how to diagnose why you're losing money on ads (like a mad scientist)
The speaker outlines a diagnostic framework for identifying why ad campaigns fail, distinguishing between ad-side problems (CPC, CTR, CPMs) and funnel problems (add-to-cart ratio, cart-to-purchase ratio). Key metrics are interconnected, and Facebook's soft rejections manifest as high CPMs or low-quality traffic, while funnel success requires at least a 10% add-to-cart rate to indicate proper ad-to-landing page congruency.
Summary
The speaker presents a systematic approach to diagnosing unprofitable ad campaigns by categorizing failures into two buckets: ads problems or funnel problems. On the ads side, the primary metrics are CPC (target under $1.50 for US market), CTR (indicator of creative quality), and CPMs (cost per thousand impressions). The speaker emphasizes that these metrics are interconnected and cannot be evaluated in isolation. For example, an 8% CTR paired with a $2 CPC indicates inflated CPMs ($150+), suggesting Facebook is penalizing the account either because the ads are too aggressive or operating in a highly competitive market. Facebook applies two types of rejections: hard rejections that shut down accounts entirely, and soft rejections that appear as elevated CPMs or degraded traffic quality. To address ad-side issues, the speaker recommends improving creatives for poor CTR or toning down aggressive copy and claims to improve CPMs and Facebook favorability. On the funnel side, the critical breakdown points are the add-to-cart ratio (percentage of landing page visitors who add items to cart) and the add-to-cart-to-purchase ratio (percentage of cart additions that convert to purchases). The speaker establishes a 10% add-to-cart ratio as the KPI threshold, indicating that the landing page achieves proper congruency with the ad and successfully convinces visitors to take action. If both funnel metrics are healthy, overall conversion rate will necessarily be strong, making conversion rate a lagging indicator rather than a diagnostic metric.
About this episode
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Key Insights
- The speaker argues that high CTR and high CPC can coexist when ads are too aggressive or operate in competitive markets, causing Facebook to penalize the account with inflated CPMs despite strong click metrics
- The speaker distinguishes between Facebook's hard rejections (account shutdown) and soft rejections (high CPMs or low-quality traffic), with soft rejections being the more common constraint on campaign profitability
- The speaker identifies 10% add-to-cart ratio as the KPI threshold that proves proper ad-to-landing page congruency and genuine visitor intent, making it the primary diagnostic metric for funnel health
Topics
Transcript
[0:00] What do you do if ad no work? Two reason why ad no work. Reason one is either you have an ads problem or a funnel problem. Let's begin with the ad side. Where is the breakdown occurring? Number one, most importantly, it's just going to be your CPC. If you're running ads in the US, I want to see under a dollar fifty. Number two is going to be your CTR. Generally good indicator of how good your creatives are, period. And then one of the next is CPMs. Now, the important thing I need to say about this is none of these exist in a vacuum. And what I mean by that is they're all interconnected because…
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