The REAL Reason You Can't Scale Facebook Ads

Summary

This video script outlines a strategy for scaling Facebook ad campaigns profitably, highlighting the importance of creating a high volume of ads to find the most effective ones. The speaker, with experience investing over $50 million in ads, emphasizes the need for exceptional ad quality to reach larger audiences without losing profitability. They also stress the significance of understanding and improving customer lifetime value to afford higher customer acquisition costs, which is crucial for scaling ads effectively.

Takeaways

• 📈 The speaker emphasizes the importance of scaling Facebook ad campaigns profitably, highlighting a strategy that increased revenue from $97,000 to $357,000 with a better return on ad spend (XRS).
• 🚀 The speaker has extensive experience, having spent over $50 million on Facebook ads, generating more than $200 million in revenue, which underscores the credibility of the advice given.
• 🔍 Two common mistakes that hinder Facebook advertisers from scaling effectively are identified: lack of volume in ad creation and insufficient customer lifetime value.
• 📊 The concept of 'volume' is crucial; top advertisers create many ads (50-30+ per week) to increase the chances of finding highly effective ads that resonate with different audience segments.
• 🔑 The speaker explains that as ads are scaled to larger audiences, they must remain compelling enough to convert less responsive viewers, which requires exceptional ad quality.
• 🎯 The necessity of creating a high volume of ads is underscored by the example that to find a '1 in 100' ad that significantly boosts scalability, one might need to create and test 100 ads.
• 💡 The speaker suggests that by creating a large number of ads, advertisers will inevitably improve their skills and stumble upon highly effective ads through trial and error.
• 💰 The discussion points out the importance of understanding and increasing customer lifetime value to afford higher customer acquisition costs, which is key to scaling ads profitably.
• 📉 The script advises against focusing solely on reducing cost per acquisition, instead advocating for strategies that increase the overall value customers bring to the business.
• 📝 The speaker provides actionable advice, including a video on calculating and improving lifetime customer value, which is essential for Facebook advertisers looking to scale effectively.

Q & A

What is the significance of scaling Facebook ad campaigns profitably?

Scaling Facebook ad campaigns profitably is crucial because it allows businesses to grow their revenue while maintaining a cost-effective customer acquisition strategy. It ensures that the cost per customer acquisition does not exceed the revenue generated by those customers, thus preserving profitability.

What are the two common mistakes that Facebook advertisers make when trying to scale their ad campaigns?

The two common mistakes are: 1) Lack of volume, meaning not creating enough new ads to test and find the most effective ones, and 2) Not having a high enough lifetime value for their customers, which restricts the amount they can afford to spend on acquiring new customers.

Why is creating a large volume of new ads important for successful ad scaling?

Creating a large volume of new ads is important because it increases the chances of discovering high-performing ads that can effectively reach a broader audience. It allows advertisers to learn from data, refine their approach, and ultimately find ads that can scale to higher budgets without sacrificing profitability.

How does the quality of an ad impact the ability to scale a Facebook ad campaign?

The quality of an ad directly impacts the ability to scale because a high-quality ad can resonate with a larger and more diverse audience, allowing for increased spending without a drop in profitability. Mediocre ads may only perform well with a small, highly responsive segment, limiting the campaign's scalability.

What is the role of customer lifetime value in scaling Facebook ad campaigns?

Customer lifetime value plays a critical role in scaling ad campaigns because it determines how much a business can afford to spend on acquiring new customers. A higher lifetime value means the business can afford a higher cost per acquisition, which in turn allows for greater scalability.

How can businesses increase their customer lifetime value to support ad scaling?

Businesses can increase their customer lifetime value by improving customer reactivation strategies, offering products or services that encourage repeat purchases, and fostering customer loyalty through referrals and positive experiences. This allows them to afford higher acquisition costs and scale their ad campaigns more effectively.

What is the 'concentric circles' concept mentioned in the script, and how does it relate to ad scaling?

The 'concentric circles' concept refers to the idea that as an ad campaign scales, it moves from targeting highly responsive audiences at the center to less responsive audiences in the outer circles. This concept illustrates how the quality of the ad and the audience's responsiveness affect the campaign's ability to scale profitably.

Why is it important for advertisers to know their maximum affordable cost per acquisition?

Knowing the maximum affordable cost per acquisition is important because it sets a boundary for how much can be spent on customer acquisition while maintaining profitability. This knowledge helps in planning ad budgets and scaling strategies effectively.

How does the number of new ads created per week compare between average advertisers and the best Facebook advertisers?

The best Facebook advertisers create 50, 20, or even 30 or more new ads per week, whereas average advertisers might create only a few new ads per month or wait until results drop off to create new ads. This difference in volume contributes to the ability to find highly effective ads for scaling.

What is the law of numbers mentioned in the script, and how does it apply to ad creation?

The law of numbers suggests that the more attempts or opportunities there are, the higher the likelihood of success. In the context of ad creation, by producing a large number of ads, advertisers increase their chances of stumbling upon a highly effective ad that can significantly improve campaign performance.

Outlines

00:00

📈 Scaling Facebook Ad Campaigns for Profit

The speaker shares a personal strategy that significantly increased a client's revenue from $97,000 to $357,000 with a better return on ad spend (XRS). They discuss their extensive experience, having spent over $50 million on Facebook ads, and highlight two common mistakes advertisers make when trying to scale. The first mistake is not creating enough new ads, which leads to a lack of volume. Top advertisers create many ads weekly, and the speaker emphasizes the importance of creating numerous ads to find the ones that resonate with different audience segments. The process involves testing, learning, and refining to eventually discover highly effective ads that can scale the campaign profitably.

05:01

💡 The Importance of Volume and Lifetime Customer Value

The speaker continues by explaining that to become exceptional at creating ads, one must go through the process of creating a large volume of ads. They share examples of clients who have seen significant improvements in their ad performance after implementing the speaker's strategies. The second common mistake is not having a high enough lifetime value for customers, which restricts the amount an advertiser can afford to spend on acquiring new customers. The speaker suggests that understanding and improving customer lifetime value is crucial for scaling Facebook ad campaigns profitably. They offer a resource to learn how to calculate and enhance lifetime customer value.

10:02

🔢 Calculating and Improving Customer Lifetime Value

The final paragraph focuses on the importance of knowing and improving the lifetime value of customers. The speaker provides a video resource that teaches how to calculate the lifetime value per customer and what one can afford to spend on acquiring a new customer. They stress that understanding this metric is essential for Facebook advertisers and can greatly impact the ability to scale campaigns effectively.

Keywords

💡Facebook Ad Campaigns

Facebook Ad Campaigns refer to the strategic use of Facebook's advertising platform to promote products, services, or content. In the video, the speaker discusses scaling these campaigns to increase revenue and improve the return on ad spend (XRS). The speaker's experience with spending over $50 million on such campaigns for clients and generating over $200 million in revenue underscores the importance of mastering the art of scaling these campaigns for business growth.

💡XRS (Return on Ad Spend)

XRS, or Return on Ad Spend, is a metric that measures the revenue generated from each dollar spent on advertising. The video highlights a client's campaign where XRS improved from 1.4 to 3.7, indicating a more profitable ad campaign. This concept is central to the video's theme of scaling campaigns profitably, as it directly relates to the efficiency and effectiveness of ad spending.

💡Volume

Volume, in the context of the video, refers to the number of new ads created and tested. The speaker emphasizes the importance of creating a high volume of ads to increase the chances of finding a highly effective ad. This is illustrated by the comparison between creating a few ads per month versus the more successful strategy of creating dozens of new ads weekly, which is crucial for scaling campaigns and finding ads that resonate with a broader audience.

💡Ad Quality

Ad Quality is the effectiveness of an advertisement in persuading viewers to take a desired action, such as making a purchase or signing up for a newsletter. The video discusses how a lack of ad quality can hinder the ability to scale campaigns profitably. The speaker suggests that creating a large volume of ads helps in refining ad quality, as it allows for testing and learning what works best for a specific audience.

💡Lifetime Customer Value

Lifetime Customer Value (LCV) is the total revenue a business can expect to earn from a customer over the entire duration of their relationship with the brand. The video stresses the importance of understanding and increasing LCV to afford higher acquisition costs and scale ad campaigns. The speaker gives an example where a business could afford to pay more to acquire a customer if they have a higher LCV due to factors like repeat purchases and referrals.

💡Cost Per Acquisition

Cost Per Acquisition (CPA) is the amount a business spends to acquire a new customer. The video discusses the relationship between CPA and the ability to scale ad campaigns. A business with a higher CPA limit, due to a better understanding of its customer's lifetime value, can afford to spend more on ads, allowing for greater scalability and potentially higher profits.

💡Scaling Profitably

Scaling Profitably means increasing the size or volume of a business operation while maintaining or improving profitability. The video's theme revolves around this concept, as the speaker shares strategies for scaling Facebook ad campaigns in a way that increases revenue without compromising profitability. This is achieved by optimizing ad quality, understanding customer value, and creating a high volume of ads.

💡Customer Reactivation

Customer Reactivation refers to strategies used to engage with customers who have previously interacted with a brand but are not currently active. In the video, the speaker mentions customer reactivation as a way to increase a customer's lifetime value, which in turn allows for higher ad spend and more aggressive scaling of ad campaigns.

💡Concentric Circles

The term 'concentric circles' is used metaphorically in the video to describe the expanding audience segments that an ad campaign targets as it scales. As the campaign moves outwards from the most responsive audience (the center) to less responsive segments (the outer circles), the ad's effectiveness and the audience's interest decrease, requiring higher quality ads to maintain profitability.

💡Back End

In the context of the video, 'back end' refers to the post-purchase or post-conversion aspects of a customer's relationship with a business. The speaker suggests that focusing on the back end, such as improving customer retention and increasing the lifetime value of customers, is crucial for scaling ad campaigns. By increasing the value derived from existing customers, businesses can afford to spend more on acquiring new ones.

Highlights

The speaker shares a strategy that scaled a client's Facebook ad campaign from $97,000 to $357,000 in revenue.

The speaker has spent over $50 million on Facebook ads, generating over $200 million in revenue.

Facebook advertisers often struggle to scale profitably due to two common mistakes.

Lack of volume in ad creation is a significant reason for difficulty in scaling.

High-performing advertisers create 50-30 or more new ads per week.

The importance of creating a high volume of ads to find the most effective ones.

Meta prioritizes showing ads to the most responsive audience first.

As ad spend increases, the audience's responsiveness decreases, requiring better ads to maintain profitability.

The necessity of testing and learning from a large number of ads to improve ad quality.

An example is given where creating 10 new ads leads to finding one that can scale to $100 a day.

To significantly scale beyond $100 a day, an advertiser might need a 'one in a hundred' ad.

The 'law of numbers' suggests that creating a large number of ads increases the chance of finding highly effective ones.

The speaker emphasizes that creating a 'one in a thousand' ad requires going through the process of making a thousand ads.

The speaker shares client success stories, including a 2-week improvement from a 0.7 to an 8.03 return on ad spend.

Another client sold out all 35,000 raffle tickets in two days after implementing the speaker's strategies.

The second reason advertisers struggle to scale is due to low customer lifetime value.

The ability to pay more to acquire a new customer is directly linked to the customer's lifetime value.

The speaker discusses the importance of knowing and improving the lifetime value of customers for scaling ads.

A video is mentioned that teaches how to calculate and improve lifetime customer value.

Transcripts

I'm about to share with you the exact

strategy that I use to scale this

client's Facebook ad campaigns from

$97,000 in Revenue at a 1.4 XRS all the

way up to

$357,000 in Revenue at a 3.7 XRS which

completely changed the trajectory of

this business and this wasn't just a

onetime thing I've personally spent more

than $50 million on Facebook ads for

clients and generated more than $200

million in revenue and you don't get to

those sorts of numbers without knowing

how to scale Facebook ad campaigns the

right way but the thing is most Facebook

advertisers are still falling into two

super common mistakes which I'm going to

show you in this video and one of them

is really easy to avoid you just have to

know what to look for okay so one of the

reasons why Facebook advertisers really

struggle to scale I should quickly

Define that when I'm talking about

struggling to scale I'm talking about

struggling to scale profitably obviously

anyone can just whack the budget up but

what we want to do is be able to scale

in a way where it still makes sense for

our business we're not acquiring

customers at too high a cost for it to

be profitable um for our business right

so that's what I mean when I say

struggling to scale and and the first

reason I want to talk about here is

volume or what I should more

specifically say lack of volume and

here's what I mean by that right so I

speak to Facebook Instagram advertisers

all the time and one of the questions I

will very often ask people is how many

new ads are you creating and often

they'll say something like I create two

new ads three new ads a month four new

ads a month something like that or

perhaps they don't have a specific

schedule they just wait until the

results drop off and then they go oh

okay I need to make some more ads then

that's their approach to new ad creation

now here's the thing thing the best

Facebook advertisers in the world create

50 20 30 or more new ads per week and

that might sound extreme and obviously

depending on your budget if you're

operating with a much smaller budget

then that doesn't make sense that would

be Overkill but the principle Remains

the Same they absolutely are going after

volume of new ad creation and here's why

you probably can't scale because your ad

isn't good enough to convince people to

convert whether that's purchase become a

lead whatever unless they are hyper

responsive so really into whatever it is

you have to offer when your ad works and

is profitable to a small segment of your

audience so you're not spending very

much meta is really good at finding out

the best possible prospects and it's

going to put your ads in front of those

people first as you spend more and spend

more you go from the people that are

absolutely super Keen love everything to

do with that industry buy every ad that

pops up to people that are still pretty

good prospects but slightly less keen

and then you scale further and you go

from then to people that are slightly

less Keen again and slightly less Keen

again and and it goes on and on and on

so if your ad is a mediocre ad perhaps

it's good enough to get those hyper

responsives right at the center of that

Circle to convert but as you go out into

those other tiers it probably isn't good

enough now the only way to create

exceptional ads and get really really

good at creating ads for your specific

business and your specific audience is

to get the Reps

in is to create tons of them put them

live see the data learn analyze rinse

and repeat so let me give you an example

to hopefully make this a little bit

easier to understand and sort of and

sort of clarify um the thought process

around this so let's say you've got a

new campaign and you've launched 10 new

ads now obviously one of those 10 ads is

going to perform best that's probably

going to get the majority of the budget

whether you manually force that or

whether meta does that um for you and

with that ad you found that you can

scale up to about $100 a day but you

can't really go any higher if you do

your profitability starts to drop and

you end up paying too much to a Car

customer basically you are using a one

in 10 ad to get you to $100 a day now if

you want to scale significant past that

let's say you want to go up to $1,000 a

day you might need a one in 100 AD the

quality of the ad needs to go from a one

in 10 ad to a onein 100 AD now the only

way to discover to to stumble across a

onein 100 AD and that's usually the way

it works by the ways you're testing a

bunch of stuff and you don't necessarily

expect it to work amazingly well and you

sort of stumble across something that

that works really well for your specific

business and your specific audience well

anyway the only way to get that one in1

100 ad is to create 100 ads and create

All Those ads that don't work and you

learn lessons and you refine your

approach and you get to the point where

you have a one one one in 100 AD and

then maybe that allows you to scale up

to that ,000 a day mark But if you then

want to go to the next level and you go

right $ th000 a day is great but our

business would be completely transformed

we go to a whole another level if we

could spend $10,000 a day maybe to do

that you need a one in 1,000 ad because

I can absolutely assure you if you go

ahead and create a thousand ads and put

proper time and effort into creating

those one of those is going to deliver

incredible results just the law of

numbers you're going to do it

accidentally even if even if nothing

else I mean of course you want to try

and help the process along and and take

a look at what you've done and and allow

that to inform the direction you take

going forward but just accidentally

you're going to stumble across a concept

something new that works really well and

it's just going to to perform much much

better and that one in 1,000 ad might

literally have a four or five times

better row ass than that one in 100 AD

which can completely obviously change

your campaign completely change Facebook

advertising and completely change your

business if you can get that ad that is

that good one in 1,000 ads are really

good but again the only way to get a one

in 1,000 ad is to actually go through

the process of making a th000 ads which

might take a lot of effort and a lot of

time and everyone wants shortcuts right

no one wants to put in that time and

effort to create a thousand ads over the

next year or 18 months to to find that

one that's going to you know perform

exceptionally well you will find others

that perform better than what you've

currently got along the way as well it's

not like you put in all that work and

then get all the reward at the end you

will have incremental gain as as you go

but to be perfectly honest often it just

takes exceptional volume to get

exceptionally good at creating ads I

cannot tell you how many ads I've

personally been involved in created our

agency we've worked with thousands of

clients all over the world all different

budgets created on average probably

dozens of ads for every single client

you just get so many reps in you can't

help but get good at it if you do an off

of it come wa a sec take a look at this

so this is in my menure program right

and the results on WIS Channel and Tara

said this in 2 weeks of joining my Ros

went from 0.7 to

8.03 and I've only implemented maybe 30%

of the feedback that's going to me so

far which is that's just incredible

that's awesome so Zoe up here she joined

the mener program with

35,000 raffle tickets was thinking she

wasn't going to sell them um and she end

up selling out completely with 2 days to

spare and we've got loads of others in

here we've got tons of people just

sharing information around how they've

done well great results they've got if

you're interested you can click on the

button beneath this video that'll go

through to a page on our website you

could book in a free no obligation call

with one of my team members to find out

more information hopefully we get to

work together hopefully you join and

you'll be sharing fantastic results like

Tara and Zoe have done just here now the

other reason why Facebook advertisers

really struggle to scale Facebook ads

profitably and you may have both by the

way sometimes you have one or the other

sometimes you have both of these reasons

um is because they simply don't make

enough money from their customers their

lifetime value isn't high enough and

what that means is that you can't afford

to pay pay enough to acquire a new

customer now when I'm having a serious

conversation with someone who is serious

about scaling their their Facebook and

Instagram ads and wants to take it from

where they are now to 10x or more where

they want to go one of the first things

I'll ask them is how much more can you

afford to pay to acquire a customer than

what you're currently paying okay so let

me give you an example right let's let's

take an e-commerce business and let's

say that that e-commerce business is

currently generating purchases for $20

each that's what they're costing if I

talking to that business owner and they

say you know we could we currently

paying $20 to acquire a new customer $20

cost per purchase but we we could pay

$25 okay we can scale a bit you're

certainly not going to turn next that

budget you might be able to double it

may maybe if we've got that sort of

wiggle room but if that same business

owner tells me oh no we can pay $40 or

even better $50 to a Kiron Customer

because we've got great customer

reactivation our products are amazing so

people buy again and they refer their

friends so we can afford to pay a lot

more that is a complete Game Changer

that is sort of business where I'm going

absolutely weaken scale we might be able

to spend 10 X 20x the difference in a

$25 cost per purchase limit versus a $40

cost per purchase limit is massive the

$40 cost per purchase limit you might

cap out at 10 times the budget um the

the $25 Max cost per purchase business

is at um simply because remember the

concentric circles you're going out to

larger and larger audiences and as you

go as you advertise to more people you

put in your ad are slightly less clean

and slightly less clean and slightly L

clean you can tap into that many more

people because you can put ads in front

of people that aren't hyperresponsive

because if a lower percentage of them

convert you can pay a higher cost per

purchase that's effectively what that is

it still works for your business now

most Facebook advertisers don't even

really know what they can afford to pay

to acquire a customer right they haven't

been through that exercise and worked it

out and and that's a problem you really

should know that information I totally

get it like I've been there most

business owners are there uh most

Facebook advertisers don't know this

sort of stuff but you absolutely should

take the time to to do it and then

Within that the advertisers that do know

that number or even the advertisers

don't know that number hardly any of

them actually spend any time trying to

improve their lifetime customer value

they're not trying to increase how much

a customer is worth their business

they're instead much more focused on how

do I just get the the cost per result

down how do I how do I shave a couple of

dollars off my cost per purchase how do

I shave $5 off off my cost per lead

that's not the right way to go about it

the pros the experts the people that get

the best POS results they focus on the

back end they go how do we massively

increase how much customers work to

allow us to pay much more to acquire our

customer and make our Facebook

advertising much easier and allow us to

scale remember how I talked about that

business that's currently at $20 cost

per purchase if it can only go to 25 it

can scale a bit if it can go to $40 cost

per purchase it can scale massively the

only way you can afford to go to $40

cost per purchase is if you get much

more out of your customers you get them

to be worth a lot more there's a number

of uh techniques to do that but that is

so important and that's why the the pros

focus on the back end fortunately I've

recorded a video that shows you EX L how

to calculate your lifetime value per

customer and what you can afford to

acquire a customer and I share it all in

this video here it's one of the most

important things for you to know as a

Facebook Advertiser so I show you how to

calculate it I also show you how to

improve your lifetime customer value

which we've already talked about is

super super important so make sure you

stick around to the end of the video for

that information