The cost of customer acquisition on Google ads has become higher than ever before, with most brands now paying an average of $28 per customer – enough to cover a takeout meal, a decent bottle of red, or two movie tickets on cheap Tuesdays.
There’s a clear need for high-performing alternatives to Google and Facebook that help brands convert customers for less, without sacrificing quality or reach. Melbourne-based e-commerce technology startup Preezie is one solution setting out to prove that customer acquisition can be done for less than the price of a latte. The company is now part of a movement to offer smarter, more sustainable customer acquisition that doesn’t rely solely on Google and Facebook.
With the “Big Two” digital marketing platforms becoming oversaturated and ineffective in reaching target audiences, even top brands are now facing skyrocketing ad costs, a higher cost per acquisition (CPA), plummeting conversion rates, and a drastic decrease in return on ad spend (ROAS) with these platforms – which all points to diminished ROI across the board for advertising brands. Privacy and data regulations – such as Apple’s App Tracking Transparency Framework – have severely limited the data that brands and advertisers can collect on users of these channels. With some websites starting to block third-party cookies, targeting ads effectively is becoming a near-impossible challenge.
In the meantime, more e-commerce businesses flooding the market have led to increased competition and higher acquisition costs while businesses bid against one another for ad space – leading to users becoming desensitised to advertising. This gives rise to lower conversion rates as users ignore the majority of the ads they see plastering their screens.
“Marketers used to rely on Facebook and Google to get good traffic volume from one source at a reasonable return,” says Michael Tutek, Preezie’s co-founder and CEO. “But with Covid, brands started pushing more online, creating more competition and higher prices. Over time, that’s seen the return on investment come down significantly. What used to cost you 30 cents a click now costs 90 cents – and if we keep this cycle going, a lot of online businesses are going to find it very difficult to survive on such cutthroat margins. As a result, brands won’t be able to spend the budget they want on customer experience, which is bad for consumers overall.”
According to Tutek, the combination of emerging privacy/data regulations, ad-blocking technologies, banner blindness and lower conversion rates have seen advertisers’ ROAS dropping by as much as 30 per cent. If brands fail to de-risk their businesses by diversifying their outreach in the face of declining returns, they are likely to miss out on potentially game-changing alternative advertising methods that may yield far better results.
“As marketers in the e-commerce industry, we have to stop looking at just being ‘quick and nasty’ and writing ‘blank cheques’ to Facebook and Google,” says Tutek. “The margins are so small because the cost is so high, so it’s unsustainable. We need to look at more channels – for example, instead of Google and Facebook drawing 40 per cent of revenue, why not find eight channels that give 5 per cent each? The revenue will be the same, but the ROAS will dramatically increase.”
Tutek’s Nextbuy solution emerged out of a recognition that whilst reliance on the Big Two is unsustainable for many brands, there is still plenty of room for new approaches. The Preezie Nextbuy program targets buyers on checkout confirmation pages who belong to a matching demographic for related products, focusing on the quality of the connection between the brand and the shopper. By presenting cross-promotional offers from similar brands relevant to the buyer, people are more likely to click through – resulting in an overall increased conversion rate.
“We’ve seen that the average conversion rate through Preezie Nextbuy clicks is 6 per cent,” says Tutek. “So if we send 100 clicks, we’re getting anywhere between five and seven sales. When you compare the average cost of acquisition through Nextbuy at $6 with the average cost of acquisition through Google ads at $27–28, it’s easy to see how much of your advertising budget you’re saving, leaving room to invest in loyalty offers or to enhance the shopping experience.
“So instead of thinking, ‘where can I get the most volume in one source and one channel?’ (that’s Google/Facebook, and it probably always will be) think, ‘where can I get that 20 or 30 per cent extra at a reasonable cost of acquisition?’ Even if that means going to several different channels, as long as the maintenance of each of those isn’t too complicated, you’ll be much better off.”
Brands seeking to break away from the Google-Meta duopoly in the digital advertising market need to be agile and adaptable to match today’s digital landscape. It’s clear that by working together to break free from their reliance on exhausted digital advertising channels, cross-promoting brands will find themselves building new opportunities for growth.
To learn more about Preezie’s Nextbuy solution, click here.