Paid Advertising Challenges and How to Optimize for Efficiency

Vern: (singing) Welcome to another episode of Individuality Unleashed, where we talk all things performance marketing, and brand. Today I'm joined by my good friend Trey Jackson. How you doing, Trey?

Trey Jackson: I'm doing great, Vern. Thanks for having me.

Vern: Absolutely. Do you want to introduce yourself to the folks?

Trey Jackson: Yeah, sure. So my name is Trey Jackson. I am a senior product marketing manager here at Wunderkind. Been here for a little over three years. Originally started working out with our clients, now working on the product marketing team. So think about what type of problems our customers are having all day. So I'm glad I have a captive audience.

Vern: Yes, you do. And the problems that this man solves are just phenomenal. He's adding value to this company day by day, and I'm really excited to bring his expertise and insight to this episode today so you guys can learn just more valuable insights around what you should be doing to drive success for your brand. Trey, today I want to talk about just this interesting topic that I've been doing some research on. I know you certainly have been, but it's what I consider this great migration for DDC brands away from paid channels like Facebook and Google, considering the rise in ad cost and what that means for the industry today. Do you want to talk a little bit about that?

Trey Jackson: Yeah, of course. Definitely top of mind. I mean, I think anytime any of our customers or people in our industry look online, they're seeing all about the different rising costs that you're having on Facebook, Meta's platforms like Facebook and Instagram as well as TikTok, Google CPCs, even Bing. There's just been a real surge in these prices. And I think ultimately I would actually not really consider it a migration, but really just kind of a chance to reassess spend across these channels. I think in the end, Facebook and Instagram and other platforms, like I mentioned, they're all going to be relevant for the future, but there's just kind of a decrease in efficiency, and that's what marketers are trying to figure out. And I think hopefully what we could shed some light on today.

Vern: That's really interesting. And we're already in it. I think I want to just continue to plow forward. What's driving those changes?

Trey Jackson: Yeah. I think it kind of is helpful to take a step back and think about all the things that have changed in the last three years now.

Vern: Sure.

Trey Jackson: So I think starting in 2020, we had this pandemic, which changed the entire world, pushed all these people online even for those who had never really shopped online. So it really changed consumer behavior in multiple ways, especially buying more things online, but also spending more time on their devices. And so that meant that more marketers wanted to meet them there. And so the demand for space on those platforms went up multiples, I think.

Vern: Supply and demand.

Trey Jackson: Supply and demand-

Vern: inaudible.

Trey Jackson: ...basic economics.

Vern: Yeah.

Trey Jackson: And as a result, it became a lot more expensive for marketers to be on those channels.

Vern: Right.

Trey Jackson: And we were actually passing around a really interesting article from Marketing Brew earlier this week that talked about how the cost on Facebook in the early days the pandemic, the cost of advertising went up 50%.

Vern: Wow.

Trey Jackson: And since then, it's really only continued to go up. So it's been a real problem for a lot of our marketers who had entire brands built on this channel. They're just not seeing the efficiency that they once were.

Vern: That's really interesting because I imagine that it's just critically important, especially as we are facing what some are considering the retail recession and rising inflation in a downturn economy, that they ultimately increase efficiency to drive more and better incremental revenue. Just to harp on that just a little bit longer, what should brands be doing and thinking about right now in order to ensure that they're able to drive that additional revenue?

Trey Jackson: Yeah, I think, like I said, I think Facebook and Instagram, those type of platforms are always going to have a place, or at least for the foreseeable future, are going to continue to have a place in acquisition marketing, in performance marketing because they're still great platforms to reach new customers and acquire them. However, I think what a lot of brands are realizing is the growth that you could have driven on those platforms in say 2012 all the way up through 2019, it's just not available at the same price. You would have to spend significantly more to get what you once did. And I think the same article from Marketing Brew talked about how the cost recently is up on Facebook via the CPMs by around 20 to 30%. And then there's an equivalent decrease in the return on ad spend.

Vern: inaudible.

Trey Jackson: So you're paying a lot more for less. So what I think marketers are really doing is just looking across the entire customer journey and looking for more opportunities to invest in performance channels. Because if you're over- indexed on the paid side, especially on the acquisition side, you could be seeing a lot of efficiency problems that are going to make your bottom line hurt and your CFO not happy of saying, " I keep giving you more budget and you're giving me less."

Vern: Right.

Trey Jackson: Like, " Let's come up with something that delivers more with the budget that we have."

Vern: It's phenomenal. No, that's really great insight. And I imagine for our listeners out there, being able to take these key insights and even checking out that article will certainly be helpful in helping them navigate and kind of understand and realize a new strategy for themselves.

Trey Jackson: Yeah.

Vern: Because ultimately, if we are not thinking critically and if we're not as marketers thinking of innovative ways in order to drive revenue, considering what's happening to the economy, considering what's happening in the shifting landscape around CCPA and GDPR, compliance issues, privacy issues, the deprecation of third party cookies, you got to kind of be out of luck.

Trey Jackson: Yeah. And I think on that note, how it's kind of driving change to other platforms. I think all marketers today, everyone today is thinking about TikTok as a really incredible new channel. Kind of like what Instagram was 10 years ago when it became a new platform to discover new things. And of course, wherever there's new consumers, there's going to be new marketers. And I think as also mentioned in the article, TikTok is kind of a really incredible place to drive new discovery. And there are kind of cheaper relative ads that you can deliver on TikTok relative to some of the other platforms that a lot of our customers and people in the retail industry have had a lot of success with.

Vern: TikTok is fun.

Trey Jackson: Yes.

Vern: Your professional opinion, is TikTok a channel that can actually drive real revenue for brands?

Trey Jackson: Yeah, I think it's a really good question, and I think the answer is yes. A lot of brands are building their entire brand on TikTok. Some in the same way we had kind of single channel brands on Facebook and Instagram, we're seeing the same thing with TikTok to really drive, especially early growth. I think the same issue that a lot of brands have with Instagram and Facebook, even back in the day, is that there does reach a peak where if you're not kind of investing throughout the entire customer life cycle throughout, you know, great, you have amazing acquisition marketing, but once people get to your site, you haven't really figured out your opportunity to remarket to people there, you're going to be seeing more and more efficiency losses, in particular as you scale. So if you're really young, yeah, maybe you spend all your time on TikTok, but as you grow as a brand and evolve, you're really going to want to think more about that whole customer funnel and opportunity to unlock new performance channels within it.

Vern: So a great channel to acquire new customers and audiences, not so great in retaining or at least creating opportunities to convert them further down the funnel.

Trey Jackson: Yeah, I think it's all kind of part of the customer funnel and where you're maybe getting net new customers.

Vern: Yeah.

Trey Jackson: But like I said it, I think you want to kind of make sure you're, in a sense, cross- pollinating across different channels and getting them into your owned channels like email and text message marketing, so you can continue to build that relationship. And those are the channels that really we've seen convert people the most efficiently, especially once you've already driven them to your website.

Vern: Yeah. So I was going to ask, so what should a marketer do considering these paid channels aren't performing historically as well as they have in the past? These newer modern channels like TikTok are great for initial acquisition, but certainly not great for long- term success and just furthered LTV.

Trey Jackson: Yeah.

Vern: What should a marketer do? What does that look like to have just a consistent strategy that drives revenue for a brand?

Trey Jackson: Yeah. I think what we're hearing from our customers, for example, we were recently talking with one of our customers, Sarah Pierson at Margaux. She's one of the co- founders of that New York- based shoe brand. And what she was saying, which I think was really insightful, was just reassessing their marketing budget, especially on the pure play acquisition marketing to see are there portions of that budget that they can then reinvest further down into that customer funnel like we've been talking about. And that's part of what actually brought her to Wunderkind, because we're able to help scale that performance on the remarketing side once customers have already made it to your website, and unlock additional revenue opportunities that a lot of people aren't able to get without our partnership or a real scaled owned channel approach. So I really think that there's the heyday of owned marketing channels right now. I think a lot of marketers should spend time making sure that they have a really robust owned channel strategy from their website, their email channel, their text messaging channel, their mobile apps. But then I think it's not just making sure they all look great, have you actually figured out opportunities to scale them to get the revenue that you get from Facebook and Instagram? Because that is the kind of inherent challenge of some of these channels, they don't often scale you would want them to.

Vern: Right. Right. And so a channel. So in looking at and considering channel opportunities, where should marketers look now? What's a specific takeaway or a specific call out that marketers should look at now to help them do exactly what you just laid out?

Trey Jackson: Yeah, I think one of the key things that I know is top of mind for a lot of marketers, is we have a lot of changes in the privacy landscape. So we have the potential ban of cookies. I think it's inevitable from Google, they've pushed back the goalpost, but mark my words, they will one day ban cookies. And that means that there are a lot of the current retargeting efforts that marketers do are based on those cookies. So I think taking a real hard look at your retargeting efforts, your ability to identify customers on your website, and then message to them based on information will, I think for a lot of our customer or not our customers, because this is kind of maybe the key thing that we help with, but for a lot of marketers out there, help them realize where they might have future leakages or even current leakages in their conversion funnel. So I think that's kind of one of the main takeaways. And then also just Facebook and Google and all those platforms, they're not the only way to unlock performance or really acquire new customers at scale. So I think just taking a holistic look and seeing what opportunities do we have to engage customers later down and build our owned channels, is really something all marketers, especially retail marketers should be doing right now.

Vern: That's really good. That's really good. And you may have already hit on this, but those takeaways are really great knowledge, such great understanding, but what words of wisdom would you give to a marketer right now that is looking at the just landscape of all of the opportunities, all of the roads that they could potentially take in order to drive revenue on the bottom line for their business? What's a wise takeaway that folks should take away from our conversation today?

Trey Jackson: Yeah, I mean I can only consider my own wisdom so wise, but-

Vern: It's wise, it's good.

Trey Jackson: I think that it's a really exciting opportunity that we're in. I think it's often daunting to think, wow, what used to work doesn't work the same way that it does now as it did 10 years ago. And that is kind of scary for a lot of brands. And add on top of that, the fact that we're heading into a recession. So I think there's definitely reason to be a little bit maybe anxious about what's to come, but I think there's also another way to look at it, which is we have a new way to grow. We kind of have to throw out the old playbook. And that's exciting. And I think in particular with the growth of owned marketing channels, this is, I think in particular, maybe it's just because that's what my background is in, but I think it is a better way to build relationships with customers and get to know them and make sure you are continually giving something that they want to receive, whether it's content, new products, innovation, whatever it is that your brand is the pillar of your brand. But I think ultimately, my wisdom is just double down on getting to know your customers and operating in the channels that they want. And I think from an owned channel perspective, the growth is unlimited from here on out. So I think it's an exciting time. What do you think, Vern?

Vern: Well, I wasn't expecting you to ask my thoughts, but I'm certainly happy to give them.

Trey Jackson: Yeah.

Vern: I think that your words of wisdom are phenomenal. Now here's why. I actually got goosebumps when he said what he said because it's often missed. Know your customers.

Trey Jackson: Yeah. It's simple.

Vern: Communicate to them where they are.

Trey Jackson: Yeah.

Vern: Like it's not, oh we have to be on TikTok. Oh, we have to be in the metaverse.

Trey Jackson: Right.

Vern: Where are your people and what do they want?

Trey Jackson: Yeah.

Vern: And it's quite simple, but oftentimes as humans we make things more challenging and more than they should be.

Trey Jackson: Yeah. Well, I think it's simple, but it's not easy.

Vern: Yeah, that's good.

Trey Jackson: Which is, I think one of the things about marketing, marketing is simple in a lot of ways, but it's not easy. But yeah, I think there's incredible potential that will continue to be in those platforms where people will spend their time like TikTok, Instagram and Facebook, but we're seeing incredible success with text message marketing, email marketing, even though people are like, " Oh no, email marketing," it's-

Vern: Strange.

Trey Jackson: Yeah. But it's relevant. I might check my email 300 times a day probably.

Vern: Yeah. And it works. And it works and we can prove that it works. And I think one thing that'll be helpful to our listeners, is to understand how they can get in contact with us or with you or with Wunderkind and what resources we have available for them to learn more about performance marketing and performance marketing as a channel.

Trey Jackson: Yeah, I mean I think we produce a lot of great content on performance marketing. And I think even to take a step back and say, how does Wunderkind actually help with this? Because I think we've been dancing around it a little bit.

Vern: A little bit.

Trey Jackson: So we can address it head on. But essentially what Wunderkind does, is we help brands scale their one- to- one messages in the owned channels that we've been talking about, to unlock a new revenue channel that's on the scale of Google and Facebook.

Vern: Exactly.

Trey Jackson: So a lot of our customers actually think of us as a performance marketing channel as they would in Google and Facebook because of exactly what I just said, the number of customers we can reach and the revenue we can drive. And I think what's exciting about it is a lot of our customers that we partner with, they're already sending the messages that we then take over, whether it's a cart abandonment, an email or text messaging, and that usually makes up around one to 2% of their revenue. Once they come over to us, we can scale that up to 10 to 15% in one channel, or even up to 25 across multiple channels. So in the end of the day, it's just, like we've been talking about, doubling down on your owned channels and then making sure that you have really leveraged them as much as you can to get new scale, especially when you might be missing that in your other channels like Google and Facebook.

Vern: So Trey, we've been talking about some of the macroeconomic elements that have been affecting cost of ad spends on some of these platforms. I'd love for you to discuss some of the privacy elements that are also contributing and affecting this as well.

Trey Jackson: Yeah, privacy is super top of mind here at Wunderkind. I think it's kind of one of those words that I think a lot of marketers hear and they're like, " I don't want to," like, they know it's important and they're definitely prioritizing it, but does it get people excited? I don't know. But I think in the end, there's kind of like the main takeaway for when it comes to advertising efficiency. And that's just how much Apple has really thrown a wrench in Facebook. And for those of you, I'm sure most of you are familiar, but Apple introduced, in 2021, AppTrackingTransparency, or ATT, which gave customers the ability, or iPhone users the ability to opt out of tracking.

Vern: Right.

Trey Jackson: So why does that matter? Well, Facebook and Instagram have become so efficient at driving ad revenue because of their ability to track people across their phones after seeing or interacting with an ad. So when you take that out, it severely limits marketer's ability to measure performance of their ads and Facebook's ability to do so efficiently. So that's been really a key driver in some of the efficiency losses we've seen on Facebook. But another part of the, or piece of the puzzle is cookies. And that's another thing that I think marketers are sick of hearing about. And I think part of the reason is because most people don't really like, do you really know how cookies affect your marketing strategy? A lot of people, for good reason, are probably like, " I hear about it, but I don't actually know what it means." But I think in the end, cookies are, in a lot of ways, like powering most of retargeting that's happening right now and storing information that allows for a lot of the personalization or one- to- one experiences that most platforms drive. So I think in that way, cookies getting phased out from Google could really affect a lot of the retargeting efforts that marketers currently have in the name of privacy, and that could actually affect their bottom line. So I think those are kind of the main takeaways from the privacy angle.

Vern: Really interesting. In fact, I believe that we have resources available on wunderkind. co that speaks directly to privacy and personalization. You want to plug that really quick?

Trey Jackson: We do. Yeah. So some people on my team actually have just released a new report, I think it's called the State of Personalization in the new Privacy Landscape. And it dives into exactly what we've just been talking about. So what do the new privacy measures mean for marketers and how can they continue to drive relevant experiences and one- to- one personalization when the tools that they had to do so are being phased out? So a really great report, really visually, incredibly well laid out. So highly recommend. It's a goldmine of information.

Vern: It really is. And it's easy to read because I know some folks don't like to read.

Trey Jackson: Yip. I mean I'm in it for the infographic.

Vern: And the cookies.

Trey Jackson: And the cookies. Yes.

Vern: So ultimately what I'd love to... Shameless plug here. How does Wunderkind ultimately help with all of this?

Trey Jackson: Yeah, I think it's been a really interesting past three years because I've been here before. COVID started all the way up until now and we're kind of in this post- COVID, or I don't know what to call the current era.

Vern: I don't know either.

Trey Jackson: But I think what really remains true is that Wunderkind's main value prop, which is to help retailers and marketers scale their one- to- one messages in owned channels, continues to be incredibly relevant and valuable. And so essentially what we do, is we partner with marketers and then as I just said, we scale their one- to- one messages in their email or text messaging channels, into an actual new paid marketing channel. So most of our customers think of us similar as they would to a Facebook or a Google. And that's because of our scale and the amount of revenue we can drive. But what's really exciting is how efficiently we can do it, and the fact that we can guarantee performance. So ultimately a marketer, especially recently, is coming to us saying, " I'm getting this type of return from Google or Meta. These are what we're seeing from our retargeting perspective." And we can say, " Great, if you're looking to optimize your budget, we can take some of that budget and invest it in Wunderkind and give you a multiples higher return, which makes everyone happy in the end." So yeah, that's the quick and dirty on Wunderkind.

Vern: That sounds like I hit a$ 2. 2 billion Powerball jackpot.

Trey Jackson: You did.

Vern: If I work with Wunderkind, I mean.

Trey Jackson: Yeah,

Vern: Okay. I'm plugging real hard, but I mean it seems like a no- brainer.

Trey Jackson: Yeah, it's exciting and I think, like I said, it's been interesting to watch the evolution of our value over the past three years, because I think it's only become more relevant as the privacy landscape changes and as owned channels as a whole become more valuable.

Vern: That's phenomenal, Trey. And one thing I like to point out is you guys can go to www. wunderkind.co to get more of these resources. We have a market outlook report. We have recently released a new impact story, JLo Beauty, the work that we've done with them. Really great information, really great insights to help you do exactly what Trey helps our brands do each and every day, which is drive more revenue, which is ultimately what we're after. We want to help our brands be successful. We want them to provide their audience and their customers with exactly what they want and what they need when they want it, and when they need it.

Trey Jackson: We're in the revenue game.

Vern: Yeah, man. That's it. So again, Trey, thank you so much for joining us, I think our folks had a wonderful time. I certainly had a great time. I learned a lot.

Trey Jackson: Yeah, this was fun.

Vern: Yeah.

Trey Jackson: I'm back anytime you want me.

Vern: Anytime. You are certainly welcome to come back.

Trey Jackson: Great.

Vern: Thank you.

Trey Jackson: All right, thank you.

Vern: And again, that's Individuality Unleashed.