Many businesses are now heavily reliant on paid marketing through platforms like Google and Facebook to drive revenue growth.
And in principle there’s nothing wrong with that, the strategy clearly works. Paid marketing is great because it’s reliable, predictable, and easily scalable.
As long as you’ve done your due diligence to ensure the lifetime value (LTV) of your acquired customers exceeds your cost per acquisition (CPA), you’re set. To increase revenue and profit all you need to do is bump up your ad spend on your top performing campaigns.
So what’s the problem? Why not continue pouring all your money into a channel that’s delivering consistent results?
In short, because it’s risky. For several reasons.
In this article, we’ll explore what those risks are, how they’ve affected businesses in the past, why risk exposure continues to grow, and how you can diversify your paid marketing strategy to protect revenue growth against unexpected setbacks.
Understanding The Risks
Relying on paid marketing as the primary driver of revenue growth comes with a significant limitation. Namely, lack of ownership. When you don’t own the platform you’re advertising on, the data stored on it, or its ad algorithm, it exposes your business to two different risks:
1. Financial Risk
If the platform you’re advertising on decides to make changes to its policies or algorithm, it can instantly make your life much harder. All of a sudden your conversion rates can drop and eat into your profit margin, or wipe it out entirely. And there’s no shortage of real-world examples of this happening in the past (more on that later).
The financial risk is greatest when you’re overly-dependent on one channel, e.g. Google PPC, to drive results. Putting all your eggs in one basket is never a good idea. Even though your campaigns may have performed well for years, that doesn’t guarantee they will continue to do so indefinitely. You’re always subject to the whims of the platform you’re using. And nobody knows for certain what they’ll decide to do in the future.
2. Ethical Risk
This has become more apparent in recent years, largely due to a barrage of negative press about Facebook / Meta. The issue here is the ad network you’re using may be perceived to be operating in an unethical way with regard to the collection, distribution, and sale of data. This means if the ad network is prosecuted or put under regulatory scrutiny, your campaigns and the data you depend on to drive results can be directly affected. In effect, this ties the ethical risk back to the financial risk.
Furthermore as a marketer, you’re likely conscious of what you’re supporting with your ad spend. So it doesn’t feel great when Facebook or Google crop up in the news over privacy violations and shady practices. Businesses are understandably frustrated when their brand and reputation are tarnished by association. But the reality of the Facebook / Google digital advertising duopoly means almost all companies are exposed to this ethical risk by proxy.
Are You Too Dependent On One Paid Channel?
If you’ve worked hard at testing, refining, and optimizing ROI on a single platform, it’s easy to understand a reluctance to branch out and diversify. It’s a time-consuming process. And complacency is tempting.
But the right time to innovate is precisely when things are going well. Shane Phair, SVP of Marketing at Campaign Monitor outlined why in an interview detailing the biggest paid marketing mistake he made in the past.
Like many other marketers, Shane was overly reliant on one paid channel. And when an algorithm change crashed his returns, he and his team were left scrambling for alternatives.
“Marketers often forget that things will change in the future, and if we aren’t preparing for this inevitability – regardless of how far in the future it might be – there could be trouble. If you don’t already have plans in place to ramp up other channels, you’ll see a dip in your results, and that’s exactly what happened to us.”
After diversifying their efforts, it still took an entire quarter for that adjustment to translate into financial results. If Shane’s team had put a multichannel contingency plan in place, they could have recovered the lost revenue in days and weeks rather than months.
You shouldn’t wait until you actually start losing revenue before you attempt to diversify your paid marketing strategy. Because by then, it’s already too late. As Shane stated in the interview:
“Just because something’s working really well doesn’t mean that something else couldn’t work really well, too.”
3 Examples Of Revenue-Dropping Platform Changes
Speaking of algorithm and policy changes, here are three notable examples that caused headaches (and probably quite a few sleepless nights) for marketers all over the world.
1. Google Removes All Right-Hand Side Ads on SERPs
Remember when ads used to display on the right-hand side of Google results pages? Google removed them in 2016 in an effort to create a similar user experience across mobile and desktop. These ads were usually cheaper to bid on compared to those that display at the top of the main search results.
This had two significant knock-on effects. For larger businesses, they saw their cost per click increase overnight, due to the reduction in available ad space. And for smaller businesses, many struggled to retain any visibility at all. Those that relied on cost-effective placement on the right-hand side were pushed to the very bottom of the page (if they even managed to win the bid in the first place).
2. Targeting Limitation & Special Ad Categories on Meta / Facebook
Following years of growing pressure, in 2021 Meta / Facebook changed its ad targeting options meaning marketers could no longer direct ads to users based on health, race, politics, religion, or sexual orientation. The removal of this kind of topic targeting, while welcomed by most, instantly made it more difficult for some businesses to reach relevant audiences. Those without a backup plan were placed in a very precarious financial position
Since then Meta has continued to expand its list of “special categories” users can choose to see fewer ads from, including things like gambling and weight loss. Further changes to Meta’s ad targeting policy are practically inevitable at this point due to the intense ethical scrutiny the company is under (more below).
3. Google Suspends All PPC Campaigns For Addiction Treatment
In 2017, Google banned all addiction treatment centers from using AdWords. The prohibition came after The Verge released a lengthy expose on rehab centers that took advantage of Google’s advertising space to target vulnerable addicts. But the blanket global action was devastating to the many legitimate treatment centers around the world. A sudden reduction in new patient numbers meant many were at risk of bankruptcy.
Google reversed the ban in 2018, with the introduction of tougher industry-specific rules. For example, treatment providers now have to pass criminal background checks, show that they’re licensed to treat people for substance abuse, and prove that they carry valid insurance. While these changes were undoubtedly a good thing, the prolonged global ban brought the issues created by lack of ownership over ad networks into sharp focus.
Ethical Risk Is Increasing Due To Shifting Public Opinion
In September 2020, Netflix released a docudrama called The Social Dilemma. Featuring interviews with former Google and Facebook execs, the film criticizes Big Tech’s role in taboo topics such as mental health, surveillance capitalism, and data privacy.
Within three weeks of its release, it shot to the top of the platform’s “Top 10 Movies” list and gained widespread media attention. Its success is reflective of a growing public suspicion and distrust of Big Tech. But what does that mean for marketers?
First and foremost, it means more government regulation is virtually inevitable. As public opinion on Big Tech continues to skew in a more negative direction, the ethical risk businesses and advertisers are exposed to (again, by proxy) grows.
A 2021 Gallup poll found that Americans’ view of technology companies has worsened significantly when compared against data from 2019. Those with negative views of Big Tech increased from 33% to 45%. And the proportion with a very negative view more than doubled, from 10% to 22%.
Even more importantly for marketers, the percentage of Americans who think the government should increase its regulation of technology firms rose from 48% to 57%.
We’re fast approaching a societal tipping point in relation to this issue. Politicians now understand they have an opportunity to win votes by taking a stand against Big Tech. And nobody knows what the eventual regulatory outcome will be. But the businesses with a more diverse paid marketing strategy are best positioned to navigate the coming changes.
Privacy-First Already Demands More Strategic Marketing
While further regulation is likely coming, a big shift in the digital landscape is already underway. Namely, the move to a privacy-first web, a transition undoubtedly motivated by the sea-change in public opinion.
Apple’s iOS privacy clampdown and Google’s new privacy-focused roadmap means third-party cookies have a limited shelf-life. Soon, people won’t be relentlessly tracked across the web like they are today. And marketers have to adapt, whether they like it or not.
When third-party cookies are phased out over the coming months, users will still expect a great (i.e. relevant and helpful) online experience. And to provide that, marketers need to move from third-party to first party data.
We explored the implications of the coming privacy-driven future in a recent webinar with the marketing agency Mediaworks. In essence, the changes are an opportunity rather than a challenge. During the discussion, our CMO Pete Rawlinson said:
“Relying on third-party data resulted in a lack of focus on the customer. The move towards first-party data gives marketers new ways to really understand their customers and what they want.”
It’s important to note that as this shift is happening gradually, it doesn’t pose the same kind of financial risk as the sudden platform or algorithm changes described above. Some businesses will still be impacted, but they’ve had fair warning in this case.
We outlined the full timeline to a cookieless web in our Guide To Advertising in a Privacy-First World. If you’re interested in learning more, you can download the full version here.
Regardless of how much time marketers are given to adapt to platform changes, diversifying your paid marketing strategy remains a wise move in the face of growing risk and uncertainty.
How To Minimize Risk Through Diversification
You’ll never be able to eliminate all risk from your paid marketing strategy. Lack of ownership over ad platforms will always be a problem.
Facebook and Google account for a whopping 63% of all online ad spend. So if you opt not to use either of them, it’s virtually impossible to reach the right audiences at scale. But heavily favoring one over the other doesn’t make sense either, for the reasons outlined above.
In addition, a reluctance to innovate and try out new paid channels increases your risk exposure and means you’re missing out on potential extra revenue growth. So where should you start when it comes to diversifying your paid channels?
Firstly, consider where your audience is. Chances are, you’ve probably got a set of clearly defined personas you want to reach. But are you choosing paid channels that actually align with these? Or are you continuing to pump all your spend into AdWords and Ads Manager because that’s “how you’ve always done it”?
If you haven’t already it’s well worth looking into the platforms below. Obviously this isn’t an exhaustive list, but it’s a good starting point:
LinkedIn is the right platform to use if you want to target people based on their industry-specific variables such as job title, seniority, company name, degree type, and technical skillset. A study conducted by HubSpot found that on average, LinkedIn Ads convert users to leads at a rate of 6.1%. That compares to the 2.5% average conversion rate from Google Search Ads.
With 90% of TikTok users opening the app on a daily basis and the majority playing videos with sound on, your ads will have maximum impact on the user. And no, it’s not just for teenagers. The majority of users (35%) are in the 19-29 age bracket.
Snapchat has 293 million daily active users and its core demographic is primarily millennials and gen-z. The Snap Pixel, similar to the Facebook pixel, lets you track a user’s journey to measure campaign success, with the ability to re-engage with the most prospective users.
The image-driven search engine has 400 million monthly users all looking for inspiration. The demographic skews slightly older with 33% of “pinners” over 40 years old. And According to ads.pinterest.com, 83% of weekly “pinners” have made a purchase based on branded pins.
Analyze On One, Optimize On All
Branching into a new channel always takes some getting used to at first. You need to get to grips with the targeting options, ad formats, tracking metrics, and more.
But the good news is, you don’t have to start from scratch when it comes to optimizing campaign performance. Lunio’s proactive exclusion functionality allows you to analyze traffic on the channel you’re spending the most on, and apply the insights gained to all other channels.
For example, if you’re using Lunio to protect your Google Search Ads from invalid clicks and traffic (i.e. bots, spammers, and fraudsters), we’ll generate extensive data and lists of bad IP addresses detailing exactly who you don’t want to see your ads.
We can then use that data to build custom invalid audiences and apply them to any new channel you want to try out. This not only guarantees that all your clicks are genuine, but it also helps ensure your new campaigns are targeted correctly from the get go.
Furthermore, your targeting accuracy actually increases the more channels and ad networks you use. For example, we can detect an invalid click on Facebook and proactively block that user from your LinkedIn, TikTok, and Snapchat campaigns.
Ready to diversify and de-risk your paid marketing strategy?