You're Probably Not Wasting Money on Ads

When are ads a waste of money?

So I think that most advertisers make a fundamental mistake when it comes to evaluating performance. It’s not that the cost per conversion and Return On Ad Spend don’t matter at all. They obviously matter.

But we often make the mistake of being far too all or nothing.

We’re over this threshold of performance, so it’s good. We’re below it, so it’s bad. And if it’s bad, we lose our senses and start to make drastic changes.

That includes turning our ads off completely because we don’t want to “waste money.”

But I’d argue that we’re rarely actually wasting money. Maybe results could be better, I don’t argue with that, but the budget you’re spending is often still making a positive impact. There are exceptions when you’re wasting money and you should just stop.

Let’s discuss the factors at play when making the determination that we’re wasting budget.

First, consider a completely new business. So that means a new Facebook page, Instagram account, ad account, and pixel. It also means a new email list, new customers, and new potential customers.

Too many advertisers approach this situation with unrealistic expectations. You’re at a built-in disadvantage because no one knows who you are. Meta doesn’t have a prioritized segment to go after who is likely to buy. There’s simply no data.

You are likely to get what appears to be some pretty awful results in the early going. But so much of what you’re doing is simply setting the foundation.

Even if you are losing money on ads, you’re building trust and brand awareness. These people may not buy right away, but they’re more likely to buy later because they’ve been exposed to your ads.

You can’t approach these initial months of advertising the same way you would with an established business. You want sales, but you’re getting exposure, too.

A similar problem exists when advertising for the first time, even if it’s an established brand. The challenge in this case is that there are no clear expectations.

How much will it cost to get a sale? How much for a lead? What percentage of those leads will buy? What is a reasonable goal for Return On Ad Spend? What pitfalls do you need to watch out for?

While you can take a standard approach when running ads for a brand for the first time, there is a great deal of unknown. Consider that first month or two as being critical to establishing expectations.

You’re learning from the results, what works and what doesn’t, and making adjustments. But no matter what your results are in this initial run, it’s unlikely to be a waste of money.

The problem is that far too often advertisers overreact to bad results in these cases. They claim it’s a waste of money and they shut off their ads or lower their budget.

That’s usually a mistake.

Now, that doesn’t mean that you can’t waste money on ads, of course. A true waste of money tends to be when low-quality results are tied to high volumes. And this waste doesn’t just last a few days, but it often goes undetected for weeks, months, or even longer.

Low-quality results could be tied to things like junk traffic, where people immediately abandon or don’t do anything on your website. It could mean a high percentage of results from people who don’t match your proven demographic.

So you’re reaching predominantly men, when only women buy. A high percentage of your budget is spent on people 65 and up when your product is for people under 45. You’re getting traffic from India and Bangladesh even though you can only serve people in the US.

None of your leads are reachable or willing to do anything else.

Assuming this happens at a high volume and it’s not a short blip, it’s a waste of money. The reason that this is a waste has nothing to do with whether their engagement led directly to a purchase.

If we know they can’t or won’t buy, you can’t even make the argument that you’re at least building awareness.

A smart advertiser will use strategies that make this waste unlikely. They optimize for conversions instead of link clicks, landing page views, and other engagement metrics.

They use breakdowns to help diagnose when there’s a problem with distribution. And when there’s a problem to be solved, they know how to solve it.

This usually means applying a value rule, or it could be audience or placement restrictions in extreme scenarios. Or it could simply be ads and an offer that appeal to your target demographic.

So here’s the bottom of the glass.

Don’t make the mistake of evaluating advertising based only on short windows and purchase value. Even when you’re not seeing the volume of sales that you want, you’re likely establishing a foundation that will help results later.

This is especially the case for new businesses or when running ads for an established business for the first time.

You’re not truly wasting budget unless you’re careless in your approach and unable to diagnose and fix the problems that come up. And that, more often than not, happens when ads are managed by someone who doesn’t know what they’re doing.

Don’t let that be you.