For the first time since 2019, we turned off Facebook and Instagram ads for a client. We had been spending anywhere from $500 to $2000 per day - PROFITABLY - on Facebook ads.
This client makes a super cool music tech product and sells direct-to-consumer through their ecommerce website. They’ve relied on Facebook and Instagram ads to drive sales for the last 3 years to acquire customers profitably.
But after 6 straight months of losing money, we had to turn off Facebook ads. The client could not afford to lose money like that any longer.
Decline in revenue as Facebook ad performance dropped.
And yes, we were using every move in the advanced Facebook ads playbook, which we developed ourselves by spending millions of dollars profitably on FB ads for the last 5 years.
Since Facebook ads were driving most of the sales for this client, this was a huge problem for their business.
Similarly, with another ecommerce company that makes sustainable household goods, we used to be able to spend $5000 per day profitably on Facebook ads. Now we’re lucky if we can spend $500 per day at break even.
These are two examples of a major shift that’s happened in the digital marketing industry. And it’s impacting many, many start-ups, small businesses and enterprise companies.
The shift is Facebook and Insta ads are not getting the same ROAS (or return on ad spend) that they used to. They don’t perform as well anymore.
Size of company does not matter. Everyone is affected. No business is immune.
So the question is WHY?
The biggest reason, as you may know, is Apple’s iOS 14 update.
With iOS 14.5, iPhone users now decide whether they want to opt-in to being tracked by apps like Facebook and Instagram or not. And of course everyone chooses to not be tracked.
96% of people opt OUT of app tracking. Obviously.
What this means is Facebook has WAY less data to optimize its ad targeting than it used to.
This is great for our privacy, and as a father with 2 young kids, I’m happy about more online privacy.
But as a performance marketer who’s mission is to get results for our clients, I know first-hand this is a MAJOR problem for entrepreneurs who have built their companies using Facebook’s AI-driven ad platform to acquire customers profitably.
Here’s a look at the same graph from above showing when iOS 14.5 was released:
Before iOS 14.5 was released, Facebook's artificial intelligence was able to pinpoint customers for small businesses, start-ups and enterprise companies in a super efficient way by using Lookalike audiences.
In other words, by finding people on Facebook and Insta who look like your past and present customers. The Lookalikes may visit the same websites, have made similar purchases online, read the same blogs, use the same apps, follow the same people on Instagram, like the same posts, etc etc.
Targeting lookalike audiences (people who look like your customers) was extremely powerful.
What this means is before iOS 14 the cost of acquiring customers via Facebook ads was not just affordable, but PROFITABLE for start-ups, SMBs, and Enterprises.
As an example, Tanjō Digital targets anywhere from 2x - 4x return on ad spend (ROAS) for our clients. Meaning, for every $1,000 our clients spend on ads, they make $2,000 to $4,000 in revenue.
The ROAS target is different for each client because it’s based on their margins and what ROAS we need to hit so each client is selling profitably.
Since iOS 14.5 was released in April 2021, this is no longer the case. Facebook and Insta ads just don’t perform as well as they used to. They no longer give that ROAS of 2x - 4x. In the past we saw ROAS as high as 15x!
This is not just happening to our clients. It’s an industry-wide issue reaching across the globe, that’s affecting all companies who advertise on Facebook.
So what can we do?
What can start-ups, small businesses and any company that relied on Facebook ads do about it?
The answer is focus on your organic traffic.
If paid traffic is not ROI positive anymore, pause it and focus on growing your organic traffic.
This can be from organic social or organic search, aka SEO. In our experience SEO (Search Engine Optimization) does a better job of driving conversions and sales than organic social, but it’s worth testing both.
We are seeing GREAT results for our clients who are now focused on SEO.
For example, with this news & information client, we saw a 50% increase in SEO traffic and leads 2 months after we started. This is unusually fast - it often takes 3-6 months to see results from SEO work.
50% increase in SEO traffic and leads 2 months after starting the SEO work.
Why?
SEO offers “free traffic” from people searching for your product or service on Google and other search engines. People who are already searching for your product/service are your most qualified traffic.
I put “free” in quotes because there is the cost of your time and working with an SEO agency or expert to get you started. But once your SEO is up and running, there is no media spend.
The 3 beauties of SEO:
Traffic is free, which means your cost per acquisition is $0. Yes, a $0 CPA. You keep 100% of your margin.
It’s an evergreen source of traffic - meaning you will get a predictable amount of traffic, leads and sales every month. It will follow the seasonality of your business. Again, without spending money on ads.
SEO traffic has a much higher conversion rate compared with paid traffic. SEO’s conversion rate is often 9-10% while paid traffic’s CR is 3%. With SEO, you’re attracting the most qualified traffic.
Sounds good, right?
Want to find out if supercharging your SEO could work for your business?
Jump on a free and quick discovery call with us! Just click here and grab a time that works for you.
