Why 98% Of Advertisers Fail On Facebook Ads
Updated: Sep 3
Yes! Let’s say it out loud! Most advertisers FAIL! When I say advertisers fail, I mean that they are not able to achieve the goals they defined. Everywhere you look, you will see articles and posts about the challenges businesses face with Facebook ads. These articles report that the majority of businesses who use Facebook ads think they are not effective. Some estimate that up to 98% of businesses don’t see the success they wanted! It’s undeniable that advertising on Facebook is beyond challenging.
If you’ve read my previous posts, you know exactly what I think on the subject, so, what’s the news here? In every business, every industry and on every advertising platform, a small percentage of advertisers own the market and outperform their competition. The definition of competitive is, “as good as or better than others of a comparable nature.” That means that in most markets, for every ten advertisers, only one or two might be successful. If advertising online was easy, what would prevent everyone from becoming rich?
Advertising platforms work based on an auction bidding system, which means that the price of ads is determined by the amount of competition and the amount advertisers are willing to pay for an ad. Theoretically speaking, if 50% or even 20% of businesses in the same industry are doing well with their Facebook ads, prices would rise as they continue to increase their spending and growth.
Prices will continue to rise because of supply and demand and only a small percentage of those advertisers will be able to continue to pay the new advertising cost. These successful advertisers will push out the competition. Naturally, a small percentage of advertisers will dominate the market while the rest won’t be able to keep up. These unsuccessful advertisers will eventually conclude that they can’t use Facebook ads to create profitable advertising for their business.
THE DIFFERENCE BETWEEN SUCCESSFUL AND UNSUCCESSFUL ADVERTISERS
ADVERTISERS ARE NOT FAMILIAR WITH THEIR KPIS.
When advertisers are not aware of their key performance indicators, they are evaluating the wrong metrics. If your KPIs are sales and growth, then cost per visitor, or cost per engagement or any other similar metric shouldn’t be your main focus. Your goals should be aligned with your strategy as well as with your analyzation and optimization methods.
ADVERTISERS ARE CLUELESS WHEN IT COMES TO THEIR CUSTOMER’S REAL VALUE
If you don’t know exactly how much a customer is worth to your business, you don’t know how much you can pay to convert him. Advertisers tend to make uneducated guesses about how much they think a conversion should cost them to make a profit but don’t factor in the lifetime value of the customer.
For startups, this part is a challenge, but if you have been in business for a while and have had some returning customers, you can easily put the data together and put a price tag on the value of your average customer. This is where most advertisers fail. Because they don’t know how much a customer is worth to them, they can’t estimate how much can they pay to get one.
Successful advertisers understand the importance of lifetime value and use that data to budget and bid smarter in competitive markets. Being data-driven allows an advertiser to know exactly how to strategize his paid advertising campaigns and achieve growth and long-term profitability.
WHO OWNS THE MARKET RIGHT NOW?
Understand that competition on Facebook is cross-industry. Advertisers from completely different industries are competing on every auction for the same audience.
Remember that on Facebook, we target audiences based on interests and behaviors, not based on keywords or search terms. This means that a real estate company and a fashion company might compete for the same customer. The real estate company can outbid the fashion company on an auctions if they are willing to pay more for an impression. This impression might be worth more for them than for the fashion company at the given time.
The opposite can be said when it comes to shopping seasons, where people spend more on shopping and less on buying or renting real estate. During that time, the fashion company might raise their bids as they are likely to get better returns on their ads.
Successful advertisers understand the importance of timing and know how to structure and strategize their campaigns in different periods and different locations to get a better return on investment. For example, if an advertiser would know that people are more likely to shop on weekends, at the beginning of the month and holidays, he would shift the majority of his budgets towards these periods.
SUPPLY AND DEMAND
Economics 101 all over again? Yes! I know people like to think that this universal rule of business doesn’t apply to Facebook ads, but it does. If on a given day, you have X amount of advertisers and Y amount of buyers, when the Y value drops by 15% because of external factors, advertisers will see a dramatic decrease in performance. This will make some advertisers start lowering their spend while others might raise their spend because they can still pay more for conversions.
Eventually, the invisible hand will act to facilitate the cost of the market. Same goes when X value increases and more advertisers are competing for the same amount of buyers. Performance will suffer, some advertisers will drop and eventually the market will stabilize.
Successful advertisers understand this concept. They will shift their budgets in search of more cost-effective opportunities based on different locations and different timing, or sometimes, they’ll promote other products that have a stronger demand at the time.
PROMOTING THE WRONG GOALS.
Last but not least, promoting the wrong goals can sabotage your ad’s performance. Keep your eyes on the prize. If your goal is to get more customers, promote your true goals from day one. If your goal is to drive sales, your campaigns need to be oriented from start to finish towards driving sales.
Successful advertisers understand the importance of promoting their true goal from the start and structure their campaigns towards that goal. Even if you run a slow nurture funnel where promoting a purchase initially might be the wrong move, your campaigns can still be oriented towards your true goal across your entire funnel.
Like every other industry or platform, advertising on Facebook is extremely competitive. Reports across the web find that the vast majority of advertisers claim that they are not able to run effective ads on Facebook. Like every platform, a small percentage of advertisers in each industry own the market. Factors like identifying KPI’s, data-driven advertising, market ownership, supply and demand and promoting the right goals are what sets apart successful from unsuccessful advertisers.