The Logic of Media Buying

What I’m about to share with you cost me $40,000 to learn, and it’s one of the most important lessons I’ve ever learned in paid advertising. So when I first got to the agency game, one of the first things I did was hire a mentor, hire a coach. If you’re new to anything, I highly recommend it. And I still remember to this day one of the very first calls, it’s not the first call we ever had,  I got one fundamental shift to the way that I looked at media buying that forever changed. It improved the quality of my output. And it was a mistake that I had made over and over and over again previously in accounts. And it’s a mistake that I see people making to this day because they don’t seem to understand. The principle is this;  as a media buyer or a business owner, you manage accounts, not campaigns. I see too many people getting into the weeds about every single ad being profitable or worrying about ads that are a little bit out of KPI or audiences or even campaigns, when in reality, the overall business itself is very healthy. And I’ve experienced this myself firsthand, where I’m in an account, I’m driving myself crazy, I’m hyper optimizing, I’m looking at everything that’s happening, and I’m doing my best to make sure that every single ad is within KPI. Meanwhile, the business owner is thinking, hey, man, things are great. Can we spend more money? You’ve got another $1,000 a day that I’d love to spend.A nd I’m sitting here thinking, why am I struggling so hard to keep this thing going? And it’s because I’m managing the ads or the campaigns and not the account itself. And here’s what I mean, at the end of the day, the results are measured on a campaign, or, excuse me, on an account level. The client is looking at their account, or if it’s you you’re looking at your account, you’re saying, we spent this much money. we made this much money. So there’s a binary success or failure that’s baked into media buying already. When you start looking at the ads individually, this is when you really start sabotaging yourself and you start limiting scale. What I mean is, let’s say you’re trying to get sales for $100 each. You’ve got 50 ads running, only let’s say ten of them are getting sales for $3 each, but the rest of them are getting sales for $120 each. Well, you leave yourself with 10% of your ads, you cut off the other 90% because you think, shoot, these ads are all out of KPI. And in theory, it sounds good, except you just killed 90% of your ads. So as a media buyer or a business owner, anybody trying to make paid ads work, now you have to reinvent those other 90%.You have to come up with some other way to make up that ad spend. And that means launching a new campaign, new ad sets, new ads, possibly new tests, with a 50/ 50 chance of failing, and it becomes very, very risky. When in reality, you’re looking for sales for 100, 10 of yours are getting sales for 5 bucks. That means you can afford to spend 105, 110, even $120 on a particular ad because you’re borrowing against the profit of one of the other ads. And I know that doesn’t sound like it’s logically intuitive, because it sounds like, well, why wouldn’t I just kill those and have more profit? And because the reason is you don’t just want more profit, you want the maximal volume at whatever KPI that you can achieve. And if you want to learn more about this particular conversation, I have another video called How Your Profitability is Killing Your Revenue. And that goes into sort of the math, the science, if you will, of exactly what I’m talking about and how to make sure that the way you’re managing and thinking about paid advertising is conducive to you really making the most possible money. So again, what we’re looking at is we’re looking at the account.So as a media buyer, I’m looking at the bottom line of the account. First thing in the morning, are we where we want to be?If I log into that account and I see that I’ve got sales at $100 or less and that’s my KPI, I’m very slow to turn everything off even if I’ve got ads getting sales for $200.Because the reality of it is that there are only so many sub $100 sales available. The ad platforms will tell you it’s because it’s an auction and because of supply and demand and all that what I really think it is, they want to get as much of your money as they can. So Facebook could give you sales for $3 each and $5 each, but they don’t want to because then they only make so much money because what’s going to happen for a physical product, at some point, you’re going to run out of inventory, which means to sell 100 units. They only got X dollars when they could have gotten ten X. That because you’re actually willing to spend 50 to get a sale.They gave it to you for five. And so they missed out on a huge amount of the money that you were willing to spend just because they gave you such great results.So that’s a little my conspiracy but I think the platforms are just designed to make sure that you can’t get so many sales for too profitable because they really want to get just the right amount of revenue out of you.They don’t want to get any less than you’re willing to give.They want to give as much as you’re willing to spend on your business.So they’re going to try to give you results right at whatever KPI they think it is that you have.So when I’m looking at these ads and I Have some that are under KPI and some that are over KPI, again, I’m looking at the account as a whole because that’s what really matters. And I’m basically borrowing against my top performers to be able to afford more expensive ads than I usually would. So I need sales at a business level for $100 or less, but I’m able to buy $150 or $200 sales. Sometimes I’m able to grab that more expensive customer because I do have some ads that are doing really well and they’re coming in at $10, $20, $50, $70. And I’m leveraging that profit to be able to reach out. What that does is that allows me to reach the maximum amount of volume. So if I were to optimize every single ad to under $100, I could be killing off things that are 105, 100, 110, and 120, and I’m giving up that volume. So my profitability goes up a little bit, but my volume goes down. And if you do that enough, you end up in a really bad situation because your super high profitability on a low ads spend is still not enough revenue to really generate a business. And that’s why this conversation is important. So if you’re a business owner, I would also challenge you to really think in terms of the business as a whole and not worry as much about the platforms. I see this as a tool. You know a lot of business owners will compare the platforms, well, Facebook’s doing this, why isn’t Google or Google’s really crushing it? Why can’t Facebook do better? And the short answer is, they’re just very different beasts.They require a completely different type of ad.They have very different audiences.It’s a completely different style of marketing.And so you just need to understand that they operate differently.But again, is the bottom line where you want it across both platforms, are you achieving a volume of sales that you want at a cost per action that you care about, or volume of leads, whatever it is? And if so, that’s it. You’ve won. You’ve won the paid advertising game. All you need to do at this point is figure out how to scale and spend more money. And if that number changes, you can adjust your KPI if you need to. But this is sort of the trap of going for the cheapest sales possible because you end up giving up so much of your volume and you end up having fewer customers overall. So this is really what I refer to as the logic of media buying.It’s part of a more complex process of really understanding how to look at accounts.But it’s one thing that I wish I could stop having a conversation about with business owners, because I can’t tell you how many dozens of accounts I’ve audited. And one of the easiest things to do is just go in and filter by everything that’s had a leader of sale and look for the ones that are under the cost that they told you they’re willing to tolerate. And I just audited an account where we found 17 ads that had generated 2000 sales under KPI that were turned off. And my first question to him was, why are these off? Right now you’re getting $25 cost per sale.These are at 19 and they’re all off. So you’re potentially giving up 2000 sales per year from not having these things on. And it’s this kind of sort of logic, or lack of logic, if you will, for the way that people approach accounts. So, again, I know it makes sense when you’re first getting started to look at every ad and make sure your ads are in KPI, thinking, well, if every ad is in KPI, my account will be in KPI. But that’s not actually true because that ad that you turned off at $100 with no sales might have converted at 107 and that changes the whole math equation.So again, very simply, I won’t say anything else about it. We manage accounts, not campaigns,not ads sets, not ads. If the account as a whole is where you want it to be, make very few changes, obviously kill things that don’t convert. If your account’s out of KPI, we’re still looking for the minimum effective dose of management.So I’m not going to turn off everything that’s out of KPI, I’m going to go into my account, I’m Going to turn off the fewest possible ads. And a lot of times what you see is even if you left everything that’s converted on and you just turned off the ones that maybe have spent your KPI but haven’t converted yet, a lot of times that brings the account into KPIs. So if you filter by everything that’s converting where’s that KPI is, that good.Well, then good. Don’t turn off anything that has a sale or a lead. Just turn off the stuff that doesn’t and that should bring you back there. So hopefully this is helpful. Again, media buying is a bit of a science, it’s not an art. It should be very mathematical and logical. So again, the logic of media buying is what I like to apply to all accounts.Hope you enjoyed this video. 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