Monetizing Ads (Part 2 of Paid Ads)

Jul 21, 2024

Lecture on Monetizing Ads (Part 2 of Paid Ads)

Introduction

  • Core Four: Continuation from the last lecture on creating ads and targeting strategies.
  • Focus on monetizing ads.
  • Covered five main topics:
    1. What matters most
    2. How much to spend
    3. How to know how well you're doing
    4. How to fix ads
    5. Lessons learned over time

What Matters Most

  • Efficiency > Creativity in advertising.
  • All ads work; question is how well.
  • Measure of success is efficiency.
  • Clear return on paid ads: X dollars in, Y dollars out.
  • Finding and scaling ads that are good enough.
  • Benchmark: 3:1 ratio (Lifetime Customer Value to Customer Acquisition Cost).

How Much to Spend

  • Three phases of ad spending:
    1. Track Money
    2. Lose Money
    3. Print Money
  • Track Money: Essential for understanding ad performance.
  • Lose Money: Expect initial losses; focus on finding winning ads.
  • Print Money: Scale winning ads to maximize profit.
  • No fixed marketing budget; spend as much as profitable.

How to Know How Well You're Doing

  • Importance of gross profit over lifetime value.
  • Lifetime Gross Profit (LG): Key metric (example: $15 product, $10 gross profit per unit, 10 units = $100 LG).
  • Measure efficiency with LG to Customer Acquisition Cost (CAC) ratio.

    • 3:1 ratio is optimal.

  • Decrease CAC with better targeting and ad efficiency.
  • Increase LG by improving business model and upselling.

How to Fix Ads

  • Phases: Initial losses, finding a winner, scaling up.
  • Implement client-financed acquisition strategies:
    • Upsell products or services.
    • Aim to break even or profit within 30 days.
  • Focus on getting immediate returns to enable faster scaling.

Lessons Learned

  • Don’t confuse sales problems with advertising problems.
  • Best free content can become successful ads.
    • Encourage user-generated content (UGC) for organic reach and credibility.
  • Avoid saying “I’m not techy”; embrace learning new skills.

Paid Ads Checklist

  • Components of successful paid ad campaigns:
    1. Who: Identify your target audience.
    2. What: Determine your offer or lead magnet.
    3. Where: Choose the right platform.
    4. When: Advertise consistently.
    5. Why: Focus on engagement and lead generation.
    6. How: Craft callouts, value propositions, CTAs.
    7. How Much: Learn through tracking, losing, and then scaling.
    8. How Long: Be prepared for the long haul.

Conclusion

  • Running successful ad campaigns takes trial and error.
  • Paid ads, when done right, offer the highest and fastest returns.
  • Essential to have a long-term perspective on ROI.