Why You Shouldn’t Start Media Buying With A Limited Budget

Why You Shouldn’t Start Media Buying With A Limited Budget

Over the past few years, media buying has become one of the more popular methods for traffic delivery. Since the emergence of these paid platforms, more and more marketers have abandoned organic traffic sources and moved into the paid platforms.  I’m going to take a moment to explain why this is not a good idea for new marketers with limited budget.

Effective Media buying requires a massive amount of testing.  Testing requires a solid starting budget.  Most marketers who start buying traffic understand that they will likely lose money during a test.  You should never start a test unless you can afford to lose money.

Let’s say you start testing Muscle supplements on Facebook.  You start with 2-3 landing pages, 3-4 ad copies and 2 offers.  The number of variables you are testing will help determine how much you need for a starting budget.  As you can see above, we have a few different factors to think about.  To effectively test a market, you need to advertise every combination of variables possible.

Example:

AD1 -> LP1 -> Offer1
AD1 -> LP1 -> Offer2
AD1 -> LP2 -> Offer1
AD1 -> LP2 -> Offer2
AD1 -> LP3 -> Offer1
AD1 -> LP3 -> Offer2

That’s 6 possible combinations with a single Ad.  With 3-4 Ads being tested, we are looking at 18-24 possible combinations that could lead to a conversion.  This is being ultra conservative as some tests have many more possible combinations.  If the offer pays you $50 per sale, you could test each combination with about $50 in traffic to determine if there is any opportunity.

Let’s look at the numbers:
$50 ad spend multiplied by 18-24 combinations = $900 – $1200 total testing budget.

Obviously there are indicators and factors that would prevent us from blowing our total budget (CTR on Ads, CTR on LPs, CR on Offer) but there is a huge chance that most(if not all) combinations will fail without any return.  Even if one of those combinations turns out to generate a positive ROI, you likely spent more money on the failed combinations.  This is why marketers should expect to lose money testing.  The good news about it is that you now have Data that will lead you to overall positive ROI.

Example:

AD1 -> LP1 -> Offer1 – $50 spent  – No conversions
AD1 -> LP1 -> Offer2 – $50 spent – No conversions
AD1 -> LP2 -> Offer1 – $50 spent – 4 conversions
AD1 -> LP2 -> Offer2 – $50 spent – No conversion
AD1 -> LP3 -> Offer1 – $50 spent – No conversions
AD1 -> LP3 -> Offer2 – $50 spent – No conversions

Total Ad Spend -> $300
Total Revenue ->  $200
Total ROI ->   -33.33%

In theory, we lost $100 during the test but now we have Data on a winning combination that generated 300% ROI!  Now we can focus our ad spend on that winning combination and stop spending on the losing combinations.  In theory, we should have able to recover our lost $100 fairly easily.

What can new media buyers learn from this example?  Both a good test and a bad test will likely leave you in the red.  Limiting your variables can also be like throwing money down the drain.  If you are only testing a single Ad, LP and Offer, you are limiting yourself from finding a winning combination.  You are effectively preventing yourself from recovering testing costs with winning combinations.  You don’t know what works and what doesn’t work until you test.

Running small tests are extremely risky and rarely generate a return unless you have some sort of inside information.  Lets say you test 5 different campaigns with a single Ad/LP/Offer setup.  You are more likely to fail 5 out of 5 times than if you take that Ad spend and focus it on a single campaign with multiple variables.

This is a very open ended example that could include many other factors.  My advice for new media buyers is to make sure you have a solid starting budget and that you can afford to lose money during initial tests.  If  your ad budget puts you in a ‘Make or Break’ scenario, you are better off waiting until you have more capital and are in a position to lose money.  Essentially you never really lose money,  instead you purchase data to gain insight on a the campaign.

Wait a minute!  –

“Running small tests are extremely risky and rarely generate a return unless you have some sort of inside information.”

What does “Inside Information” mean?

Inside information comes from those who have already run the campaigns and know what combinations work and which do not.  Insight on demographics also help tremendously!  If you had an offer you know converts, a winning landing page and a few decent Ad copies, wouldn’t that save time and money?

7ROI provides ‘Like Audience Data’ and ‘Advanced Demographics’ that has been generated internally or provided by our advertisers.  We test offers and only work with advertisers that are proactive to roll up their sleeves to get the job done.  Since we are not like other networks (Re-brokering offers), our relationships are always direct with the product owners.  This line of direct communication gives us a huge advantage and insight on offer performance. Our love for our affiliates is what motivates us to have close relationships with all our advertisers.  We strive to give you as much data as possible before testing a campaign which places 7ROI as the answer to becoming profitable faster and eliminating a portion of the overall risk.  Let us know how we can help!  Reach out to our team today.

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