Don’t Become Dependant on Paid Ads
Updated: Sep 8
If you’re running an online business, whether it’s a product that you are selling or a service that you are providing, there is always one thing on your mind… more sales. Today, nothing matters in Ecommerce like your online dashboard that shows how much revenue was generated today.
Strangely, instead of focusing on actual profits that can be measured on the amount of money left in your bank account, most companies tend to follow the herd and care only about growth. It doesn’t matter what it takes and at what costs it takes to grow, day after day, month after month and year after year growth is all that matters. If our sales are not growing (even if our profits are!), it feels like we’re taking a step backwards. That’s why, when you hear that this year’s Black Friday sales broke new records and every year it seems that things are getting better, but notice that they are never talking about profits, only revenue growth. The reason being is that the new trend for large companies is to gain as much growth even if it means losing money. No need to look far away, just take companies like Uber, Lyft, and others that went public for record numbers before they produced a single dollar in profits.
Although I find the topic extremely interesting, in this blog post I would like to reflect on the importance of the type of growth businesses should be after and the associated outcomes.
Paid growth is what I define as buying growth through increasing your paid marketing in return for getting more sales (revenue). This can come in the form of more sales and more profits, or more sales and little profits, or even more sales with no profits. The bottom line here is to grow your sales compared to previous periods, even if it means having less cash available as a result. Sustainable growth is what I define as having growth that is not dependent on increased or decreased paid advertising campaigns and that includes digital assets that will continue to drive visitors to your website that will eventually convert to sales on a sustainable or extended basis. This might sound a little confusing, but let’s look at some real life examples for more clarity.
Paid growth includes running sponsored ads on advertising platforms like Facebook, Google, Instagram, Snapchat, Tiktok, Youtube or any other platform online or offline that offers the opportunity to be sponsored. The idea is that you extend your “natural/organic” reach by reaching more people who might be interested in your products and pay for when they see your ads. Paid growth doesn’t give you any permanent exposure, and similar to renting your house, the minute you stop paying rent or your lease is over, you are out. You can spend millions of dollars on ads and be extremely successful, but the minute that you pause your ads, they will disappear like they never existed.
Sustainable growth is a method of building organic growth that is not dependent whether you are currently advertising your business or not. It includes organic digital assets such as your existing customer base, traffic coming from organic sources like search english (SEO), unpaid referrals from third party sources such as blogs, website recommendations, or even groups on Facebook or Whatsapp. This is any source of traffic that isn’t a result of a paid promotion that contributes towards sustainable growth.
Naturally, sustainable growth sounds like the obvious choice for healthy business growth, but is also the hardest type of growth to achieve. Take for example something like a Google search for a keyword like shoes. Being first on the Google search will obviously be the best thing that can happen for your business, but unless you’re Amazon or shoes.com, your chances of appearing first are close to zero. On the other hand, Google gives you the option of appearing first using their sponsored ads and paying for every click. Think of how tremendous the difference is between paying for a click or getting it for free. Every little detail has an impact along the way. What’s the value of each click? How much does it cost you? How much revenue are you able to pull from it? Once that click was free, who cares? It was free.
Both on direct search advertising platforms like Google or Bing, or discovery platforms like Facebook Or Youtube, every year there is a wave of businesses and industries that are able to achieve exponential growth using paid growth. We call it businesses that disrupt the market. They either introduce a product or service to the world, or reintroduce a revised concept of a product or service in a new shape or form. Because they are either first to market or dramatically lack competition, they are able to achieve massive value from every sponsored ad, thus being able to create massive growth using mostly paid growth. If you’re trying to think of companies that I am referring to in this example, then just think of the mattress in the box companies, and the subscription box websites. Think of the one product shops and try to think of all the viral ads for gadgets that you remember seeing. These are all companies that surged because of an opportunity in paid growth platforms and achieved on a massive scale.
Normally what happens is after these companies have achieved dramatic growth using paid ads is that they reach a peak, and from there, their performance slowly starts decreasing. This happens because they maxed out on reaching new users on the advertising platform for a cost that is worthy of delivering the ad, or their product is trending out.
What happens shortly after can be categorized into two scenarios: Scenario one is when the cost of advertising to users becomes unprofitable, as their ads are producing less revenue than before. The companies realize a little too late that they must find alternative traffic sources and bounce between different marketing channels and methods, hoping to find a worthy alternative source.
Their sales bounce up and down and their profits ultimately trend downwards. This can lead to an alarming cash flow call,l or as much as putting the entire business at risk. Scenario two is businesses that realize that the exponential growth that they are achieving is temporary, and instead of relying on it and shifting more budgets towards it, they use the growth as fuel to establish other alternative sustainable growth assets. They treat paid growth as natural oil that is scarce and they consider sustainable growth as green energy and try to get as much of it as possible. They understand that from the paid growth, most of what will be left is their customers and they invest heavily on their customer experience, understanding that the likelihood for a returning customer purchase is far greater than a new customer. They turn their customers into a digital asset that drives recurring revenue over time. They establish other organic assets such as memberships for recurring revenue, outreach programs to work with ambassadors, and invest heavily in connecting their brand to permanent traffic sources that, like water sprinklers, sprinkle little by little traffic to the website, establishing an ecosystem of organic traffic methods that will continuously drive people to their website. As their business grows, their goal is to have the ratio of paid vs sustainable growth as balanced as possible in an effort to ensure that when traffic becomes expensive or ineffective from paid traffic, sustainable growth will allow them to navigate smoothly until the next massive opportunity for growth or reach arises.
Obviously, it’s easier said than done. One of the greatest advantages of paid growth and the reason it’s so effective is because it works. Advertising giants invest a tremendous amount of resources into their systems to ensure they give as many resources and tools to advertisers to ensure that the ads are as effective as possible. With other forms of advertising, measuring and scaling is much more complex. Take something like Influencer marketing, for example. Everyone wants to invest in influencers because influencers can be, to some extent, a source of sustainable traffic growth as their posts remain live after the promotion took place. Yet, a small percentage of companies can accurately measure and predict these results. It’s easier to spend $2,000 on a Facebook or Google campaign and have a better idea of what to expect vs spending that same amount on SEO or on Influencer marketing and expecting the same rate of return in revenue.
Another obstacle to consider is that because many of these companies and niches have risen from the opportunity in paid advertising that would never be available, using other sources of traffic have no alternatives. Take for example a rending product such as a colorful fidget spinner. If you found a trending product and created a cool video ad to back up and decided to test paid ads with it, and quickly realized that you have a trending product, paid ads can give you the opportunity to scale in a way that other sources don’t. It’s hard to find examples of recent viral products’ video posts that reach massive scale solely through organic reach. Yet with paid advertising, the examples are endless. The point I am trying to make is that ideas or businesses that are born through the opportunity of paid reach or paid ads at a given time depend on it for its survival and existence, and might not have other suitable alternatives to support or replace the need for other sources of traffic.
If your business isn’t centered around a trending or seasonal product, and you are worried about your dependence on platforms like Google or Facebook for your business’ survival, then your most important goal should be to become independent before it’s too late. If it’s profitable for you to buy traffic from these platforms today, don’t expect it to be the same tomorrow. Find ways to diversify your traffic sources through places that feel native to your business. Aside from paid ads, where do people search or talk about your product? What other spaces can be relevant to your business and what can you do to leverage them? Establish and build digital assets by turning your customers and users to the most important priority in terms of monitizations. Diversify your traffic sources to as many sources as possible to decrease your reliance on one main platform.
Paid ads are a great way to effectively increase your product’s reach, but come with their risks. Focusing only on paid ads and not on other forms of sustainable growth may backfire once paid ads stop working for you. Use the growth from paid ads to leverage other avenues of sustainable growth such as building a loyal customer base or establishing other organic assets. Relying too heavily on paid ads and ignoring forms of sustainable growth is not a sustainable business plan.