How to manage PPC during high inflation and a looming recession

Episode Description

What’s going on with the high inflation and dropping consumer demand? Are we headed toward a recession? Or are we already in one?

These are global phenomena that we can’t control. But what we CAN control as PPC marketers is HOW we deal with such events.

This week we spoke to two of the top experts, Jon Kagan and Sam Tomlinson, who know quite a bit about this topic and can help you sail safely in the midst of this uncertainty.

Tune into this episode of PPC Town Hall to learn:

- What do high inflation and a potential recession mean to PPC?

- What are the dos and don’ts during this time of crisis?

- What strategies you can use to survive the current time?

Episode Takeaways

High Inflation and Potential Recession Impacts on PPC

• High inflation often leads to increased costs per click (CPCs), as advertisers face higher costs in the digital ad space.
• A recession could lead to decreased consumer spending, impacting conversion rates and overall ad performance. It’s crucial to monitor spending and adjust PPC strategies accordingly.

Dos and Don’ts During Economic Crisis

• Do reassess and realign PPC budgets with an emphasis on most profitable campaigns or keywords to ensure efficient spending.
• Do not neglect the importance of understanding detailed financial metrics like contribution margin and customer lifetime value, which guide more informed bidding and targeting decisions.
• Do leverage technology and data, such as CRM lists and enhanced conversions, to improve targeting and measurement.

Strategies to Survive Economic Challenges

• Opportunistic Expansion: As competitors may pull back during tough times, consider increasing ad spend in less competitive terms to capture additional market share at a lower cost.
• Strategic Retraction: Focus on high-ROI activities by scaling back on broader brand awareness campaigns and directing resources towards direct response and sales-driven initiatives.
• Utilize Smart Bidding and Automation: Implement Google’s automated tools like Smart Bidding to optimize bids based on real-time data, but maintain oversight to ensure alignment with overall business objectives.
• Increase Efficiency: Streamline operations and focus on performance metrics to drive decisions, ensuring each ad dollar is spent effectively.

Additional Takeaways

• Businesses should prepare for fluctuations in demand and adjust PPC campaigns to either capitalize on opportunities or minimize risks associated with lower demand.
• Maintaining flexibility in strategy and being ready to pivot based on real-time market conditions and data insights is crucial for navigating uncertain economic times effectively.

Episode Transcript

FREDERICK VALLAEYS: Hello and welcome to another episode of PPC Town Hall. My name is Fred Vallaeys. I’m your host. I’m also the CEO and co founder and Optmyzr, the great PPC management software that if you haven’t tried, you should. If you’re new to watching PPC Town Hall and you like the content we have here, be sure to subscribe on the YouTube channel.

You can also visit ppctownhall. com to take a look at all of the other episodes that we’ve had. But this week, we have another pre recorded episode while we’re live premiering it on YouTube. The panelists are there to answer your questions live, so take advantage of that. And if you can’t do it for this one, then make sure you attend the next live premiere.

So but the topic we’ve got here today is a very timely, right? There’s inflation, potentially recession. People have less money. Things cost more money. There’s a shift in consumer demand. There’s still a lot of other craziness happening in the world. And Ultimately, all of that is going to have some level of impact on the work that we do in PPC.

Now, what exactly is that impact? How do we deal with it? How do we make the most of it? That’s what we’re going to address here today. And I’ve got two great panelists to help explain all of these things, and I’ll introduce them in just a minute. Welcome to PPC Town Hall.

All right, let’s bring in our guests. We have Jon Kagan, VP at 9RoofTops, and Sam Tomlinson, EVP at Warschawski. I hope I said that correctly. Welcome, guys. So, Jon, let’s start with you. Say hello, tell people who you are and what you do at 9RoofTops.

JON KAGAN: Yeah. Hi, everyone. My name is Jon Kagan. I’m the VP of Search and Biblical Media for 9RoofTops.

We are a full service agency doing traditional digital production, creative, et cetera. I oversee paid search operations for the department and we’re operating with about 250 team members around the country and a few other countries as well, touching roughly every vertical under the sun.

FREDERICK VALLAEYS: Nice.

Welcome to the show, Sam. What about you at Warschawski?

SAM TOMLINSON: Sure. I’m Sam Tomlinson, EVP at Warchawski. So we’re a global boutique, digital marketing agency. We’re based in Baltimore. We’re offices right now, New York, DC, Miami, and Dallas. So we’re, we’re growing pretty quickly. I oversee everything that comes with the internet.

So my portfolio is all digital media, retail media, Websites, analytics and strategy. So great to be here. Thanks for having me again, Fred.

FREDERICK VALLAEYS: Yeah, of course. Hey, and let’s share a little personal fact about each of the panelists. So let’s go full screen on Sander for a second. I noticed that Sam seems to like let’s go full screen.

He’s got some basketballs in the background. What’s the story behind those basketballs,

SAM TOMLINSON: Sam? So we I played in our agency, put it on a pro am a few years ago for charity in Baltimore. So these are all signed by former NBA players who played in this. I was like a charity program game benefiting kids who were I want to say the company is called shooting for peace.

So it was basically, you know, helping kids in inner city, Baltimore. Again, I don’t remember the exact purpose of the charity, but that was the point. It was, I think it was,

FREDERICK VALLAEYS: yeah, it was fun. Good calls. Yeah,

SAM TOMLINSON: it was fun. We helped kids. That was good.

FREDERICK VALLAEYS: And you got to play basketball, Jon

SAM TOMLINSON: Jon,

FREDERICK VALLAEYS: any fun facts about you?

Any cool hobbies?

JON KAGAN: Oh, hobbies fun facts. Let me think here. What makes it fun? I have a small flock of chickens, so my family’s big on homesteading to a degree in a city. So we have a small farm in our backyard with chickens. And before I got into this, I naturally segued into digital media from being a firefighter prior to this.

I’ve been doing this for 17 years now.

FREDERICK VALLAEYS: That’s totally natural. So hey, firefighting, maybe that’s like the exact same topic we got here. Right? So it was a

JON KAGAN: lot safer doing that. And it is this

FREDERICK VALLAEYS: money. So PPC, not that safe. We got to bring in the firefighters to deal with the situation. Like, what is the situation?

Let’s maybe start with the topic. The certainty here. We have inflation, right? Prices of pretty much everything seemed to have gone up. If you’re buying eggs, they say it’s like a 30 percent increase. If you live in the United Kingdom right now, like you can probably not afford to heat your house anymore.

What’s going on with inflation? And let’s, let’s maybe actually really just describe what inflation means in terms of PPC. And Jon, do you want to start with that? Yeah, when we talk inflation from the PPC side, yes, we there’s a couple of angles you look at. You look at it especially doing econ, the pricing of the products to see if you still remain competitive.

JON KAGAN: Okay. Versus everyone else in the marketplace to see if you’re still going to get the same conversion rate. But also simultaneously, we look at the most direct one rising costs of CPCs. We’ve seen them kind of going to levels. We’ve never seen them go to before starting around tax day in the US around April 15th, 16th.

And we’ve seen them at abnormally high levels for year over year growth. Roughly the highest I’ve ever seen, and it’s just going to continue to go. And we saw a very similar pattern happen back in 07, 08, but we’ve far superseded those numbers now.

FREDERICK VALLAEYS: Interesting. Sam, what are you seeing in terms of rising CPCs?

SAM TOMLINSON: I mean, I think we’re seeing the same things Jon’s, Jon is seeing across our client portfolio, which is, you know, CPCs are going up at concerning rates, but I think some of that is, you know, the nature of the digital media ecosystem. So. It’s logical that it would mirror 07 08, but be an order of magnitude larger because you’re not dealing with, you’re dealing with biddable media, right?

So you, as more players are going digital advertising, the rate at which increases happen increases exponentially. So that seems logical.

FREDERICK VALLAEYS: Right. The story was sort of in 07 and 08 when we had the last recession. That was not good. The market was impacted. Still a small portion of overall advertising. Now it’s just such a huge beast that even a small impact to it is just going to have an outsized impact on the world at large.

Right. Well, Jon, and then lead us into the second half of this equation, right? So we’ve talked about inflation. What about recession? We’re not, we’re not in a recession. We might go into a recession. What would that mean to PPC? I

JON KAGAN: mean, the reality is we never know if we’ve had a recession until we’ve already entered it in rather than foreseeing it.

But the speculation from all the economists that I talked to were heading in towards 1. So I have to be prepared. Biggest thing that we typically see when it comes to recession is declining in demand. What is a little bit different than this scenario where we believe we’re heading into one at right now versus what we saw in 08, 07, 08 the decline in demand was we had almost a direct one to one correlation with rising unemployment rate back then.

Higher level of unemployment, people are becoming more discretionary with what they’re buying, what they’re seeking out. So we started seeing massive drop offs in impression volume, impression, impression share would rise, but impression volume would decline for us. And we would just see out in peak season drops and out of season drops for the normal right now, that’s kind of what we are looking for to eyeball.

Say like, all right, we are definitely entering into that recessionary market right now, but we have high, we have very low unemployment rate right now with the U S and when we’re also not seeing that drop off and decline. So it’s kind of an interesting scenario of, all right, are we just gonna. Go forward into what we’re considering a recession with constant or high demand, but our costs are just going to go through the roof and we’ll have to live with that, or are we going to eventually start seeing the drop off go down because prices have risen across the board for everyone so high that they can’t.

Maintain the ability to buy certain items, and then that will cause the demand. So it’s we’re trying to see which one is going to slow down demand or if we can fully even see demand decline.

FREDERICK VALLAEYS: Right. And I suppose one of the angles here is that demand broadly may go down, but in certain categories, it’s going to go up.

I think it was the lipstick factor. Where one of the cosmetics companies, Estee Lauder was basically saying that sales of lipstick and fragrances have gone up because people don’t buy TVs anymore electronics. So they don’t buy that thousand dollar TV, but now having saved a thousand dollars mentally, they’re like, Oh, well, I can afford some other small luxuries that cost 30, 40.

And so those sales have gone up. And so it’s like this whole balancing act. But I find it very interesting that us in PPC, we’re so. Close to real time metrics that maybe Jon, you’re kind of saying, like, even if we don’t know we’re in a recession, maybe in PPC, we actually have those signals before a lot of other people do.

JON KAGAN: We’ll start to see the inflection points. The other scenario is I deal with a lot of vice categories for my clients, alcohol, gambling and fast food. When people are under economic or financial stress, they turn to their vices, the things that make them feel good. And we see abnormal upticks. In fast food, alcohol and gambling that starts to tell us, all right, something is going on at a bigger macro scenario.

Granted, we’ve also seen that at the start of the pandemic, we saw that go through the roof as well. So anything that will cause massive degrees of stress, like a recession. These are some of our other Signals, if you will, for us,

FREDERICK VALLAEYS: Sam, you were bringing in the angle when we spoke previously about some of the non recession, non inflation stuff, but like supply chain issues, student loans, economic stimulus that’s happening, like, how does all of that factor in?

SAM TOMLINSON: I think at the end of the day, you’re talking about factors that still hit. You’ve been supply of goods or demand, right? So if you’re talking about, you know, you have a supply chain crash that’s been 2 years in the making that is slowly unwinding as supply chains kind of figure themselves out. Right? Obviously, China is still on covid 0.

So they’re still kind of crushing so many supplies, but you’ve got port situations that have finally unwound themselves to a significant degree. And now you have retailers that have placed this inventory 6, 9, 12, 15 months ago that are getting it right into the teeth of what Jon’s describing, which is a decline demand for these things.

So now you’re a retailer holding this inventory saying, okay, well, I got to move it. It’s dead weight on your books. And you’re trying to move it into an environment where consumers may not be receptive to it, you know, or like some of our other retailers that we’ve talked to, you’re in a situation where you have placed your 2022 order is based on your 2021 volume, which is pretty normal to do.

But when you realize that 2021 was an anomaly in 20, it was. It was an anomaly. It was crazy, right? You had a decade of e commerce growth in two months, three months. Those projections for 2022 were never real. So now again, you’re stuck in the same situation where you are holding this inventory. And you have to find a way to move it and the easiest way to move it, discount it.

But you can’t discount effectively if CPCs are rising, right? Because all you’re gonna do is crush your own margin and you’re going to sell at a loss. So you’re in this weird situation where you have inventory, you need to move. You really have a floor on how much you can discount it. And you’re starting to sell it into an environment where people may not want it anymore.

Which is, you know, fun. Good times are had by all, right? But then it’s like the student loans, you know, all this other stimulus stuff is, It’s the supply side, right? It’s money. And when you start squeezing people’s wallets, right, you know, for two years, roughly 30 percent of us households have not had to make a federal student loan payment, which averages what?

360 bucks, 400 bucks a month, give or take a, give or take a few dollars. Some economist is going to correct me on this, but it’s close enough for government work. Median U S income is 65, 000 a year. That’s. It’s 10 to 12 percent of your income that you had the ability to just spend on other stuff. And now it’s going to go back to Uncle Sam.

So again, it goes to Jon’s point about stuff now costs more and now you actually have less money available for discretionary purchases, which further hits retailers and further hits demand. So it’s all fun. Part and parcel of the same equation.

FREDERICK VALLAEYS: And then the fact that, you know, I still have toilet paper left over from the pandemic.

So even though it’s really high, I’m not going to buy it for another couple. Right. And how much long furniture do you ultimately need to buy? You’re not going to refresh your. For dining table every year, even if you did hit last year with your stimulus money. So yeah, that, that complicates things quite a bit.

So, I mean, are you guys looking at inventory systems and bringing those a little bit more tightly into PPC or, or how do you, I mean, how do you look at so many different factors and inputs and what that means for what you do in PPC?

JON KAGAN: I mean, from an inventory standpoint and a sales standpoint, I’ve gotten roughly every one of my clients has been on board, knock on wood, and thank goodness for that, that we’ve called 2020 2021 a mulligan.

In fact, we don’t consider anything. I can’t use the word normal because it’s still technically a pandemic. We’re not calling anything a what would be considered a normal degree of performance until Q3 of 2021 when we had high vaccination rates. We started seeing everyone’s lives go back to what they used to be.

And so we started value. When we look at year over year data, we’re looking at essentially 2019 performance 2019, and then take about six quarters off. And then we started looking at 2021 Q’s three and four going forward to try and use that as our comparisons. And then that’s how we started selling our inventory, right.

From these prior levels, let’s assume that not everyone is at home trying to make sourdough bread. And out into a normal degree of buying apparel or alcohol or going out. How do we adjust to that? And how do we compensate and call the last or call those six quarters a windfall for us? But let’s not, it was an exception to the rule, but not a new standard for us.

SAM TOMLINSON: Yeah, I think that’s right. I mean, we’re doing a lot of the same stuff. And we’re also looking at, you know, obviously you have to treat different SKUs differently. So getting clients to start looking at like per SKU. Financial metrics per skew contribution margin per skew buying patterns, right? Getting clients to actually think a little bit more granularly about their inventory than they might have before.

And then, like Jon said, just what happened during what happened in 2020 stays in 2020. And what happened in the first two quarters of 2021, it stays there because you really don’t have. There’s nothing from that that you can extrapolate onto except for when, if and when the next pandemic, which I really, truly don’t want to happen happens, but it will, because that’s how the world works.

Yeah, we’ll probably go back and dig those up, but I’m hoping I’m retired by then. Hopefully. So talking about looking at products more specifically in the contribution margin and the profits, like talk about measurement systems. Has anything shifted or are you putting more? Focus on certain bid management strategies.

FREDERICK VALLAEYS: Given all this change, or are we? Yeah. Oh, sorry. I mean, I think on a bid management standpoint, not necessarily, I think the bid strategy remains fundaments, but the same, I think the, you know, the TCPA or the ROAS target that you’re setting can be more granular as you get better data and as you focus more, because there are, you know, everybody’s inventory has a Kind of a distribution has a distribution curve, right on some products are super high margin, super low volume.

SAM TOMLINSON: Some products are moderate margin with high volume. Some products are either negative margin or very low margin. On some degree of volume, those might be our last leaders. They also just might be products that suck. And looking at those and figuring out. Okay, based on the current economic conditions, based on what we can afford to pay based on our budgets.

What products do we need to move? And how many of them can we move are interesting questions that a lot of our retailers are asking. But then on the service side, it’s the same question because. You have some services presumably that are really profitable and getting those getting better at those numbers helps you make more informed decisions.

It helps you give smart bidding algorithms better data to optimize off of. So that’s what everything

FREDERICK VALLAEYS: is. You we can talk all we want about strategies, but if we don’t understand the underlying numbers, then we’re still basically making strategies that we can’t pretty

SAM TOMLINSON: much. Yeah. If you don’t understand your underlying financial numbers.

Yeah. Maybe figure those out first and then try to figure out Google later.

FREDERICK VALLAEYS: Yeah, exactly. And sometimes we talk about how do you set a target return on ad spend? And sometimes it’s just like finger in the wind and figure out what number we feel like today. It’s not very scientific, right? You got to do better than that, especially when there’s so many moving parts.

Jon, you were going to say something as well on Yeah,

JON KAGAN: I, I try and break everything down. I mean, I personally have never been a fan of a ROAS strategy. It works for some folks. It’s not my cup of tea because I’ve always found an inverse scenario where like, all right, I’m getting a really great ROI, but it’s going to start hacking away at my volume if I don’t have a substantial amount of conversion volume when so it really comes down to price sensitivity and to you guys point, knowing your numbers.

I know that I have a high. Profitable tool or that’s a high or a high profitable product. That’s a high volume. Then all I can do is say, let me get as much volume as possible at as cheap as possible. So this is really good for really niche products, really niche keywords. I’ll go to the max clicks. And I’ll start with it uncapped because I know that’s my best shot at reducing my CPC.

On the most qualified, on the higher volume, more generic keywords. If they’re doing volume, if they’re doing sales, and when I say sales, I mean at least one per day. Then I’ll start looking into a max conversion strategy. The worst thing that and this gets this anger, some folks with the worst thing that anyone will ever come up to me and say is, look, I’d rather go with like a target impression, share a bid strategy.

And so I’m visible and I’ll make it more fun. I’ll do it on my competitors, keywords. Or competitive conquesting. That way I’m visible when people think about it and call it a day. And then that’s usually when I say, all right, it’s been a pleasure working with you, but we can’t continue this relationship kind of scenario.

I may be overreliant on max clicks, but it really comes down to my price sensitivity and I need to know. I have a good understanding of what a constant conversion rate is for each client, each product, each SKU. I have a good understanding of their level of profitability, and I have a good understanding of, I’m less concerned on the conversion rate and more concerned on the CPC.

Because typically we’ll get our conversion rates as high as they can get from a qualification, and then once I’ve hit all my other, checked all my other boxes, it’s focused on going back down to the nitty gritty of how do I get the most volume, and how do I get it as cheap as possible. So that it carries over to the long run.

Some folks don’t love that idea. Some people do. It’s a mixed bag, and it doesn’t work for us, but it doesn’t work for everyone.

FREDERICK VALLAEYS: I think it’s an unusual or a bit contrarian in a way. I think when we talk about PPC, we’re always focused on, you know, automated bidding and keeping the cost per click.

Control, but I think you’re saying like, listen, I can, I can buy cheaper clicks, which generally tend to be the lower converting ones because you’re so good at conversion rate optimization. If I’m hearing correctly. And a lot of people, they just put conversion rate optimization as sort of an afterthought after we’ve done everything we can close.

JON KAGAN: Well, I mean, the, the conversion rate optimizations. To realistically a focus of our site and our landing page. We try and make sure that’s being maximized as best as possible. Once we’ve already touched all the boxes though, and we’ve made sure we’ve done our due diligence from a conversion rate, a user experience to add copies as fine tuned and as relevant as humanly possible.

That’s not considered performance max. Then all I’m left with is how do I control my costs and get as much volume as possible? I’m not saying you should ever focus on volume or quantity over quality, but at some point you can’t really enhance the quality anymore. And you have to start focusing on quantity.

And when you go into quantity, you need to make it as most cost efficient as possible. Otherwise it’s just a lot of cost and not a lot of return. Ultimately.

FREDERICK VALLAEYS: Very interesting.

SAM TOMLINSON: I mean, I think you’re still talking about the same fundamental underlying equation, right? Like visits times conversion rate times.

You know, your AOV or your contribution margin per sale, there you go. Like, that’s fundamentally what you’re optimizing for. You’re pulling one of a few levers. And obviously, if you don’t, you don’t like you know, your costs. You don’t like CPM, which you can convert to CPC. Like it’s all the same stuff, but you’re talking about the same fundamental equation that you’re trying to maximize,

JON KAGAN: right?

It’s just coming out at the different different side of it. It sounds right.

FREDERICK VALLAEYS: It’s that one level you exercise the control, right? How much you give up to the automation. And then I heard you mentioned P max and I didn’t quite get if you were a fan or not.

JON KAGAN: It was me being very snarky about it. I I’m running on a number of clients.

75 percent of the time it does good or does as good as we were previously doing and 25 percent of the time it doesn’t and 100 percent of the time we really realistically have no idea what it’s performing.

SAM TOMLINSON: Yeah. It’s kind of like, I mean, I think I made the analogy on Twitter that probably angered somebody at Google, but since they’re not listening, I can actually make this again.

It’s like opening locusts into your nice little account. It consumes everything. Right. It just cannibalizes everything. It destroys things.

JON KAGAN: But at the same point, you have no idea what’s performing like, right. You just don’t know. And we, we accidentally pulled a report the other day showing video views on desktop for performance max, which is not supposed to be even possible to show because it’s not supposed to show video views on desktop.

And we asked Google support about it. And they finally said after two weeks of you should just ignore those reports. So we go back to this. Fundamental question of what is performing? What does not perform?

SAM TOMLINSON: Well, it’s like I think Aaron Levy made the joke that like they basically resorted to golf club branding where you get the golf club for the really bad golfer And you just call it max Because that’s the thing that everybody can hit.

So it’s

FREDERICK VALLAEYS: max,

SAM TOMLINSON: right? But that’s what we did for for this. And I mean, to your point, Jon, there’s whatever, like, obviously, being able to call your Google rep, which is in itself a real a real treat. It’s a great experience to have them exclude your branded terms from P max is a choice. But sure, like, you have no idea what’s actually working.

You don’t know what ad units are working. You don’t know even where your ads are appearing half the time, but you can pull like a blank report. I pulled that out of the something, I think at a data studio where you can get a blank report of every place where your PMAX ads have shown, which is a real treat.

Like, okay, 165, 000 placements where this has shown up. That’s great. But this CPCs because I mean, my, if you put on a tinfoil hat for a second, and I will P max does a really is really good at one thing, and that’s driving volume into camp into ads or into auctions that otherwise would not get volume.

All right. It’s, it’s great that it’s a fantastic tool for that. So if you want to rise, if you have a saturated market, which you do and go in the U S and you need CPCs to rise in order to hit earnings with the easiest way to make earnings go up, make CPCs go up. And how do you make CPCs go up? You drive more advertisers into options.

They don’t want to be in. And how do you do that? And you make it all, you close it off.

FREDERICK VALLAEYS: Right. So it’s the auction depth. If you increase that rate for Google. And it’s interesting too, because there’s sort of two angles on this, right? There’s. You as the experienced advertisers, you’re being sucked into like, now we advertise on everything and then there’s the whole angle of, Hey, I didn’t, I couldn’t figure this out before, so I didn’t do Google ads, but now they made it super easy, like performance max.

So let me turn that on and that’s yet more competition. So it’s like, it’s like coming from two angles, pushing up the prices.

JON KAGAN: I saw someone on Twitter say, call performance max AdWords express 2. 0 and. I could not have said it better. It is exactly that and credit to whoever tweet I saw. I mean, it’s a fundamental, ideal tool for an SMB or a mom and pop platform.

Say, Hey Google, here’s my money. Here’s my site. Here’s my assets. Do what you will and give me the return. I don’t have, but when you look at more seasoned individuals, like the three of us, just like, Yeah, I kind of want to know where we’re showing or why you’re making such a cringy YouTube video because I didn’t give you any YouTube assets with a really bad overlay of music.

FREDERICK VALLAEYS: Right. And ultimately one of the few levers or controls that we still have is how we report to what it is we actually want out of these automated campaigns. So let’s talk about that a little bit. Attribution modeling, conversion tracking, offline conversion import, or any of these like more important given.

Recession, inflation or just the current state of the industry.

SAM TOMLINSON: And I think there are, I would say they’re probably more important. I think if you separate these into a couple of different buckets, right? Cause I think attribution is a, I have thoughts on attribution. Let me put those aside. But I think if you look at, you know, offline conversion, import, enhanced conversions customer lists these are all actually really positive improvements that Google has made.

So as much crap as I give them. Or some of the other choices they make. These were good life choices. And they get better, right? You know, the ability to add current customers so that you can exclude them from campaigns. That’s a good thing, especially for a lot of our e commerce clients. We’re not going to cannibalize our own customers.

That’s cool. Or if I’m going to, I can deal with upsell offers and not show them bad stuff. Like a new customer offer and make them angry. That seems good. The ability to get conversions closer to revenue for, you know, for B to B companies has been a game changer for a lot of our services companies where we’re not now optimizing off of form submits.

We can optimize off of SQL. That’s a really good thing to feed a machine better data. The ability to dynamically set conversion values. That’s really nice. And pass those right back into Google and be like, Hey, this is how much this customer actually was worth to us. Or, you know, to upload different conversion values based on different lifetime about different purchase habits or different customer profiles is cool.

Those are all things that help businesses, I think, Give platforms better data. And when you give platforms better data in really constricted environments, small advantages lead to outsides rewards. So you end up in a situation where I think you can all pretty much safely say the best data tends to win and overall sufficiently large sample.

And by giving Google or Facebook or whoever you’re using better data about your business and about what works for you, you will build a long term advantage and be able to be more profitable despite economic conditions.

FREDERICK VALLAEYS: I’m kind of curious, Sam. You know, people come in on a certain keyword and then they get to look at everything on the website and given that things are more expensive, maybe they make a choice for a much cheaper product than what you were advertising.

Maybe they even shift categories, right? So how do you model sort of that purchase behavior where they, you know, you bid high because you thought you were going to sell a high margin product and then they end up buying the cheap thing that’s a loss later. Is that something you’re dealing with more these days?

Thank you.

SAM TOMLINSON: Sometimes not as much as you’d think it’s more of a fringe case, but I mean, you can really easily model that off just with we, so let me model out like LTV. I think LTV is a fool’s errand, but I think if you take a lifetime value and you discount it back to present value, that’s a much better choice.

I’ve seen other agencies using a cash multiplier where you look at like 30 day cash or 60 day cash. I think that’s fine too, but you can, we use net present value. So net present allows for a discount rate and you can just. Look at a whole, a larger segment of the population. See what the actual result was over a certain time.

Discount it back to present value. So you’re accounting for the risk inherent in that click being weird or bad. Like you mentioned, Fred. So I would say that’s a A case of click just being weird, right? There’s just less profit on that particular click. So, yeah. Jon, what are your thoughts on meeting the machine, better data and measurement?

FREDERICK VALLAEYS: I mean, I gotta be in line with Sam. One of, in my mind, one of the greatest things Google has ever done was allow us to create audiences and just build them to any wave fantasy scenario I have. And essentially we take every audience member, anybody that comes to my site, Based on the behavior, if you didn’t purchase and you’ve been in the shopping cart, you’re going to get a dynamic remarketing display ad.

JON KAGAN: If you are higher household income, I’m going to serve you the, an ad. I’m going to drive you to the higher price point product and the lower price point product. And then we’ll, we’ll go back in afterwards, analyze what you came in on from a landing page versus what you purchased to see if it was a one to one correlation, or if you’re downgrading or upgrading.

It was really huge for us when we were running a lot of travel clients back in the day. You’d see everyone coming, looking to go to the Dominican Republic, realize they didn’t have a passport, and then they would book Puerto Rico kind of scenario. So we always look at the cross value analysis on this one.

The, the biggest thing right now is just the maturity of understanding brand versus non brand. Understanding that brand no longer costs 10 cents like it did back in the day, a brand keyword, especially with the amount of competition, especially with performance max pulling whatever wants to pull the state of the week and adjusting for it.

And then saying, look, I have all these non brand keywords. I can now segment them out by top performers, high volume, low volume, long tail, mid tail, mid funnel, high funnel, bottom of the funnel. Just a better segmentation of it. I love automated bid strategies, and I love the ability to do all these different inflection points to calculate it in, but I’m also a huge believer that the human eye has to still get that strong iron fist of guidance upon it and kind of lead it as we go through.

Yeah, I mean, we look at lifetime value. A lot of our products especially our QSR fast food clients, we get a great lifetime value assessment out of them, especially with our mobile apps for them. So we like, all right, we know if we get one person to download, they’re good for five purchases. Per year. We had one actually that did a 300 purchase in a year, which was really concerning, but we did send them a gift card afterwards.

So we’re able to do these types of analysis and then put them into our cycle and say like, how are we going to reach back out to you for kind of an account based marketing strategy from them and really just feed it beyond the pay search. I don’t want to say paid search is done as we brought them in, but we take our insights, we do the calculations.

And then we’ll serve them different deals. I can incentivize, I do a client of ours that’s literally sells bacon online. It’s the best thing on earth. We bring them in with a 10 percent off deal on their ad. If they’ve never purchased from the site before we’ll track that up to two years and then.

And once we’ve got them hooked, we know they’re going to buy three times a year, every year for six years. And then after that, we just go back and serve them new ads without the ability to do a discount going forward. And then just slowly upsell them on the next product. You bought the 12 ounce one. Next time you want the 24 ounce triple thick.

And the next one after that, you want the five pound bag because you need to survive the winter kind of scenarios.

SAM TOMLINSON: And then Jon Kagan, cardiologist in business since That’s

JON KAGAN: the other part of my business is the healthcare side of

SAM TOMLINSON: Explorys.

FREDERICK VALLAEYS: I think, I know the audience is going to want to know more about this, right?

But you talked about segmentation and upper funnel, mid funnel, brand on brand. Can you quickly explain what that looks like in terms of campaign structure? Is it pretty like split out or is that mostly done through audiences overlaid on simpler campaigns?

JON KAGAN: We used to do it on overlays, but we realized we wanted to start dedicating specific amount of funding.

To it. So we started doing it at the campaign level. We call them new to file or first time purchasers. We know that look, so one of our QSR brands that we know that if we get, they have a 20 year lifespan, not literally they die after 20 years, but we know that there’ll be a dedicated customer for 20 years.

So the key is making sure we get them at around age 25, post college has a little bit of disposable income in their pocket. And Get them in a first few tries and then focus on them longterm. So we try and put as much money into the younger demographic in that first time you consume or possible. And as they go up and they become two, three years dedicated one, we start funding them less and less and less.

Except for maybe like holiday peak deals where we’re selling special products or pushing them for catering as we’ve evolved through their life and their career path, but really kind of focus that. And we have money dedicated for each part of the audience segment. Where you are in the lifespan of your time with us for our lifetime value.

The most dedicated ones, we invest the least amount in, but we also have to make sure we build our audiences to reflect these individuals otherwise it’s of no value to us. And then we segmented by campaign. So we have accounts, honestly, with 200 campaigns and 150 of them will be deemed absolutely necessary to keep that way, which makes my team incredibly angry, but it worked for us.

All

FREDERICK VALLAEYS: right. Right now. Have you done anything to make your team like a little bit happier? What kind of tech do you guys use?

JON KAGAN: Pizza parties.

FREDERICK VALLAEYS: Okay. We’re very

JON KAGAN: heavily reliant on third party platforms. We’re a huge advocate for SA 360 and we do a lot of CRM lists for building lookalikes and all that. The CRM lists uploads are been absolutely vital for us for helping build our longterm segmentations.

Cause we’ll get data cuts of who’s been a purchase multiple times or X period of time. And then we can say, look, they’re high, they’re bottom of the funnel repeat or to invest them the least, but there’ll be a whole dedicated campaign or ad group scenario for them.

FREDERICK VALLAEYS: Okay. Thanks for sharing that. How about we shift gears here a little bit and talk about the potential decline in volume, right?

So as people make different decisions about what they buy and that volume goes away I think there might be two strategies. I think, Jon, you pointed this out in the search engine land article. One is I mean, I’ll let you explain what the two strategies are.

JON KAGAN: Yeah, it’s called having money in the bank or having money to throw or making people think you have money in the bank.

It’s one of two methodologies. I last time I ran this was literally over 10 years ago, but it’s something that we’ve done. And we’ve built out these contingency plans for just about all of our clients. Anything, anyone that is focused on the user sales is realistically who we go after. One of the money in the bank, or we also call it a revenue model.

It also works for just pure lead volume is look, you know, things are about to go into decline. You need to have money on hand to pay your bills, overhead, prevent layoffs, what have you. So what you’re going to do is providing your already profitable, which nine times out 10, you should be you’re going to go after, you’re going to eliminate a lot of your branding based efforts and just focus on whatever does last click, highest revenue drivers of paid search, paid social, sometimes some video, what have you, and you’re just going to get as many sales leads as you can.

Revenue in house as possible through this, you’re not going to cut your spend. You’re only going to reallocate your spend to whatever, you know, is the left performer and yeah, you’re going to take a loss on the ROI, but you’re going to run this for two, between two and four quarters. And then after that time period, you’re going to pull back as much as possible.

Bottom of the funnel branding just to get your ROI recovery. And after a little while. So you’re hopefully within a fiscal quarter, you’re back to a degree of profitability, but you had all that money in the bank to help you survive the tough times. The other end of it is you make people, you have money in the bank.

This is, we see this big for brands that are trying to prepare for sales or are trying to entice shareholders. So you try and show just how profitable you are. And here you’ll see a mass. This is the assumption that you already have all that money in the bank to cover your expenses. Overhead expenditures for at least a fiscal year fingers crossed.

You don’t have to go more than three quarters though. And what you’ll do is you’ll pull back for all your branding spend will be gone. There’ll be no just GDN. There’ll be minimal YouTube. There’ll be no trade desk video. There’ll be minimal linear out of home. You’re going to go with brand. And what you know is your bottom of the funnel, highest producing non brand keywords, and your remarketing list of prior purchasers for social.

And anything that’s going to produce an obscenely high ROI, regardless of how low the revenue is. So, yeah, I’ll have a thousand percent ROI, but I only made 10, but you’ll do that and you’ll run with that for probably two to three quarters. And then after that, you’ve saved all that money up. Then you’ll just dump that money back in about three to four quarters later to try and recover the revenue going.

So the two strategies more or less make a horseshoe and meet back at each other after about a fiscal year. But these are the two prime strategies that we’ve seen that have worked over time.

FREDERICK VALLAEYS: Fascinating. And if people want to know more, look up those articles posted on search engine land. We’ll put the URL here on the screen.

Sam, any thoughts on declining volumes and what strategy to consider?

SAM TOMLINSON: So I think, you know, for a lot of our clients, it comes down to a strategy of Opportunistic expansion or basically, whenever something contracts, you have a couple options, right? You have opportunistic expansion. You have. Tactical retreat, or you have.

You know, something that’s a more extreme version of those 2 things. So either, like. Full on aggression or. Completely cut everything. I think, I mean, we look at it from a client standpoint of for a lot of our clients, they go with the they’re on board with the idea of tactical strategic expansion, right when everybody else is pulling out of ad markets, that’s a really good time to go in.

So, you know, we look at it as as some terms become less competitive as volume declines, as advertisers pull back, like Jon’s mentioning, that’s a really good time to get really low cost volume that we can hopefully take market share. And then there’s also, I’m not fully convinced there’ll be a decline in volume.

I think there’s going to be a decline in conversion rate on that volume. But it’s not like people sitting at home on layouts are not going to use the internet. So I think you have to, this is the part where you have to get smarter about what you bid on. Right. And that’s a difficult question, but that’s where having, you know, like Jon said, CRM lists, customer lists, uploads, actual good modeling on what your customer’s profitability and what their life cycle looks like allows you to make some smarter decisions on what impressions to go after.

So, I mean, I look at it as, you know, behind every collapse is a great opportunity. So the bigger the collapse, the bigger the opportunity.

FREDERICK VALLAEYS: And I’m sure we’ll see some interesting new companies coming into the space. And if we get to as clients early on as an agency, I mean, Sam, I think you worked with Under Armour, right?

We’ve worked

SAM TOMLINSON: with Under Armour. They do a lot of stuff in house now, but yeah, we still, every once in a while. Are doing my part with that. You

FREDERICK VALLAEYS: guys worked with them when they were still in the garage, basically.

SAM TOMLINSON: Yes. They were a bunch of like 20 guys in a room. Yeah. We were one of the first agencies. In fact, our first agency.

FREDERICK VALLAEYS: So we might not stick around, but you but at least it’s a good opportunity while we’re not, yeah,

SAM TOMLINSON: I mean, that’s why we started a venture fund.

FREDERICK VALLAEYS: There you go. And I suppose the other way to say it here is the party’s over easy. PPC is like a thing of the past. She’s got to work a little harder, a little smarter, buy more pizza for the team to get them to do what they need to do.

SAM TOMLINSON: I mean, I think it’s a great opportunity. It’s so good. Like there’s, I think for so long, so many people have stood on the shoulders of giants and thought they could see far. And that’s not like a slight to any one person, but it’s like, yeah, you were in a rising tide for a long time. 12 years, everything was just going up into the right and no one could, people could do no wrong.

Well, the party comes crashing down. We’re going to find out, you know, who’s, who’s really ready to pivot and to really do good work. And the people that do good work are going to be fantastically in demand and they’re going to thrive. And the people that just, You know, road waves up are gonna well, we saw what happened to crypto.

JON KAGAN: I mean to that concept what we’ll probably see if we do actually enter this recession coming out of it Is we’re probably going to see I hate to downplay the industry, but so when I started doing this 17 years ago, there was 50 agencies in the U S that handled paid search. The town that I live in right now, there’s nine agencies alone and over two dozen freelancers that I know.

I’m on enough of the Facebook groups where they say, Hey, I’m a guru with three years experience, increase your return by 5, 000%. I’m like, All right, well, so a number of these folks are hacks or they’re just not worth it. They’re taught because it’s easy to make the cash in this as a freelancer. We’re going to start to see them disappear if they can’t prove that they can build a good strategy coming through the track record.

So it’s going to be a, I hate to say, but a bit of a purging of our industry of those who just can’t survive it. Going to be better for everyone in the long run from a agency side, getting quality talent, having quality time to brand side and make sure they know who they’re actually working with. And that if your team is strong throughout a recession or even the pandemic producing constant result or helping give you the guidance through, you know, that you’re going to be less likely to have poor hires or underwhelming talent still circulating within the industry.

That being said, if you cruise some of the message boards and some of the Facebook groups, you’ll still see. Those that are promising on realistic things or literally trying to sell accounts to other people.

SAM TOMLINSON: Yeah. I mean, I love the I love the Reddit threads where it’s like, I just signed this account.

It’s the dog that caught the car. Like you see people posting these things, like I just signed this account and I have no idea what to do now. Yep. Like, like, well, then why’d you sign the account? But to your point, Jon, it’s all, it’s been a party for 12 years and. The bill comes due now, the bill is going to come due and some people are gonna get wiped out.

And that’s okay. It’s natural. It happens in every industry. It doesn’t mean to be callous, but

that’s how life works. That’s how markets work. So it’s a good thing, I think, in the long term to clear out some of this underbrush and hopefully give really good practitioners off new opportunities to free up clients to see, you know, different values and to hopefully you know, Lead us to a place where coming out of this, there are a lot of opportunities for businesses to make a lot of money.

FREDERICK VALLAEYS: And I feel on that note, I mean we sort of have to end here. It’s you decided really well. No, but hey, how do people get in touch with each of you? Is there any final points that you’d like to make? But Jon, why don’t we start with you and have the people get ahold of 9RoofTops.

JON KAGAN: Yeah, sure.

So if you want to ask me a question directly, I’m more responsive on Twitter than anything else for reasons I can’t even explain myself. And you can find my Twitter handle is Jon Kagan, J O N K A G A N. If you actually have a true legitimate work question, you can email me, jkagan@9rooftops.

com. We are a full service agency. If you need an audit or just a second opinion, feel free to email and give you our thoughts.

FREDERICK VALLAEYS: Great. So that’s Jon. What about you, Sam?

SAM TOMLINSON: So like Jon, I enjoy the hellscape that is Twitter. But if you have a question digital Sam, I am literally digital Sam. I am.

That’s me on every platform. So that’s a good place to find me. And then as with Jon, we are a full service agency, but if you do need an audit you want a second opinion, you want somebody to just bounce an idea off of it’s Sam at warschawski.com. W A R S C H A W S K I. com. Always happy to talk to people.

FREDERICK VALLAEYS: Great. Well, thank you both for being amazing panelists and talking to people that had to get through all of the craziness happening in the economy. If anyone needs a good tool that helps them a little bit as well, check out Optmyzr. We have two week free trials make your life a little bit easier.

If you enjoyed this video, subscribe to the channel, go to pptownhall. com, sign up for the newsletter. We’ll let you know what we’ve been up to, what episodes are coming, but we’ll see you on the next one. Thank you for watching. Thank you.