-seed" nonsense) on a powerpoint-deck-only plan with no TAM $ analysis at all. It was a drug, and I knew (from talking to doctors and patients) that on day 0 people would pay thousands, and their doctors could sell it to them (specific market where that was the case). Then I had a slide talking about demographic trends (aging baby boomers). Because the marketing was so compelling the investors did their own TAM in their heads.
I mention that not because I think you should ignore TAM! But in my case TAM $ was impossible to calculate; OTOH I had enough market data (and the one VC who did some DD doing his own survey confirmed it, to his surprise) that I knew enough about the market to be able to talk about how I could steer (as much as you can in the pharma business) as certain numbers turned out to be wrong.
Marketing is a two way process you should start right away -- "before starting", actually.
Marketing is understanding your market: who wants your product, who uses it, who decides that it should be used, and who pays for it (sometimes four different people), both at the micro (individuals) and macro (demographics, market lifecycle ("crossing the chasm"), external factors (changing environment)). And then why -- what matters to them? And only later in the process do you start to think of how you might reach them -- ads? What kinds? What tone do you set?
At the very beginning you want to get some idea of 1- would anyone at all actually ever use this and 2 - how many o of those people will there be on day 0 and how many in a few years?
The other thing you learn is how to design your product: what features actually matter, and for my SaaS how big a back end infrastructure will I need -- with multiple answers like in the first year and when it's time to scale. Lets' you design a small product with affordances for later, revenue-funded changes to make it scale. You don't need K8s on day 0, maybe never, or maybe someday so you design your MVP without supporting k8s but with it in the back of your mind. This all comes from marketing.
Many years ago I raised a $20MM A round (when $20MM was a lot of money and there were rarely seed rounds and no "pre-seed" nonsense) on a powerpoint-deck-only plan with no TAM $ analysis at all. It was a drug, and I knew (from talking to doctors and patients) that on day 0 people would pay thousands, and their doctors could sell it to them (specific market where that was the case). Then I had a slide talking about demographic trends (aging baby boomers). Because the marketing was so compelling the investors did their own TAM in their heads.
I mention that not because I think you should ignore TAM! But in my case TAM $ was impossible to calculate; OTOH I had enough market data (and the one VC who did some DD doing his own survey confirmed it, to his surprise) that I knew enough about the market to be able to talk about how I could steer (as much as you can in the pharma business) as certain numbers turned out to be wrong.
Hey there, author here! I fully agree - this is exactly where I want to get to with my article series. This is just the first post, talking about objectives. If you click on the next article, it talks about branding and after that, how to define your target audience. More to come! This introductory story was just a horror story of what can happen without great PMF or clearly defined marketing / advertising objectives. Thank you for reading!
I think your order is backwards. Advertising comes last and branding second to last.
Starting with advertising is like choosing what kind of car to shop for by color.
Starting with advertising is like choosing what kind of car to shop for by color.
In somewhat related news Studio Ghibli recently released new last Miyazaki animated movie - The Boy and the Heron - with pretty much no marketing, as in not even a trailer. Its opening box office surpassed that of Spirited Away.
Author of article here and massive Studio Ghibli fan. Can't wait to see this movie!
Well, 1.5M did get you 15min of fame (on the HN frontpage).
Could have been a broken click-through URL
Due to the mismanagement, for sure
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Damn you almost as good as the Bud Light marketing team
You don't really deserve a response, but what are you talking about?
Bud Lite sent cans to multiple influencers as part of a larger campaign, one of whom happened to be a trans woman. They didn't spend millions of dollars on this campaign; they didn't try to sell these cans; they were just commemorating (in a corporate-y way) an influencer they did a brand deal with.
It's sad how much hate you have toward someone for simply existing. Why do you feel the need to bring it up when it's completely irrelevant?
Bud Lite sent cans to multiple influencers as part of a larger campaign, one of whom happened to be a trans woman. They didn't spend millions of dollars on this campaign; they didn't try to sell these cans; they were just commemorating (in a corporate-y way) an influencer they did a brand deal with.
It's sad how much hate you have toward someone for simply existing. Why do you feel the need to bring it up when it's completely irrelevant?
I have no idea what is in the mind / heart of op -
however from a purely non-emotional place it would be reasonable to point out that losing a million dollars to ads and not getting a sale is or is not a better or worse result than another marketing campaign that spent less than that and instead of getting zero dollars in sales caused a loss 300 million (I think that's the last number I saw, and does not include stock losses / brand devalue-ing) in sales.
I think it's unfair to to say someone has hate for someone else without knowing, and to assume it's for 'simply existing' - the BL situation for most people caught up in it is not that I believe.
I agree it may be sensitive to bring it up, but considering this is about marketing and such it's completely irrelevant - although I believe the discussions on this piece would be fine without it.
however from a purely non-emotional place it would be reasonable to point out that losing a million dollars to ads and not getting a sale is or is not a better or worse result than another marketing campaign that spent less than that and instead of getting zero dollars in sales caused a loss 300 million (I think that's the last number I saw, and does not include stock losses / brand devalue-ing) in sales.
I think it's unfair to to say someone has hate for someone else without knowing, and to assume it's for 'simply existing' - the BL situation for most people caught up in it is not that I believe.
I agree it may be sensitive to bring it up, but considering this is about marketing and such it's completely irrelevant - although I believe the discussions on this piece would be fine without it.
This was about spending millions and making $0. Bud Lite spent $0 and lost millions.
This post was about how marketing can't fix a bad product. Bud Lite had a product people liked, and marketing caused people to turn against it.
You can bring up the Bud Lite situation in conversation and have a genuine conversation about it. But this is such a stretch, out of nowhere, that I think it's safe to assume the intentions of this person.
This post was about how marketing can't fix a bad product. Bud Lite had a product people liked, and marketing caused people to turn against it.
You can bring up the Bud Lite situation in conversation and have a genuine conversation about it. But this is such a stretch, out of nowhere, that I think it's safe to assume the intentions of this person.
marketing’s purpose is sales.
marketing loses sales = company loses money
Company loses money = company, cuts jobs
Bad marketing kills companies.
Bud Light did negative billions from their campaign. These people did negative millions for their company. Comprende?
Not everything is about LGBTQ bullshit get over yourself
marketing loses sales = company loses money
Company loses money = company, cuts jobs
Bad marketing kills companies.
Bud Light did negative billions from their campaign. These people did negative millions for their company. Comprende?
Not everything is about LGBTQ bullshit get over yourself
That doesn't relate to the post at all, which is about finding product market fit before investing in Google ads. Their marketing wasn't bad; it was futile due to a bad product. And calling it "LGBTQ bullshit" is telling on yourself.
But you already know that.
But you already know that.
I see this sort of headline and have a visceral reaction, but this time it wasn’t justified (woot). Some thoughts:
> I once joined a company as a consultant - in the previous 12 months, they'd spent their entire $1,500,000 marketing budget on Google/Facebook ads. Using Hubspot we could track leads through the funnel and look at exactly how many customers this money had generated. The answer was 0. In total, the ads brought in two leads to the website who never even booked a demo for the product. For $1,500,000.
I would posit that this isn’t entirely true. This is what Hubspot saw, but ( unless they’re doing really scaled Account Based Marketing) they’re going to miss non-click signals in the funnel and misattribute results.
I’ve done a ton of B2B SaaS marketing over the last ~18yrs and most (>70%) of the marketing ROI comes from reaching your target accounts at scale - and they never fill out a lead form. Instead they respond to your sales team that has already reached out, resulting in sales taking the credit. I’ve quantified this effect several times now with a number of companies so I’m quite confident in it.
That said, it doesn’t mean the company he cites was doing great - far from it! They definitely needed to get their house in order and spending $1.5mm was clearly not the right path. Was it zero effectiveness? Unlikely. Was it really effective? Absolutely not.
> But how do you know if your business is ready to invest in marketing? To answer this question, you'll need to understand if your company have some form of product market fit - PMF.
Agreed. I typically warn clients that are early on in their growth journey to focus on product led growth, start a referral program (I end up doing that a lot) and get their organic growth in order. Paid ads should be an amplifier on a strong foundation, not the foundation itself.
> If you don't have any PMF, don't invest money in marketing - you might end up like the examples mentioned in the introduction.
It’s less about not investing and more about being smart. Referrals are great and low cost, investment in SEO early on - those are where to put the energy. They are great ways to accelerate your path to product market fit without burning excessive cash.
> How did we arrive at this number? As a rule of thumb, the pipeline in startup SaaS businesses usually comes from: > > - Marketing: 40% > - Cold-outreach/sales: 40% > - Partnerships: 20%
Just like my own experience with the ratio of B2B SaaS conversions from leads vs. sales outreach through paid, be very careful here ascribing a rule of thumb to your business. I’ve seen companies with very different mixes of sources, all very healthy. Your business may see greater opportunity from marketing and nearly zero lift from sales, so don’t assume this is a metric to shoot for.
Overall, I enjoyed the article and I’m glad to see that despite the clickbait-y title it was a more levelheaded read.
> I once joined a company as a consultant - in the previous 12 months, they'd spent their entire $1,500,000 marketing budget on Google/Facebook ads. Using Hubspot we could track leads through the funnel and look at exactly how many customers this money had generated. The answer was 0. In total, the ads brought in two leads to the website who never even booked a demo for the product. For $1,500,000.
I would posit that this isn’t entirely true. This is what Hubspot saw, but ( unless they’re doing really scaled Account Based Marketing) they’re going to miss non-click signals in the funnel and misattribute results.
I’ve done a ton of B2B SaaS marketing over the last ~18yrs and most (>70%) of the marketing ROI comes from reaching your target accounts at scale - and they never fill out a lead form. Instead they respond to your sales team that has already reached out, resulting in sales taking the credit. I’ve quantified this effect several times now with a number of companies so I’m quite confident in it.
That said, it doesn’t mean the company he cites was doing great - far from it! They definitely needed to get their house in order and spending $1.5mm was clearly not the right path. Was it zero effectiveness? Unlikely. Was it really effective? Absolutely not.
> But how do you know if your business is ready to invest in marketing? To answer this question, you'll need to understand if your company have some form of product market fit - PMF.
Agreed. I typically warn clients that are early on in their growth journey to focus on product led growth, start a referral program (I end up doing that a lot) and get their organic growth in order. Paid ads should be an amplifier on a strong foundation, not the foundation itself.
> If you don't have any PMF, don't invest money in marketing - you might end up like the examples mentioned in the introduction.
It’s less about not investing and more about being smart. Referrals are great and low cost, investment in SEO early on - those are where to put the energy. They are great ways to accelerate your path to product market fit without burning excessive cash.
> How did we arrive at this number? As a rule of thumb, the pipeline in startup SaaS businesses usually comes from: > > - Marketing: 40% > - Cold-outreach/sales: 40% > - Partnerships: 20%
Just like my own experience with the ratio of B2B SaaS conversions from leads vs. sales outreach through paid, be very careful here ascribing a rule of thumb to your business. I’ve seen companies with very different mixes of sources, all very healthy. Your business may see greater opportunity from marketing and nearly zero lift from sales, so don’t assume this is a metric to shoot for.
Overall, I enjoyed the article and I’m glad to see that despite the clickbait-y title it was a more levelheaded read.
Author here - thanks for a thoughtful comment! :)
The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year.
Hubspot showed that direct ads actually didn't work at all - there were only 2 identified leads (who downloaded some ebook) and the rest were anonymous users. Hubspot cookies them so if they would have gone on to get a demo, a trial or become customers, we'd know. They didn't insanely enough! We could also check IP ranges of companies visiting through ads, and they were not signed up as customers at any point.
100% agree that organic / product led growth is the way to go in the beginning. I should probably reword the article and say to not focus on "Paid" marketing - you still want to start thinking about organic etc. Thanks!
The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year.
Hubspot showed that direct ads actually didn't work at all - there were only 2 identified leads (who downloaded some ebook) and the rest were anonymous users. Hubspot cookies them so if they would have gone on to get a demo, a trial or become customers, we'd know. They didn't insanely enough! We could also check IP ranges of companies visiting through ads, and they were not signed up as customers at any point.
100% agree that organic / product led growth is the way to go in the beginning. I should probably reword the article and say to not focus on "Paid" marketing - you still want to start thinking about organic etc. Thanks!
> The problem for them was mainly that the agency running their ad account counted "demo requests" as their top metric and mistakingly counted all demo requests that came in as attributed to the marketing spend. So they reported on faulty numbers during the entire year.
Oh man, that’s going to give me nightmares…
Re Hubspot: they’re going to miss people that see the ad and don’t click. That’s the lift I’ve found to be highly effective, if a pain to quantify.
Thanks for responding and I’m glad you posted the article
Oh man, that’s going to give me nightmares…
Re Hubspot: they’re going to miss people that see the ad and don’t click. That’s the lift I’ve found to be highly effective, if a pain to quantify.
Thanks for responding and I’m glad you posted the article
i'm glad capitalism is so efficient at allocating resources
Advertising is an assumed cost of business for any medium to large company these days, but I feel there's a growing silent minority who slowly believe, slowly know, that advertising in the online space is unfeasible for a majority of products. Advertisers like google make so much money because online advertising is one of those things that is super easy to keep throwing more money at. I wonder how many companies would benefit from entirely ditching online advertising and pursue alternate methods like direct outreach or sponsored content.
We might see 4,000-10,000 advertisements a day[1]. Do you remember two advertisements you saw today? Mere-exposure effect is the only thing going for it. Which may be fine if you're Coca-Cola, not so much if you run an online clothing store.
[1]https://webtribunal.net/blog/how-many-ads-do-we-see-a-day/#:....