How to Maximize ROI on Your Early Paid Advertising Efforts
November 9, 2023
So, you want to use paid advertisements for your early-stage B2B startup to drive user sign-ups or contact sales. Your company has little to no experience with paid campaigns, and you’re reluctant to spend money on something that might not work. Whether you’re considering your first paid campaign or have launched a few campaigns with underwhelming results, this article will lay the groundwork for what you’ll need to be effective going forward.
In this guide we’ll focus on the nuances of initiating paid advertising for early-stage B2B startups. We’ll look at setting an adequate budget and the need for cross-functional support encompassing design, content, engineering, security, and legal considerations. We’ll explore the essential tools, including web analytics, UTM parameters, platform integrations, and approaches like remarketing and lookalike audiences. For goal setting, we’ll touch on the importance of experimentation and using industry benchmarks as guiding metrics. We’ll also touch on understanding and calculating Return on Ad Spend (ROAS) as a metric for scaling the advertising program.
My experience with paid advertising is diverse, ranging from managing the initial campaigns for early-stage startups on a tight budget to overseeing mature demand generation teams with annual budgets in the millions. Those two scenarios are significantly different. In this article, I’ll concentrate on the early stages of paid advertising, highlighting essential components to ensure efficient use of limited resources.
If you plan on using an external agency for your digital advertising efforts, this article has plenty of insights that will be helpful. While an agency can do a lot of the heavy lifting for you, they are not a turn-key solution. I would view an agency as a partner in an effort that requires ongoing input and feedback to be effective.
Lastly, a disclaimer: If you have any reservations about running paid ads to developers, get over it! A common misconception is that developers hate ads and advertising to them doesn’t work. Simply put: EVERYONE hates useless/deceptive/abusive ads. EVERYONE hates being bombarded with spam. The quality of your campaigns will be the primary gauge to the success of your efforts. With that out of the way, let’s dive right in!
If you’re running ads for the first time, your goal is to learn, iterate, and scale up where the opportunity is the greatest. While you shouldn’t splurge and waste money, you will need a sufficient budget to see results in a timely manner.
$5-10k per month across 2-3 channels is a reasonable budget at the start. This should give you enough room to try different audience targeting options and ad content while providing the volume of traffic for statistically significant results. This budget range is also in line with the monthly minimums that some smaller agencies will require to support your paid campaigns.
Like a lot of efforts in marketing, paid campaigns are a team sport. Design and content are at the core of your ads, and in most cases these are the responsibilities of two different people. Assuming you’re doing the content, you’ll need to either leverage existing assets or require design support to create new assets.
In order to monitor and optimize your campaigns, you’ll likely need engineering support to build new landing pages, integrate analytics and send key events from your website or product to the advertising platforms (more on that later).
Don’t overlook the security and legal considerations. Any new tracking tool installed on your website or in your product creates a potential security vulnerability, albeit in most cases the risk is very low. Conducting a security review gives you one less thing to worry about.
Some platforms allow you to upload first-party PII data so you can target your existing customers or find look-a-like audiences. While this is a very effective approach, you’ll want a legal review of the platform’s data sharing policies to make sure you are operating within the bounds of regional privacy regulations and your own terms of service.
Tools of the Trade
All major advertising platforms provide analytics to monitor campaign performance on their platforms. Since your goal is to bring visitors to your website or product, you’ll need to be able to analyze user behavior off of these platforms as well. Most early stage companies have analytics tools instrumented within the product early on to help improve product usability. Often this translates to the same analytics tool being used on the website.
Unlike most product analytics tools, web-specific tools primarily focus on how visitors find and interact with your website, highlighting overall trends and include demographics data about your audience; all critical information to help you monitor and improve your paid campaigns. If you don’t have a web-analytics tool installed on your website, use Google Analytics; it’s free, it’s standard, and it will give you all of the insights you need to monitor and improve your campaigns.
This example shows the default Landing Pages report in the latest version of Google Analytics (GA4). By default, GA4 provides detailed information on user behavior based on page location and where they came from (source/medium). Since Conversions and Total revenue metrics are unique to each business, these metrics need to be manually configured within your account.
Almost all analytics platforms will capture the source and medium of your traffic. For example, if you’re running an ad on LinkedIn, by default, the source/medium will show up as linkedin/cpc. If you’re running multiple ads on the same platform, you’ll want to use UTM parameters on the links in your ads. Here’s an example of a link with UTM parameters (the part in bold):
With the UTM parameters above, you’d be able to separate the traffic by the campaign name, while still being able to group all of your paid LinkedIn efforts under linkedin/cpc. This will be very helpful for reporting. While UTM parameters allow for additional values beyond source, medium and campaign name, these three parameters are required and, in most cases, is all that you need. Google URL Builder provides a simple interface for adding UTM parameters to your links.
Remarketing is a paid advertising strategy that targets visitors who have visited your website, and serves them your ads on other sites. Remarketing is less expensive than display ads, making it a cost effective strategy for companies of all sizes and stages.
Generally, remarketing is enabled by embedding a third-party tracking script or pixel provided by the advertising platform. Each advertising platform will have detailed instructions on how to implement this.
In general, embedding third-party tracking scripts requires code changes. While trivial for an engineer, for non-engineers this introduces an external dependency. In many cases, leveraging a tag management solution like Google Tag Manager simplifies the process of embedding and managing multiple tracking scripts on a website without requiring code changes for each implementation, meaning you won’t need an engineer’s help everytime you want to add a new third-party tracking script. Initially, adding Google Tag Manager to your website will require engineering support, but it’s a one time effort that is well worth it in the long run.
To further optimize your advertising spend, you’ll want to send conversion events to the associated platform once a visitor has taken a desired action. This is worth some additional detail on how advertising platforms target users.
When you define the audience you want to target with your ads, the platform will find an audience segment that matches your selected criteria and will serve them up your ads. Assuming someone from the group signs up for your product (aka converts), you wouldn’t want to waste money continuing to serve them the same ads. By sending a conversion event to the platform, you are instructing the targeting algorithm to pull the converted user out of your campaign and replace them with someone else with matching criteria.
For one-off integrations, sending conversion events will require engineering support to make code changes, but, again, this is worth the effort as it is a very effective way to optimize your campaign spend.
As you start to scale and have various data sources you need to pull and send data from, you’ll want to implement a tool like Segment. Be warned, while these types of tools make managing multiple data sources easier, they can be complicated to implement and will require ongoing configuration and maintenance.
With the right tools in place, you’re ready to start experimenting! Your ad content will be your control, and the various platforms are the variables you are testing. To get the most accurate results, keep your ads as consistent as possible across each platform. Since each platform has its own requirements, aim for as close as possible to minimize any variance. Don’t let perfect be the enemy of the good.
The next variable you want to control is audience targeting. The goal here is to match the audience criteria as closely as possible across platforms. Be as specific as you can be (e.g. demographics, region, interests, etc.) without making the audience so small that you don’t get results in a timely manner.
Remarketing is a good strategy for finding the same audience across platforms. Remarketing will anonymously target visitors that have previously visited your website. Keep in mind that remarketing only works if the platform that you use can actually “find” the people that you want to retarget. This will require a certain volume of traffic on the properties you own.
Lookalike audiences and customer match targeting are also effective strategies for finding the same audience across platforms. This approach requires you to upload a list of your existing users so the platform can either target the specific customers or find other users with matching criteria. Similar to remarketing, there are certain volume thresholds you need to reach in order to make this approach effective. You’ll also need to consider legal and privacy issues since you’re uploading PII data.
Finally, since each platform has its own data set, you’ll want to add all of the data into a centralized report. Start with a spreadsheet, manually adding the data for each platform you’re using. In time, you can automate the data collection process with a tool like Zapier, and create more visually compelling reports with a data visualization tool like Looker Studio.
This is an example report from Looker Studio. Reports are highly customizable allowing you to pull in multiple data sources for a single report all for free (forever).
A successful paid advertising program relies on setting realistic and revenue-aligned goals against your advertising budget. But in the beginning, when you have little to no historic data to work off of, this can be a recipe for failure and disappointment. So where do you start?
First, you want to set the right expectations. Your first few tests should be considered experiments, and the process is about discovery and learning. Take the time to communicate your approach, review the assets with your stakeholders, and get everyone aligned with the initiative.
With limited or no historical data to reference, use industry benchmarks as your KPIs. Finding the appropriate benchmarks will take a little digging as you need to factor in the platform, your industry, and other factors like the ad type as well.
Wordstream is a quality source of information, and they are referenced across multiple credible sources. In their 2023 report on B2B Paid Advertising Benchmarks, they suggest Google Search Ads to be a top-performing paid advertising channel with click-through rates (CTR) ranging from 6-7% and average cost-per click (CPC) between $2-$4. Compare that to X (formerly known as Twitter 🙄) with an average CTR of 0.86% and CPC of $0.58 and you see the significant difference.
Ultimately, you want to measure your performance based on the benchmarks you realize over time. So your next step is to aggregate all of the data into a spreadsheet and compare results.
The example above shows actual results from the very first paid advertising experiment I ran for a B2B SaaS client. The Budget column shows the planned spend (what we defined at the beginning), and the Actual column keeps track of how much was spent so far. The CTR is derived from Clicks/Impressions and CPC from Actual/Clicks.
These results only tell one side of the story: the quantity of users that came through your ads. Since your goal is to convert visitors outside of the platform, you’ll want to take into consideration the conversion rates on the pages you are sending traffic to to start forecasting the number of new sign-ups or leads you think you can generate. Ultimately you want to understand how much revenue you’re generating from each channel to define your Return on Ad Spend (ROAS).
ROAS refers to the amount of revenue that is earned for every dollar spent on a campaign and is a critical KPI for scaling your program. Similar to other benchmarks, ROAS is specific to the platform, campaign, industry, etc. ROAS can also be impacted by internal factors such as your business development team’s ability to qualify leads or the product’s ability to monetize new users. Calculating and improving your ROAS can be complex. If you want more information on the subject, Neil Patel’s A Complete Guide to Improving ROAS is a great place to start.
This guide outlined a strategic approach to getting started with paid advertising. With a focus on maximizing outcomes while on a budget, we covered the right mix of tools, processes and cross-functional support needed to effectively run your paid campaigns. As you continue to scale up your paid advertising program, a methodical approach, as described in this article, coupled with continuous learning, is the key to maximizing return on investment!