The No.1 Reason Why Paid Ads Fail: Example Campaign Metrics

Content Warning: Speculative funnel metrics

Moz’s whiteboard video, “The #1 Reason Paid Ads (On Search, Social, and Display) Fail”, concludes that most paid ads fail because brands are not known to their audience.

There’s no trust, no recognition, and so the cost per click remains high and rising.

I see this dynamic play out at companies of all sizes, all the time, so here are some example campaign metrics to illustrate Rand Fishkin’s point in the ‘Why Paid Ads Fail’ episode of Whiteboard Friday. (Watch the full whiteboard video here).

Why Paid Ads Fail: Campaign Comparison

The numbers in the table below reflect estimates and compounding assumptions.

I have observed many marketing campaigns yield similar numbers. That being said, these results can easily be manipulated to draw the opposite conclusion or exaggerate the point. My aim is only to give a more detailed example of how the conclusion in Moz’s video, “Why Paid Ads Fail”, may play out in a marketing campaign.

These numbers pass my smell test. If you have an alternative perspective, let me know in the comments.

Here is a comparison of two multi-part campaigns with equal budget, executed over the same time frame:

Click here for a higher resolution image.

Before taking a second look at the numbers, consider the elements of the two campaigns. Which is a better experience for the customer? Which is going to convert better? At just a glance, my money is on the second.

In the first “cold” paid campaign, a company has no market awareness and launches a paid campaign.

Cold paid campaigns start out with a high CPC. The audience is not yet aware of the brand. They don’t know or trust the company or product so they don’t click, purchase, like, share, etc. CPC remains flat (or goes up).

In the second campaign, the brand compromises initial momentum and lead count to build awareness and interest. Paid ads eventually play a key role in the campaign, but only after the audience has some preliminary exposure to the brand.

By preemptively building brand awareness, AdWords CPC goes down and landing page conversion rates goes up. When a brand is already known to an audience, marketers can be more confident and aggressive with paid digital ad spend.

People typically think of AIDA as a model of the entire buyer journey but, really, this process repeats itself between every step in a marketing funnel.

A potential customer is made (re)aware of a brand’s presence.
The potential customer’s interest is held
Desire is created by demonstrating value
Action is secured

Here is a generalized funnel:

AIDA almost never happens in one shot. It happens many times throughout the buying process. And, it typically happens in starts and fits.

A ➡ A-I ➡ A-I-D ➡ A-I ➡ A-I-D ➡ A-I-D ➡ A-I-D-A ! ➡ start over.

AIDA is hardly perfect when it comes to marketing concepts, but it’s hard to argue that these steps don’t roughly flow in order.

If you attempt to create Awareness (or grab your audiences Attention) from a standstill, you must work harder than you otherwise would to inspire action. In the digital ad world, that extra effort can be measured in dollars and cents.

So, why do many marketers still put so many of their chips in cold paid ad campaigns, even after watching similar paid ads fail. There are logical, if not “good”, reasons.

Paid ads are faster and easier to set up
Easier to scale up in many ways – you can just ‘turn the budget dial’
Easier to outsource to an agency or freelancer
Agencies and freelancers often recommend this strategy because they are paid as a percentage of media spend
Lack of understanding regarding “organic” results over time
Lack of patience to invest in brand marketing
Rarely is there an opportunity to compare apples to apples when looking at purely paid campaigns versus multi-channel campaigns with organic components. As a result, lift from content and other individual components of a campaign are obscured and cost is inflated.
Paid ad campaigns have less moving parts and are more straightforward to optimize. Thus paid campaigns come off as ‘more scientific.’
With enough budget, cold paid ad campaigns will always work at some level
Occasionally, cold paid ad campaigns have great results

Rand’s suggestions:

Be known to your audience before you pour money into advertising.
Advertise primarily or exclusively to an audience that already has experience with you.

This first suggestion is a good rule of thumb to keep in mind. Brand advertising works on some level — even though measurement is not easy. Marketers need to find more effective ways to quantify brand advertising and content but, if you are lacking in this area, you might consider how much further your ad dollars could go with a warmer, more engaged audience.

In the example above, you need to have an answer when the CEO asks, “Why should do any more events when we get 125% of the leads with half the spend via AdWords.” It’s a legitimate question. Reporting on a campaign-level can help, and so can tracking historical CPCs.

The second suggestion supports an advertising tactic I like: CRM and list-based (re)targeting. In my experience, digital ad spend is more effective moving people through the funnel than feeding people into it. The longer the sales cycle, and more expensive the product, there truer this is.

In both the campaigns above, retargeting should be a given.

My advice to marketers is to go a step further with retargeting by using smart lists in your Marketing Automation Software, such as Hubspot or Marketo, to build your audiences. This strategy enables you to layer firmographic and demographic data on behavioral data. For example you, rather than retargeting every user that visits your Pricing page, you can limit the ads to users that visit the Pricing page *and* fit your ideal buyer or account profile. When dealing with a more qualified audience, you have more room to absorb the higher cost associated with targeting a smaller pool of people.

Paid ads fail for many reasons, but the dynamic I see at play most often is that the predictability of paid ads is used to justify a brute-force approach to capturing leads that have no prior awareness of the brand or product.

If you’re putting the bulk of your spend into search, social and display, and wondering where all your ad dollars are going, the thumbnail image for Moz’s “Why Most Paid Ads Fail” of Rand holding a garbage can is a good guess.

This post The No.1 Reason Why Paid Ads Fail: Example Campaign Metrics originally appeared on williamwickey.com.