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How To Work With Your Media Buying Agency On A Performance-Based Model

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By Mustafa Saeed

There’s a hidden back door in the agency world that allows you to avoid retainer fees for a completely performance-based model. Imagine only having to pay your agency for every sale they generate for your business. This is called media buying arbitrage.

Explaining Media Buying Arbitrage

Let’s say you can afford to pay $75 to acquire a customer for your business. This factors in the value you expect to receive from each customer acquired, minus your costs. Whether you’re running ads on Meta, TikTok, Google, Pinterest or elsewhere, the money you pay for every customer acquired will depend on your agency’s performance, your ability to provide them with what is needed to perform, and external factors.

Media buying arbitrage allows you to pay a flat performance fee of $75 for every customer they acquire for you. If the agency isn’t successful in acquiring customers, you pay nothing. If they are successful in achieving profitability—say you’re paying them $75 for every customer acquired, but they’re acquiring customers at $55—they’re able to arbitrage the difference to make their profit and scale volume with the campaign.

Compared To Traditional Agencies

Not having to pay a retainer means having the flexibility to work with multiple agencies at a time. No agency is best at everything—there are so many traffic sources to advertise on—and it’s more common for agencies to have a few core areas of expertise. Being able to work with multiple channel experts as opposed to one that proclaims to be an expert in everything can be a massive advantage.

This lets you test much quicker, allowing you to gain learnings about what messaging, creative, landing pages and traffic sources resonate with your customers and most cost-effectively generate revenue. Being able to rely on multiple traffic sources is another advantage in itself, making you less risk-prone. If one channel goes down, you’ll have multiple others to rely on for consistent revenue.

The static nature of the performance fee can make your business less susceptible to seasonal fluctuations and provide cost consistency related to customer acquisition.

Benefits To The Agency

The agency isn’t necessarily getting the short end of the stick in this arrangement either. Many agencies actually prefer performance-based relationships. For one, they can work with a much larger number of brands. Since they’re only being paid to perform, these agencies test campaigns quickly and often to find their next profitable campaign.

There’s also a mutual responsibility between the brand and agency that’s created with performance-based partnerships. Building a successful agency relationship is a collaborative effort. Your agency will need your help to provide product knowledge, category insights, historical data, decision-making authority and more. When you’re paying several thousand a month in retainer fees, it may feel like the agency is winning in this arrangement no matter how they perform. Accordingly, more of the onus tends to be put on the agency. When it’s performance-based, everyone is incentivized with the goal to generate new customer acquisition.

Limitations To Consider

As quickly as a media buyer can start a campaign, they can end it just as fast, especially if they don’t see a quick path to profitability. Finding partners that will take the time to learn, iterate and test until they reach their winner are hard to come by. Without the cushion of a monthly retainer paying the bills, they can only lose so much of their own money to make your business work.

Test budgets and loss pools are popular ways of mitigating large upfront losses. This consists of paying the agency to cover advertising budgets for initial testing or covering losses up to a pre-agreed-upon amount. This is especially important for traffic sources, landing pages or products that are new or untested. This gives the agency the ability to gather initial data to identify opportunities to optimize and scale the campaign.

Although your agency may be incentivized to generate sales for your business, the quality of those sales should also be taken into account. It’s important to set traffic quality expectations before activating a new agency. This includes continuous monitoring of average order values, order cancellations and adverse customer responses.

How To Leverage Arbitrage Relationships

You can find agencies and media buyers to work with on performance-based networks. Many of these networks are segmented by vertical, with health and wellness, consumer tech and subscription services being popular categories. Some of the more popular networks include Squaredance, Madrivo and GiddyUp.

There are also agencies that will help you to find performance-based partnerships and manage these relationships for you. These often come with a monthly retainer. Nevertheless, working with one of these agencies can allow you to gain access to multiple partners, each with individual channel expertise.

Don’t be afraid to reach out to an agency directly that sparks your interest. You’d be surprised that some agencies would rather take a larger performance fee than a cushy retainer with a percentage of ad spend. If they’re a true channel expert and are confident in your product, the only last piece of the equation is you being a good partner to them.

Feature Image Credit: getty

By Mustafa Saeed

Co-Founder & Growth Chief at Paul Street. Read Mustafa Saeed’s full executive profile here.

Follow me on Twitter or LinkedIn. Check out my website.

Sourced from Forbes

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I made nearly $1 million in revenue my first year on Etsy. Here’s how I did it and my best tips for shop owners.

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By Aria Yang

  • Hannah Gardner is an e-commerce entrepreneur who made over $945,000 in her first year on Etsy.
  • She says the easiest Etsy niches are print-on-demand products and small-parcel accessories.
  • Her biggest advice is to set proper expectations for the niche that you’re entering.

When I graduated college in 2018, I never had a regular job. I knew I wanted to be an entrepreneur. Back then, the biggest thing was media buying, like doing Facebook ads, Instagram ads, and Google ads for people. So I started teaching myself by learning from YouTube videos.

When you’re broke, you say yes to everybody. I tried to build a media-buying agency specifically for doctors. I went to every Chamber of Commerce meeting from Miami to West Palm. When it was my time to pitch my services, I was just horrible at it. I did that for two months and ended up getting zero clients in the medical field.

As time went on, I found myself undercharging for my services while overdelivering to my clients, which eventually led to burnout.

One of my clients back then had an Etsy shop, and she was selling products both on an Etsy shop and a Shopify Store. While managing her ads, I discovered that working with Etsy was so much easier than media buying. That’s how I got into the Etsy world.

I wasn’t the standard DIY or handmade crafts Etsy shop owner

I didn’t make crafts or other handmade products — I was the give-me-something-to-sell-and-I-will-sell-it type of Etsy shop owner. I found a production partner online by just a regular Google Search and also hired a designer. I tested out a few partners before settling on one.

Together, we focused on the fast fashion accessory niche. Our manufacturer was in Brazil and we became very close. If we had new designs, we could have the inventory ready within two weeks.

2020 was just this magical year when the business started really pumping. In December 2019, our total revenue got up to $30,000. One of our highest months was actually August 2020 — we did almost $200,000 in total revenue with Etsy and Shopify combined. It was crazy.

I handled every aspect of the business on my own. It wasn’t until I reached my second $200,000 month that I finally decided to hire my first employee.

Print-on-demand is the easiest for new beginners

Print-on-demand service is the easiest niche for new Etsy sellers, then small parcel accessories because the barrier of entry is so low.

In the Etsy world, sellers are more reserved with their funds. So the print-on-demand realm is very appealing to people because you don’t pay for the product until it sells. It mitigates the risk and you can scale very, very fast.

The second best for scaling, I would say, is the small parcel accessory world. Small parcels are items that can be shipped via USPS First Class Mail, which entails 4-7 day shipping. This option is the cheapest for items weighing less than one pound.

Essential tips to start your first-ever Print-on-demand Etsy store 

1. Define your brand 

If you’re starting for the first time, you want to define your brand to make it recognizable. It’s like when you walk into Hollister versus American Eagle, they’re similar, but still different. You want to maintain that level of consistency to be able to build a brand.

What people are kind of doing now, unfortunately, is they’re just coming in and launching random products — nothing’s in sync. We don’t want to do that.

Instead, we want to create a brand identity that can easily translate into Shopify later on. Take into account factors like color schemes, brand identity, and other elements that contribute to a cohesive brand image.

2. Integrate your Etsy shop with tools 

The next thing is integrating tools with your shops, such as Printify, Mydesigns, or Printful, the middleman that connects you to those print providers. For example, when you get an order from your Etsy shop, Printfuls will print it and fulfill it for you. I really like MyDesigns specifically because they can bulk upload a bunch of listings at once.

We also use tools like Canva for design. When it comes to making your designs, you should do research on the market to see what’s selling. We usually type in keywords in the search bar and try to find other listings that have “best seller” badges.

If, for instance, there are 4,000 monthly searches for “Baby Bows,” which is a considerable search volume, it’s important to include “Baby Bows” in your title and create a competitive listing in comparison to the top performers for that keyword.

We then look at those designs and try to figure out how we can improve upon them, or how we can add value to our listings. These people are at the top of these micro niches, but we’re careful not to blatantly copy them.

3. Do a competitor analysis

Etsy launched its own competitor analysis tools, too. One tip is to look at the key attributes of why those listings are the top for that keyword.

You need to analyse the trends they are following, the fonts they are using, whether they say something fun in their listings, the options they offer, their price point, whether they are running daily sales, the number of photos they feature, and the appearance of their mockups.

The common mistakes Print-on-Demand sellers should avoid

One of the biggest mistakes POD people can make is rushing through the launching process, especially if they’re new to design. They might think, “Let me just launch.” But their products are lacking in quality.

Also, a lot of POD sellers fail to establish a functional business model. A lot of people who come to Etsy don’t want to invest a lot of money — they’re just not the biggest risk-takers. When it comes time to scale, they’re so unprepared and they haven’t set up their business model.

A useful approach in this regard is to write out every if-then scenario. After answering a ton of customer service questions with buyers, you should have a lot of data about your customers and be able to list the top 50 most commonly asked questions.

For example, you should know about your fulfilment process, the quality control process for print-on-demand, the design process, research for print-on-demand, the research, and development process, as well as how you determine your priorities and what to design for.

Remember: this is a marathon, not a sprint

The biggest advice I would give to someone who wants to start an Etsy business is to set proper expectations for the niche that you’re entering.

The Etsy online game is all about long-term business building. It’s not a “Get Rich Quick” or “How I can get to 1000 listings in 30 days” kind of story.

The focus is on building scalable systems so your business is constantly growing. The simplest example is with your listings, your launch strategy should be repeatable and consistent from week to week.

By Aria Yang

Sourced from INSIDER

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Digital Advertising Is Overwhelming. Where to Look Next?

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By Anton Volovyk

The rapid start-up of new businesses has led to oversaturation and excessive competition in media buying and digital traffic. In this overwhelming digital landscape, it seems like only ad empires like Google and Amazon are benefiting. Despite Facebook plateauing, and the worst spring for stocks since 2008, new platforms like TikTok are readily taking up market share and consolidating profits, and the ad industry is booming.

It’s no secret that digital advertising is an attention game. However, time spent on social media and on screens has not only peaked but has generally been plateauing since the pandemic. Unfortunately, the reduction of digital traffic isn’t reducing digital advertising, it is having the opposite effect. The digital ad space is becoming even more saturated.

Even though traffic is down, and saturation is up, there are three universal ways for brands to work with their audience, product, and business models to lead the market.

#1 Growing the community

The cheapest and the most effective way to improve your business performance.

Customer retention and loyalty should be primary areas of focus. Depending on the industry, acquiring a new customer may cost 5-25 times more than retaining an existing one. The solution is to retain current customers by building a community around your brand.

The community represents the core of customers who are most interested in your product, are brand ambassadors, and communicate with each other. Communities help foster repeat purchases, improve retention, fix product bugs in real time using direct feedback, distribute brand messages for free, and can offer even more:

  • Communities produce UGC, which may go viral.
  • New customers are more likely to make decisions based on feedback from other users versus marketing messages directly from a company.
  • Communities help people establish strong social bonds based on common interests.
  • Community makes customers feel good, social interaction produces dopamine.
  • Community members are generally very profitable for a company given that they usually have higher LTV (Lifetime Value).

Harley-Davidson and the British cycling brand Rapha are good examples of building a strong community around a product. Both brands have managed to create a club of dedicated and loyal members with a subscription model and benefits like club memberships, sharing experiences, organizing meetings with cycling and motorcycle enthusiasts using the app, drinking coffee at partner points, and even offering bike rentals from their stores.

#2 Integrating growth loops into your product and business model

Marketing tricks that help businesses grow organically.

Since the late 2000s, many innovative companies have been launched (Uber, Airbnb, Spotify, and many others) that soon became leaders in their niches. All of these companies utilized a non-standard marketing approach. They didn’t reject the traditional AARRR Pirate framework (Acquisition, Activation, Retention, Referral, and Revenue). In addition to this more traditional sales funnel, they incorporated growth loops into their business models.

The logic behind a growth loop is that the contribution of each new user should lead to a particular action that positively affects the likelihood of user acquisition. Thus, without additional marketing efforts, the client’s community constantly grows and each client brings in a new one.

The neo banking company Revolut claims to have acquired 4M users through viral growth loops, and the first 1.5 million users were reportedly acquired without spending on advertising. How? Revolut’s Head of Growth for UK/IE calls it an Offline → Online → Offline acquisition loop. Users receive their Revolut card delivery at home, they share the unboxing experience on social media, complete registration, and get rewarded for signing up new users. It is simple but effective.

#3 Analysing and catching global trends ahead of the competition

It’s hard, but it works all the time.

Do you remember the first ad banner? In 1994, at the dawn of digital advertising a little rectangle purchased by AT&T on HotWired hit a record 44% click through rate. Today, the best banners boast much lower rates, generally from 0.39% in Tech to 1.08% in Real Estate for example.

Social media marketing indicators, which performed actively in the mid-2000s, are not representative today. Despite Apple’s iOS privacy changes, US advertisers are estimated to spend over $58B on Facebook advertising in 2022, up 15.5% from last year. But most web users find digital ads too intrusive and annoying.

To catch user attention, brands are hunting for their audience in places where people spend most of their time. According to State of Mobile 2022 data, people are still spending their time on social media with global time spent on social apps reaching 412 billion hours in 2021 (up to 35% from 2018).

In the last few years, advertisers have been using a mobile-first approach in which companies start product design from the mobile end, which is fitting, as mobile has become the priority.

TikTok remains the most downloaded app in the world, allowing users to scroll through a feed of short videos without tapping any buttons. The company has made a breakthrough in mobile consumption, allowing advertisers to get effective campaign results without taking users out of the app.

Trends run out of steam. What’s next?

Today, the web is becoming more interactive. Many tech experts believe we are smoothly moving into the Web 3 phase — the next Internet generation. In the 90s, we just “read” the Internet in its Web 1 form. With the rise of the first social networks in Web 2, users gained more online opportunities. Web 3 heralds the invention of new tools for interaction, and the Metaverse is one of its upcoming trends. A huge number of companies, big and small are now developing tools and technologies that will accelerate web decentralization and allow the introduction of more sales and distribution channels. The creator economy will reach the next level as soon as users, endowed with rights to content, get to the centre of the new web infrastructure.

Thanks to new technologies, the Internet will change, as will advertising.

The full-scale penetration of Metaverse-like experiences and the massive rollout of AR/VR has not yet happened. Still, many tech companies are already working on creating ad opportunities in virtual environments, launching digital clothing brands, hosting virtual shows and exhibitions, and more. For example, this July, India’s largest Food Delivery presented a hyper-localized video campaign on YouTube. This ad featured an actor mentioning the name of the dish, restaurant, and city, which vary from viewer to viewer based on their phone’s GPS.

If there is one thing we can expect from the digital landscape, it is change. No one knows exactly what the future of the Internet will look like, but it will certainly be more immersive and personalized. The new web will affect the whole of advertising, but brands can continue to thrive if they build community, integrate growth loops and keep an eye on the next emergent trend.

Feature Image Credit: Joe Yates

By Anton Volovyk

Anton Volovyk holds an MBA degree from Harvard Business School and a Master in Finance degree from IE Business School. Anton is an expert in app-monetization, business development, and leadership. Before Reface, he worked at the Boston Consulting Group, a global strategy consulting company working with clients across consumer, tech, and media. Prior to BCG, Anton worked in investment banking in the M&A department and Private Equity as a tech and consumer investor.

Sourced from BM

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What is the future of programmatic media buying?

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By Mike Nutley

Programmatic media buying is on the verge of a new era built on collaboration.

This was the key thread in the panel session on the future of programmatic run in association with digital advertising technology provider PubMatic at The Drum’s Agencies 4 Growth Festival. Watch the fascinating panel here.

Although advertising as a whole has been battered by the pandemic, the use of programmatic media buying continues to increase. At the beginning of October, IAB Europe published its 2020 Attitudes to Programmatic survey, which showed that the number of advertisers spending more than 41% of their display budget through programmatic channels had increased from 55% in 2019 to 77% in 2020. Similarly, the number spending more than 41% of their video advertising budget programmatically grew from 50% in 2019 to 54% in 2020.

As programmatic grows, the way it’s being managed continues to change. The IAB survey found that the number of advertisers using hybrid models, where brands bring some elements of programmatic buying in-house, supplemented with agency expertise, had doubled since 2019 to almost a third. In-housing of programmatic, meanwhile, fell from 38% of advertisers in 2019 to 20% in 2020.

Speaking on The Drum panel, Richard Kanolik, programmatic lead at Vodafone, put this change down to the growing level of programmatic expertise. Programmatic used to be a “black box” tended by the agency, he said, but now advertisers want more visibility and control of their media buy, and they can hire in the people to deliver that.

But he argued that there’s still a need for agencies to fill in the gaps.

“Advertisers can underestimate what’s required to bring programmatic in house,” he said. “Hence the hybrid model.”

This view was backed up by Chris Camacho, chief performance officer at Mindshare. He pointed out that in-housing involves more than just a deal with a DSP provider.

“You also need to think about the set-up, data, tools and talent,” he said. “It’s not easy, but with the right infrastructure, the right support and the right agency, it can be done. There’s a lot of value to having a guide.”

Lisa Kalyuzhny, senior director, advertising solutions, EMEA at PubMatic agreed that working together is crucial, both across the business and between the business and its agencies.

“It’s about knowing what your strengths are as a brand, and being able to use the people you have on the ground internally as well the agency, and being able to really collaborate. That’s where we’ve seen the most success,” she said.

But brands and agencies working together isn’t the only form of collaboration that’s changing programmatic buying. Kalyuzhny pointed out that the introduction of header bidding revealed to advertisers that they could be using 20 or 30 different partners to buy the same inventory, and they started asking themselves what the benefit was.

“Supply Path Optimisation has become a catchphrase for many different adtech initiatives. At the core, it’s about buyers understanding and optimising supply. To deliver better media buying and selling strategies, the collaborative relationships and understanding of both buyers’ and sellers’ goals are a must have,” she said. “In digital advertising, brands and publishers are ultimately working towards the same goal: creating a transparent programmatic set-up that optimises consumers’ ad experiences and values inventory at a fair price for all.”

Kanolik argued that programmatic’s transparency problems were self-inflicted, the result of an infant industry prioritising technology and innovation at the expense of clarity. But he also said that buy and sell sides know that transparency is crucial to programmatic maturing as a medium, and that awareness is bringing the two sides together.

“For programmatic to evolve into a trusted medium, transparency is key,” he said. “We’re moving towards that, and it will kick off a new era of programmatic advertising.”

To watch the entire panel discussion on the future of programmatic media buying, presented in partnership with PubMatic, click here.

By Mike Nutley

Sourced from The Drum

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PwC wants in on the agency business, but not media buying

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By Yuyu Chen.

With more than $1 billion in revenue and over 14,000 employees across 32 offices globally, PricewaterhouseCoopers’ digital arm, Digital Services, is encroaching on agency turf through mergers and acquisitions.

Now, the practice is helping clients (it declined to share its client roster) set up trading desks on their own, as more and more brands are planning to bring programmatic in house for more transparency.

But one thing PwC Digital Services doesn’t have an interest in building is its own agency trading desk to run programmatic campaigns for clients.

“Media buying is not the most complex marketing problem that our clients want to solve,” said John Swadener, chief operations officer for PwC Digital Services. “We are working with clients on in-house media, but we don’t want to — and will not — get into media buying.”

For instance, if a software company wants to move programmatic in house, Swadener’s team will help the brand figure out how many people it needs to hire in order to manage the new processing, how to structure the teams, the proper technology platforms and how to implement the technology. The only thing that PwC Digital Services doesn’t do is buy media on behalf of the software client. It’s like buying furniture from IKEA: All the materials come in the box, but there is assembly required.

Swadener thinks that programmatic is like search back in 2000 when there were lots of small independent search agencies, but search gradually became an in-house marketing functionality for most brands.

“If clients pass media buying to us, they will always try to keep the cost down in the future by switching to a different agency,” said Swadener. “So why not just help them build their own trading desk in the first place?”

PwC Digital Services doesn’t plan to acquire media agencies or ad tech firms in the near future. The company, along with other Big Four accounting firms and consultancies, is very focused on digital design and user experience, as evidenced in their mergers and acquisitions.

For example, PwC acquired agency Fluid in February of last year and Deloitte bought Heat around the same time. Accenture snapped up a few shops recently, including Germany digital agency SinnerSchrader last month and U.K. agency Karmarama in November 2016.

All of the above are creative shops that specialize in digital design and web development.

John Kaiser, partner of investment bank DeSilva + Phillips that sold Banyan Branch to Deloitte in 2013, thinks that agencies that understand design, user experience and customer engagement are more valuable to big consulting firms because as the consultancies work with companies in transforming their businesses to be more digital, a key consideration is how companies can improve the experiences customers have with their brands and how companies can attract and retain customers in a digital world.

“Today, at least, media planning and buying is less focused on enhancing the customer experience and more oriented toward automation and efficiency, which is why the consultancies are inclined to not have media in-house,” said Kaiser.

Also, media agencies compete on scale, so it is hard for a new player to enter the market, added Brian Wieser, senior analyst for research firm Pivotal.

Media agency execs aren’t exactly sweating, either. Charles Fiordalis, chief digital officer for agency MediaStorm noted that he has never seen a single consultancy get its hands dirty and actually implement its reports on clients’ digital media systems and strategy.

“Even when consulting firms make recommendations, our clients come to us to help interpret them and to take action,” he said. “If anything, they are a helpful force because they have brilliant people who provide frameworks and assessments we can use to help guide change.”

But things are different on the creative side. In the case of PwC Digital Services, it consults CMOs on brand strategy, market insights and marketing performance, and it executes its suggestions for brands.

For instance, if a client doesn’t generate enough return on investment and Swadener’s team identifies that the reason is the brand’s loyalty program doesn’t drive incremental sales, PwC Digital Services will redesign the client’s loyalty program.

“Of course, the brand can bring our structure analysis to other agencies for execution,” said Swadener. “But if that’s the case, the client will need to start over and bring the new agency partner up to speed.”

By Yuyu Chen

Sourced from DIGIDAY UK

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GroupM’s Brian Lesser: The Nature Of Media Buying Leverage Has Changed For Good

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Sourced from AdExchanger.

Welcome to the first episode of AdExchanger Talks, a new podcast on data-driven marketing. Following this discussion with GroupM’s North America CEO, Brian Lesser, we will publish new episodes twice monthly.

If you need further proof of the big agency holding companies’ seriousness about programmatic advertising, consider the rise of Brian Lesser.

Lesser started his WPP career as an ad tech product guy at 24/7 Real Media, which the holding company bought in 2007. After launching Xaxis and growing it into a $1 billion dollar business, he was promoted to CEO of GroupM North America, one of the biggest jobs in media buying.

“The nature of what GroupM is and does is changing,” Lesser says in this episode. “GroupM is much more reliant on data and technology platforms and automation than it has been in the past.”

He notes that GroupM was set up 13 years ago to create leverage for clients by aggregating their spend for media negotiations. He says leverage still exists today, but it’s more about data and technology.

“Thirteen years ago, the concept of leverage was much different,” he added. “My job is to transform GroupM to be much more about gathering data about consumers, because that’s where our leverage is going to come from in the future. And that’s how we’re going to drive performance for clients.”

For the inaugural episode of our AdExchanger Talks podcast, we’re pleased to share a half-hour conversation in which Lesser answers a range of questions on GroupM’s media buying ethos, agency transparency and the changing programmatic industry.

Sourced from AdExchanger

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