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There are only 4 metrics that will impact your ROAS

"In my last email, I made a video explaining how only 4 metrics can impact your Ad Performance.

These are the only metrics to help you analyze whether you break even, scale or go bankrupt.

These will also determine your ROAS after achieving efficiency in your account.

The 4 metrics are:

• CPM - Cost Per 1000 Impressions (Meta)

• CTR - Click Through Rate (Meta)

• CVR - Conversion Rate (Website)

• AOV - Average Order Value (Website)

As you can see in the above screenshot,

Column B has a considerate situation with:

• CPM - $20

• CTR - 1.5%

• CVR - 2%

• AOV - $75

For every $1000 spent with the above metrics, you'd make a break-even ROAS of 1.13

Even if 1 of them gets expensive, the table turns around.

In Columns C, D, E & F are the respective scenarios and their effect on ROAS

If you want to turn around the situation and get better ROAS, you will need to improve each metric.

The respective scenarios are shown in columns H, I, J, K

That's how you achieve a staggering 4x ROAS for your business.

Here’s the loom video of me explaining this concept in detail

Here’s the Link to Ad-ROI Calculator.

IBRAHIM’S NUGGETS

Happy Monday!

One of the things I’ve been thinking about as it relates to 2024 bets in terms of where brands are placing advertising dollars is how advertising will shift as it relates to the upcoming US election. Depending on which numbers you go with (these are all projections since it’s so early in the year), political ad spending in the US is expected to reach somewhere between $10-16 billion in 2024.

Although the exact numbers are unknown, roughly 70% will go toward traditional media (think TV, print, radio, and OOH), and 30% will go toward digital (Meta, Google, YouTube, X, LinkedIn, TikTok, etc.).

No matter how you slice it, that’s a lot of new money flowing into the ad ecosystem this year. This means that there will be billions of dollars in new spend that e-commerce brands (and all brands) have to compete with in 2024. With CPMs and CACs already rising, I thought it would be valuable to write a short email sharing some of my thoughts about how brands should think about it below.

Personally, I think it’s important to:

• Know the key events and dates

• Know the historical data about CPMs and performance

• And know the best practices, channels, and strategies to deal with advertising in an election year

Key events and dates for 2024:

As far as the key events and dates that you should know, CNN has put together a full list here. I won’t bore you with recapping all of them since there are more than 50 important events related to both the presidential and non-presidential elections happening in 2024.

In my opinion, the big events and dates that are upcoming to know about are:

• July 15th to 18th — The Republican National Convention

• August 19th to 22nd — The Democratic National Convention

• September 16th — The first presidential debate

• September 25th — The vice presidential debate

• October 1st — The second presidential debate

• October 9th — The third presidential debate

• November 5th — Election day

All of these dates will correspond with heightened ad spend during the weeks leading up to these events with a massive amount of spending reserved for the final push in September and October all the way up to election day on November 5th.

As soon as the election takes place, there is also going to be a lot of additional media coverage, commentary, and other ads over the next few weeks in November that will likely compete with Cyber Month CPMs and CACs as we plan for BFCM 2024.

And as we all know, stock markets, consumer confidence and spending can also be dramatically impacted by the presidential election results. If the markets aren’t happy with the winner, it could be an interesting BFCM this year. If the markets are happy with the result, we could see record-high sales, even topping what we saw in 2023.

Historical data:

As far as historical data about what happens during election years, there are a lot of different reports. In general, I think brands should prepare for a 10-30% increase in CPMs across the entirety of their spending compared to last year. Obviously, this is highly dependent on your category, targeting, ad creative, etc., but that’s what I’ve seen.

Last election cycle, some brands saw that YouTube CPVs (cost per view) went from an average of $0.06 per view to $1.50 per view in key states around major events.

Facebook’s CPMs are also expected to rise between 15-30% during the months leading up to the election, and the same thing happens with TV. During election years, TV ad rates can increase by 10-20% and up to 50% in battleground states compared to non-election years.

Google Ads:

Google is another big beneficiary of election year ads—Google is actually the winner, along with Meta, of the election. New for this election cycle, you can use Google’s Transparency Reporting Tool to see who is spending and how much on politically related Google ads.

It’s pretty fascinating to filter the ads by spending (most to least) to learn about where candidates are spending their campaign money. You will quickly see who is spending or has spent millions of dollars on current and past political ads. You can also see how they are catering to different zip codes, different ethnicities and whether their creative leans more Gen Z or more elderly.

In general, I think brands can expect to see higher CPCs and lower CTRs across Google ads, especially for video/YouTube. In Q3, when the political ad spending reaches an all-time high for the year, CPMs will rise along with it.

The silver lining of election-year marketing:

Although the cost increases seem bad, the silver lining of election-year marketing for brands is that media engagement is typically at an all-time high. Consumers want to know what’s going on, so they are consuming more media than ever. Think back to the last election cycle; everyone was glued to their phones. Subscriptions for newspapers, publications, etc. were at an all-time high, which means more revenue for media companies, which means a lot more content that will be created.

Both traditional and digital media consumption (i.e., TV, streaming, radio, print, etc, and social) will likely be at an all-time high. With that in mind, if you can cut through the noise and the heightened emotion around elections, the consumer is going to be on their devices there waiting for you. It can be the biggest opportunity.

Strategies for 2024:

The strategies that I like to recommend to brands during election years are generally to diversify their spend and test into channels that don’t have highly variable CPMs.

For 2024, especially in Q3, it’s worth playing around with some of these channels:

• OOH (digital and physical billboards)

• Truckside billboards

• Influencer partnerships and promotions

• Direct mail prospecting

• Buying remnant TV ads

• Event sponsorships

• Podcast advertising on shows related to your demo

• Affiliate marketing

• Sponsored content with publishers

Typically, during the first 6 months, you’re testing channels. This year, focus on testing into some of these channels that have some more scale for you during the big sale periods. If nothing else, you’ll be able to help balance your MER (media efficiency ratio) a bit better with lower CPM channels.

I also think it’s a great time to double down on email and SMS. I think that you will be really happy that you built a strong email subscriber list in Q4 to combat any fluctuations in CPMs and CPAs. Although sending emails isn’t free, it’s dramatically less expensive than paying $10-20 CPMs on paid social to reach your target audience. You can test running ads and building funnels to drive growth in your email list and figure out how to back into a new customer CPA with some lead-gen style funnels.

I also think mobile apps could be valuable here for established brands. If you can get your top 10-25% of customers and fans to download your app, then you can send free push notifications to re-activate (as long as they don’t disable notifications) anytime. Those will all be free to message when every channel is at an all-time high in Q4.

Obviously, there’s no one-size-fits-all with regards to what to do during an election year. The goal as a brand founder or marketer is to know the trends and key dates and to plan accordingly. I hope that this was helpful, and I hope that it can help you position yourself and your brand for a successful 2024.

Alright folks, that’s it for today!

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Have any questions that you need help with?

Ask here - and look out for Fridays Issue where Ibrahim will answer them.