How do big ecommerce businesses achieve such rapid expansion?
We discovered that one marketing approach enables ecommerce companies to develop faster than any other, after analyzing well-known brands as well as a number of smaller but rapidly expanding firms.
If you aren’t utilizing it to the maximum degree, you’re restricting your company’s expansion.
- Influencer marketing
- Email marketing
Facebook advertising is the one channel that is propelling e-commerce businesses to greater heights of success.
Here are a few reasons why Facebook advertising is so exciting for ecommerce:
- Product discovery: Facebook allows your brand to reach out to potential customers who may not even be aware that a product like yours exists through sponsored stories, which are similar to YouTube advertisements. Your brand can now communicate with these people directly, unlike when it was necessary for them to look specifically for your goods such as Google Search ads and other pay-per-click platforms.
- Targeting: The most sophisticated targeting capabilities of any online ad platform are found on Facebook. Advertisers may target consumers based on their age, location, sex, marital status, and hobbies, such as the movies, music, publications, and companies they like and follow.
- Visual: Facebook is a highly visual advertising platform. This enables e-commerce businesses to demonstrate their goods in an engaging, visually appealing way.
- Transparent reporting: It’s simple to measure the amount of money you’re earning from your campaigns using Facebook. Unlike other forms of advertising, which aren’t as easily tracked, Facebook allows you to track the effectiveness of your campaigns down to the penny.
- Scale: You’d be shocked by the number of e-commerce companies you’ve never heard of that spend $100,000 per month on Facebook advertising. How can such small firms have so much money to spend on advertisements? Because when Facebook works, it may be quite scalable.
Facebook advertisements provide an abundance of possibilities for ecommerce companies. However, if you’re new to Facebook advertising, it might appear frightening, perplexing, and overwhelming.
When you’re working with just one ad account, it’s easy to feel like what you’re seeing in your campaigns is unusual. And if you’re just getting started with Facebook advertising, you may have no idea what to anticipate or how to define your target metrics.
At Biddyco, we work with a lot of ecommerce firms, giving us a wide perspective on what works and doesn’t for various businesses. That’s why, in this article, we’re pulling back the curtain on our Facebook advertising data and offering you a better view of the social media ad environment.
Ad data from 20+ e-commerce brands and millions of dollars in spend
We’ve worked with over 20 e-commerce companies to optimize their Facebook advertising in the past year. This post is a general rollup of all of those campaigns, so that we may provide some high-level statistics.
Certainly, each company, price range, and target market is unique, but this information will provide you a baseline figure for our customers’ performance across the board.
Cost per purchase
Cost per purchase is the amount you have to spend in order for a client to make an order on your site. It’s calculated by dividing your ad spend by the number of orders you received from advertisements. This phrase, CPA, is often shortened to indicate cost per acquisition. In this scenario, our cost per purchase for 2017 was $22.
A $22 CPA might be prohibitively expensive for your company, or it may be an inexpensive method to take your business to the next level. We’ve worked with clients from all across the spectrum. Some needed a $9 CPA to break even, while others were satisfied with a $150 CPA.
CPA by month
A $22 CPA for the year, while a decent starting point, doesn’t provide a clear picture from month to month. Seasonality is also common among ecommerce companies, with Q4 being the most important.
Below, you’ll see how our CPA changed throughout the year:
Higher CPAs are observed in the first half of the year. As consumer demand rises and holiday shopping begins, costs begin to fall towards the end of the year. So if you’re seeing reduced demand and higher CPAs in Q1 and Q2, don’t worry, you’re not alone!
Return on ad spend
Return on ad spend (ROAS) is a statistic that shows how much money you made from your advertising investment. If you spent $1 on advertisements and generated $3 in revenue, your ROAS would be 3x or 300%.Our 2017 ROAS was roughly 3.14 times higher than it was in 2016.
You’re probably thinking that 7x looks a lot better than 3.14x, so returns have significantly decreased.
That’s correct, at first glance. However, in 2017, we were able to significantly expand ad spend and help our clients earn considerably more money. When you increase your advertising expenditure, it’s usually because something is wrong with your ROAS, so don’t worry when you’re trying to scale!
Based on our experience working with a variety of companies, price points, and industries, a 3x ROAS is typical when you have around $100 million in spend.
CPM and CPC
CPM (cost per thousand impressions) is the cost of obtaining 1,000 impressions on an ad platform. CPC (cost per click) is the price it costs to have someone click your ad and visit your website. On Facebook and Google as a whole, there’s a clear trend toward rising CPCs and CPMs. We can see that CPMs nearly doubled from 2016 to 2017, while the overall CPC increased by 56% over the same period..
Here’s why: as more and more marketers join these platforms, the demand for ad space grows. However, there is only so much ad real estate available. If Facebook begins to show every other post on your feed as an advertisement, it will repel users. This involves a delicate juggling act of increasing income while keeping users happy.
The CPCs are growing because there is a limited supply and an increasing demand, which is the same reason why home prices have risen in my Los Angeles neighborhood by double over the last five years.
As ecommerce brands, you’ll have to get used to spending more money on traffic in order to your site as the platforms become increasingly competitive. You’ll also need to make sure that your ad content is compelling enough to stand out among the newsfeed.
Even if CPCs and CPMs rise, it does not imply that Facebook advertisements are a lost cause. You’ll discover why below.