The Investment of Calculating ROAS

Advertising can be tough. Truth be told, it can seem a lot like gambling. In my interview with Stas Balanevsky, we talked about how ads can be more than just luck of the draw.

Commit and test to make ads work

When I met with Stas, he asked my advice on a hypothetical, but common, scenario. It goes like this:

Let’s say a company is trying to measure ROI on a very simple B2C campaign. They have a widget that people want.

But maybe they decide to put a little fuel on the fire, so they pay the 20% to Amazon. Then they put it on Shopify and advertise Shopify on Facebook and on Google and advertise Amazon. This company now needs 4x ROAS on Facebook and 6x on Amazon to break even.

What do you tell a company that wants to spend $5k a month on advertising but gets charged a $5,000 fee? There’s no ROI for them.

Tough, right?

Here’s what I recommend: Don’t do ads until you can invest enough to test long enough.

As rough as it sounds, you really need to assume you’re going to throw the money away by testing.

But when you’re ready, go all in. If you dip your toe into five different networks, you’re never going to get enough data to know what works.

You’ve got to be willing to commit money each month to put into advertising and test it out so you can know if it’s going to work.

It’s a safe gamble at that point. Consider a roulette wheel. If you’re landing on 17 every time, but it’s going to take a hundred thousand dollars to figure that out, it’ll be worth it.

You have to be willing to put money out upfront to figure out what works.