Testing your social media ads

Creative, targeting, offer

On social media, showing an ad is very affordable compared to, say, a TV commercial or a newspaper ad. Your ads also generally include more than just text like they do on AdWords: images, links, video content. On most social media platforms your ad campaigns consist of:

  1. The creative. This is the image, the text on the ad, the video content.

  2. The targeting. How you define your audience for a specific ad campaign makes a big difference in the outcome.

  3. The offer. Each ad asks people who see it to do something. What exactly do you ask them to do? Are you asking them to sign up for your email list? Or to buy your product at full price? Or get a 50% discount?

With multiple variables at play and with a low cost for running an ad, social media is a perfect place for testing your ads. Start with a number of variations of different parts of the creative, for example 5 ad headlines and 5 images, build ads with each combination of the text and the image, and see if there are any ads that perform better than others. A lifetime budget of $100 per variation and a few days of time are generally enough to show the winner.

Once you’ve nailed a few images and headlines try different variations of the offer. Different creatives and offers will resonate differently with each audience you run the ads for, so if you tweak the audience in some cases you might need to test a few variations of the ads again.

The structure of the offer

You can put different offers on ads, and they will get different levels of traction. For the same audience, you can expect the conversion rate for a sale to be much lower than the conversion rate for a website visit. Why? Because paying someone money requires way more intent and trust than just visiting someone’s website.

Let’s suppose that you have two offers: one is to sign up for a free trial of your software, and one is for a newsletter sign-up. The free trial offer converts at 0.05%, so out of 10,000 people who see your ad 5 will sign up for a free trial. Let’s also suppose that you’ve spent $1000 running those ads. So your cost of sale is the total of the ad spend divided by the number of people who signed up for a trial as a result of your ad campaign, so $200 / trial sign-up.

Imagine that the users who sign up for your free trial generally convert at a 3% rate to paid customers, and the average lifetime value of every paid customer for you is $800.

So if you use the Facebook ad above to acquire free trial users, the paid users that come out of those free trials will cost you the trial sign-up divided by the trial -> paid conversion rate for each paid customer:

( $200 / trial sign-up ) / ( 3% trial -> paid conversion rate ) = $6,667 / paid sign-up.

So you would be paying $6,667 for each customer that would bring you $800. This isn’t a viable business.

Driving towards a newsletter

Now, let’s assume that you are using the ads to drive sign-ups for your email newsletter. The ad offers the user to download a cool PDF ebook and sign them up for your newsletter.

You also spend $1,000 on running the ads, but now the ask is smaller, and you also have a compelling offer — a PDF ebook looks interesting and useful. So the conversion rate goes up from 0.05% to 2%, and out of 10,000 people who see your ad 200 people will download the ebook sign up for your newsletter.

Let’s also assume that you are doing a great job at email marketing, and your newsletter sign-up -> free trial conversion rate is 10%. From the 200 people who signed up for the newsletter, 20 will sign up for a free trial. The email marketing sequence also explains how to use your product, and users can get more out of their free trial. The free trial -> paid conversion rate jumps to 10% for people who received your email sequence. 20 free trials, 10% trial -> paid rate, so at the very end of the funnel you get 2 paid users. Each will bring you $800 of lifetime value.

In this second case with the email marketing sequence in between the ad and your SaaS you have paid $1,000 to acquire $1,600 in revenue. You can keep the difference of $600 as profit.

By changing the offer and adding another piece to the funnel you have dramatically improved the math on your social media ads.

Webinars as the offer

Webinars are a great way to educate your potential customers about your software. It’s like answering everyone’s questions on a video call, but with a hundred people at a time.

The webinars are much more scalable ways to address people’s questions than one-on-one sales calls. It is much lower-commitment than getting on the phone with you, and if you do it right it can be no less engaging for the prospective customer. So more prospective customers will show up, and you’ll feel better about your time as you’ve been talking to many people at the same time.

The best part about webinars: they can be recorded. The recordings of webinars make a great offer to put on social media ads. It’s valuable enough that your prospective customers would trade their email address for it, and at the same time very scalable as you can use the same recording on hundreds of ads across all social media platforms.

If you are showing ads to people that haven’t heard of you before you might not have much success getting people to see a webinar. A better way could be to get them to visit your website, or get your PDF e-book on a topic relevant to your product, after which you can “upsell” them to a webinar registration.

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