Issue 13: Fixing Facebook ROAS - Part 2.
Why one-dimensional reporting will give you wrong numbers.
Hello Big Ponders!
Thanks for coming back to read our latest issue. Helping local and regional businesses get more value out of their marketing is why we get out of bed. Also, we need our coffee. Today’s knowledge drop is the single biggest challenge we need to solve in paid media. Let’s do this!
In issue 12 on Facebook ROAS we established the problem and why this is really, really hard.
Top experts in Facebook advertising all say the same thing - ignore the Facebook ROAS metric within Ad Manager. Focus on MER and new customer CPA.
Woah Andrew! you cry. Stop with the three letter stuff. Plain English please.
I hear you. The aim today is not to leave anyone behind. Remember, just because you can advertise on Facebook doesn’t mean you should - it’s no longer profitable for everyone.
Let me make a fresh brew and take this one clear paragraph at a time.
Budget: Minimum Spend To Make Facebook Advertising Worthwhile
In a casino, if you want to win bigger returns you need to have the funds to sit at the bigger stakes tables. Minimum buy-ins are non-negotiable. This helps to establish player type and control expectations.
In Facebook’s advertising platform, there is no gatekeeper to inform you that you lack the budget to play. The ad auctions are open to almost everyone. This creates advantages and/or disadvantages depending on how you approach things.
The budget you need will always be relative to your own goals and objectives. The point to understand is this - are you asking to compete at the high rollers table without the money (or ad creative, or funnel behaviour insights) to make it work?
Ecommerce ad budget feedback from the best Facebook ad consultants like Belfast-based Gil David confirms £3K GBP / $5K USD is the minimum monthly level to give you the opportunity for profitability, “and even that is pushing it these days”.
US-based PPC industry thought leader Susan Wenograd agrees.
Monthly budgets below this level have very low odds of creating a positive ROAS longterm. This is where emotion and denial can result in the wrong business decision.
Hear me out.
Startups and emerging companies will always believe their products or services are going to succeed so they spend the money and roll the dice.
Yet it’s exactly at this sub £3K GBP / $5K USD monthly level where founders are stressed about making money and will not - I repeat - categorically NOT have the patience to make Facebook ads work in a positive ROAS sense.
Be smart. Calculate the risk and weigh up alternative options if you need to make money. Especially as awareness alone won’t pay the bills if short-term cashflow is tight.
So now, what if we do have the budget?
Learning: Teaching Facebook’s Advertising Platform About Your Ideal Prospect
“You need scale for it to learn anything” is the important bit in Susan’s tweet.
We’re working with less data (iOS privacy updates) and the ad auction platform takes longer to decide who the winners will be (machine learning deliberately has to rule out the wrong customer before it targets the right customer).
The days of intensive manual ad account setups, where testing as much as you liked didn’t cause too much trouble, are gone.
We are now in the era of managing automation (those computer learning models we often hear described as machine learning), and that behaves differently.
Most importantly, it takes longer for machine learning to do its thing than the average stakeholder/founder/director is willing to wait.
Why? Because if you’re paying for the ad auction to identify the type of people you absolutely do not want to show ads to, then your ROAS will likely get worse before it gets better.
This is what every senior stakeholder fails to grasp. They think four weeks is more than enough time to know if your approach will work or not. Unless you’re a very well known brand, it isn’t. However, twelve weeks absolutely is enough time.
Anything shorter than a 3-month initial period is potentially a waste of everyone’s time.
Measuring: Successful Ad Management Focuses On Metrics You Can Trust
Over reporting, under reporting, UTM tags not being respected by analytics - the list of reasons why Facebook conversion numbers are not to be trusted grows by the week.
What’s the solution then?
For small to medium sized business, this might be the single biggest opportunity you’ve had in years IF you have enough budget, patience, and a Facebook Ad expert who knows how to manage automation.
A bigger company might spend budget across many tactics, from content marketing to influencers, from TV infomericals to radio ads, from PPC ads to affiliate systems. As we’ve said before, it’s not the last beer that gets you drunk, so why give it all the credit?
Untangling all those user journeys to see what moved somebody from A to B to C, to eventually doing that thing on your site you wanted, well… that’s quite complicated to map out.
Here’s what is easy to measure - Money going into your bank account, divided by the ad cost.
This is what we call measuring Media Efficiency Ratio (MER). This is a KPI you can trust that isn’t affected by privacy data updates on digital devices.
To clarify:
Media Efficiency Ratio (MER) = Total Revenue / Total Paid Media Spend. For example, if there is £10,000 in sales and media cost is £1,000, then the Media Efficiency Ratio (MER) is 10.
If you’re a small to medium sized business with Facebook ROAS concerns, turning off your FB ads for a week can give you a baseline of what your revenue is when the ads don’t run - subject to your industry seasonality, competitor promotion behaviour, and any other mitigating factors.
The point is MER is much harder to attribute to a specific promotion tactic if you’re running multiple tactics. You must be able to see what happens when you turn a tactic off and measure the impact.
Test and Learn: First Look
Your approach to test and learn for Facebook advertising could look like this:
pause Facebook ads to establish a revenue baseline without Facebook running
look at your analytics to establish per channel revenue benchmarks and marketing mix % (example: is organic typically X% of revenue?)
turn Facebook ads back on and create your MER baseline
create revenue and ROI/ROAS ranges expected per promotion tactic (SEO, PPC, influencers, email, affiliates, direct mail, etc)
give machine learning in Facebook ads enough time to do its thing over 8-12 weeks, and have enough confidence in your initial creative message and audience targeting that you don’t kneejerk into early changes that will reset learnings! [CRITICAL POINT]
you now have the best possible chance to create a sustainable, profitable method of competing in the Facebook ad auction.
MER: OK, But Which Promotional Channel Drove The Revenue?
Whenever the issue of Facebook Ad ROAS and MER comes up, the question of how to solve MER when many different promotional tactics are running, always gets asked.
The challenge in using MER is it doesn’t show which source drove the revenue.
The biggest mistake senior stakeholders make is deciding there is ONE single north star of truth. I can promise you there isn’t because of data privacy updates.
We have to piece together a new combined view. Like a mega robot transformer coming together from others combined to create incredible power.
Depending on which analytics platform you use, and plenty of senior business managers stick to the backend areas of their website, the data is likely to be skewed away from ROAS clarity.
Google analytics exists to make Google ads look the best, which is why UTM tagging alone won’t save you. Shopify backend data exists to keep you looking at Shopify insights.
Stitching data sources together into a clear picture is often beyond the capabilities of small to medium sized companies.
With MER as a starting point, the ability to identify and subtract individual tactics will eventually leave you with the remaining figure - the revenue Facebook ads created. Measure that against your ad cost and hey presto, you have your Facebook ROAS figure.
Seriously, the one-dimensional way you look at ROAS data from a single source is a bad idea.
Data privacy is here to stay and it’s best to adapt and thrive in this new business environment.
Measuring: Successful Ad Accounts Focus On Metrics You Can Trust
If you are not a Facebook Ad expert that’s ok. Remember that user behaviour must be the focus, not ROAS. Always, always, always focus on what you can control - the user journey!
The most important things to ask on catchup calls as a stakeholder includes:
MER trend based on Total Revenue / Total Paid Media Spend.
New customer/lead CPA.
Funnel behaviour progress.
Asking to maximise ROAS is simply unhelpful. It’s like asking a Formula 1 driver to DRIVE AS FAST AS YOU CAN instead of discussing ways to make the car and driver perform better. If you like making money, focus on the process.
Facebook Ads Account Management Call Questions To Ask
are we making progress in terms of how people progress in the funnel (behaviour), from first seeing a Facebook ad through each step to a confirmed lead form or purchase complete screen?
have we mapped out the latest screengrabs on devices for each key step in the user journey?
where is the biggest drop off in the funnel?
which metrics can we trust without further data stitching (eg. ad cost)?
which metrics can we only trust when we stitch multiple data sources together to create a 3D view of the business marketing activities (eg. ad ROAS)?
how does our creative compare with others in the ad auction?
when is the next agreed date to A/B test new creative without resetting machine learning in existing campaigns?
do we see ROAS getting worse before it gets better as is often the case, and how is that curve looking against the 4, 8, and 12 week milestones?
how much traffic and revenue counted in Google analytics as ‘Direct’, can be shown to have started on a specific page that is likely a timed out session (eg. enter details screen)?
when we run or stop Facebook ads, do we see an increase/decrease in other channels such as Google ads? (eg. spend £10 here to make £100 there)
how well can we see the cost of acquisition for first time buyers or sign-ups?
Small Size As Advantage: Killing Giants
Being smaller than competitors has advantages. For one, having fewer promotion tactics/channels makes it easier to stitch together a multi-dimensional view.
Fact: it is easier for a small business spending £3K/$5K per month to work out their ROAS than a big brand spending millions across a long menu of tactics.
You have to be brave enough to have a plan, understand the expected trends (ROAS can get worse before it trends upwards), and follow through until the end.
SMEs need £9K/$15K minimum over 12 weeks to see what Facebook ads machine learning can deliver for them, based on the current funnel, creative and competitive landscape. If you can’t commit to that, you can’t afford to play at this table.
Facebook won’t tell you that. We will.
Until then, if you have company stories or updates in need of an audience, boosting organic posts to your followers is a solid tactic to re-engage existing fans, customers or clients.
Consider boosting posts the small stakes table. We all have to start somewhere. And that’s OK. Better that and keep the odds of winning firmly in your favour.
News 📰
Ayrshire: Ayr Racecourse’s charity donation for new support centre. - LINK
Glasgow: Glasgow dental group secures funding for acquisitions. - LINK
Edinburgh: Cycle Law Scotland raises £2,000 for Doddie Aid 2022. - LINK
Aberdeen: It’s a dog’s life nowadays for former oil and gas worker Julie Hunter. - LINK
Dundee: Sewing retreat to take over hotel with thread and fabric. - LINK
Debug: Google and Mozilla are ready for Chrome and Firefox version 100 to break some websites - LINK
Web Dev: The 10 commandments of navigating code reviews - LINK
ML: Good News About the Carbon Footprint of Machine Learning Training - LINK
Technology: Bored Apes, BuzzFeed and the Battle for the Future of the Internet. - LINK
Copywriting: AI-generated summaries in Google Docs - LINK
Stakeholder Reports: Ecom experts discuss the key things to measure and ways to create insights. - LINK
Data Viz: 10 ways to use fewer colours in your data visualisations LINK
Paid Social Geeks #1: Google plans to limit tracking across apps in Android—just like Apple. - LINK
Paid Social Geeks #2: Facebook ads cost report for 2022. - LINK
SEO: Top 17 SEO Podcasts For 2022 - LINK
And Finally… 📌
The value of positive reviews and the weight Google places on brand sentiment is an evolving metric. You know what I’m going to say next, right? Every search is local.
Successful businesses have a process in place for generating and responding to reviews.
First impressions count every bit as much as last click metrics. Build trust and confidence that is instantly understandable to potential new clients and customers.
☎ If fixing Facebook ROAS (or other digital issues!) is on your to-do list, feel free to give us a call on 01292 844899. Or if you’re in a hurry, email claire@bigponddigital.co.uk and let’s set up a call to chat.
Until next time - good luck!
Andrew @ Big Pond
Enjoyed this newsletter? Feel free to share it.