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Comment by raiyu | Hacker News Reader

I'm skeptical of articles that talk about how well they did something but don't provide the actual numbers.

There is no mention of actual ROI, conversions, traffic, and so forth.

Overall, I'm pretty skeptical of the true return that marketing campaigns can generate. When you calculate the full cost not just of the marketing but you include margins and the full lifetime value of the customer then you get a real sense.

The thing that stood out to me is the first sentence, that the person had an unlimited budget. With that in mind, basically makes me believe they weren't that focused on the true profitability of the spend.

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You noted a few interesting things that I wanted to call out as a marketer, like budget.

No one has a $3m Google Ads budget for something that doesn't work already. I've run campaigns for brands that lead the market and for new businesses that have no brand recognition at all--the difference is night and day. Should founders run to Gmail ads because of this? Probably not.

Assuming the campaigns are still profitable, doubling the budget is great. I hope they really did well. But what does this really tell us? What can a startup or small business founder learn from this? Not much.

There is some evidence that big companies (e.g. Ebay) were not wisely spending millions of dollars on Google search ads.

Blake, Nosko & Tadelis, 2015. "Consumer Heterogeneity and Paid Search Effectiveness: A Large‐Scale Field Experiment," Econometrica.

https://econpapers.repec.org/paper/nbrnberwo/20171.htm

I'm sure the landscape has changed since then in terms of there being more accountability (better tools to measure things like ROAI and mgmt demanding stronger evidence of marketing efficacy).

I can assure you there's companies that spend a millions on ads with no idea what they are doing. In-fact there are products within business units, within large enterprises that spend >$1M per quarter, where the segment itself may spend $5M+/Quarter, easily.

The agency that runs the programs the the only people that win - after they pocket their 5+% commission.

Source: past roles where I saw a lot of people who do not know wtf they are doing with ads (yet they themselves are making 6 figures)

I originally had more nuance in my comment but wanted to keep it simple. In my experience, companies like the ones you describe have a really strong brand (so large volume of branded search) and/or really strong other channels, like SEO. At that point, paid search is a piece of the overall ROI (serving market share or other strategic objectives) and not channel-specific.

Adding even more nuance, that really only describes successful companies. Failing companies _think_ they are profitable, until they quickly aren't. Your experience is very similar to my own. You're 100% right.

Author here and I think you're spot on! We had a tight focus on ROAS and overall profitability for those campaigns, and optimized based on that. Sure, there are companies that can waste millions of dollars on ad spend, but the company I worked with was heavily invested in making paid ads work and had the right feedback loops in place to ensure we were making the right decisions.

How did you approach incrementality? I have some experience in this area, and get frustrated when marketers talk in terms of ROAS/ROI, without discussing the return compared to other options.

The ultimate goal of the marketer is to use the most effective, scalable channels. The optimization isn't against a fixed goal (CPA), but against the entire universe of ways to spend each marketing dollar.

If you're running $6MM in ads, you're spending $500k+ on brand lift and similar studies that give you answers.

Not all the time. A previous employer was spending around $350k/mo (for 2+ years) and did no verification outside of ROAS and what Marin told them.

A worthwhile question whenever a marketer is talking about marketing: Is this mainly self-marketing? If so it's worth treating with the same skepticism that you'd use with any other advertisement.

Hey there, thanks for your comment! You're totally right to be skeptical. I didn't include any numbers on ROI for 2 reasons:

- This was my previous job, and I don't have the data anymore :) - I don't want to reveal numbers that could harm that company or inform their competitors.

I will say I was 100% focused on profitability. I'd be a pretty shitty marketer if I doubled spend without focusing on profit.

If you were focused on profitability, you wouldn't run Target CPA. Your marginal cost per action is going to be much higher than the target CPA, making your marginal acquisitions unprofitable, lowering your total profit. That's in the best case, if you have unlimited budget. In the unlimited budget case, Google is at least incentivized to bid on the lowest CPA users first. In the constrained budget setting, they can give you absolute garbage, and it's no skin off their backs. It's even worse if not all of the actions are incremental, which for an established company with unlimited budget is guaranteed.

The past few years, Google has been adding features that make absolutely no economic sense (assuming rational firms), but assuming that most of their clients are unsophisticated and then taking advantage of them has no doubt earned some Google Ads PMs huge bonuses.

Thanks for sharing your thoughts! That hasn't been my experience, target CPA was absolutely the driver of both volume and profitability for that business. You have to know how to work the algorithm and feed it the correct data. I was doing thousands of conversions a day so we had scale in our favor. If you're not careful tCPA can spend a lot of money for sure. YMMV though.

This is a basic application of the mean value theorem. Moreover, assuming 100% incrementality is what leads marketers to do silly throw money away things like Mailgun bidding on "mailgun" even though all the links on the first page of results are already to pages Mailgun controls.

Actually, that's not always that silly - if you have a structured campaign that uses ads to send people searching for specific things to the parts of your funnel you have optimized for them you can increase conversions and have a good ROAS even over the same keyword performance organically. It can totally be worth it to do.

Yes, but they crushed it. How much more quantitative could you get? A task is either crushed, or not crushed.

Relevant video https://www.youtube.com/watch?v=d2BuP7-m5Ww

Actually it either crushed (or in the act of being) or pivoted. No one ever explicitly fails at crushing it in the instagram world.

But without the author opening to kimono-box, the ad remains both crushed and uncrushed. Open the box and the schrödinger waveform collapses onto one or the other.

I’m generally skeptical of content marketing that is mostly comprised of vague self-praise. I don’t know why this is on the HN front page. Though I guess arguably that’s a point in favor of their marketing competence.

I'd guess it's on the HN front page because people were curious about someone who could afford to spend 6 million dollars on ads in a single year.

My first thought was not "I was in charge of spending my employer's money on ads", it was "I was spending my money on ads".

Yeah, the whole article is pretty sketch. Almost feels like astroturfing. Unlimited budget. Oh but also have to be profitable. Yeah, pick one.

You're right to be skeptical! There's no mystery behind this curtain, just a guy who spent a bunch of money on advertising and wanted to write about it. My unlimited budget was strictly tied to profitability. Being profitable was the only way to scale because I had to maintain certain margins. If I hit the right margin, I could spend as much money as I wanted because the supply was there. Thanks for your comment!

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