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.
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!"
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.
During your review of previous comments, did you observe the context in which "cost" is discussed? Was it in amorphous "value of your time" concepts or was it in concrete, "This cost 1.5 million dollars that we paid to a company"?
What you'll find is that the "cost" reference is to a payment made, not to an estimation of time value. In this sense, "sending an email" does cost $0.00, as you can do it without paying, for example, Google.
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.
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.
“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 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.
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.
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.
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.
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.
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!
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.
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!
What is the average ROI on advertising by using google AdSense et. al?
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.
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.
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.
"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.
"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.
> "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.
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).
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.
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).
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.
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.
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.
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.)
Mobile phones are definitely what keeps the advertising industry alive, especially social media.
In my opinion, thats a good thing for the majority of the population. Those who do not care about ads and tracking makes it so evasion still possible (to some extent)
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
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.
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.
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.)
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!
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.
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.
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 :)
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.
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.
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.
"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.
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!
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?
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!
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.
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.
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!
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.
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
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.
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.
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.
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 :)
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..
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?
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.
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.
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.
Even if this was about the OP finding a man acting an offensive caricature of women to be rather distasteful, rather than commentary on a terrible marketing campaign, it isn't "hate toward someone for simply existing". Less hyperbole, please.
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.
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.
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:
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.
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.
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[ 0.28 ms ] story [ 269 ms ] thread> 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…
Of course the calculations if someone's throwing enough money at you that you can throw away 1.5m on marketing without results.
If you want someone else to do it, it costs you money.
Managing ad campaign takes time too.
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.
...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!"
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.
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.
What you'll find is that the "cost" reference is to a payment made, not to an estimation of time value. In this sense, "sending an email" does cost $0.00, as you can do it without paying, for example, Google.
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?
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?
I struggle to see how one could read the article to the end and walk away with that sentiment.
I'm not sure if you know what 'cope' means. Or 'reading' for that matter.
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.
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.
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!
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/#:....
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.
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.
"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.
"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.
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.
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).
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 makes more sense if you think about it as a function that turns CAC into LTV.
I am not sure about whether the metrics above are benchmarks for CAC based on advertisement alone.
Some products (B2C) are marketing heavy. Others (B2B) are sales heavy. But they both get included
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.
Per channel attribution is of course far more difficult, depending on the channel.
Yeah, that’s definitely false. At best 100+.
> We only register under a hundred. And we pay conscious attention to even fewer.
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.
Jesus.
(That’s not to say everyone should be spending money on ads, that currently spends.)
Thank god for adblockers and pity those who do not have one or do not know firefox on android still allows them.
In my opinion, thats a good thing for the majority of the population. Those who do not care about ads and tracking makes it so evasion still possible (to some extent)
It is a misconception that ad blockers significantly impact the ad market as a whole, obviously they impact Google and web advertisers though.
Also I really like the given email:
nosupport@revanced.app
Makes it clear what not to write them (but I bet many still do).
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.
This is like the most insane comment I've ever read
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.
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.)
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!
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.
Thanks to uBlock, Newpipe and the like, I generally see less than two advertisements a week.
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.
https://www.youtube.com/watch?v=x8iXj2vkpJI
You will remember at least one...
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 :)
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.
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.
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.
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!
Now that's a story I'd like to hear.
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!
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 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.
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.
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.
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
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.
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.
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.
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?
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 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 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
But you already know that.
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.
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
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.