How much $$$ do you waste on ads?

We all want to grow our businesses. Easier said than done, right? A myriad of things need to go right across multiple touch points to move forward, sometimes to even stay where you're at.

With everything that you have going on, it's hard to stay on top of each channel and its performance. Make no mistake, this is costing you - it's just a question of how much. So we set out to analyze our dataset and find out:

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What % of ad budgets are being allocated to "losing ads"?

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TLDR

• Best Brands → were testing ample new creative, monitoring fatigue & graduating their winning tests ads into evergreen campaigns for scale after turning off their losing ads
• Mediocre Brands → were testing a large amount of creative but not monitoring fatigue with much vigilance, allowing for performance leakage
• Worst Brands → were not testing enough creative or monitoring fatigue

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Definitions

📈 Winning Ads: Above your account baseline for our selected metric, in this case CTR.

📉 Losing Ads: Below your account baseline

💡 "Enough Creative" - Our analysis (linked here) of 600+ ads in Q3 2021 showed that to find 1 winning ad creative, you need to test 10.

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Methodology

• We chose CTR as the most ubiquitous and readily available metric we have post iOS14
• We analyzed total spend/ads, not just Pencil spend/ads
• The data was broken out by funnel stage - Acquisition, Retargeting, Retention
• We analyzed a dataset from November 2020 to June 2021
• We analyzed across 100+ brands in a wide variety of sectors

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Findings

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Over half of brands we sampled are allocating more budget to their losing ads than their winning ads 🤯

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% of spend dedicated to losing ads per funnel stage 👇

• Acquisition: 66%
• Retargeting: 52%
• Retention: 44%

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Random sample of 10 DTC brands' prospecting spend on winning & losing ads (anonymized by sector)

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Why it matters

• Budget well spent = new customers = greater LTV = 🚀
• With competition in each sector growing daily you want your budget allocation to being driving value for your customers and ultimately your business. Consistently overspending on losing ads will catch up with you sooner or later, making you doubt the channel incremental impact to your business when the negative impact you derived was based on the monitoring framework you were using

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What to do

• Test "enough creative" on a regular cadence, based on your ad budget. We recommend weekly. This allows you to have winning test ads that ready to scale into evergreen campaigns
• Monitor fatigue hawkishly, that means knowing the 2-3 main KPI baselines are meaningful to your business and turning off/swapping out losing ads that aren't driving performance
• Follow the data, many times what we like dictates the tests we run, but that has no bearing on what audiences, and customers respond to. Follow the data from your scaled testing rigorously and you will find new propositions that just might unlock a new level of growth from your business

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As always, we'd love to hear from you if you have any questions or thoughts. Also if you want to check out our free creative dashboard to monitor your ad fatigue, you can get started now right here.