Online Advertising: Don’t optimize for cost

Why a cheap cost per acquisition is not always good marketing


Since the invention of Google Adwords we have seen a rise in all kinds of different online ad units, with a lot of start ups creating management and optimization tools to get the most of them.

Online advertising is the most trackable and most highly target-able advertising there is. Where with a TV spot you mostly buy quick reach and awareness to a fairly broad, general audience, online ads can speak to Timmy in Boston working at MIT who likes sneakers.

Because in online advertising we can be so precise, many online marketers have been falling into the land of “if you can’t track it, don’t do it”. When they come back to their boss or client, they want to be sure they can tell exactly what value they’ve created:

“I optimized our Facebook install ads to deliver a $.60 cost per install, down from $1.75 …”

If you are optimizing for a direct purchase, this kind of thinking can make a lot of sense. But not if you are advertising a free app or service. As much as saving money is a great thing, I believe optimizing for cost is not good marketing.

A study says you are 475.28 times more likely to survive a plane crash than you are to click on a banner ad. Another study done in 2009 states that roughly 84% of people never click on an ad.

If 84% of people never click on an ad in the first place, who are the 16% of people you are optimizing within? Who is this person that actually clicks ads? And if we optimize for the people who are the most likely to click on an ad, of those 16% who do, (holy moly) who are those? Are these the people you want to be your customers?

I heard of a bunch of start ups complaining about how they ran online ad campaigns, got great sign up numbers but then no one came back. This does not mean they have a bad product, they just acquired the wrong users.

I think instead of optimizing for a low cost per click or cheap cost per install you should look at the demographics of your most active users and target your ads towards these demographics. This way you will definitely not get the cheapest cost per install or an awesome cost per click, but you will get people who actually use your product or service.

The problem with optimizing for active users instead of installs or sign ups is that it’s much harder to track and therefore harder to show off your awesome work to your boss. Also it’s not the marketers success alone, but also a success of the product team who created a product people keep using in the first place. This is especially a tricky thing for marketing agencies, because they can’t show an immediate success and it’s hard to prove for them the success in active users was partly theirs too.

Online advertising should never be your only driver anyway, because there are still 84% of people who might want to be your customer as well. And chances are they are way cooler people, like you.

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