Many of you will know I co-founded and own half of Glass Elephant, a Digital Agency. As the largest B2C 3pl in NZ now (3rd or 4th largest B2B 3PL) I felt jumping into this was a good investment for SCS clients wanting to improve their online sales channels but didn’t know how. It’s a new world, a new language.
We launched in 2020 and it’s been a roller-coaster, lot’s of ups and downs, the ups were we caught a wave boosted by covid and we built literally, dozens of 6, 7 and a couple of 8-figure (net profit) businesses in 2020. GE made a 7 figure NP in our first year of operation because so much of what we touched turned to gold and bringing logistics discipline and process management to the ad world has been a game changer. Off that success I launched SCS Global, now operating in 6 countries (USA, Canada, UK, Europe, Australia, of course, our home town New Zealand!!).
It’s been incredibly satisfying and validating to see how well our SCS NZ technology, culture and work ethic translate in international markets. Without exception, our clients are constantly telling me our technology is the best they have ever seen and are in awe of our Kiwi work ethic and integrity.
In April 2021 the world changed, covid was over (for most of the world except NZ and parts of AU) and people started getting off online and going back to work and traditional bricks and mortar retail. In April Apple released iOS 14 and killed FaceBooks’s ability to track consumers. I think this is daft, a lot of people are precious about ‘being tracked’ yet blurt their private details all over the internet, the advantage of being tracked is that advertisers can present relevant ads to users. If you are a bloke and you like cars, people selling car-related items can put them in front of you, now its a crap shoot and you’ll just as likely get an add for women’s hygiene products which to me makes no sense, the reason these platforms are free is they are supported by ad revenue so if you want to use a free platform may as well get offered things that of interest to you.
A key metric in Digital Advertising is called ROAS, which stands for Return On Ad Spend and if you spend 1,000 and you get 3,000 in sales revenue your ROAS is 3.0 (I have ROAS as my licence plate, so if you see it, now you know what it means lol).
In 2020 we were achieving ROAS of between 2 and 6, for most companies a ROAS above 2 means you’ve got a real business, and two things happen, you’re selling so you are acquiring customers and building a database that you can remarket to which is where you make much better returns and build long term stability for your business and in that channel, secondly, you are probably making money, my rule of thumb is you need a GP of 75-90% and a ROAS of 3 and you’re doing well. 3.5-5 and you are printing cash. Some of our clients with unique products earn between 7 and 11 ROAS.
Through to Q3 2022 our ROAS had dropped from 2-6 to around 1.5 to 3.5 for our clients and we were working a LOT harder for it. Out the back of covid we estimated the number of advertisers on FB/IG had tripled so when shopping volumes dropped and Apple killed customer tracking behaviour, well the party was over and the grind set in, and grind we did. We pivoted our Digital Agency 180 degrees, we went from a wide offering to a very narrow one, we dropped most services, retained FB/IG, learnt TikTok and developed a training course, and our fees went from 2-8k/month retainer (plus ad spend) to a minimum of 15k/month (plus ad spend). We simply needed a lot more money to get higher results now. This meant our smaller clients could no longer afford us which gave us the idea for the training course. Before we used to do everything for you now we teach you what to do and you do the work. We’ve had endless exceptional results from this course, we sell the course globally and we sold a version of it to one of the largest e-commerce platform on the planet where it has gained the highest NPS (Net Promoter Score) score ever.
Late last year we started hitting 2020 esk numbers ask, for our largest customers, we had days where we were spending +100k/day and delivering 3-4.5 ROAS. One great story is we lost a huge account early last year, they felt they had outgrown us and went with the two top Digital Agencies in EU and USA. Six months later they asked to come back within a week we had doubled what their previous agencies were doing and over Xmas we blew every budget in every territory around the world they had, to smithereens.
One of the things we try to teach our customers is to not focus purely on Activation (sales) but to spend ad money on Brand. This argument is as old as the hills, the temptation in digital is to tailor ads to activation and because it’s so measurable you develop a false sense of achievement and control. Brands that constantly focus on sales end up fatiguing the brand and creating a sales ceiling. Brand building is black magic, its impossible to know how to attribute this ad spend to future sales income but its critical for the mid to long-term play. I recommend a multimodal approach where 80% of the ad spend is on activation and 20% is on brand, most of the new millionaires we create turn this down as they suffer from hubris, and invariably they end up revenue limited. The clients who invest in the brand alongside activation eventually win the long play and keep growing. We have one client we support globally that is getting ROAS of 11 using a pure brand-led play, it’s really clever. We teach you all about this in our e-commerce course, and connect you with other participants here and around the world where we share experiences to keep current, the biggest advantage of the course is the Agency lives between the bleeding and the cutting edge and we pipe this IP into the course in real-time, people waiting for info to trickle down from the proven cutting edge strategies are too late. If you’re interested drop me a line at firstname.lastname@example.org and I’ll hook you up for a sales call with Simo (my partner) he’ll explain the costs, and guarantee, we offer a 100% money-back guarantee but we need to assess you first to ensure we feel you’ll benefit from the IP, which involves spending time putting key actions and learnings into practice.
These two articles from Meta are well worth a read.