The Dilemma of Acquiring New Customers via Paid AdvertisingBack to home
Today I listened to a seasoned e-commerce entrepreneur share an interesting insight. He recently sold his company, but he’s still running it. He and his data team have noticed that advertising rates on platforms like Meta (Facebook) and Google have increased sharply this year. This is anecdotal evidence, but it’s not the first time I’ve heard this.
Acquiring customers from paid advertising channels can be part of a customer acquisition strategy, but it can’t be the customer acquisition strategy. Especially for early-stage companies. Relying on paid ads puts the company in a reactionary position—it’s at the mercy of platforms’ rates, so the economics of a nothing-but-paid-advertising strategy can stop working quickly. When this happens, companies are in a difficult position. They can keep paying the higher rates to protect top-line revenue at the expense of margins. Or they can reduce paid advertising, which reduces top-line revenue (and could reduce profitability).
Acquiring new customers is hard, and founders should think thoughtfully about how to best do it.