Mitigating rising digital marketing / CAC expenses

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by a searcher from The University of Chicago - Booth School of Business
in California, USA

1yr ago

Mitigating rising digital marketing / CAC expenses

Hi SF community

In most businesses I look at - not just ecomm - ad expense is the most material cost, the most volatile, and the most at the whim of external forces.

Invariably every business I look at with digital marketing has significant increases in costs over the last two years, relative to revenue, which I understand to be industry wide dynamic. In some cases, they have made recent changes (e.g., to new vendor) and projecting material pro forma improvements based on short run rate.

Obviously I have healthy skepticism, and am aware you can game numbers short-term While I am far from an expert, neither is current mgmt in most cases, and there are some obvious opportunities. I am generally pursuing in cases where I have ideas and applicable experience to reduce dependency, e.g. through expanding other channels..

I would love any stories - good or bad - on how ROMI / CAC has moved after recent acquisitions, and how you have mitigated (through DD or post-close operational changes), in order to have a more realistic view.

thanks in advance!

1 Like

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reply by a searcher 1yr ago
from University of British Columbia in Canada

Steve's responses was spot on. Google used to let you get pretty granular on how you targeted keywords and how you allocate budget. Over the past few years they have moved farther and farther from this. They now push you extremely hard to go with automated bidding (Google picks what you pay) and they've broadened keyword match types. They've also started to hide keyword data in reports - for example if you now use "phrase" match in your campaigns you will typically only see 30% to 40% of the search terms you paid for. They do this so you can't add negative keywords to campaigns for keywords that aren't relevant to your company. Many of these changes occur without account owners realizing the change. Overtime spend continues to go up and up....

In terms off the cost of advertising going up - previous to starting my search I was in the tech B2B space where I managed a decent PPC budget. Towards the end of Covid I started to notice large increases in the cost-per-click (CPC) resulting in increased overall spend. Interestingly large increases in CPC seemed to occur in December - not sure if it was the holiday season driving this up or Googles year end :)

Hope this helps and if you have any further questions or need clarification please reach out.

reply by a professional 3mos ago
from University of Pisa in Northampton, UK

@redacted‌ the only reliable way I've found to find out the real CAC pre-acquisition is to triangulate platform activity, CRM activity and bank activity. You can optimise in-platform until the cows come home, but if you're optimising against what I call ghost conversions, CAC won't be brought under control. It's fair enough if it gets more expensive considering advertising costs are also rising, but it is imperative to make optimisation decisions based on real sales.