How to Scale Paid Advertising Smart: A Strategic Guide for eCommerce Brands
Scaling paid advertising isn't as simple as allocating more budget to top-performing campaigns. For eCommerce brands doing more than $5M in annual revenue, scaling smart means increasing ad spend while also increasing topline revenue without sacrificing substantial profitability. We're going to break down the nuances of strategic scaling, considerations for certain brands, and common pitfalls to avoid.
What Does Scaling Smart Actually Mean?
It's not rocket science, but smart scaling means the additional ad spend that you're scaling with is incremental. In other words, the additional ad dollars are bringing in additional revenue, not just eating away at your profitability. It's not just about spending more, it's about scaling in a way that supports sustainable growth.
Risks of Scaling Too Fast or Too Slowly
Scaling too fast can lead to bloated budgets, dips in ROAS and MER, and lowered profitability. It can also strain operations and fulfillment teams if they are unprepared to handle additional volume.
Scaling too cautiously can cause missed revenue opportunities. Simply put, it's the opportunity cost of not spending and acquiring potential customers.
It's constantly walking the line of aggressiveness and control and knowing when to lean into each.
Why Platform ROAS Shouldn't Be Your North Star
Platform ROAS - particularly on Meta is often based on modeled data - what the platform thinks it drove. This includes view-through conversion and post-click attribution. Which is okay - Meta does provide value beyond just the click, but it shouldn't be your determining factor of whether to increase overall spend or not.
There are attribution tools like TripleWhale and Kendall that provide third-party attribution, but they have their limitations as well. Plus, some of these tools can be quite pricey.
What is the most reliable signal?
The most reliable signal is topline revenue. It should grow at a similar rate or better with your spend. Example, if you increase media spend by 20%, ideally net sales should increase by 20% (or more) as well. This suggests that the additional investment actually drove additional revenue. For brands in an aggressive growth phase, a slightly reduced MER may be okay, as long as the trade-off of profits for top-line revenue growth is understood.
How to Increase Spend Strategically
Go Gradual - Almost always.
Jumping from $10k/day to $30k/day in spend without testing how that additional spend drives revenue can quickly wreck your efficiency and actually hurt your momentum of increasing sales. Instead:
Increase spend by 15-20%
Hold that spend level for 2-4 weeks
Measure and monitor changes in topline revenue and MER over that time period
If topline revenue grows and MER holds steady or improves, keep scaling
How do you know which platforms to add investment in?
This is where platform ROAS and the third-party attribution platforms can come to use. A good place to start is by putting more investment where your ROAS is best. But here are some additional considerations to keep in mind with various channels:
Google Ads. Evaluate Search Impression Share Lost to Budget. If campaigns are limited by budget and not by rank, simply increasing the budget can boost the revenue from these campaigns. If campaigns are limited by rank, consider changing dropping/increasing target ROAS/CPA respectively - but only if performance justifies the risk of that change.
Facebook and other social platforms. Monitor frequency on new customer optimized campaigns. If frequency is under 3x in the last 7 days, you should feel good about increasing budgets. Once frequency pushes 4x over 7 days, watch for decreases in ROAS. Scalability also depends on the types of audiences in your account. Using narrower interest targeting with limited audience sizes may put a ceiling on your reach and spend than a broader audience strategy. Generally, running a good variety of creative and constantly rotating in new ads, the risks of high frequency and creative fatigue will be lessened.
When Big Leaps Do Make Sense
In certain cases, doubling or tripling spend does make sense for limited periods. A couple good examples:
Major promotions or sales
Product drops with high expected demand
Big events
Essentially, big spend leaps make sense when you know conversion rate will spike.
Other Factors to Weigh
LTV/CAC ratios for subscription and repeat purchase brands
If a brand's average customer buys frequently, whether they purchase on their own accord or on a subscription, you can justify an unprofitable CAC upon first purchase. Particularly if they're looking to grow. Knowing the payback window that it would take to recoup the losses on a first purchase can help adjust your MER targets.
Run Incrementality Tests
If you're unsure whether new spend is actually driving net-new revenue, it's time to run more structured incrementality tests. Check out our blog posts on how to incrementality testing here.
What Else Should Be in Place to Support Scaling?
Scaling your media budgets without the operations to support it is a recipe for disaster. Here's what high-growth brands have locked in:
Creative Development. Constantly testing new ideas and executions to draw interest from the market and maintain/improve performance.
Conversion Rate Optimization. Media gets people in the door, but the website and product merchandising closes the deal. Ensure your site is optimized for mobile most importantly, but is also fast to remove friction during the buying process.
Email & SMS. As traffic volume increases from more media investment, you'll inevitably bring more "maybe later" shoppers. Strong lead capture magnets and email campaigns are critical for re-engaging prospects without paying for another impression on paid media.
Organic and social (nice to have). Not exclusively required to scale, but having a strong brand presence raises trust and can have an indirect positive impact on your ad performance.
Summary
Scaling paid media isn't black and white. It's a mix of art and science that requires the discipline to grow budgets while maintaining control. If you're ready to scale, but don't want to burn budget, follow our measured approach and keep a good pulse on the impact of your media investment on topline revenue.