Why Your Facebook Ad ROI Sucks

What’s your ROI on Facebook ads?

Let me preface this article by stating that in my opinion Facebook currently offers the most comprehensive and powerful ad platform for businesses of all sizes. Unfortunately, the 99.9% of people that say Facebook ads don’t work aren’t fully embracing the incredible technology that Facebook offers them. I launched a new brand, Startup Drugz, about 6 months ago and the only paid advertising I do is on Facebook. We did over $10k last month in sales and are on pace to do over $15k this month. For every $1 we spend on FB ads we make $3-$5 back depending on the day.

Through my social media marketing consulting I hear the same story from nearly every SMB client. The story goes “I made an ad on Facebook targeted some relevant groups and pressed submit, but after a few days and a few hundred dollars I didn’t get any sales so I stopped.” The problem with this strategy is that, even with decent targeting on your first ad, you are still targeting way too broad of a group and aren’t using data from your store to tweak and tailor the ad. Even the biggest most successful advertisers (all of whom allocate huge chunks of their budget to Facebook) in the world don’t hit a homerun with their first ad on a new platform. It’s just not possible. That being said here are several things you should be doing in order to increase your ROI with Facebook ads:

1. Install Tracking Pixels: Have you ever visited a website and noticed that an hour later on Facebook you are seeing an ad for the product you just looked at? Well it’s not magic or a coincidence. That site is using Facebook’s tracking pixels to tell them who you are and what you are doing on their site. They are then able to show you incredibly targeted ads based on your behavior. Having tracking pixels on your site is an absolute must. Think about this analogy for brick and mortar businesses. Imagine you run a coffee shop, but everyone who works there is blindfolded, so you don’t see your customers or get to know them at all. That is what your website is like without tracking pixels (or good analytics).
2. Create Custom Audiences: Once you have tracking pixels on your website you will be able to create custom audiences. This means you can use simple logic (based on on-site behavior) to segment people who visit your site. An example of a custom audience that I use for Startup Drugz is people who add items to their cart, but don’t purchase. Another audience is people who are paying customers. You can also create custom audiences with external data, such as your email list. Facebook takes this data and finds the corresponding Facebook user.
3. Target Custom Audiences: You can run ads that target just these audiences. This means you can run incredibly targeted ads where you know exactly who the viewer is. If the audience is made up of people who abandoned their cart you can run an ad offering a 25% off discount or some other type of promotion to get them to check out.
4. Create Lookalike Audiences: Once your custom audience is big enough you can have Facebook create a lookalike audience of ~2+ million people. Facebook looks at all of the available data they have on your actual audience and will find people who most closely match that data. This is an incredible tool and one I use frequently. I took my “paying customer” custom audience and create a lookalike audience of 2.5 million people. Now I run ads targeting people who are incredibly similar to my actual customers. The results have been incredible with an average ROI of 400%.
5. Create Dynamic Product Ads: Facebook gives you the ability to link your entire product catalog to your ad account. This allows you to run personalized ads for each individual who visits your site. For Startup Drugz we have a dynamic product ad running, which shows past visitors the 5 most recent shirts they looked at below the ad copy. With most ads you are just guessing when it comes to what the creative should be. With this ad format you are using creatives you know the viewers will respond to since they have already expressed interest in the respective products.
6. Analyze Your Data!: Even if you are the best social media marketer in the world, using all the above tools/tactics, you can’t just put up one ad, let it run and assume it’s going to be a homerun. You need to constantly be analyzing data you are collecting from Facebook and other tools like Google Analytics. I check my GA account daily to understand which demographics are responding best to my ads. Is more traffic coming from mobile or desktop? Which has higher conversion rates? What time of day are visitor more likely to buy something? Based on these answers I am able to tweak my various Facebook ad sets and creatives, which ultimately helps improve ROI. If you think you know exactly who your best customer is, without looking at analytics, you are wrong. I assumed my best customers would be 20–25 year old males living in San Francisco or NYC, accessing our store via their iPhones. It turns out that my best customers (the ones with the highest conversion rate) are 35–40 year old males living in cities like Tampa, Atlanta, Austin and Boulder using their laptops. Without looking at the data I would be burning money trying to target a demographic that doesn’t represent my best customer.

There are many more items I can add to this list, but I wanted to focus on the 6 items I view as the most important. Long story short, if you’ve advertised on Facebook without following the above steps then it’s no surprise you lost money. Successful advertising isn’t about the cash you put into it. It’s about the time you put into it after the cash.

If anyone is interested in learning more about/would like help implementing this plan feel free to contact me at max@startupdrugz.com.

P.S. In regards to people switching to Google because Facebook didn’t work right away, keep in mind that Apple’s iOS 9 is slowly killing AdWords. Pretty soon most iPhone users will be blocking all browser based ads, which means there’s going to be a ton of advertisers competing for fewer and fewer eyeballs. Based on simple economics, bid rates will steadily increase. As SMBs we will most likely be priced out of this market by larger brands. This is something Google understands well, which is part of the reason why they rebranded the company and are focusing on their other products like Nest and Calico. Social media and native ads are where your brand should be. Beyond Facebook, Pinterest and Twitter both offer great ad platforms that I’d recommend looking into.