Oh, and welcome to shopify, come this, this is a learning platform built for you to take the guesswork out of entrepreneurship I'm your host today. My name is Krista and I'm joined by our guest, Brandon Lubow from sliced bread agency, who will help us understand how to best create a 2021 advertising roadmap. After the year that was, Brandon will share historical data from clients to help provide visibility into yearly trends.
And the effects of 20-20 on advertising channels will help you take those trends and establish monthly budgets to maximize performance. We have lots to cover today, so let's get a few friendly reminders out of the way. Before we get started, you can sign into the chat on the right of your screen to participate in today's discussion. Ask your questions as they come up, and we'll address them in the Q&A at the end of Brandon's presentation.
We also have two wonderful Shopify support advisors in the chat today, Andrew and Sally. There's anything Shopify specific that comes up. Our team can support you with answers and links to unblock anything in your way. And don't fret, we'll cover a lot of valuable information today that you can revisit via the recording that will be sent out later today to all of those that registered, if for any news, any reason you misregistration.
We're also going to share valuable. Next steps in the recording in our Shopify campus community forum link will be coming your way via live chat. With all this out of the way, I'm excited to introduce today's expert, Brandon Lupo. He is the co-founder of sliced bread, a digital advertising agency based in Los Angeles, originally from Atlanta, Georgia.
Brandon arrived in Los Angeles through an opportunity focused on digital reporting and analytics, identifying growth potential in the digital advertising space. Brandon founded sliced bread with a focus on Google ads, Facebook ads and Amazon advertising. In the last 6 and 1/2 years, sliced bread has built a team of 35 employees and helped generate 1/2 billion in advertising revenue in 20.
20 sliced bread is now a Google premiere partner, Facebook preferred partner, Amazon partner agency and Shopify Plus development agency. Thank you so much for being here. Brandon, welcome to Shopify compass. Thank you. Thank you. So before we get started, I actually love the name of your company sliced bread.
Can you tell us a little bit about where that came from? Oh, man. Actually, sliced bread was created by my partner, Justin zabo. We tried for weeks to try to put together a name, and all of a sudden, he said, let's just be the best thing since. And it stuck and we've carried it since then. Love that. It is so catchy. Well, I, for one, am very excited to have you here today.
A lot of the merchants that I work with in my role at Shopify are always, always asking questions about advertising and marketing, Facebook ads, Google Ads. It all comes up with a lot of questions. So we are all very excited to learn from you today. Awesome I will let you take it away. Cool let's just jump right in and get started.
As I was putting this together. And when Shopify contacted me a couple of weeks ago, we had just started to see inklings of these ilist 14 privacy updates and the effects that they were going to have on these channels, and this one from a fairly simple kind of advertising roadmap to something entirely different.
So what you're going to find today out of this presentation is going to be a lot on the implications of attribution, how we're trying to read those channels, how they differ from what's happened in the past. Also, dive into 2020 the effects of 2020 how it differed from 2019 and your traditional year in trying to put all of that together.
I'm going to cover eight hunt and I'm going to use. They're going to be a ton of stipulations on the things that we put together. And so what we build here, you're going to have to you, you're going to use as a base and then you're going to translate that to your business. And I'll tell you the places where that needs to be done. But, yeah, this is going to build an overarching framework. So this is how we get there.
And this is what I talked about. We're going to start with the effects of 2020 what to really see there, how that compares to prior year, the effects of iOS 14. And then we're going to put it all together, craft those budgets and goals and then make adjustments based off of your guidance business. I'm really excited for the Q&A section. I think that's where you'll get a lot of value on singular instances and things that might be able to be changed in these metrics and in these roadmaps that we build.
So we will get to that here at the end. So as I put this together, this is really where I want it to start. And what are the differences between these three numbers? Traditionally there? You wouldn't have had to focus on these, but the difference now is attribution. So this 28 day clip, one day window is where we traditionally have been.
This is what we've been able to see. The seven day clip one day view is where we are. And the seven day. Click is where we're going on the Facebook side. So a lot of this. And as we start to roadmap. It is, how do I figure out how to use the data. When the data that I'm going to use is changing and has changed in the last two weeks. And it's going to change again, when something rolled, when the full update rolls out.
And we'll talk a lot about what goes into that and how that works. But at the end of the day, this is really where we put a lot of stock into ourselves outside of platform businesses in general. 65% average traffic growth and 84% average revenue growth. And that's really what we're looking for. So 20, 20 trends, you guys know a lot of them, it's nice to be able to see a lot of different businesses and put them all together.
I'm going to show you an accumulation of 300 plus businesses to give you a true tramlines, not just what you guys saw, but what we see across the spectrum. So first things first. There is still a yearly advertising trend and consistency in that trend pre and post pandemic. You'll see that they very much mirror each other, even though we saw massive, massive changes during the year.
There are lowered CPMS in the early days of the pandemic, and that's cost per impression. We will want to note that as we walk through here, there are periods of lower impressions or lower auction cost, which can really give you a leg up and you'll want to be looking for those as you build. There's a front loading of demand prior to holiday. You will see that as I walk through the chart.
And then massive increases in auction cost and conversion rates as people run to the online space. So here we go. This is an aggregate. These actually came directly out of platform. I had them transposed to make it look like they matched the actual presentation by our designers. But these are direct polls. So what you have here is a year 2020 with Facebook at the top and Google at the bottom.
These first two charts show us the cost per impression and the cost per click in platform. And this magazine monitors auction cost. It's a pretty straight line arrow. As you get this presentation and you dig a little bit deeper, you'll actually be able to see what the true cost was for us as an aggregate. And how it's grown. In this case, it's about 100% since the bottom.
And and you'll note that this is continue to hold early in 2021 Google cost per click. Actually, not too bad. And you see how it kind of shuffles down for us earlier than early in the pandemic. But it has a massive, massive, massive increase as we get into Q3 and Q4 as people start to buy. Same thing with conversion rates as we saw a doubling in CPMS.
A lot of folks said, hey, is this going to be worthwhile for us? Does Facebook still make sense because of the cost. It does when the conversion rate continues along the same sort of path? And so even though it got more expensive, the conversion rates increased almost at the same amount. Same thing with Google. I mean, this is a pretty crazy chart for us. This is a lead in into Q3 and then this Q4 push, pretty standard, pretty much what we always see.
So even in a pandemic here, we see the same sort of moves. Let's see, same sort of charts here. Now we're starting to get into return on ad spending to rev. So with the implications of an increased cost and an increased conversion value, what happens from a Facebook standpoint? Fairly, it's been fairly consistent.
The cost and again, the costs stayed or the costs continue to rise, but so did our conversion rate. So what happens here is volume just continues to rise throughout the course of the year. But as I mentioned, with CPMS driven down in some cases. And you'll see this not just with the pandemic, it also occurs when people try to boycott Facebook and times at which there are turmoil or uncertainty.
If you're still in the platform, a lot of times, you can actually do very, very well. And you see that out of our metrics here early on in the early days of the pandemic with Google, some pretty crazy numbers here. These look a little bit more overstated than they really are, moving down from seven to about 4 and 1/2 is. He is a huge move, but not something that isn't like on.
Unexpected for us, usually, we would have seen a little bit more consistency where we didn't have these returns on antennas that are super high. And so it would have flattened this curve a little bit. But again, with the pandemic here, much, much higher returns on them than we traditionally see and alongside of that Google rev straight through the roof. So how does that compare to a normal year?
Let's take a look. So I started to aggregate some of these charts. What we have here at the top is conversion rate year to year. A lot of the same sort of trends are found here for us because of the decrease in cost in the ad auctions. We do really, really well throughout the first and second quarter. And you'll note that our return on ad spend and conversion rates generally are higher during the beginning half of the year and always rise up.
It's kind of an interesting trend for us. And then in the second half of the year, we start to see a kind of a slowdown over time through the summer doldrums and then down into Q4. We really do try to over accelerate some of our advertising in October to try to get an accumulation of users for November and December. Sometimes it does force that the row, as in conversion rates, down a little bit.
But then we try to pick that back up in Q4 and you see the effects here in conversion value. So steady, stable upward trend in both years. 2019 versus 20, 20. The things that I would watch out for. And as you start to put together your roadmaps is to measure your own seasonality. Take a look at 20 nineteen, twenty, eighteen, 2020 of course.
And how do they all play together? We've seen generally January, February and March in terms of return on ad spend better than December in 2019 and 2018 and 2017 for most, for most of our businesses. So it's pretty crazy where, where your volume can be driven, but also where a lot of your profit can be, can be maintained. So note that that's how those run. And these are in aggregate.
By the way, this is both Facebook and Google. So takeaways, they do look very similar. We do see our best performance leading up to Q2. CPMS in Q4 can limit rollouts, but it is a volume driver. And alongside of that, in Q4 a lot of times, well, most people are doing discounting and alongside that discounting, you're going to see your margin in our decrease.
And your is just generally isn't going to be as high, but it can drive these massive sales volumes. It's a continuation of a trend that we've seen forever. And then in 2019 there wasn't the same front loading of sales volume. As I get deeper into this, we're talking very much on the advertising side. But there are some things that happened outside of it in organic and into SEO that really, really changed the game early in 2020 that are going to make these advertising roadmaps look a little bit funny if you're not looking at them correctly.
So there's your historical metrics year over year. It was an outstanding year. It's not one that we traditionally see that increase in revenue through a channel is huge. Note that this increase here and paid advertising spend does outstrip what we saw as a business, as a whole. So how does that happen? You know, it is us focusing in on those channels, pushing additional revenue through them.
But a lot of the other channels in the business aren't able to drive that same sort of growth. And that's one of the advantages of pay, but also a disadvantage. So that 88% increase in total business doesn't match our 181 increase in paid r��ve because of it. Also something to watch out for that becomes more of an inventory fulfillment back in management, other marketing channel conversation.
But it is worthwhile to note because they are so different. So how does the trend continue? I think so. I just noticed that this didn't transpose, but if we were to put that trend, it's going to look very similar to here where it's going to run about 50% below what the prior year looked like are 50% below, what, 20, 20 or to 20, 20 looked like.
So, yes, the trend does continue. There is a little bit of cooling. It's not going to be the same as what you saw in 2019. It's going to look more like 20, 20, but not quite. And I think that will continue on as we run through this or run further and further into and away from this pandemic. So the other thing to talk about here is not just what has happened, but what is coming for us.
And that is the changing in the attribution models. This is directly from Apple. They are moving to a seven day clip window. This is what we talked about in the very beginning. We were going to only be able to see something like. 40% or 50% of the value that we used to be able to see, how much of that is over attribution, we're going to try to reduce as much of that as we possibly can.
But that we do know that exists. And this will reduce a lot of that. On the other side, if we take a look at what Google is doing for us and how they are attacking these iOS 14 policy updates. And just a note for I was 14. It's a privacy update on Google Earth Hour on Apple phones that are going to require people to opt in to advertising rather than opt out.
There's going to be a prompt at the opening of an app that says, hey, do you allow this app to track here to track your metrics? And most folks are going to opt out. And that is significantly going to disrupt the environment. So, again, Facebook's going to just go ahead and cut down their model to try to get a tighter attribution model for them, something that's a little bit closer to truth and that they can see and you'll see the effects on the Google side here.
So display video view through conversions. Anything coming through that side is going to fluctuate incredibly, mostly because nobody really knows how it's going to track. Google is going in the opposite route of Facebook, where they're going to try to not disrupt what we currently have and they're going to do. So with model conversions. So they're just going to fill in the gaps in places that they cannot see or where we're removed.
So here it is. And this will be more for as you're reading through and going through this report again. But conversion value is reduced by 40% or 50% The Google conversion value remains mostly unchanged, but will be modeled in. The real crazy part about this is with the diverging attribution models. It's just going to make the environment incredibly hard to read.
Who do you trust? The trust Facebook. You trust google? How did the two interplay? And this is going to become more of a look outside of that environment than it is going to be just sticking in each individual channel? I think as advertisers and as businesses, we've gotten so attuned to saying, hey, what is Facebook showing me? What is Google Google showing me? Can I drive direct growth directly through those channels?
And we haven't had to lean too much on what is the back end cost, and what is this truly costing us. But as we see less and less of it, we're going to have to lean more and more in a correlation, a lot more than we have in the past 3, 2 five years. But this is really a return to where we started in a lot of ways. You know, when we first started, it sliced bread. We couldn't see conversion metrics.
So it was just running traffic campaigns. We couldn't see revenue. So we're getting we're going backwards just a little bit, not that far. But it will change the way that we have to read these metrics. So how do we do it? We're going to redefine our KPIs. We're going to try to move away from just channel specific advertising and try to give you metrics to look at as a business, as a whole.
You will have to have a pulse on your cost at all times. And there are many Shopify apps that can help you do that. One thing that tells us that we're going in the right direction is the contribution margin report that's coming out of Shopify. Now, most of you folks don't have access to this. That is brand new, but it is a report to make decisions or to make smart decisions. It's going to allow you to see what your true margin is based off a product cost based advertising cost and do exactly what we're trying to do today.
But until we have it, there are a ton of tools out there that will help you do it. The two that we really like from a very top level standpoint is a platform called life timely. And then internally for our larger tracking platform called golu analytics, which we provide to our clients. But from a very, very top level standpoint, I really like lifetime.
It does start to give you some places that you need to be looking at. You have total rev, you know that. But are you taking a look at product costs or you're looking at marketing costs? Are you truly trying to find net profit and is your advertising attuned to that? So this is just a snapshot of a random date. But what I really want to focus in on here are the types of things that you guys should be looking at.
And even this client hasn't filled out all of them at this point. So what is the effect of discounts or refunds or your taxes or handling or shipping customs, you know, all of these things or eat into your bottom line. And if you're paid, advertising is taking you closer to a zero net margin or an underneath zero net margin, then you're really hurting yourself.
Or you can be depending on how you're setting up your platform. But in general, these are all of these things are things that we should be looking at in the. It is if we can't trust the platform to tell us truly what is our revenue, then we're having to change the model and change how we're getting results out of each of those. And we'll talk about what that looks like. So here we go.
This is creating the roadmap. So for this, we're going to have to redesign some of our budgets, redefine our projections and redefine what we're looking for. What I'm really, really like to do. And I like to use is an advertising cost to total revenue metric. So basically what it says is what percentage of my ad spend amusing is part of total red. So if I'm spending if my ad spend 30% of my total revenue, generally that is pretty high.
If it's 50 or 60 percent, which it can be, in some cases for large businesses, you're probably eating yourself alive because there's not any margin left to create the actual product. So we're going to want to take a look at that. And then what discounts and lifetime value and other things can have or the effects that they can have on that metric. We do want to go backwards. You're going to have to look at return on ad spend levels at the seven day Facebook window.
That's where things are going. As you're starting to put this together, you might want to do seven day, one day view, right. Or a seven day clock, one day view right now as your window, because that's what we can see. But eventually it'll go to seven. And you really want a handle on what the differences are, because, again, it's like 30% or 40% of what you can see right now. So your returns on ads than metrics as you start to project twenty, 21 are going to be much, much different.
You'll have to learn what rowhouses in terms of the platform. And as a whole, and then we'll talk about future value, so key terms, things that should know gross profit margin, we're going to be coming off of this a lot. It's net sales minus cost of good over goods, over net sales. So basically, what is left over after the cost of goods in this case alone includes salaries on include overhead, all the cost down side of advertising because I'm trying to isolate advertising as a unit.
We'll also talk about net profit, which is gross profit minus our ad cost. And then our net profit margin after all of our costs are taking out what is left over. So here we go. This is all based off of this sample roadmap, which is going to be included alongside of this report. And so you'll have all of this and a lot of the data that I have as well.
So how do we work this? What does this really look like for us? This is your traditional if you know, if I was doing a monthly performance chart, this is how I traditionally would have done it. And then I'd say, OK, well, where did I end up and spend and how do I want to spend it in the next year? I probably would take these metrics in December and cut them down 20, 30% and say, OK, that's my new baseline for January 20, 2001.
But it does get a lot more detailed than that. So what I want to take a look at here is putting together some of the things that we saw earlier in those 2020 2020 in that 2020 20 data set and then making some assumptions as we start to put together a 2021 chart. So again, you see it here. We talked about, we just talked about this is percentage of ad spending, total revenue.
This is incredibly low. So ad spending makes up 5% or started at 5% of total revenue. So meaning you've created a business that is stable, almost outside of advertising as a whole. And as this has grown and as you started to spend more and you started to make more money. All right, so that was a pretty good test on train of thought and if you can keep it, but we are back, so here we go.
So from a jumping right back into this again, we're moving away from just channel specific advertising. And now moving into the effects of advertising as a whole. Again, looking at this. And this is sample data from a business that we've dummied up. But this is what we've seen for 20, 20 in a lot of cases where this average total percentage of marketing spend a total revenue is incredibly low.
This is basically meaning that this business is supported totally outside of paid advertising efforts. And what's interesting here is look how much of how much ad revenue. It's saying it's making up. This is an overreport this is just not going to happen in that case. So what we're attempting to do is trying to get a little bit more truth out of the advertising platforms in general in this number will never change. Right because you know what these are.
And that's why we're working on them. So hard. It is ad spending doesn't change. And it is site revenue should not change unless you get returns, but that's going to be very slight. So with it, we can use those to start to measure how deep or how far we want to try to push our advertising efforts in this case. And note this as you start to put this together, march, April, may, June, for these folks, this is so low because of the pandemic.
These sorts of numbers don't come along all the time. And you can start to see the influence on paid and what we're having to do in order to start to create some of this revenue in later months when the demand is in as high. So this is non-standard. And as you start to see what I put together for twenty, 20 one, we're going to have a more consistent percentage of ad revenue, total spend.
Here's that gross margin or gross profit margin number that we started to take a look at. Let's say this advertising makes up 60% your costs are not advertising. Sorry, anything outside of advertising makes up 60% of your cost. This is what's left over. And then I subtract it out. Page spend here. We'll take a look at the full sheet. But note that that is how that works. So from a net margin perspective, this is what this business is left with after everything.
And really, it's up to you guys on how healthy. This is for you, for this business. I'm marking it as a 25% net margin, all in, which is incredibly healthy. But it does give us some looking at net profit. It does give us about six months of run rate. And that's probably what I would keep for you guys, is, what are my expenses? What does it cost to cover six months of them? And even in a single month, what does that really look like?
Am I covered and am I growing? So take a look at that. What I'll use for 2021 is going to be this net margin number at 25% So how do you create a roadmap? I'm going to do a little bit of the legwork for you, but for you determine what your acceptable level of margin is for growth. If you have higher LTV, you can accept more risk generally and we'll talk about that, determine your starting budget.
And let's take a look at advertising blitz and return on aspinall's. So this is really small, but this is what you're going to be looking at as you start to determine these numbers. There are some estimates that I'm going to want you guys to take as you put this together. And then there are things that you will do. You want to duplicate out this sample roadmap that I've put together for you here. And then use it on your own. So I have net margin here at 25% As we talked about this estimated spend percentage to Facebook.
I want to spend 70% of my spend on Facebook. And that's historically what they've done. So I'll use that as my base. Same thing for Google and then these will change over time. Note that these roadmaps, you can change them as you see fit based off of his, based off of what actually happens. And I would almost always recommend that you keep some sort of float. So that you can move in and out depending on performance. I very, very much dislike sticking to a standard budget.
If you can move between platforms or you can over overspend in times where you were performing, I highly, highly recommend that. I'm going to start at 30,000 dollars and spend. Because that's where this business was prior in December. And I cut it, I cut it by about 20% Again, that is up to you on how hard do you want to go. But return on ad spend again for us generally is up in the early months and then is an ad spend to total revenue, I have put it.
15% that matches back to go back. This chart right here. So margin is 25 advertising spend total rose 15% fairly consistent. And again, LTV considerations as we start to put this together, this is just a sample of LTV, but if you're LTV is sorry if your first order is $66 but your lifetime value is 150 one, then you're going to have much, much more room to work on a month to month basis because a lot of your advertising is going to take place outside of your core.
I highly recommend looking at acquiring first customers or prospecting heavily with most of our campaigns where about 80, 20 or higher on prospecting and leave a lot of room for back in aps. Your email marketing campaigns like laveaux to do a lot of the back work off the front end. I would lean very heavily on the Facebook side into prospecting campaigns.
You're looking like audiences, of course, your affinity audiences. And then on the Google side, one place where you can get tripped up and I would highly recommend would be to turn on what I looking for here to turn on a new user acquisition for Google Shopping campaigns, for smart shopping campaigns, because it'll literally try to find new users rather than just being an aggregate of new and recurring.
So those are little I think that's out of beta at this point. But you want to lean into things like that. So as we start to see it, how do we adjust? And the way to do this is to start to compare the roadmap to actual results. Again, this will be in the sample. We'll take a look at the sample as a whole after I make it through this and after I stop screen sharing or stop sharing this presentation.
But as you look at it here, the results here are very, very close to actual. And again, this is a dumbed, but it is very, very close. I like to do comparisons. We overspent on Google here. We underspent on Facebook for January, but our total page spend total revenue to zero, as was just about where we wanted it to be in our project against our projections.
Now, interestingly enough, if you look at this as a whole, even though we were down just a little bit on page of the business, actually made more money. This says that you did this business did exactly what they should have in terms of other programs outside of our efforts. And you should always be pushing on that, always try to build business outside of just paid and very, very much disliked.
When this total percentage of ad revenue gets to like 80% or 90% It's just not it's not sustainable long term. So make sure that you are differing out your advertising platforms or your marketing platforms. So in general, what this does is since this business over performed, our percentage of total revenue went down and it allows us to spend more in places where we might want to down the road.
I mean, we have an extra float here of 10 percent, about $8,000. So know we can pick and choose where we want to put those dollars. But I almost always recommend that we reinvest. If you're this close to your actual targets, you can also see what happens in February. But in general, this is a very good month for these folks. So add like I just talked about, keep a comparison of your actual performance, maintain a marketing calendar, please, please maintain a marketing calendar.
It is very hard to see and really easy to overestimate the effects of paid. If you aren't monitoring what's happening outside, you have a PR push it. You have a you have a news clipping or you're actually in the news or on a website. And it blows blows you up. A lot of that's going to be taken by the pay channel again over attributing.
And you're really not going to know why or how that's happened in either of your agency. So it is something to watch out for as you start to build. And then as I was talking about, maintain that float and look for below or above average cost per impression. If it is below average, it means the market is going to right for you to expand out. And if you're a smaller business, a lot of the things that you should be keying on are just not just conversion, but also how far you can actually push your audience or push your message in lower CPMS means that you can get it out there where we find a lot of issues as we're starting to put together these roadmaps is for smaller clients.
If you're only spending two or three thousand, a lot of times you want a month, you want to save that your bigger efforts for November and December. But in a lot of times, you can do your best work early in the year because you can push your message. So much further with that limited budget. So just note that it is there, and it is something that you want to qiong it to find out more. Just a little bit about us.
I'm going to walk you through one more time outside of this presentation. I'm going to walk you through the actual chart itself. But if you want to learn more about us, the notes. This presentation are on our site or you can email me directly. You will have that. So here's what this actually looks like as a whole. And you guys will have this. This is the 2020.
This is 2021. You have these stipulations here, little adjustments and recommendations that I would make as I started to do this. I haven't I've changed spend levels or driven the increases by about by 10% or so every month. And then heavier into Q4. I did that based off of what we would deem consistent growth over time.
But what I haven't adjusted our target returns on ad spend in any channel. Right what do we want on facebook? What do we want on google? I kept them in this case fairly low, only because that's what we started to see in December. It's probably going to be a little bit higher than this. But I would rather under attribute than or underestimate than overestimate in this case.
It just makes it a little bit easier for you to actually see what might happen. And then the other thing to note here is and this is going to be a common occurrence for most of you folks. If you had an incredible year outside of advertising during the pandemic and you had these massively high march, April, may, June note, as we kind of come back to earth, net profit, even at a much higher spend rate, is going to be less than what you saw in the prior year.
That can happen to you if you're leaning back on these higher margins. It's really, really tough to get down into these 5% to 10% ranges. So in a lot of cases, you're not going to see that same sort of result. So you have to be careful about it. And again, it does put a lot of effort or a lot of onus on things outside of paid. But if let's say you were driving just by paid based off of where you sit now, this is generally what you would see.
So lots and lots of little things here. And I'm excited to talk about those in the Q&A. But for the most part, this is what you get. And this is where I would start, as I started to take a look at the environment as a whole for a road map. That was awesome.
Thank you so much, Brandon, so much amazing information, so many great takeaways from there. I actually had a really big light bulb moment when you were talking about, you know, small businesses. A lot of the merchants that I work with are smaller businesses who either haven't been around very long or are just starting out. And I love that concept of having that floating budget and keeping an eye on those costs throughout the year, because that's a trend that I see, too.
tend to see these small businesses, you know, focused really hard on black Friday, cyber Monday, putting all of their advertising dollars towards that. This is that's a really great tip that I'm going to take and share with the people that I work with. So thank you for that. We had a ton of really great questions come in through the chat while you were presenting. Are you ready to get into them?
Yeah, let's do it. All right. We are going to start with a question from Hilary. And Hilary asks, any chance you can address concerns on the Apple privacy rollout that may affect sorry, that may decrease Facebook pixels? Yeah and, you know, that is a concern of ours as well. One of the benefits of putting something together like this is you are going to have some sort of baseline to work against.
And what I very much am looking for here for us as an agency is I'm trying to figure out where we sit within the new models. So, again, very much look at a 7 day window. And what that looks like historically and then try to measure the change as you start to get into the new year. Once I say, hey, this is going to flip over, you'll now know, like, OK, this is where we were.
And then you'll have it. You'll have something to compare it to. And I would lean into that heavily. Now, how is it. How does. I don't feel as bad? The one thing that isn't really shared out there is they're still letting you track one thing. As long as even if somebody opts out, you're still able to track one event. That event for most of you guys is going to be purchases. So if I have the start.
And I have the finish, not so bad. So we'll see what the net impact is there. But I was running scared because I didn't think they would have that in target or that an event tracking. But they do. So we'll see. That's great, that's another tidbit for me, I actually hadn't heard that yet, so thank you for sharing. Our next question comes from Jen, who asks, what's a good percentage of product cost to get conversion?
You mentioned that 30% is high. So what should we be shooting for? Yeah, and I wouldn't attribute that to product cost. Try to silo those out into two bundles. So this gross profit margin basically is going to say, hey, this is what I've spent for product, for overhead, for salaries, for everything. And then whatever you have left over, you can start to determine how much you want to put into paid spend.
Right, so in this case, let's say I have a profit margin of 40 percent, 60% went into all of my product cost. You have to say, hey, what am I willing to spend and what do I need to save in terms of net profit to keep the business going? Something if you're very, very healthy, it's going to be sub 10. The norm is somewhere between 10 and 20.
If you're trying to scale 20 and 30, it's good. And then beyond that, I would watch out and especially in this. All right. If you've already busted out 60% of your margin is gone. If you're running plus 30, then you only have a 10% margin left. And if there's changes in any month, that can hurt you. And after the year, we had last year, we know we can expect changes at any time, big time. All right.
Our next question comes from Jared. And Jared asks, do you have any guides to build a dashboard in Google data studio? So I don't specifically for you guys, but I very much would recommend is to use super metrics. I love super metrics as a base for me. I'm not so much the visual person.
I like to look at spreadsheets like this. So I use super metrics for Google Sheets. But if you're looking for a great dashboard that you can modify super metrics for Google Data Studio is a very good one. One thing that you'll find it's really hard to find is, how do I get this all on page or how do I get a template that can do it? Most of your data aggregators or analytics tools are going to allow you to do it.
So it is in the beginning, you're going to have to use something like this. Great, thank you. Another one from Jared, how do you put all of the Facebook and Google info into the Google sheet? This one I've done manually. One thing that Facebook has. And I really, really like is, is there Google or is there Facebook reporting to you?
And it allows you to kind of dig through if you're just in platform and you see it here, I'll use these guys it as an example because, one, they're long term flyovers. But this is just one campaign. If you're trying to find this month to month, you can find it in the reporting there. But you can also take a look at a month to month basis, literally by just doing a breakdown by month. So literally what I'm doing is I'm taking each of these numbers and I'm dumping them into here.
Super metrics, again, is a great tool to aggregate and pull these things. But if you have to do it manually, the platform has it there for you. Again, it's just breakdown time by month. OK, thank you. All right, here is a great question from Alan. What would you recommend as a must do step for a newbie venturing into advertising?
Oh, man, this is the step, right? You have to have a hold on. What what your budgets are going to be, what your margins are and what your inventory looks like where we really struggle. And a lot of cases, as an agency is let's say we've built a business in the first two or three months off of a certain product, and that product is done incredibly well.
The pixel itself on the Facebook side and on the Google side are King very much in on that product. And all of a sudden, it's gone. When that happens, the data goes insane. And a lot of times we see our returns on and spends on both platforms just krater. So be very, very, very cognizant of the inventory that you hold and try to measure that over time.
Right what you think you're going to project in terms of revenue. Be careful of overstock's and understocked, but getting a hold of all of the back in business metrics is almost more important than, you know, that advertising itself. And in that step of making sure you're set up for success right away, right? Yes, please love that this one kind of in the same vein and would be a great answer for someone who is a new merchant, who are who's just getting into advertising.
And the question is, where did it go? Sorry all right, I'll come back to that one. I will find it. Here's a great one from Abel. What's a healthy marketing budget?
So percentage of revenue for businesses under one, two or three million? Hard question to answer because there's a lot that goes into that. Again, what I really like to get a hold of, if I was going to answer that question, the things that I would be looking at would be what's your margin is what your LTV is and what you're kind of affinity for.
Growth generally is there's another sheet that I haven't included here that starts to talk about the pacing of growth based off of LTV. And I'll pull that in just so you can kind of see how we think about it. That was not it. This is it. So same sort of concept here. And this is kind of just as an aside. But what we're really looking for is, you know, what is overhead, what is our repeat customer rate?
How many people how often do those repeat customers buy? What we're trying to say is see is, can we get down to a percentage that really makes sense. In this case, these folks ran below, below, profitable even, and they didn't know it. But off the back with their LTV, they are actually profitable in every month. What we said is, how far can we take them?
And we do this sort of modeling and projections for lots of folks. But you'll see here, you know, we're measuring rate of decay, we're measuring rate of rate of growth and really trying to get you to a zero point almost in that first month. I'm all I'm of the mindset for heavy, heavy growth underneath I and you can get to those points where, from an advertising perspective, you're getting to truly one to one and the rest of your dollars are coming through LTV.
You can build a base like that. And grow that way. If not, and you're kind of a more traditional, more standard business in a million a year. You know, let's just do the math. 12 months, you're making 83,000 and r��ve, if you want to keep that somewhere in this 20% range, 20% to 30% And You're looking at something like 16,000 a month, 15 or 16, and that's where I would start.
And build from there, that would be healthy at a million range, but always do it. I mean, mathematically is the easiest way to see it. So use those kind of flows. Thanks for breaking that down. All right. I found the question I was looking for back to New merchants for a minute. How long should we expect to invest in Google and Facebook advertising before seeing a return?
And is it different by platform? It's different platforms, different by type of business. And that's really the key in the kind of business that you guys are creating. And I'll key on that first, because I think that is important as you guys are building business and you're starting out one thing to really notice how to position yourself.
There is such a thing as positioning yourself too broad and too narrow. What we find is that sections or niches and larger businesses do really well. I mean, take urban armored gear, for example. They're massive now. But the way that they built their business is focusing in on a subset of a much larger core. So if you can do that, then it gives you a huge leg up. And different in your different platforms if you are a business.
I have a lot of traffic, a lot of visibility up front. And I'll keep using you as an example for Google, something like rugged cell phone case that is very, very targeted. And you're going to do fairly well, because that's the kind of position that you put yourself in. If you're broader, though, and you still kind of just at larger groups of products like, let's say, athletic, where there are so many merchants out there that you just get worn out from the Google side.
So watch out for that. And if that's the case, then go to Facebook, maybe your products a little bit more visual. Maybe you have something that you can tell users. That's a little bit different. And you can actually get that across in the Facebook visual platform. That's probably where I would lean. So it really, really, really depends on the business where you're putting your bubbs. That makes a lot of sense.
All right, I have another one here from Hillary who asks, do you have KPIs for launching stars for real, as we don't have a follow up on that doing so? Again, it really depends on the kind of store and the kind of margin and the kind of potential growth that you guys are looking for.
And looking at. The KPIs will swing wildly. I will say, if you have a one off product and you know that there is a very little chance of repurchase, then you're going to have to set much larger KPIs in terms of Roe. You just have to because you know that they're not going to come back. I, I generally do not see businesses in the first month or 3, 2 six over, you know, over a1x x you're really, really trying to drive massive growth and you're in a very congested space, it's going to be hard to break out.
And a lot of times you're really just trying to push out of that hole or to drive some sort of early on metric. Now, you can take this incredibly slow. I very much dislike using paid advertising as the core for a new business. If you can do pr, if you can get your name out there and do all those things that come for free, you can set a baseline that you can then use against you can actually pay for your paid advertising.
That way it's hard to do. Just bepaid. Don't try to do it on its own. That very, very rarely works out unless your budgets are massive. That's how I would approach that. I would agree with you, I also give the advice to new merchants just starting out to try looking at some little organic advertising things, you can try start building up that audience and then you have a little bit of data to use when you start going to pay for your ads.
Absolutely all right, our next question comes from Jen, who asks, why start small in Q1 when historically, it's so strong. It's going to be because of volume? Right we would love to get that get even more out there. But from a volume perspective, we just generally don't have it.
The key to it is figuring out when those volume pieces starts to hit. So, for example, this year, we didn't see retailers return really well until the third week ish of January. And if we were to take a look at what happened in 2020 or 2020 19 a year back, well, now 20, 20 a year back, it was a little bit faster.
So we saw early Roe as faster for us, usually in the seven to 10 days in January. And then this year it was more, more so like 18 to 20 days. So that's almost a month loss and it's just kind of hard to see that. And to measure that. So we're building these big baskets month to month to month, but we're really kicking off of what happens on a weekly trend.
That's where we make our adjustments is on a daily to weekly basis, and it's a little bit more granular and harder to see. Thank you. That makes a lot of sense as well. All right. Our next question comes from Max. And max asks, what budget should we allocate for an ad or a marketing agency such as sliced bread? Depends on what you're getting right.
And depends on how you build businesses for us. We very much in the past have siloed on certain services, let's say, for advertising specifically, we've paid for. Well, we've done just the algorithmic side alone as a standalone, and that has a certain cost. We've done a consolidation of algorithmic and creative and that comes across generally.
The rule of thumb is if you're spending anywhere between 50 thousand, you're usually going to be some $50,000 in marketing, usually going to be somewhere to the tune of 20% or less. And then as you start to scale above that, you'll see those numbers start to come down. So it's molar percentage of ads than that's how we run it. All of the agencies and all of our US and all of our competitors generally have a bottom threshold that we hit for us.
We like to set that at $2,000 a month for our retainer only. But you'll find a lot of agents right along that level, even a little bit higher, depending on the services that you get. It's great. Thank you. Another great question here. What are your thoughts on splitting ad budgets between retail channels?
Boo! that is a different story. And a different conversation, but a good one, I very, very much like the retail channel and pushing there. A lot of the success that we've seen from our businesses have been supporting ekom, using it as a higher margin base, using it as a profit base, and then using retail channels as a much larger piece of the pie.
It generally is over time, especially as your brand gain cloud. And then what we do is we support those retail efforts for a lot of larger businesses. What they're going to do is they're going to have systems in place off the back end that measure foot traffic, that measure the amount of sales on a daily, weekly, monthly basis. Not all platforms have them, but they will have some sort of piece of that, even if it's just inventory measurement.
I very, very much would split out some portion of your budget to visibility plays, and that's a really good goal on the Facebook side. And then if you want to get really in depth, you can move into YouTube, you can move into o.t., you can move into your snaps and your Pinterest and your tech docs, all sorts of channels. And we do those. And you can include those here just by adding columns and charts.
But depending on the size of your business, depending on how much you're doing, it could be as much as 80, 90% of your business. If that's what the retail channel does for you, I would keep them siloed in this case. And sometimes you do have to do digital spend on retail business, but keep it off to the side and measure it in a different way. Thank you.
Now, there's a question here from Ronan who asks your chart seemed to suggest that the reliance on social advertising is growing and performing at a higher ahli than Google at the moment. So would you recommend allocating a greater portion of budget for product advertising on social versus google? Again, depends on the depends on the product. I will say Google has been catching up with Facebook.
It kind of slipped on this right in the very beginning. Google is keyed on Google. Google crushed us. And then Facebook came out and really expanded their algorithm and then ran the show for a couple of years. But we've started to see Google chip away heavier and heavier into that Facebook budget because the performance. There is continuing to go up. Doesn't look so much like it in the 2020 chart because of what was.
But in general, Google's algorithms and some of the things that they've been able to do with their smart bidding, it's gone incredibly well. So, again, case by case basis, take it based off of the business that you have. You know, there's a huge push still in the smart shopping space. It is an aggregate of those remarketing prospecting, and we know that.
But taking care of your business to, you know, massively new heights. So I would very much follow along that. Let me just follow it up with this. Actually, this. Right here is a platform called Facebook attribution. I want to be careful with this, because this is live, but I love Facebook attribution as a tool.
This is probably going to go away. There is no seven touch win or seven day window in here yet. So once iOS hits, this will go away. And this only goes forward. So if you're going to do this, you got to do it now. But what this takes and what this does is it uses Facebook as the hub. And since we see all of our impressions on Facebook and on the Google side, especially if you're a small business, you're not doing much YouTube, you're not doing much impression based stuff.
So what we do is we force the data into Facebook literally using scripts and daily pulls all found in Facebook, but it gives you a feel for first touch rather than last. Right? this is where your dollars are coming from. And what you can get is some really interesting data. If you're taking a look here at this business. Their conversions are actually coming from Google, and we find this fairly frequently.
And what I do here is I say, OK, well, what percentage of my sales came from google? What percentage of my new sales? Again, first touch came from Facebook and Instagram. And then I try to measure my budgets based off of that. Right, so if I have 80 nine, 43 in ten, you know, we're 99% What is that. 142 And then I'm just dividing out the 89. It's going to be something like 60% or 70% of my budget should actually go to Google because it's over performing as long as the, the ad spend matches that.
So I use this tool. A lot and most folks don't look here and it again, will probably go away. But I would highly, highly recommend that you start getting this app. All right. You heard it here. First, folks, go check out Facebook attribution. All right. We are just a minute over the hour, so we will go ahead and get wrapped up.
Thank you again. So much for your presence today, Brennan, and for all of the knowledge that you shared. For those of you watching us live, you're going to receive an email later today with a link to a recording and a summary of the links we shared in our live chat throughout the session. Please also take a moment to complete the survey in the email. We would love to hear from you, what you're enjoying, what you'd like to see more of, what you'd like to see less of.
We're actually going to continue today's conversation over on the Shopify community forum with the link to follow in our chat. So any questions that didn't get answered? Any remaining questions that you have? Bring it on over there. And I also really highly encourage you to share your thoughts and your stories with your fellow Shopify merchant community. Thank you, everyone, for joining us.
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