Many new projects were taken by surprise in the fourth quarter. Everywhere entrepreneurs could read that e-commerce is growing and that it’s the ideal time to begin doing business online… And then came disappointment! Most of these projects are new brands relying on PPC advertising for acquisitions. That’s a mistake!
Prices for PPC ads, for instance FB ads, rapidly grew. We are talking about a 30 – 50% increase. When the CPM (price per 1,000 impressions) is about 50% higher while all the other metrics remain the same, then that alone pushes up the cost of acquisition by 50%! But what about new projects that usually have limited budgets? For the FB advertising to be efficient it is necessary to have a sufficient budget. The ad group must be able to gain at least 25 conversions a week, but ideally 50. So when impressions decrease by 50% but you have the same budget, it is much harder to collect the conversions.
COVID built entry barriers. How?
Many entrepreneurs believe there are no barriers to entering the online market. That’s an incorrect assumption. There were barriers even before the coronavirus crisis… Only most new entrepreneurs cannot identify them, not to mention overcome them.
The online market is already quite saturated. You will have to compete for customers’ attention. It will not be enough to set up PPC advertising and expect people to come running. Such projects are an exception to the rule and usually do not even need any PPC to succeed.
Many projects are built on using only one acquisition channel. But that’s a big mistake, as you can read in another article on this site. Because your business can end overnight and there will be nothing you can do about it.
Every project also has its own special risks depending on the segment. Not to mention risks associated with expansion. That’s worth another article.
Advice in conclusion: To avoid the above-mentioned problems make sure to map not only the risks, but also come up with a strategy to achieve your sales plans under various scenarios. It can save your business.
Photo: Mikael Blomkvist