Happy Sunday,

I hope that if you’re reading this, you’re sitting back on a couch, feet up, relaxed, and have a face balm in your hand to hydrate your skin while we talk shop. If you’ve ever thought to yourself, “We should run awareness ads on Facebook,” then today’s newsletter is made for you. I’m very passionate about today’s subject and will do my best to help you understand my thinking.

Before we get into today’s newsletter, a few announcements:

  • I’ll be speaking at MarketingLand in Austin in 2 weeks. See you there!
  • Sharma Brands is hiring a Director of Retention. If that’s you, apply here.
  • Moiz and I did an audience Q&A episode for Limited Supply. Tons of you loved it!
  • OpenStore is hosting OpenStore Live in Miami on 11/2 — a full day of networking & talks. Keith said it’s going to be amazing. Request an invite.
  • HOOX is hiring an account manager to join the team. Apply here.
  • If you plan to be at Advertising Week NY, come see my talk with Claudia Oshry (The Morning Toast) and Ben Soffer (Spritz Society).
  • I went on the Shopify podcast to talk about what to focus on, as an early-stage founder. Check it out!

Okay, let’s get into today’s newsletter…

In 2017, I joined a beverage company as their director of performance marketing, where it was my job to help them hit revenue goals for the DTC business. The challenge I was coming in to solve was they couldn’t acquire more than 100 customers per day without having enormous costs associated with customer acquisition. I clearly remember meeting a board member who said, “Don’t get too comfortable. This role doesn’t last long.” He was right, too.

So I decided to dive in and really focus on paid social as a way to begin turning the ship. I met with a marketing agency we worked with in New York City, and I was told they’re experts at their craft (they’ve since closed up shop). As I opened the ad account, I setup my Facebook view to understand the numbers. That view is to look at, in order:

  • Delivery
  • Ad Set Name
  • Bid strategy
  • Budget
  • Results
  • Reach
  • Impressions
  • Cost per result
  • Quality ranking
  • Engagement rate ranking
  • Conversion rate ranking
  • Amount spent
  • CPM (cost per 1,000 impressions)
  • Link clicks
  • CPC (All)
  • Content views
  • Website content views
  • Cost per content view
  • Adds to cart
  • Website adds to cart
  • Cost per add to cart
  • Checkouts Initiated
  • Website checkouts initiated
  • Cost per checkout initiated
  • Purchases
  • Cost per purchase

Some of the campaigns looked right… others had no numbers as I looked to the right. Why? Because there were campaigns set as Awareness and Website Clicks campaigns. In theory… these campaigns should drive, well, awareness and site traffic, right? Sure, but it’s deeper than that.

For the purpose of today’s email, I’m going to name the Facebook ads engine, “Ethan.” The best way to understand how Facebook ads work is by thinking of it as a person, not just a computer. Ethan is a bunch of software and code, but Ethan is so smart it’s better to think of him as someone who makes rapid decisions based on data rather than software, which usually has binary actions.

Ethan knows everything about its users. Whether you know it or not, and whether you think you’re doing something by removing Amazon Alexa from your home (you’re not), here are a few ways that Facebook gets its data on you:

User-Provided Data: The most basic layer is what users willingly offer up. Names, ages, locations, interests—you name it. Even the groups you join or pages you like contribute to your ad profile.

On-Platform Behavior: Facebook closely tracks how you interact on the platform. What you like, share, or even just spend time looking at all goes into understanding what might catch your eye in an ad.

Off-Platform Behavior: Ever heard of Facebook Pixel? Think of it like a security guard on websites… it knows who you are when you get there, what you’re doing on the site, what you’re clicking on, etc. It's a small piece of code that businesses can put on their websites. This pixel tracks user behavior on these external sites and feeds that info back to Facebook. So, if you're shopping for shoes on a different site, don't be surprised to see shoe ads on Facebook later.

Third-Party Data: Facebook partners with data brokers to get even more info. Things like your offline purchase history, property ownership, or even what kind of car you drive can be included. 

You, as an advertiser, can easily buy this data for yourself, too. I used to buy customer segments all the time. You know Experian? That company you use to check your credit? They make most of their money selling you in a group of anonymized users to people like me. I’d imagine about 30% of their revenue comes from this.

Device Information: Facebook also knows what kind of device you’re using, your internet speed, and sometimes even other apps you've installed. This helps in serving you ads that are tailored to your device's capabilities.

Location Data: If you have location services enabled, Facebook can serve you ads based on where you are, where you’ve been, or even where it thinks you’re going.

Social Connections: Your friends’ likes and interests can also influence what ads you see. The thinking is, if your friends like something, there’s a good chance you might too. This is why you and your friends see the same TikTok videos.

Lookalike/Similar Audiences: Advertisers can upload customer lists. Facebook will then try to match those to existing profiles and create "lookalike" audiences who are similar to those customers but haven't necessarily interacted with the brand yet.

Retargeting: If you interact with a certain ad or brand, you’re more likely to see their ads again in the future. This is a core part of retargeting strategies.

Machine Learning Algorithms: On top of all this raw data, Facebook uses advanced algorithms to make sense of it. These algorithms predict user behavior, making educated guesses about what kind of ads are most likely to engage you.

By using all this data, collectively, Ethan can decide which of its users are actually going to buy things from advertisers, which users will browse a site and not buy, which will add to cart and then bail, which will just click a link and then bounce, and which people won’t click anything and don’t care. Of course, all this data changes in real-time, but it’s not far from what was shown in The Social Dilemma.

If you’re still following, you can now start to understand that Ethan knows, on a scale, its most valuable users to advertisers and it’s least valuable users to advertisers. For example, those who are likely to purchase products are purposely shown more ads, with advertisers looking for a purchase intent. Those who are likely to keep scrolling without making purchases but can be counted as an “impression” will only see ads for advertisers running Awareness campaigns.

So when the company I worked for was running website clicks campaigns and awareness campaigns, those ads were not only a waste of money, but we were just targeting unqualified prospects. The argument I often hear is, “The CPMs are so much lower when we run awareness.” Or, “But this is top-of-funnel marketing!” 

Yes, both of those things are true, but you’re targeting an unqualified audience. If they were qualified, the cost of landing a site visitor in an awareness campaign wouldn’t cost 6-7x as much. I’ll give you a real-world example.

At Sharma Brands, 2 years ago, we worked with one of the largest alcohol companies to bring one of their legacy brands from Europe to the US. Part of the campaign was to drive sampling for customers. We setup a campaign with Drizly — give us your email & number, we’ll teach you about the brand, and we’ll give you a $10 off coupon to get it delivered to your door.

The agency that ran the campaign is one of the largest global media agencies in the world. We told them we needed to run the campaign as a conversions-based campaign, where the conversion event is defined as successfully acquiring a user’s email and phone number. We wanted to tell Ethan, “Hey Ethan, when you run ads, ONLY look for and optimize toward people who are likely to give us their email and phone number that fit within this audience group.” The result for this type of campaign should be no more than $5 to $10 per email and number submission. 

Instead of running it this way, the agency ran it as an Awareness campaign because the CPMs were lower. Instead of $25 CPMs, they were getting $1 CPMs. The problem was that, again, the quality of these users was not what we wanted, and they were clearly unqualified. With the Awareness campaign, 1 lead costs anywhere from $100 to $300 per email and phone number submission. However, according to the agency, because the CPMs were lower and they were reaching people for cheap, they felt it was worth it to run Awareness campaigns. Well, if they were the right people, wouldn’t there be people who would click through and submit their information? Or at least… click the ad? Or if not that, then at least engage with the ad itself? None of that was there, but somehow, this was still the way the agency wanted to proceed.

I tell you this story to help you understand that unless you’re a brand like Kate Spade or Crocs, you don’t need to spend your dollars on Awareness or Website Clicks campaigns. Everything should be a conversion campaign. What changes is the Conversion Event that you optimize toward. If you’re looking for purchases, you optimize for Purchases. If you’re looking to fill your funnel, you optimize for Add To Cart. If you’re looking for site traffic, you optimize for View Content. If you’re looking to get leads, you create a custom Conversion Event with the Events Setup Tool and make that “Submit” button the conversion event. If you’re looking to drive awareness for your product at Target, you create a Conversion Event for the button people click on the store locator once they put their zip code in.

Running campaigns this way makes sure that you’re getting high-quality, qualified prospects to your site. Large companies have goals like “Impressions” or “People Reached” they need to hit, but they’re also household brand names doing over $1B in revenue. If you’re not doing $1B in revenue, you don’t need to run Awareness campaigns. 

If you want to prove that your awareness is going up, even with conversion campaigns, then you can use Tracksuit to measure your brand penetration and awareness for cheap. On the flip side, Tracksuit will show you how building brand also lowers your overall cost of customer acquisition.

So what’s the punchline? Figure out your conversion events that align with what you need to accomplish, and run a conversion campaign optimizing for that. Don’t let me catch you running an awareness campaign because you think you’re reaching more of the right people.

Ok, I’m done ranting. Now, on to some fun stuff…

Vendor of the Week:

Ditto — The secret channel brands use to off-load inventory at a discount without hurting their brand.

Have you ever been in a situation where you have product that’s about to expire, you’ve got too much product from a past season/collection, or you just need to get rid of some product before your new packaging or formulation comes out? Let me tell you how companies like Fulton, MAC Cosmetics, Christian Dior, Hilma, and others do it… they use an app called Ditto.

Ditto allows you to immediately offload inventory to an audience of buyers on their iPhone app at 40% to 60% off. Because it’s an iPhone app, only Ditto users will see the products at a discount; it doesn’t get scraped for pricing algorithms or SEO.

The Ditto team put together a deck you can scan in 30 seconds to see how their platform works, what their revenue model is, what you get from it, and how to get set up. Click here to read that deck.

I just bought something from the app, too.

LP of the Week:

This week’s LP of the Week shows how amazing our developers are at building pages that have a true north star of optimizing pages for conversion and consumer psychology.

CLICK HERE TO SEE THE LANDING PAGE!

The landing page features a BYOB section that pulls products and inventory dynamically from Shopify, along with dynamic pricing based on the discount. Here, it’s 10% off when you add 2 or more items, so we make that really obvious to the customer.

There are less than a handful of agencies that build landing pages as well as HOOX, especially when it comes to strategy, research, user experience design, copywriting, UI design and development. That BYOB section, for example, is fully custom-built. If we think it’ll drive conversion, we’ll build anything necessary.

Don’t take chances with driving traffic to unoptimized website pages that YOU think are good enough. Book a call with HOOX, let us talk about your current funnel, and share examples of landing pages that would work well for your brand. Click here to book that call. It’s the last week of our Black Friday sale.

That's all for this week

That’s all for this Sunday. If you have tomorrow off, I hope you enjoy the day. Get some sun, take some time for yourself, read a book, and clear that inbox of yours.

Tonight is Sunday night, so you know the drill — get 9 hours of sleep tonight, hydrate yourself, and have an incredible upcoming week. I’ll see you next Sunday. Same time, same place.