MBA2030 Q&A Wednesday: I’ve had no luck with paid ads. Should I just stop wasting my money?

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It feels good to save big. It feels good to Geico. I want to start today's episode. My answer to today's Q and A Wednesday's question from Roberto about running paid ads. He's been running him for eight months. No luck. Feels like he's wasting his money. Should he quit? I want to start by saying that not every product or service is actually suitable for paid advertising. Especially if you're a small business or a startup, you have limited marketing dollars. If you're not backed with millions and millions of dollars. Some businesses are just not meant to be using paid marketing. It's not a really good avenue. You're not going to get a good bang for your buck. And I'll explain. And it all has to do with your deal size. This means how much money your customer spends on your business. Right? Or in your business. For example, if you're like Roberto and you run a software company and let's say his software is inexpensive, it's $20 a month and the average customer stays 10 months. That means the lifetime value of Roberto's customer is $200. This means if it costs Roberto more than $200 to acquire this customer, it's going to be really hard for them to make sense of paid ads. In fact, a lot of people don't think you should get into paid ads unless you're making at least double your investment. Meaning if you're spending 100 and the lifetime value is 200. So you need to understand that the lifetime value, the deal size of your customer, really matters. And the higher the deal size, the more the deal size, the easier it is for you to run paid ads. This is particularly important with platforms that are getting expensive. LinkedIn is expensive. Many high profile marketers don't believe you should even invest or Even look at LinkedIn ads if your deal size or your lifetime value is less than $5,000. That's how expensive the ads can be. Now you might be thinking, wow, is it that expensive to run ads? Well, to run the ad, it's not expensive, as I'm sure Roberto has found out. Facebook will run your ad as much as you, but it's the conversion. How many people need to see this ad in order for them to actually, eventually buy? It also depends on the niche you're in, the market you're in. Some markets are highly, highly competitive when it comes to paid marketing. It's super noisy. Everybody's dumping money, everybody's running ads. So it's really hard because you're all competing for the same eyeballs and therefore the price of the ad goes up. But let's say, for example, you're in a niche that nobody's running ads. You might find it a lot easier to run ads and get conversions because it's not so cutthroat and competitive. So I wanted to make sure that's super clear at the start. Now, Roberto has been running ads for eight months and has not seen a return on investment. My advice to Roberto is definitely to stop. Okay, to pause for a moment actually, and reevaluate what's going on. If you are actually getting conversions from the ad, meaning people are actually buying, then you need to really work on where can you improve your roi. And one of the easiest ways to do this is to improve your conversion rate. So people can manipulate their conversion rates or change their conversion rates by improving their ads, by improving their offer, by improving their landing pages, so that when somebody actually clicks on the ad and goes to your site, it actually does convert. So you're not wasting dollars. The other thing you need to review is actually the type of ad you're running. Like, for example, Facebook offers different types of ads, like where you can collect the lead right inside of Facebook so they don't leave Facebook. A lot of people have found that this is quite a great avenue because then they can grab the lead, put them in their email marketing and nurture them there. And it gets their cost per lead quite low. It's a longer funnel. And remember, the longer your funnel, the riskier it is. But you do low your cost per acquisition. That way, take a look at the buyer's journey, look at how your customers actually become customers, and see if you can cut out some steps to improve your conversions. For example, if you have a product that has a free plan or something like that, so you drive traffic to your site so they can sign up for a free plan, and then from the free plan, they convert into a paid customer, you might think that this is lowering your cost per conversion and this is going to be a good play for you. But test that against maybe a free trial with a credit card on file. You might get a higher caliber customer. That's serious. And the conversion rate from trial to paid will be much higher. Don't be afraid to be wrong and say, hey, my free trial or my free plan didn't work. I need to change it to something else. Now. I want to give Roberto some alternatives. If he doesn't want to do paid ads, if he optimizes pages, optimizes his ads, and he's still not getting the conversions he's looking for or the return on investment that he's hoping for. Here's my thoughts on this, and I'm really bullish on this. Okay? Paid advertising is just one way to get a customer by paying for it. A lot of people think that's the only way to get a customer, no? How much money are you spending on ads every single month? Let's say you're spending $5,000 every single month on Facebook and Instagram ads and Google Ads and all that stuff. That's $5,000 that you can use somewhere else. There's an opportunity cost here. What if you invested that $5,000 a month on building a crazy, valuable, amazing YouTube channel where you hire somebody to create incredible videos for you and you play the YouTube SEO game, where you get customers, mind you, evergreen customers because the traffic is evergreen, because the videos don't go anywhere. And you create this asset for your business over time. Remember, when you're running paid ads, you're borrowing an audience from Facebook or from whatever platform you're using. And once you stop paying, that audience is gone. But when you build an asset like a podcast or a YouTube channel or something like that, those videos, that channel, that show it lives on and serves you for years to come. How else can you deploy those resources, that $5,000 or whatever budget you're spending on paid ads to get you some traffic, to get your customers interested in what you have? And the reason why I'm so bullish on investing in content is that it's not Push. It's pull marketing. What do I mean by that? Push marketing is that you're pushing ads in people's faces. You're saying, look at this, look at that. Buy my thing. That's far less effective than pull marketing, meaning that people are coming to you. When somebody searches on YouTube for the keywords that you specialize in, they're going to find your videos. They're going to be coming to you to learn about your product. This is why people that invest also in their own blog and SEO for their website really win. Because when people search on Google, they find their blog posts or find their website. So take a look at content and SEO as an investment instead of marketing. You might be spending your dollars in a better way for your business with these avenues. Thy ticket lady, Jennifer of Coolidge. Well, many thanks, good sir. Here is my Discover card. They accept Discover at Renaissance Fairs?

Yeah, they do here. Discover is accepted at the places I love to shop. Get it with the times.

With the times. You're playing the loot.

Yeah, and it sounds pretty good, right? Discover is accepted at 99% of places that take credit cards nationwide, based on the February 2025 Nielsen report.

To wrap up today's lesson and today's question from Roberto. I know that paid ads can be frustrating. I spent hundreds of thousands of dollars on paid ads, and a lot of that money did not get me a return on investment because I was learning I wasted money through process. But I have to say that if it's not converting for you, if it's not clearly working for you, you should stop. Okay? Because that's money that you're not going to get back. I've never regretted spending money on content, on SEO, on valuable information that I can produce media. This is something that will live on forever and serve me and my customers forever. So consider that as an alternative to paid marketing. Thanks so much for listening to the $100 MBA show. If you got a question you want to ask, we can answer it right here, just like we did today on Q and A Wednesday. Just email me over at omar@100mba.net and make sure you hit subscribe on your favorite podcast app so you don't miss an episode and get access to over 2,000 business lessons in our archives. Hit subscribe or follow or whatever it says on your favorite podcast app to make sure you get the show. Also, while you're at it, leave us a rating and review. It's the best way to support the show because you tell other people why you love our podcast and what you get out of it. Thank you in advance for doing that. Before I go, I want to leave you with this. Some of the best companies spend minimal money on advertising, like Basecamp or Wistia or big companies like Tesla, who don't spend a dime on paid advertising. It doesn't mean they don't spend money on marketing. Elon spends time on Twitter. That's marketing. They do these big events and these launches. That's marketing. They do referral marketing or they did it for a very long time, where if you refer somebody with your referral code, you get something like free charging for a year or something like that, and the person that uses the code gets something similar. That's referral marketing. Paid marketing is not the only way to market. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care. Of.

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