Meta Ads Attribution Is Simpler Than You Think transcript

the bank account never lies if you want to understand how to think about attribution for your advertising for your DTC brand and for your Omni Channel brand that is the guiding principle above every other guiding principle there are all of these tools out there for how to measure your ads what I want to talk about right now is just the reality that you can get really really really really far with zero additional attribution or incrementality tools by simply watching your bank account so let's get into it okay I want to think about two stages right now of meta ads um well of all advertising performance of of how e-commerce businesses operate um in general okay and the first of those is like the sort of sub 10 million stage of revenue for most brands it might be a little higher than that um but for for a lot of for a lot of DDC e-commerce Brands If you're sort of sub 10 million probably even sub 20 million the vast majority of your spend is very likely going to be on Facebook ads on meta ads if you're if you're running ads if you're like most brands now there's all kinds of Brands doing all kinds of other stuff in amazing way and that's great but for many many brands that is the vast majority of their spend and so the question then um for them is how to measure the impact of their meta ads on their revenue and you can get extremely far by doing two things okay number one if you measure your ad Performance Based on a click you will get really really far however your meta ads are set up right now in terms of the optimization one day click one day view 7-Day click one day view that's the default for for any campaign that you launch on meta ads um if you check your attribution and you are you're on any measurement that's fine but go and pull up in your meta ads account if you go to your column setup you can see a compare attribution Windows uh menu item okay and when you go to that uh you can click on that and pull up 28 day click attribution in your ad account and the reason that I think that's really useful okay um is because it basically ladders your data to a click and allows you to see on a click basis on the longest window that met ads will give you without using any other tools the per the total performance of your meta ads and what I have found repeatedly is that most brands uh can basically measure the impact of their ads by looking at that number that is if you are seeing a 28 day click revenue of $10,000 from a campaign or from your total ad account or whatever okay it probably produced about 28 about $10,000 in revenue for your business um and especially what you ought to look at is your new customer Revenue now not all of your meta ad spend is going to support new customer Revenue it will also support some returning customer Revenue even if you run exclusions it's just the reality of how modern uh tracking works but but uh the majority of it should be as long as you're excluding past customers from your ad spend the majority of it should be uh towards new customers and so what you could do to measure the performance of your meta ads above absolutely everything else is uh simply measure on 28 day click and then go check your actual new customer Revenue okay and this is where we get get to like the bank account right really it's the Shopify account in this case but at some point it's the bank account the Shopify account basically will not lie to you about how much revenue you got uh you know there's some things with your Revenue definition there all a couple little details but essentially the dollars that your Shopify account is reporting to you are the dollars that came in from customers in your business and if your ads are producing value it will show up there and so the fundamental idea that's so important for you to keep straight is tune out the noise of all the tools that you know Oil North beam incrementality tools all these things if you're sub1 or20 million if n if you know 80% plus 75% plus of your ad spend is on meta ads revenue is the attribution tool it is the attribution tool and particularly new customer revenue is the attribution tool if you put your focus there you will see very very clearly whether or not your ads are producing value and if you then go look in your actual ad account and see the 28 day click revenue of different um campaigns it will basically tell you how each of those campaigns is performing okay now this is modeled data it's not perfect and that's fine but I'll tell you this in my experience meta ads is very unlikely to be over reporting your revenue on a 208 tili basis what it is more likely to doing is slightly Under reporting your revenue and this is surprising to a lot of people because what they think is that oh these big tech companies they're just trying to do the thing um that they want to do to try and get the most money from you as possible and so they're hiding this St I just don't think that's true I think meta ads is trying to measure on a click basis the performance of your ads properly and therefore um they are modeling that as best as they can because if you're if your money from your ads ends up in your bank account you will keep spending with them that is the ultimate measure that everybody cares about is the business Health that's what will ultimately lead to more spend for meta so they actually have an incentive I think to get this right okay and then of course we can recognize that there are some untracked purchases for all kinds of reasons some people are going to be view converters it's a small percentage but they're going to view your ad think about it and look at it a little bit and then they're not going to purchase until later it is um it is uh it is very likely the case that your meta ads 208 click re attribution is slightly Under reporting the total value of your spend there's another pulse check I like to use when I'm looking at an ad account to see like is everything basically right and that is to keep track week over week for a very long time and month over month even for a very long time of the last click revenue of my ads so what I mean is using Google analytics or Shopify UTM traffic report they're both really easy to set up okay particularly Shopify now now that Google G4 is a mess the Shopify um well you know the being able to use your UTM tags uh UTM parameters set up dynamically in your ad account uh and and and measure the last click performance of your ads is a nice pulse check in the midst of this so it's not perfect uh last click Revenue right which is like a revenue that came somebody clicked on your ad and bought without leaving the site just boom click buy just like that okay that has a really tight feedback loop it doesn't cookie tracking is not an issue here the UTM work either way and uh and so you you can tell basically with an objective measure over a long period of time if you're basically in the right range of performance or not and and so you know if you've got if you average a one to one last day click Rass okay so you know uh you spend $10,000 and you get $10,000 back on a last click basis measured on the on that very very tight window okay then you can see that if that's what I've been getting you know something like a one to one or within 10 or 20% of that for a bunch of weeks in a row and then suddenly I get a 1.5 to one then probably my ad performance is is doing really really well or if I'm getting at 0.5 to1 it's probably doing a lot worse than you think in all of that though the real key is measure it against the actual money in your Shopify account if your Shopify money is going up if the money in your Shopify account is going up the money in your bank account is going up the ads are working and that is actually the crucial principle that takes you to part two of this because at some point you get Beyond meta ads all right and when you go beyond meta ads now you're introducing other channels and other retail other distribution channels not just ad channels okay and I've been looking at this I had a client recently over over a couple week period had um or a month over month period had their meta ads uh performance almost exactly the same okay um and there and uh on a spend basis and on a on a on a revenue basis reported on 20 click Revenue um in metah ads okay so the the basic performance was exactly the same which was great okay but uh uh but uh they had spent about 40 Grand more in Google ads and it was it was like a you know 25 Grand versus 65 Grand so it was like you know 150% more whatever that amounts to um month over month it was it was a lot difference actually the more recent month was the smaller month okay um particularly because we had pulled back our performance Max spend I um have become really suspicious of performance Max even though we're excluding brand terms it looked to me like pmax campaigns we um we're hurting we're potentially hurting the total performance and we thought let's see what happens if we push our Target on pmax and we'll say let's just make up some numbers from a 3 to1 to a 4: one all right um if that was the performance difference well if that um was the case or or so what we did was we we forced pmax to spend less and be more efficient okay on the assumption that pmax unlike meta ads is over reporting its total contribution essentially that a 3: one is really actually producing something like you know a one and a half to one or something like that which was which was basically the Assumption we had and we wanted to be above that Target so we said okay let's go from 3 to1 to four to one well that was the basically the chunk of spend that came out of my total spend and what I noticed was we lost a whole bunch of Revenue month over month okay and and you know the meta ads performance is the same the Google ads performance is different forget for a second the click-based numbers in Google ads forget anything else it looks to me like very likely to be the case that in fact that pmax spend was more incremental than I thought and therefore we ought to turn it back up and we ought to gen try see if we can generate more Revenue based off of that and see if we can reverse that not because of the Google ads number in platform but because we're looking at the bank account and we're tracking again specifically new customer Revenue every single week watching to see uh week over week month over month how our ads are producing Revenue I talked to a manufacturer the other day who saved 30% on his cogs got a dollar off the Fulfillment cost of every order that went out and cut his lead time down in half for his product from his manufacturer and he did that by working with move supply chain uh he heard about move through my podcast one of my ads talking about them and probably I made the same pitch in that ad that I'm going to make right now which is this your supply chain is under optimized there are savings like that in your business and imagine how much better your business would be if your cogs and your 3pl costs were that much lower and if cash moved through your business that much more efficiently uh which is what happens when your lead time gets cut down uh your forecasting risk massiv massively decreases and what's so what is so true for so many brands that have been around in the e-commerce space is that their supply chains just haven't had the kind of um optimization that they should because they've optimized all kinds of other parts of their businesses I'm actually convinced that in the next year or two this is going to be the place that more and more operators are spending their time is working on Supply chains because right now they are so bad I actually talked with Laura uh gavar the CEO of of move you've heard on this podcast a few times before and she said she loves when she gets on calls with e-commerce operators because pretty much within five minutes of talking to them about their supply chain she's like oh yeah we can win really big for this brand like over and over and over again they're so under optimized that they can make really big moves really really fast that help their business move is based in the supply chain it's an agency style service so it's not like hiring somebody in your business as a full-time supply chain person you're going to go with them and work on a project basis and say how do we tighten up our supply chain how do we get faster lead times how do we save uh money in different places how do we maintain really high product quality at the same time as we do this uh how do we have backup manufacturers and think about inventory planning all those things so uh so it is really really worth it go check out mov Supply chain.com if you are working on an e-commerce business and you have not tried to optimize your supply chain yet go to move uh moov Supply chain.com I am building a supply chain for my own brand with move it's an incredible experience so far it's been really affordable uh just really great don't have I I just can't say enough good things about that mve Supply chain.com go check it out if you start to expand that mentality out across your total business over a very long period of time what you will find is that it becomes an incredibly good guide because if you are making enough profit in your business while spending on ads to grow your business if you are doing those two things at the same time and your business is basically healthy in those ways it's really hard to go very wrong from a measurement perspective now I do think Brands as they get bigger and as they get more complex um can use some tools to help them grow I am not a big fan of mtas or mmm I don't think those are very useful tools in the same way what I'm much more interested in is incrementality testing but incrementality testing at this point is very expensive the best tool I know of in the space that I've seen is house it's it's it's probably a six figureure line item per year um it's really slick stuff but um and and I believe it's really useful but it's just most brands cannot afford to drop $100,000 on you know 10 or 12 incrementality tests for the year okay so for that reason um you have to find a way to try to solve this problem for a lot of Brands without doing that uh you know once you get to 30 4050 million maybe you're starting to do that but um for a long time it's not the case plus how's I mean maybe I don't know maybe the incrementality tools can do something with like literally physical retail sell through but physical retail sell through is basically going to be impossible to measure even Amazon halo effect is really hard because this is another thing that really dogs Brands as they get bigger I've had this conversation with a lot of clients where it's like okay we have Amazon we have retail presence now our D Toc performance looks worse than it used to is that because we actually are doing worse on our Facebook ads or is it just because we're achieving our Revenue in other channels and I want to tell you a story about this to help illustrate the challenge of this a little bit more and how real the halo effect is okay because what I'm telling you right now for sure 100% with certainty is that there is a halo effect from your DDC ad spend on your other channels and you have to take that seriously otherwise you're just being foolish with your ad spend okay there is a halo effect I saw an incredible example of this with one client of mine who at one point um launched a major Mass retailer in the US like thousands of doors okay and when they when they launched that retailer they put it all over their website uh and uh and they they had a thing it's like now available you know on their homepage now available at you know this retailer and um and when they when they did that our ad performance as soon as they started saying we were available on these other channels our ad performance immediately tanked immediately on a row ass basis suddenly everything looked a lot worse and then what we did was we steadily rolled back all of those things on the website so we stopped saying that we were in those retail settings and instead we just sort of we're going to let people find that out when they got to those retail settings okay um and our performance came back up now it never came back up all the way but what that tells me is that for some large subset of customers they are very very happy to be buying products in a mass retail setting if they can get them there because they regularly shop in those places or they like them and I believe the exact same thing is true of Amazon as the brick and mortar example that I just gave you and I believe that in part because you can watch branded search over time on Amazon as you spend more and so uh and so what does that tell you it tells you that your D Toc spend is producing value in these other channels the problem is it's extremely hard to measure exactly how much and so here's what I have done to begin to answer this question and that I think is the actual right way to do it to do two steps okay number one okay the first step in this process is to seek to measure your performance by simply estimating some halo effect and this is true even if you're just Amazon okay I talked to another brand just the other day that was looking at their um you know Amazon revenue and their their revenue was about 30 some odd percent of their total business and they had spent some money on Amazon ads for sure but the money they had spent on Amazon ad like if you just sort of measured their total revenue on Amazon versus the ad spend it would versus the Amazon ad spend it would look like it was drastically more efficient than the way they spent on on uh on their uh DTC brand okay let's call their DTC brand like a two to one uh it was actually lower than that I think it was like a 1.8 or 1.9 okay so essentially like they were if you just just measured their D Toc spend based off of uh based off of their Shopify performance it looked like they were spending about 60% of their revenue something like that uh on ads right so that's it's really hard for a brand even with great margins to be healthy at 60 % of your Revenue going to ads that's that's that's pretty tough now the other fascinating thing is that the vast vast you know 80 plus percent maybe 85% I think it was about 85% 85% of the revenue was new customer Revenue so you could see that their their revenue was not just a bunch of returning customers over time basically the majority of their spend was creating majority of the new customer Revenue now they were running it really tight and it's possible they should um you know you might even say like how can you survive on that at that point you're talking about your new customer CPA being like 70% of your new customer revenue on DC except except that their Amazon business was again an additional 30% or something like that of their revenue and their Amazon spend was probably I don't know 10% of their Amazon revenue and so if you do all that math you realize there's no way their Amazon spend is producing a 10 to one return on Amazon right what is clearly Happening Here is that their dtoc spend is producing a whole bunch of Amazon revenue for them and uh and therefore they they rightly were measuring their performance of their D toc on an untrackable number they were not using now there are incrementality tools again they're expensive but they're incrementality tools that will do this with Amazon and see like okay what's your actual return on Amazon from your D Toc spend just by just by doing holdout tests and stuff and that's great um but again this brand was not going to be able to afford that okay uh they just weren't at the stage of business where they could do that so instead all they could do was measure on the bank account and you know what it worked perfectly for them their dtoc numbers looked bad and yet it it uh their D Toc their their Facebook row ass in platform looked bad but when you actually measure the performance against their total business it worked really really well everything was going the right direction and uh and what that tells you I think is that that is not an isolated incident that is happening for every brand everywhere and there's a really obvious way of thinking about this for a second okay um and that is just consider the the initial value of your ad spend and then the byproduct value of your ad spend okay the initial value of your ad spend sort of the optimized value of your ad spend for the vast majority of meta ads advertisers is conversion optimized ad spend okay so what you're doing is you're telling meta um I'm going to give you I'm going to give you money you get me purchases at the lowest cost possible that's what you're telling meta or you give me the highest value of purchases possible which would be to your spitting okay it's not just the lowest cost CAC now it's the highest value aov okay so those those are the two options lowest CAC highest value okay you go and do that and and you report that value on the basis of the purchase that you get but no matter how much you do that okay for the majority of brand well let's let's just take like an average brand let's say a brand is converting on a 28 day click basis which is not a true last click conversion but on a 28 day click basis uh let's say they're converting let's just call it 5% of their meta ads clicks are turning into purchases okay 5% that would mean that would mean that if you drive a 100,000 clicks on your ads okay then 95,000 of them do not end up in purchases and yet if you measured their time on your website I bet it is at least an I bet it's around a minute on average for a lot of brands that means people spent 100,000 people um or 100,000 clicks right that's not quite people but 100,000 clicks generated 5,000 purchases but 95,000 one minute other sessions and it is foolish to think that there is simply no value to that brand exposure brand awareness and brand Equity Building the you know the time they spent reading your PDP and maybe click over to your about page or read your reviews and just looked over your product and compared the price else the idea that that is not producing value in your other channels is just wrong it's just wrong of course it is doing that but that is the byproduct of your ad spend and um and what many people do is they think of their ad spend entirely in terms of the the actual conversion value um without thinking about the byproduct value for other channels if they have other channels at all and and they should they should think about that you should recognize that those 95,000 clicks or in the case of a year maybe 950,000 clicks uh depending on how much you're spending right those those clicks maybe maybe a couple million clicks are producing value that's before you talk about the video views the time You' spent on your social channels any of those other engagements with your brand of course that's doing something and it's building somewhat over time and therefore the way to measure the performance of that is to look at the actual revenue on other channels the best place to learn the specifics of how to set up and run your meta ads account the best course style content of which I aware on the Internet is through Common Thread collectives admission program admission is an incredible thing uh it is uh it is a course style program where you basically get access to a portal with a whole bunch of different courses that are going to give you the specifics updated all the time so you're staying um you're staying up with what's what's new and best in e-commerce okay things are changing all the time so you got to do that admission will get you cor style content around all the kind of things I talk about here all the time like how to think about measurement how to think about forecasting think about setting up cost caps um you know from scratch like what do you do if you need to go um to go build those like uh there's all of the details of how to run a DDC business and they're coming straight down from the mind of Taylor holiday on top of um the core style content which is already amazing to begin with there's a weekly webinar Q&A including um including a specific gated private Q&A with Taylor holiday who in my view is one of the very brightest Minds in e-commerce if not the brightest just a brilliant guy you get specific access to him and you also get ongoing coaching and support from highly experienced media buyers at Common Thread Collective for an incredibly low cost in fact they'll give you their first support call for free if you sign up for admission from my link look if you're trying to grow your knowledge of e-commerce how to run a good efficient business and a good efficient ad account how to do those things really well I cannot recommend admission highly enough I am Telling You person after person I've talked to tells me about their meta ads account the DM me something and I just think you would have saved yourself tens of thousands of dollars if You' had just joined admission and done what they say so you can go to the link of that check the link in the description for this I have an affiliate link where you get a free coaching call with their team you cannot get that through any other sources free coaching call through my affiliate link um so go go check that out in the show notes for this or in the description on YouTube it's going to really help you a lot go join admission today so um so again to come back to this example if you have an Amazon business or if you have a mass retail business you should basically assume that those 95,000 clicks are producing some value in those channels and what I watch happen for the example of the client that I mentioned earlier that had sold in that mass retail business is that their D Toc roas never fully recovered back to where it was before and yet the total revenue in their business either grew um or or is either stayed the same or or it grew some it just at least a lot of the performance a lot of the revenue shifted from their DTC channel to their Mass retail Channel but it was clearly being powered by the same thing um and they also had Amazon okay it was clearly being powered by the same thing and so the mistake they could make was not deploying enough ad dollars in their business and that that would be the really foolish thing because they would look at just their Facebook ads dashboard or something like that and go oh it's not producing a good return we got to we got to make sure that we um turn that turn that spend down because we're losing money no they weren't losing money they were just getting in in other channels and in fact for them they were the kind of business where the other channels probably mattered more than their DDC business because the future of their business was going to be in those channels it was a better uh it was a better approach for them to have other channels so um now that doesn't mean you can spend forever the check on this ultimately the way to measure this I think is really simple which is to forecast the performance of your business business all the way through your p&l across your channels have some sense of what you need to see and deploy your ad dollars much more like a traditional uh like a traditional marketing department would hey we expect that we're going to make I don't know let's call it three million bucks this month okay we expect that we think we can spend $800,000 on ads so let's deploy that $800,000 as efficiently as possible and then you measure what happened okay we spent 800,000 we actually made 2 and a half million which means our ads didn't produce the outcome that we wanted oh we actually made 4 million which means our ads are working better than we think no matter what the actual platform tells us uh at a given time and so then you start doing that over time measuring seeing how your performance goes and basically just do that if you do that sort of think like a more traditional marketer once you're Omni Channel I think you're going to get really really far with measurement and as you grow then you can start to bring in more complex tools to think about specific channels Etc in all of that you can still use the dashboard of the um tool of the of the ad distribution channel that uh that you have to measure relative effectiveness of your ads so what I mean is right that doesn't mean that what I'm you know that sort of measure across the total p&l uh forecast and behave that way uh sort of more like a traditional marketing department would un less like a d Toc sort of spend is spend when you hit a Ros Target kind of mentality um what you can still do is see like okay if campaign one in my meta ads account is producing a two to one on click and campaign two is producing a one to one on click um then I can probably be safely assume that the campaign producing a two to1 on 28 day click is better than the campaign producing a one: one and therefore I ought to scale the two to1 campaign because whether it's measured on just the DTC Channel um or on my other channels uh I can do the same now of course I'm still running manual bids including for these kinds of Mark for these kinds of brands that are mass retail or that are have big amazon presence uh you just have to change your Targets on your manual bids based off of your uh based off of the of your sort of relative Target um based off of you know any halo effect you're assign to those channels but the point still stands what I'm saying is within the actual ad dashboard you can you can uh use the dashboard as a directional signal of what's going on uh let me wrap this up in in all this I I talked to a brand a long time ago that was a major uh major Mass retail brand really big company that had sort of exploded uh and it makes sense that they're mostly Mass retail they selling diapers I talked to a guy who had who had been running their D Toc ads for a long time and then as the brand grew um they opened up Mass retail after being a DDC specific brand as the brand grew um he said they pulled back their ad spend a whole bunch because all of a sudden their DDC performance looked worse and then what they realized pretty quickly over time is that their Mass retail sales came down with it and so they thought oh no the D Toc spend is actually powering everything uh the conversion optimized spend is still the best use of their dollars for a really long time in their business they didn't go and run a bunch of Link clicks ads or anything like that know maybe they did that at some point but um but they're still running conversion optimized campaigns taking the byproduct of those 95 000 clicks that example that I gave earlier and assuming that that was producing value another channel so they pulled back their spend because they thought okay our DDC spend got a lot worse but then they pushed their spend right back up over time as they realized their retail sell through was going getting bad and of course what happened in the end was that their retail sell through improved at the same time now maybe that's just a coincidence I think it's not I think what's very likely to be the case is that they recognized correctly that that spend was actually producing value in other channels and that if you have a DC only mentality about that you're going to short the growth of your business in ways that are not really helpful for anything at the Baseline level just to recap measure on click a click gets you really really far it's a really helpful metric as you get bigger let the bank account um decide uh and don't worry too much about measuring perfectly until you can get to a stage where you're big enough to where you can bring in maybe some more complex tools that can help you think through this down to individual Channel levels uh because because those tools do exist and they they can be useful I think for larger Brands but uh but especially when you're in that middle phase and you're trying to grow for a lot of Brands I really see them struggle with with this problem uh and so work on you know I'm dealing with a figure Brands I talk with my clients about it all the time uh that's the way I would think about it in the end the bank account never lies and if you're growing your business at a healthy profit number a profit number that works for your business your odds are working [Music]