Paid Ads Case Study: Retargeting Vs. Facebook Ads Vs. AfterOffers
We’ve recently boarded the paid advertisement train and we’re finding great value in stepping away from focusing strictly on organic traffic. From an ROI perspective, if putting in $1 got us at least $2 (or more!) wouldn’t it make sense to pour money into the engine?[callout]If putting in $1 got us at least $2 (or more!) wouldn’t it make sense to pour money into the engine?[/callout] It was interesting to stray away from the mainstream paid advertisements (AdWords, for example) and experiment with lesser-known methods. In fact, we’re surprised more people aren’t doing this.
Our goal is to drive opt-ins into our email list where we have each member self-select their own interests. Those on the “buyer” sequence get emails relevant to buying websites; sellers get emails about selling; builders get emails about building sites; etc. We call this the “Choose Your Own Adventure” autoresponder approach and the feedback from subscribers has been awesome.
Because we don’t have one single squeeze page that pushed a specific product, we had to play with numbers to determine a conservative value estimate for each subscriber.
We didn’t want to overestimate when calculating ROI, as overvaluing each subscriber would have made it too easy to assume a campaign was profitable. Even if it really wasn’t.
We broke the formula we used down into six steps for you, so that you can determine your own ROI as it applies to your business:
1) Determine your gross revenue by adding up all your income sources and figures in a given time period (three months, six months, one-year).
We added up the revenue we made from June 2013 – December 2013 in brokered site sales and our products/services to calculate the last six months’ gross revenue at $180,000.
2) Divide your monthly gross revenue by the number of months in your given time period.
Since we had chosen to use the six month given time period for determining our gross revenue at $180,000, we then divided by six (6) to get our average monthly gross revenue of $30,000.
3) Multiply your average monthly gross revenue by your average profit margin percentage to get the average monthly net profit.
We know our average profit margin runs at about 50%, so we multiplied $30,000 by 50% to get $15,000 average monthly net profit
4) Take your total email subscribers and multiply by the engaged percentage to find the monthly engaged subscribers.
Our list is 10,000 people strong (thanks everyone!) so we multiplied that number by 57%, as that is how many subscribers open an email at least every two months from us. This gave us a monthly engaged subscribers count of 5,700 subscribers.
5) Divide your average monthly net profit by your monthly engaged subscribers to determine your monthly value per subscriber.
With our average monthly net profit at $15,000, we divided that by 5,700 monthly engaged subscribers to get a monthly value per subscriber of ~$2.60.
6) Multiply your monthly value per subscriber by the campaign duration in months to determine your campaign value per subscriber
By multiplying our monthly value per subscriber of $2.60 by a campaign duration of six months (6) we landed on a campaign value per subscriber of $15.60
This could be a little confusing as we used the six month given time period at the beginning of this process and are also running a six month campaign duration in months. Depending on the number of months you use for determining the ROI, your figures for these time periods may be the same or they may be different.
If a subscriber is worth $15 to us over six months, how much are we willing to spend to acquire that one subscriber?
Well, let’s get into that.
For our paid advertising campaigns we decided to try Retargeting, AfterOffers, and Facebook Ads.
To keep consistency and make sure we measured each method evenly against the other we decided to break each method down into five sections: what it is, what’s special about it, who the method is for or isn’t for, our results, and a final analysis/summary.
Method #1: Retargeting (Using Perfect Audience)
1. What is it?
The first thing we tried back in January 2014 was retargeting. The cool thing about retargeting is that it displays ads to folks who have visited your site before, so the only people who see your ads are the ones already familiar with you. We hoped that these warmer leads would convert at a higher rate than cold leads who we still need to be introduced to our brand.
It’s also interesting when you consider somewhere between 95%-99% of your visitors will NOT sign up for your email the first time around, but they are familiar with your brand.
2. Cool; what else can you do?
It doesn’t end there. You can customize it so that visitors who view a certain page are segmented from those viewing other pages.
For example, visitors who read a post on how to sell their site on our marketplace will be on our “Sellers” list and get ads related to website selling. Landing on a blog post about buying websites puts you on the “Buyers” list and you’ll see ads about buying profitable websites.
Once you have them segmented by interest based on their choice of content, you can make sure you continue to deliver them only what they’re interested in through narrowly-focused autoresponders.
3. Who can use this? Who can’t?
This works really well if you have a high amount of traffic with a lot of new visitors. We’re somewhere in the middle where we get a lot of visitors per month, but about half of our visitors are returning. With that, the list we have for retargeting is a bit light and doesn’t add to itself as often as we’d like. If you’re not driving enough new visitors to the site, you might not have a big enough pool of people to target the advertisements at in the long run.
One answer to this problem is periodically turning the campaign on and off. Run the campaign until you’ve reached critical mass and then turn it off again while your targeting list continues to grow over the next couple of months.
Period Of Time: January 26, 2014 – June 1, 2014
Landing Page Conversion Rate: 16% (averaged over four different pages)
Total Subscribers Acquired: 610 subscribers
“Real” Subscribers Acquired (not counting those who subscribed before 1/26/14): 480
Total Spent: $3,764 (Perfect Audience) + $2,000 (Dave/GrowthScout’s fee) = $5,764
Cost Per Subscriber: $9.45
Cost Per “Real” Subscriber: $12
Retargeting got us SUPER excited when we first started off and the first two months had great momentum, just as we’d hoped.
Unfortunately, we soon saw diminishing returns and the cost per subscriber began to climb as more time went on until eventually we were losing money.
Our retargeting campaigns attracted a lot of trolls who created obviously fake email addresses like ****@you.com and email@example.com. I mean, hey, maybe we really ran into the John who registered john.com back in the beginning of the interwebz, but how likely is that?
One of the biggest upsides that is near impossible to verify is: We may have made sales we wouldn’t have otherwise, even if they were already on our email list or familiar with our brand. For example, someone was bent on buying a site from us but it slipped his mind for three months. He sees our ad, suddenly remembers, goes on our marketplace, and buys.
Is it likely? I have no idea, but it’s plausible.
With that said, I would rate Retargeting (for our purposes) a B-.
Overall, maybe Retargeting wasn’t best for us, but I can see how someone with the right amount of traffic could do well with this. I also think that lower-priced products with a finely-crafted sales funnel might have more success and a much more accurate ROI.
If you have more money than time and you’re at the level where you have enough traffic and profit to make hiring a consultant viable, you can hire someone else to be on top of rotating ads so you have more time to focus on your own business. With our current traffic, the costs of a third party running our campaigns lowers our ROI too much to make it worthwhile.
Method #2: Facebook Ads
1. What is it?
I think we all know what Facebook Ads looks like. They’re the advertisements on the sidebar and newsfeed that we see on a daily basis while we’re browsing to see what our friends are up to and while we’re stalking our crushes.
One popular appeal of Facebook’s advertising platform is its ultra-relevant targeting feature—only the people you want to see your offer are shown ads.
Instead of focusing on everyone in our audience, we’ve decided to tailor our copy, ads, landing page, etc. to focus strictly on website sellers. The main message was basically: “LIST YOUR SITE WITH US!”
Here’s a screenshot of our LeadPages landing page with two different headlines:
Interestingly enough, the default cloud background beat out our custom design backgrounds.
Once they’ve converted they were brought to a page that explains the benefits of listing with us and provided resources on how to get started.
Check out a copy of our post-conversion sales page.
2. Cool; what else can you do?[callout]Although Facebook’s default targeting system is good, we took it a step further by targeting only people who Like our competitors’ Facebook pages.[/callout]Although Facebook’s default targeting system is good, we took it a step further by targeting only people who Like our competitors’ Facebook pages.
We found that it was difficult to accurately target these users using Facebook’s standard features because what we’re doing at Empire Flippers isn’t exactly mainstream. Targeting something vague like “Entrepreneurship” isn’t likely to be an exact match for people looking to sell websites and online businesses.
We followed Matthew Woodward’s advice for the majority of this. First, his basic Facebook Ads guide allowed us to get more comfortable with the whole thing—first time and all. Once we got it started, we took notes from his March Monthly Report where he shares the exact tool (FaceSniper) he used for creating custom audiences.
3. Who can use this? Who can’t?
Retargeting works best for those with high traffic volume and large marketing budgets to scale, but Facebook is the best bet when it comes to versatility and ease of use.
Facebook doesn’t need you to have existing traffic to reach its over one billion active users. They let you set your own daily/monthly budget and you can create a hard limit so you never spend more than you intended.
Another bonus is its ability to run multiple campaigns and ad sets so you can split-test and find a winning combination.
Period Of Time: May 7, 2014 – June 1, 2014
Landing Page Conversion Rate: 20%
Total Subscribers Acquired: 214
“Real” Subscribers Acquired (not counting those who subscribed before 5/07/14): 199
Total Spent: $796
Cost Per Subscriber: $3.72
Cost Per “Real” Subscriber: $4.00
Like Retargeting, the results were GREAT at the start while the targeted list was still fresh, but I found that I actually had to change out the ad image every 5 days or so.
It’s starting to see faster diminishing returns in a shorter amount of time than Retargeting did.
Click-through rates and conversion rates were still decent, but this was definitely not a passive strategy with a lot of ad and audience rotation required.
Also, Facebook seems to have really shut down a lot of the scraping tools out there—I was using FaceSniper before it got taken out—so it may be more difficult to target your competitors now.
Not enough time has passed for Facebook Ads so it’s difficult to say for sure, but I think experimenting with more custom audiences (before Facebook took the scraping tools down) would’ve made this a big winner.
Right now, I’d give Facebook Ads a B+/A-.
Method #3: AfterOffers
1. What is it?
AfterOffers has a network of websites in similar niches that have email lists. When someone subscribers to a website in their network they get sent to a “Thank You” page and are met with an option to subscribe to our email list. It’s simply a checkbox they have to click on, and they’re in.
We interviewed the founder, Tim Bourquin, on one of our podcast episodes and he shares a bit of information on AfterOffers.
2. Cool; what else can you do?
This one’s fairly straightforward and there’s nothing else you can modify, as Tim keeps the finer details secret. It’s strictly passive and you get sent an invoice at the end of every month.
It’s nice in that it’s completely hands-off—all we have to do is pay the invoice AFTER we’ve received the new subscribers.
3. Who can use this? Who can’t?
AfterOffers is invite-only—for now anyway. They do allow you to reach out to them to determine eligibility and we handled everything through a Skype call.
Period Of Time: March 20, 2014 – Today
Landing Page Conversion Rate: N/A
Total Subscribers Acquired: 149 (last updated 6/21/14)
“Real” Subscribers Acquired (not counting those who subscribed before 3/20/14): 149
Total Spent: $149 (last updated 6/21/14)
Cost Per Subscriber: $1
Justin and I really want to scale this thing up and pour more money in, but unfortunately it’s out of our hands. AfterOffers is onto something great here, but we’re limited by the amount of websites they feature us on and that’s 100% in their control. We’d LOVE to spend hundreds or thousands of dollars on their service.
It’s a great service that we can’t complain about with the cost being a mere dollar per subscriber. If you’re looking for scale and huge volume, though, this won’t be your holy grail (at least not yet).
I wish there were more transparency, but the most they could do is assure us that the sites are all relevant and high quality. They handpick their clients and keep their information private. Maybe this will change in the future.
For now, AfterOffers is a B+/A-. We’re not losing anything with each subscriber costing us a mere $1.
The lack of volume and transparency are two downsides but, they haven’t deterred us from using their services.
The campaign is looking great from an ROI perspective and the company’s led by a brilliant entrepreneur who won me over on the first phone call.
I went into this expecting to find a highly scalable, passive engine that just brings us more subscribers and customers, but I’m finding that I have to temper my expectations a bit.
We still haven’t really done anything with AdWords yet, and I think that’s the next step. I just started a few campaigns to get familiar with the interface before we launch our redesign, where we’ll start putting more money into paid ads.
We’re pausing Retargeting for now and if we do pick it back up in the future, I may end up running the campaigns instead of hiring someone else to manage them. At our traffic levels, the additional cost of having a third party run the campaign just doesn’t make much sense and cuts deeply into ROI.
AfterOffers is ongoing and Facebook Ads is on pause for post-redesign.
All in all, we’ve had good experiences with all three.
I’m sure there are TONS of awesome paid routes out there that are worth trying. Which ones are have you tried that brought you great results? Any different experiences with the three above?