Lecture on Paid Advertising (Part 2)

Introduction

• Last lecture covered the core elements of ad creation and targeting.
• This lecture focuses on monetizing ads, the "money stuff."
• Key topics: What matters most, how much to spend, evaluating performance, fixing underperforming ads, and lessons learned.

What Matters Most

• Efficiency over Creativity:
  • All ads work; focus on how well they work.
  • If advertising increases awareness, profit likelihood increases.
  • Measure by return on investment (ROI).
  • For paid ads: X dollars in, Y dollars out.
  • Goal: Scale "good enough" ads massively.
  • Benchmark: Aim for a 3:1 ratio (lifetime customer profit vs. acquisition cost).

How Much to Spend (Three Stages)

• Tracking Money:
  • Essential to have tracking in place.
  • Tracking helps identify ROI-positive ads to scale.
• Losing Money:
  • Expect to lose money initially before seeing profits.
  • Success rate: Small percentage of ads will be profitable.
• Printing Money:
  • Once a profitable ad is identified, scale it to maximize ROI.

Evaluating Performance

• Gross Profit Calculation:
  • Example: $15 product price, $5 cost, $10 gross profit.
  • Lifetime gross profit (LtGP) = Gross profit per unit × Number of units sold.
• Key Metrics:
  • Compare LtGP with Customer Acquisition Cost (CAC).
  • LtGP/CAC > 3 is a scalable, profitable model.
• Improving Metrics:
  • Decrease CAC: Better ad targeting, improved sales processes.
  • Increase LtGP: Provide more value per customer.

Fixing Ads

• Break-Even Analysis:
  • Example model to break even faster: Upselling additional services/products.
  • Aim to achieve Client-Financed Acquisition: break even within the first 30 days.
  • Allows continuous reinvestment and rapid scaling.

Lessons Learned

• Sales vs. Advertising Problems:
  • Properly identify if issues are due to advertising or poor sales processes.
• Best Content for Ads:
  • Use top-performing free content or user-generated content for ads.
• Mindset Towards Skills:
  • Avoid self-limiting beliefs about technical skills.
  • Overcome tech aversion for better control over advertising.
• Checklist for Paid Ads:
  • Who: Identify the audience.
  • What: Specify your offer/lead magnet.
  • Where: Choose platforms.
  • When: Run ads consistently.
  • Why: Get engaged leads.
  • How: Implement the 3 W's (value, call to action).
  • Budget: Set a learning budget.
  • Duration: Commit to the long-term learning process.

Conclusion

• This concludes the four core methods of advertising.
• Next steps will be about amplifying these methods.