Mar 6, 2024
READ TIME: 5 MINUTES
Renaissance man 👋 ,
This week's deep dive is a little spicy.
Answer me a quick question: What’s more important for a dropshipping entrepreneur than understanding the ins and outs of their money printer (FB Ads)?
Nothing,
When I first started learning about FB ads, I would have done anything for someone to sit me down and show me exactly all the ins & outs.
I’ve learned it the hard way, within my journey I’ve spent over multiple millions on FB ads and I could achieve way better results by understanding how FB ads actually work…
TODAY, AT A GLANCE
Most of you are familiar with KPIs,
and you can look at ads to see how profitable they are,
but it seems that the knowledge rarely goes beyond that.
Today, I want you to understand and speak the language of Facebook.
THE TIGHT ROPE WALKER ANALOGY
One of the best ways I’ve found for teaching purposes is through analogies and parables. This is the best and easiest way to understand today’s issue.
Optimization really only happens at three levels.
The add account level
The campaign level
The ad set level
(Contrary to popular beliefs, the pixel has very little to do with optimization)
Let’s say you launch the same product, the same creative, the same copy, the same budgets, everything is the same. What I’ll find is that some of the ad sets will drastically outperform others.
What is the reason for this?
Well, that’s because each ad set has been optimized to a different degree or has a different skill level.
RULE #1 - STABILITY
The more stable the product, the better your creative, the better the pricing, just the better the product in general.
The easier it will be for the ad set to walk over that tightrope.
Each ad set will walk on this rope with a different skill level:
RULE #2 - SKILLS
We are born differently genetically with different skills, the same applies for your ad sets. Your budget is the speed at which you’re asking the ad set to walk on the tightrope.
The more talented the ad set, the faster he can walk on that rope without falling off, which means being unprofitable.
THE STABILITY WALK ROPE
You might ask yourself, how do we figure the stability out?
Well, it’s by communicating with Facebook, raising these budgets, and then interpreting the data to see how the ad sets are responding.
You’ll find that some ad sets will respond well, and others will respond negatively to budget increases
The ad sets that fall off, is either due the lack of the skill of the ad set, or due the instability of the rope.
The better the product, the more ad sets walking successfully along this rope—and the more ad sets you’re going to have profitable.
For the ones falling off the rope:
We correct this, bringing the budgets down.
THE SKILFUL WALK ROPE
There is also this other angle: If you have some very skilled, super optimized ad sets that are absolutely crushing it and you don’t push them hard enough, they’ll eventually fall off as well.
PARABLE - SCHOOL STUDENT
Let’s say you’re a school student, and your teacher is not challenging you; what will happen? You become disinterested and start getting bad grades. Not because you’re not smart or talented but because you weren’t challenged appropriately
It’s your job to crack the whip, to push them to see how fast they can walk on this rope without falling off.
This is a trait of a seasoned marketer: the ability to know how hard you can push an ad before it becomes unprofitable.
For the ones falling off the rope:
You want to find the sweet spot.
THE BOULDER ANALOGY
As the algorithm changes, it requires some extra language to understand.
What we’re finding is that Facebook's algorithm has evolved to optimize for the product itself rather than individually between campaigns or ad sets.
You’ll see when you launch a bunch of ads or duplicate the ad sets to a higher budget, the old ones will die, even though it was performing very well before.
In this analogy, the product is the boulder, and the boulder is the main focus. It’s no longer the ad set or campaign optimization; our focus is purely on the product itself.
THE MAIN PRINCIPLE IN THIS ANALOGY:
The focus is on momentum. Momentum is really everything when it comes to ads nowadays.
To get the boulder to roll, we have to throw money at it.
THE MAIN GOAL IN THIS ANALOGY:
If our goal is to generate momentum with a boulder, what would you like the boulder to look like?
You’d probably want it to be as round, smooth as possible, and not curved and jagged with chunks missing.
THE MAIN OUTCOME IN THIS ANALOGY:
The smoother the boulder, the more money you throw at it, the more momentum you’re going to be able to generate
However….
Unfortunately, when we’re doing product research, we are kind of doing it in the dark and we can not really figure out how smooth the boulder is.
Therefore we can only ask the boulder questions like:
“How much do you cost?”
“How much can I sell you for?”
“How good is the photography?”
“How good are the videos that are available?”
“How many variants do you have?”
“How big is the potential of the audience?”
Of course, none of these answers guarantees that the boulder is going to be smooth, but they do increase the odds.
JAGGED BOULDER
A very common thing that we see, is that people, when testing products, is they launch ads for their product, they’ll get a few easy sales on day one, and then it just dies.
This is what we call a Jagged boulder
SMOOTH BOULDER
When having a winning product, we exert a little bit of force, and that thing just keeps making us money.
This is what we call a Smooth boulder
Keep in mind that there will be obstacles:
Variables that we can’t really predict or control
—These variables will chip away your boulders, and that’s why winners don’t really last forever, unless you have a method of repairing your boulder.
OBSTACLE 1
Let’s say facebook runs a massive systemwide update and tweaks their algorithm, and all of your ads die (This seem to happen once a year). This would be a catastrophic event where your boulder just smashes and has to be completely replaced or repaired.
OBSTACLE 2
Let’s say your Facebook page, get’s a low feedback score, or you have a failed payment on your add account, and your ads stop for a few hours before you replace the page or fixed the payment billing.
Things like these are interruptions in the path; they’re an obstacle that causes damage, which will lead to decreased momentum to generate the same amount of force that you are using with the same budget before.
Over time, your boulder will wear down the pieces, the boulder will crack and not be smooth anymore, the boulder start to die gradually, and this is the life cycle of pretty much any product.
We can extend the lifespan with:
Regularly introduce new creatives.
THE BOULDER ANALOGY STRATEGY
As most of the products are moving on momentum, we need to push this boulder to the maximum momentum.
To do this:
I will scale winning (strong) products very aggressively.
Let’s say you’re running profitable $60 ad sets, what I’ll do:
Launch extra ad sets with $500 budgets
run them for 24 hours
In this strategy:
You’re shooting for 5% margins
You want to be barely profitable
You want to be super aggressive
You want to get as much spin on the boulder as you can.
The next day, you’re going to scale back; what will happen?
You’ll find out that your margins stretch way out, along the 20,30% target margins.
You’ll be able to milk that momentum for 3 or 4 days.
You’ll find out that momentum has now produced a greater net profit for you.
This is a way better strategy, then just be chilling at the earlier $60 budgets. You’re communicating with Facebook in order to get a desired result.
Again, you should understand what Facebook is telling us, how to speak it, how to understand the algorithm, and so many of you guys are wasting time flipping jagged boulders over and over again.
I want to invite you to stop doing that; when you find a smooth boulder, you will know it will roll, and it will roll easily.
Stop beating the dead horse.
