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Happy Sunday, Everyone!
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I hope you’re all enjoying the August sun and (hopefully) getting
in some well-deserved and much-needed rest/relaxation/family
time, before the back to school and the end of Q3 kicks into high
gear.
For this week’s issue, I want to discuss a topic that I spend an
inordinate amount of time thinking about, but I almost never hear
discussed: advertising investment strategy + capital allocation.
If you read that last sentence and thought, “I have no earthly
idea what he’s talking about…” – then this is the issue you
should read.
I started my career in finance - 5+ years spent living in
spreadsheets, building models and finding every possible way to
squeeze every dime of profit out of development projects. Then I
made the (very natural) switch to advertising….where I’ve done a
lot of the same. The numbers in the spreadsheets changed, but the
fundamentals of what we’re trying to achieve (maximize
risk-adjusted returns; minimize capital required and risk) did
not. In fact, there was only one major thing that changed:
(Virtually) no one in marketing talks about capital allocation or
investment philosophy.
Sure, some of us hint at it in new business pitches or when we
talk about how we approach ad accounts, but vanishingly few
people/agencies have articulated a philosophy for how they
approach making investments on behalf of their clients (internal
or external).
I want to change that.
Before we dive in, let’s take a step back. For most companies,
marketing/growth is one of the largest line items on their P&L
every year. It’s the lifeblood of the enterprise – if marketing
fails to perform, growth slows (or stops altogether). If that
happens, we all know what follows: stagnation. And stagnation is
death. I - along with many others - have written plenty on the
tactical/mechanical/strategic drivers of marketing failure; but
the more I’ve thought about this, the stronger my conviction that
those things are only 20% of the problem. The 80%? The investment
philosophy that underpins the entire strategy. This is no
different from your retirement or real estate investments: if you
get the big stuff (you pick the right market, avoid the big
mistakes), you can endure more than a few tactical bumps and
still wind up massively ahead.
I talked about this topic in a keynote in Lancaster, PA a few
years ago - and the response I got (especially from big agency
people) was this: Madison Avenue isn’t Wall Street. Marketing
doesn’t work like finance. And when you try to approach marketing
investments like you would financial investments, you’re doing it
wrong.
I think that’s bullshit. I did then, and nothing in the
intervening years has done a damn thing to change my mind.
When you buy a stock (or a piece of real estate, or a bond, or
whatever), you’re making an investment decision: what is my
expected return, over what time period, and with what risk
profile? For each potential investment, you consider those three
questions, weight the answers according to your own preferences
(some investors are more conservative than others; we all have
different time horizons for realizing returns; each of us has a
certain tolerance for risk + volatility. None of these are right
or wrong; they’re just different).
My contention is that advertising is exactly the same: when you
buy an ad unit, you’re buying an expected value. If the expected
value is greater than your cost, and if that value is realized
over a suitable time horizon, your returns are positive. If it
isn’t? They’re negative. From a fundamentals standpoint, every
time you buy an ad, you’re making an investment.
So why do most marketers (and CMOs and CEOs) treat their
marketing investments like paying the electric bill or the rent –
as if it's an expense to be minimized as opposed to capital to be
allocated. This is a fundamental mistake. Marketing budgets
aren’t costs to be minimized; they’re capital to be allocated.
Wall Street understands this intuitively. Madison Avenue doesn’t.
And the gap between those two mindsets is why so many CMOs fail
to unlock the true compounding power of their marketing dollars.
Over the next two issues, I want to share how I apply my personal
investing philosophy to client ad budgets and ad accounts. It’s a
framework that has helped me avoid the traps of short-term
thinking, smooth the emotional rollercoaster of daily results,
and ultimately compound results in ways most competitors miss.
This issue contains Parts I & II, which focus on capital
allocation and investment philosophy; next week's issue contains
Parts III, IV & V focus on portfolio construction, management
rules & contrarian approaches that can produce outsized returns.
Without further ado, let’s get to it:
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Part I: Marketing’s Many Capital Allocation Problems
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One of the most persistent issues I see when auditing ad accounts
is an implicit failure to understand how compounding + growth
occurs. That may seem harsh, but it’s true. This starts with how
budgets are set, and bleeds into how the accounts are run and
optimized. The end result is middling performance - good enough
to avoid getting fired, but no-where close to the account’s true
potential.
Most Marketers Have No Capital Allocation Philosophy
----------------------------------------------------
When I talk to CMOs or CEOs, one of the first questions I ask is:
how did you arrive at your current budget allocation across
campaigns/channels?
The most common response I get is something along the lines of,
“I don’t understand the question – we had $XXX,XXX budgeted each
month, so we split that across Meta, Google + TikTok. We then
split each platform’s share based on how many campaigns we had
with some adjustments for how much each campaign could spend.”
To put actual numbers to this, I recently spoke with a brand
spending about $300,000 per month across Meta, Google &
Programmatic. Each channel had a $100,000/mo budget. Google had 5
campaigns, Meta had 10, Programmatic had 8. Each campaign had a
$20,000/$10,000/$12,500 monthly budget. Perfectly balanced, as if
Thanos himself had set them up.
The problem: ad markets aren’t neat, tidy or balanced. Channel
performance is not uniform across days, weeks or months. What is
convenient for accounting turns out to be cancerous to growth.
When I actually looked in the account, I found that the Google
non-branded search campaign was returning $60 CPAs ($40 under the
target of $100) while being budget-capped. The competitor
campaign was at $140 (also budget capped). The use case campaign
(focused on more informational searches) was right at $100 CPA,
but 3 core use cases were posting a $75 CPA, while the other 12
ranged from $100 to $275.
This is a capital allocation disaster. The top-level returns
($100 CPA account-wide) looked fine, but that was just because
the winners were masking the horrific performance of the losers.
Forget optimization and management – this account would perform
20% to 30% better simply with improved capital allocation. No new
landers or keywords or creatives or audiences – just setting the
right budgets + targets.
This is the equivalent of an investor allocating equal dollars to
every stock in the S&P 500 – sure, it’s “fair”. It’s simple. But
when you’re putting the same total dollars into Apple or
Microsoft are you are into LKQ Corporation (yes, that’s a real
company that’s really in the SP500), that’s not allocation;
that’s laziness masquerading as diversification.
Going back to the above account, the math is brutal:
* The non-branded search campaign (CPA $60, target $100) can
profitably deploy an extra $30k each month, netting ~450 more
customers (adjusting for some CPA increases as the campaign
scales).
* Meanwhile, the competitor campaign (CPA $140, target $100) and
those 12 use cases are incinerating money. When deployed into
those two campaigns/ad groups, the same $30k nets just 190
customers at a cost that isn’t tenable (read: you’re losing money
on virtually every one).
* Because the non-branded search is SO good, it masks the losses
posted by the competitor and some of the use cases – so the
client doesn’t think Google is broken.
* Even allocation results in the non-branded search campaign
being limited to just $20k, while the competitor and use-case
campaigns underperform by ~260 customers (~450 if the non-branded
campaign was given the $30k vs. the ~190 the other two campaigns
delivered).
The end result? You’re not “managing risk.” You’re averaging
down. You’re ensuring mediocrity, because your allocation choices
were driven by neat columns in a spreadsheet instead of
real-world performance.
A smarter, performance-responsive allocation almost never looks
even. It looks concentrated, with the campaigns that are
producing the best returns being funded until they hit
diminishing returns, and the underperformers starved of capital
until they either rebound or stop serving altogether (aka die).
Investors call this survivorship concentration. Marketers should
too. Winners deserve more capital. Losers deserve none.
While your spreadsheet won’t look neat-and-tidy, your monthly
reports will make the client’s eyes sparkle as s/he grins from
ear-to-ear. Win some, lose some.
Monthly Budgets Are Growth Killers
----------------------------------
A significant portion of the above account’s under-performance is
capital allocation, but a non-insignificant portion of it is the
driver behind it: the monthly budget. Each month, the CMO gets
$300,000 to allocate.
Why? Because that’s what the CFO plugged into the spreadsheet.
Here’s the silliness: customers don’t buy on your schedule.
Prospects don’t sign contracts because it’s the third week of
your fiscal quarter. A customer doesn’t think, “Gee, if I waited
to buy this widget until September 1, then Lululemon’s marketing
team would be happier with my decision.”
People buy when their conditions demand it. It might be a sudden
stimulus (i.e., the pipe under the sink cracked or the HVAC
stopped working) or it might be a temporal trigger (i.e., their
child’s school sent a note with the supplies needed for the
upcoming school year) or might be erosion of resistance (i.e.,
they weren’t feeling great about their appearance, then their
favorite pair of jeans stopped fitting, then they saw an IG ad
for Caliber fitness, then they got winded when trying to play
with their kids….and finally, one night, they decided to make a
change…and went on a health / fitness buying bender).
At no point, in any of these examples, did the customer think
about the brand’s budget or marketing calendar (unless they were
trying to calculate whether they could hold out a bit longer to
get a better deal).
If you could acquire 1,000 additional customers this month at or
below your target CPA, why in the world would you not do it? Why
would you choose to hold those dollars into the next month, when
we all have no idea what’s going to happen? You have potential
customers who could be acquired today at a reasonable, profitable
cost – and you’re choosing to forego acquiring them in the hope
that you can get them next month.
While it’s possible you might be able to pull that off, it’s
equally possible (if not more likely) that conditions - both in
ad markets and in your target audience’s lives - will be
materially different next month vs. now. Generally speaking, the
further out you go, the greater the range of potential outcomes
(the further forward you try to project, the more uncertain the
projection). Waiting to spend is actually increasing the risk
profile of your marketing investments.
You read that right.
Customers are self-centered. They’re interested in buying when
the conditions in their lives demand it. It might be the first
cold night of fall, when the heater doesn’t kick on (or doesn’t
heat the house). It might be that back-to-school email from the
teacher, or the first math test that comes home with a “C”. It
could be the first autumn breeze that seeps through the window in
the home office (need better windows!) or their kid mastering the
balance bike and looking longingly at the neighborhood kids on
their pedal bikes. It could be the marketing director who just
got her 2026 goals + budget back, and is reviewing what her
agency did last year and wondering, “Are they going to be able to
get me to the next level?”
Most of the demand captured by brands isn’t created by them; it’s
created by the broader environment and (at best) channeled by the
brand’s ads. Once you accept that, then ditching monthly budgets
should become even easier – spend in response to market demand,
not CFO schedules.
Put another way: your customers don’t care that it’s Q4. They buy
when the pain is urgent, when the message resonates, when the
offer clicks. If your campaigns are working in those moments but
your budget is tapped, you’re literally forcing yourself to lose
business.
Opportunities don’t care about your budget cycle.
Cutting off your campaigns when they are performing, solely
because of an arbitrary budget is not discipline or being
responsible; it’s laziness and irrationality. It’s the equivalent
of refusing to buy more shares of a company you love at a price
you adore, simply because you already hit your monthly
allocation. Investors don’t say, “I’ll put the same $10,000 into
the market on the 1st of every month, regardless of what’s
happening.” They say, “When the price is right, I’ll allocate
aggressively.”
Stop Losses Have Their Place
----------------------------
To be very clear, this is not me saying, “always spend!” – far
from it. Stop losses have their place. Budget reductions have
their place. In stock trading, you might cut a stock when breaks
below a key level (like your entry point or the 200 WMA),
especially if you believe that the decline is a result of
something structural (bad management, bad strategy, moving
market, etc.).
The same logic applies to advertising.
If a channel’s efficiency starts to crumble as you scale, the
prudent thing isn’t to scale into declining returns, it’s to pull
back to a stable and acceptable performance level (i.e. a lower
budget and/or a more conservative target).
What should be clear is that this budget reduction isn’t being
driven by a calendar or a budget cycle; it’s being driven by the
fundamentals of both your customer’s reality and the ad market.
That’s rational risk management.
Most marketers stop here. They live in neat spreadsheets and tidy
allocations, and they call it “management.” But this isn’t
management. It’s accounting.
And accounting doesn’t compound.
Investors don’t build wealth by distributing their dollars evenly
or obeying arbitrary calendars. They build wealth by following
rules — hard rules — that force discipline when emotions,
headlines, and herd behavior try to pull them off track.
The same principle applies to advertising. If every ad dollar is
capital, then the way you allocate isn’t about neatness or
compliance — it’s about philosophy. Rules that guide when to
deploy, when to hold, when to pull back, and when to double down.
Which brings us to the core of the framework: the investing rules
that govern my approach to advertising.
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Part II: Core Rules For Advertising Investments
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If Part I was the wrecking ball to the traditional approach, this
is the path forward.
The truth is, most marketers don’t have rules. They have habits,
tendencies and preferences. They manage by feel, by calendar
and/or by what was done last quarter/year/whatever. That’s how
you get lazy, even splits across channels, budget caps that crush
growth and accounts that look dreamy in a spreadsheet but
disappointing on the P&L. In short: that’s how you get
mediocrity.
No one worth discussing aspires to that.
Successful investors don’t operate this way. They don’t wake up
every morning asking, “How do I feel about Apple today?” or “Am I
vibing with what Tommy Boy is doing over at $BMNR?” The very
thought of allocating capital in that way is laughable. Investors
have principles: hard, clear, non-negotiable rules that govern
when to buy, when to hold, when to cut and when to double down.
Advertising demands the same discipline. If you treat every
dollar like capital, then you need a philosophy for allocating
it. Below are 5 rules I use to manage advertising investments,
drawn directly from my personal investing philosophy.
Rule #1: Only Run What You Understand
-------------------------------------
Warren Buffett has been saying it for decades: “Never invest in a
business you don’t understand.”
I couldn’t agree more - both when it comes to stocks AND when it
comes to advertising.
Too many brands chase whatever’s shiny. TikTok launches a new ad
format? They’re throwing money at trying to make it work.
LinkedIn releases conversation ads? They’re bringing in a
consultant to explore it. Some vendor pitches a “next-gen”
attribution platform? They’ve sent the contract to the purchasing
person before they’ve figured out what’s so revolutionary.
Here’s the problem: when you don’t understand the underlying
mechanics, you can’t properly evaluate risk, expected return or
the conditions under which performance might collapse.
* I recently audited a brand that was using an “AI powered”
Google Ads management software (NOT Optmyzr) to run campaigns. No
one could really explain what it did, other than it was $1,000/mo
and it used machine learning to run the six-figure account. After
a few hours in the account (and a few more in the change log), I
found that all this (allegedly) smart thing did was run
everything on broad match, auto-apply recommendations and feed
landing pages into Gemini to create more headlines. 25% of the
budget was being incinerated on obviously irrelevant terms, but
that was being masked by branded search not being excluded from
non-brand.
* On the flip side, brands that stick to channels and tactics
they understand can scale with confidence. When you know how the
auction works, what signals matter, what creative tends to
perform, how the ads appear in the feed and where the performance
ceilings are, you’re not just spending money; you’re making
calculated investments.
Missing hype cycles hurts less than falling victim to something
you never understood in the first place. If you don’t understand
it, don’t invest in it.
Rule #2: Think Long-Term - Because Day Trading Will Kill Your
Account
-----------------------------------------------------------------
Most marketers are guilty of day trading their ad accounts (
).
They watch performance like a stock ticker, obsessing over
hour-by-hour CPA swings (or worse, by each click coming into the
account), pulling budget from campaigns that look “red” and
dumping money into ones that look “green.”
That’s not a strategy; that’s a frantic game of whack-a-mole that
you’ll never win.
Day trading in your ad account is the marketing equivalent of
selling Amazon because it dipped 3 percent this morning, then
buying Peloton because it is surging 50% based on FinTwit or
WallStBets. The likely outcome is that it will collapse 70% over
the next year, and you’ll be left holding the bag.
The same is true in advertising. Data is noisy in the short run
and signal-rich in the long run. Platforms + algorithms need time
to stabilize. Audiences need time to see, consider and act.
Offers need time to cycle through different buying windows. When
you judge everything on a minute-by-minute basis, you’re not
allocating your capital rationally. You’re gambling.
Many of the best campaigns I’ve ever run looked like losers at
one point or another. One campaign in a legal account was
downright dreadful for a solid 2 weeks – plowed through money
($900 CPCs add up quite quickly) and didn’t produce a single
signed case. Most PPCers (and most clients) would kill the
campaign - but I didn’t because the underlying performance was
not as bad as the results suggested. While we didn’t sign a case,
we did get a handful of excellent leads that failed to convert
due to external factors. The searches were exactly what we
wanted. The fundamentals were good. The outcomes were bad. Based
on that, I convinced the client to stay the course, and over the
following two weeks, we signed two massive cases - more than 20x
the total investment.
If I would have treated this like a day-trading account, I
would’ve pulled the budget and locked in my losses.
The investor parallel is clear. The market rewards those who can
stomach short-term noise in order to realize long-term returns.
The same discipline applies to ad spend. You don’t generate
outsized returns by chasing what’s hot today; you achieve it by
allowing the proverbial cream to rise to the top (aka by letting
the fundamentals play out).
Patience is not passive. It’s an active decision to ignore the
ticker, trust the process and allocate based on fundamentals, not
feelings. In a landscape where everyone else is day trading their
accounts, patience becomes your competitive edge.
Rule #3: Know Your Golden Channels
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Not all channels/tactics/campaign types are equal.
In investing, there are two kinds of “golden” companies:
* The ones you love and use every day
* The ones you curse but can’t live without
Those are the companies you want in your portfolio, because those
are companies that are likely to make you a LOT of money over
time (assuming you have decent-to-good taste/preferences).
Advertising works the same way:
* Golden Channels You Love: TikTok, YouTube, Reddit, X, Email,
retargeting – each one of them has favorable economics and
positive tailwinds (people are finally catching on that YouTube
might be the most valuable impression on the web)
* Golden Channels You Hate But Need: Meta and Google. Everyone
complains about them. Everyone says they’re inefficient,
expensive, monopolistic, unfriendly and unpredictable. And yet,
try to create a growth strategy that doesn’t include them
The art of allocation is knowing which are truly golden versus
which are distractions. Golden channels earn more capital because
they’re either inevitable (Google owns search, Meta owns social)
or structurally advantaged (retargeting often produces the
highest expected value impressions).
The danger is when marketers treat all channels as equally
deserving. They’re not. Just like you don’t allocate the same
amount of capital to a CarMax that you do to MSFT, you shouldn’t
fund a speculative Quora experiment the same way you fund your
non-branded search campaigns on Google.
The reality is that most brands would do better to identify their
golden channels/campaigns and pour more money into them, vs.
trying to sprinkle it around to everything (if you’re curious
about my approach here, read this ancient article from 2023:
link (
)).
Rule #4: Buy Into Non-Structural Weakness, Not Hype
---------------------------------------------------
Most marketers scale when costs rise and cut when costs fall. In
most cases, doing that is categorically insane.
* CPMs spike? Budgets expand
* CPMs dip? Budgets shrink
That’s the advertising equivalent of buying tech stocks at
all-time highs and dumping them at the bottom of a recession.
The rational media buyer does the opposite. When search CPCs drop
at the end of the month because your competition is out of money,
that’s your entry point. When inventory gets cheap because the
market is jittery or because your competition has diverted funds
to AppLovin, that’s when you start pushing more chips onto the
table.
This is easy to write in a newsletter. It’s more difficult to do
when you’re actually running an ad account.
One example: way back in April 2020 - during the early days of
COVID - CPMs on Meta absolutely cratered down 20% to 40% (which
was rational - the entire world was shutting down). Tens of
thousands of brands paused their advertising while they waited
for certainty (or, at the very least, clarity)....but a handful
didn’t.
Those rare brands that pushed chips onto the table when everyone
else was running away? They acquired customers for pennies on the
dollar, because they recognized an asymmetric opportunity: either
things were going to stabilize relatively quickly and people
would still need stuff OR things were truly dire and we were
careening toward some dystopian hellscape out of World War Z (in
which case, the $100k they plowed into Meta ads wouldn't matter,
anyway).
One thing worth mentioning: the non-structural part. Everything
I’ve described above is non-structural weakness – it’s people
being irrational or making mistakes, which shows up as cheaper
costs for a short period of time. When search CPCs drop at the
end of the month, it’s not because Google is broken or people
aren’t searching anymore; it’s because other advertisers ran out
of money and search is an auction-based platform. Structural
weakness, on the other hand, is something to avoid – that’s when
CPMs are cheap because the platform pulled a Quibi and has no
users. That’s not a time to spend more - that’s a time to run
away faster.
In the short term, auctions are irrational. In the long term,
efficiency rewards contrarian discipline.
Rule #5: Lower Your Basis by Lowering the Cost of Learning
----------------------------------------------------------
When I invest, I am often focused on lowering my basis - not just
because I enjoy seeing big % increasing numbers, but because
doing so maximizes my upside and reduces my overall risk. It
creates a margin of safety and expands the room for compounding.
Buying the same company cheaper improves my risk/reward profile.
Advertising works the same way.
Every platform/channel/campaign has an upfront basis. You are not
just spending to acquire clicks or impressions; you’re paying to
learn the platform/campaign type (either for your team or via an
outsourced partner), to develop platform-specific creative, to
build landers, to spin up post-click flows, to learn what works
and to refine what doesn't. Those costs add drag to every
marketing program.
The brands that win long-term don’t eliminate those costs - they
lower them. They figure out how to reduce the unit cost of
producing a winning ad, of shipping a high-performing experience,
of the lessons learned along the way. Just as the investor who
continually lowers his/her basis compounds wealth faster, the
advertiser who lowers creative, lander, experience + learning
costs compounds growth faster.
* Creative: Some brands spend $20k to $30k producing a handful of
“hero” ads. Others produce dozens of variations at a fraction of
the cost, increasing surface area for breakthroughs while
lowering average cost per “hit” creative. Over time, the brand
that can produce strong creative for half the unit cost builds a
structural advantage: they spend less to make ads that perform
better, which frees up more capital into those winning ads, which
gives them the ability to create even more ads, and so on and so
forth.
* Experiences: Same story on the post-click side. Many brands
build custom landing pages from scratch for every campaign.
Smarter brands modularize. They create systems where new
experiences can be deployed at 10% the cost and 10x the speed.
That lowers the basis for every future campaign.
* Learning: Finally, learning itself has a cost. Early dollars
are the most expensive because you are still figuring out how the
platform works, what account structures make sense, which
audience(s) tend to perform best, what eccentricities (and there
are always eccentricities) exist…all while calibrating messaging,
offers, creatives, angles and landers. If you can reach
confidence faster and cheaper, every future dollar compounds more
efficiently.
Think of it like this:
* Brand A spends $100k in Q3 to generate three winning creatives,
two high-performing experiences and the insights to scale.
* Brand B spends $60k over the same period, and reaches the same
point.
Both may scale successfully. But Brand B starts compounding from
a lower basis, with $40k of capital ready to be redeployed into
growth. Over quarters and years, that advantage snowballs.
I wrote about this dynamic in detail inThe Creative Performance
Metrics That Matter in 2025 (
).
The key point is this: most marketers optimize at the surface
with CPMs, CTRs and CPCs. But the real compounding advantage
comes from lowering structural costs. The lower your basis in
creative, in experiences and in learning, the higher your
risk-adjusted returns over time.
Rule #6: Stay Emotionally Neutral
---------------------------------
This one might be the hardest.
Emotions kill returns. Fear makes you sell at the bottom. Greed
compels you to buy at the top.
But the deeper trap is resulting - a term coined by poker player
Annie Duke’s for judging decisions only by their immediate
outcomes. In poker, as in investing or advertising, a player can
make the right decision, put the chips in with the odds in their
favor and still lose to an unlucky draw. Luck cuts both ways -
that same player can make a reckless call and get bailed out by
the river. The outcome doesn’t prove the decision right or wrong.
The best investors stay even.
The same applies to advertising. Campaign performance can be
incredible one day and horrific the next. Some days your ROAS
will look like you’ve had a bank error in your favor or found the
cheat code. Other days, you’ll wonder if your client’s business
is still viable and offer up just about anything to the Google
Gods for a sale.
We’ve all been there.
Good campaigns sometimes look terrible in the short term. Bad
campaigns sometimes spike and look like winners. If you judge by
next-day results, you’ll never know which is which.
Warren Buffett has warned shareholders of this exact trap.
Berkshire Hathaway stock has fallen more than 50% three separate
times. Did that make Berkshire a bad investment? Not at all. The
fundamentals were intact, so he held. Holding is why Berkshire
compounded into one of the greatest investments of all time.
I’ve seen this play out recently for a B2B SaaS client. Due to a
series of weird factors (some leads cancelling multiple bookings,
a few vacations, a prospect’s kid getting sick), their account
looked like it produced nothing for 2+ weeks – no closed/won
deals. Based on the top-line, it was bleak. But, as with the
legal client above, the fundamentals were fine. The leads were
good. The opportunities were real. Life just got in the way for
several of those prospects all at the same time. We stayed the
course, and by the end of the month, those deals had closed and
the top-line performance matched the fundamentals.
That’s the point: emotional neutrality isn’t about ignoring
performance. It’s about separating signal from noise. Buffett
didn’t dump Berkshire when the stock price cratered (he actually
bought more) – so don’t turn off a historically-good campaign
because your Tuesday bled red.
The easy-to-say, hard-to-master secret is detachment. Don’t chase
the ticker (or the CPA, or the ROAS, or whatever else); stay
focused on the fundamentals.
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The Point of Rules
------------------
Rules don’t exist to make things rigid. They exist to prevent you
from doing something stupid.
Without rules, every budget decision feels like a debate. Debates
are often won by emotions and loud voices, not logic, reason or
math. With rules, every decision is filtered through a framework
that already anticipates volatility, risk and human bias.
You don’t need to win every campaign. You just need a governing
philosophy that minimizes the probability of disaster while
allowing you to compound returns over time. That’s exactly what
these rules do.
This week’s issue was sponsored by Optmyzr.
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One of the things I stress to our team constantly is that it
doesn’t matter how great our approach is IF we can’t execute the
fundamentals. Being brilliant at the basics is table stakes for
success in investing and in PPC. Since we’re on the topic of
budgets, I wanted to highlight Optmyzr’s Budget Management tool.
If you’re unfamiliar, it’s portfolio management for ad spend.
Instead of dividing budgets evenly across campaigns or scrambling
to fix pacing at the end of the month, Optmyzr lets you plan,
allocate and rebalance dynamically.
You can set budgets at any level account, campaign, channel,
geography — and monitor spend in real time. We use the “smart”
forecasts to get accurate predictions, based on each client’s
account history, seasonality + budget changes for pacing +
expected performance. That allows us to avoid budget-wrecking
disasters while automating the boring routines, such as pausing
overspending campaigns or shifting dollars to higher performers.
Since I already shared some principles above, here’s how Optmyzr
helps me implement them in my day-to-day:
* Principle #1: No arbitrary limits. Optmyzr makes sure you never
under-invest in winners or over-feed losers. The budget
optimization tool suggests exact changes to both budget and
targets, so you don’t inadvertently leave sales/leads on the
table.
* Principle #2: Think long-term. Forecasting spend lets you stay
ahead of the curve instead of reacting to noise.
* Principle #5: Lower your cost of learning. Automations handle
the grunt work, freeing you to focus on strategy, creative and
experiences (i.e., the highest-leverage work that’s most likely
to drive outsized returns).
The end result? You stop acting like a day trader with
spreadsheets and start allocating like an investor with
conviction.
Optmyzr is currently running a 14-day free trial (no credit card
required). If you think about ad budgets as capital to be
invested, this is the infrastructure that makes disciplined
allocation possible.
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That’s where I’ll leave it for this first issue.
If you take anything away from the last ~5,000 words, I hope it’s
this: everything is a capital allocation exercise - and the rules
of advertising aren’t dissimilar from the rules of investing.
That’s why the best marketers borrow from the best investors.
The game isn’t about looking busy, it’s about compounding. It
isn’t about spreading dollars evenly, it’s about putting them
where they earn the highest return. And it isn’t about reacting
to the day’s swings, it’s about staying consistent long enough
for the math to work in your favor.
In next week’s issue, we’re going deeper. I’ll walk you through
how to build a portfolio of ad spend the way a great investor
builds a portfolio of assets: concentrating on winners, cutting
losers without hesitation and sidestepping the survivorship traps
that quietly kill performance. We’ll also cover the management
rules that keep you compounding through volatility, plus the
contrarian plays that separate disciplined allocators from
everyone else.
If Part I tore down the bad habits and Part II reframed the
rules, then Part III is where it all comes together.
I know that most marketers will never operate this way. But I
also know that if you do, you’ll find yourself playing a
completely different game.
Until next week,
Sam
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