(
)
***********************
Happy Sunday, Everyone!
***********************
I hope youâre squeezing the last bit of joy out of summer,
whether thatâs family time, travel, or just a cold drink in the
backyard before back-to-school + the September chaos arrives.
If you didnât read last weekâs issue, I highly suggest starting
there. The big takeaway is marketing budgets arenât expenses;
theyâre investments. And the way most marketers treat them
(monthly caps, neat allocations, spreadsheets that look tidy but
kill growth) is the #1 reason why far too many brands fail to
grow. That mindset shift, paired with the 6 rules for capital
allocation, is what forms the foundation of how I (and we at
Warschawski) think about investing marketing budgets.
The second challenge Iâve run into is that rules without a
framework for implementing them are almost always ignored or
forgotten. We need a way to connect the theory of allocation into
the practical, tactical, day-to-day execution.
So, this week, weâre going to focus on where the rubber meets the
road - how it looks when you actually apply the ideas from the
last issue to your ad accounts (math & all is included!)
Before we get to it, this weekâs issue is brought to you by
Optmyzr
-----------------------------------------------------------------
One of the most frustrating parts of managing ad accounts is
answering the deceptively simple question: âWhy did performance
change?â
Weâve all had the unpleasant experience of a client asking, âSo
why did our ROAS drop? Or, âWhy is CPA so much higher this month
vs. last month? What did you change?â
And while most platforms will tell you what changed (impressions
down, CPC up, CVR down, etc.), they rarely tell you why (and no,
the silly AI-powered âexplanationsâ donât solve this). That
leaves you stuck guessing and reacting, instead of diagnosing and
fixing.
Thatâs why I love Optmyzrâs PPC Investigator. It breaks down the
performance shifts based on contributing components (clicks, CPC,
CTR, conversions, CVR, IS, etc.) and shows exactly whatâs driving
the change. You can see, at a glance, whether a drop in leads is
because of higher CPCs, lower click volume, weaker conversion
rates or some combination - then make an informed determination
whether the issue requires making changes (i.e. a new lander) or
is simply noise.
The net-net: instead of wasting hours creating and digging
through pivot tables, you can spend a fraction of that time
identifying the root cause and reallocating dollars. And when you
walk into that next client or board meeting, youâre not
hand-waving; youâre explaining performance like an investor would
explain portfolio shifts: clear, precise and data-backed.
In investing, clarity prevents panic. In PPC, clarity prevents
bad decisions. PPC Investigator gives you both.
Optmyzr is running a 14-day free trial (no credit card required).
If you still needed more reasons to give it a try, hopefully this
is what you needed.
-->Get Optmyzr (
)
Get Optmyzr ( link )
With that out of the way (and now that youâre an Optmyzr
customer), letâs get to it!
---------------------------------------------
Part III: Portfolio Construction for Ad Spend
---------------------------------------------
As I shared last week, the single-most-common mistake I see in
marketing strategies (writ large) isnât a technical mistake or a
setup error; itâs a fundamentally flawed allocation of resources.
At its very core, marketing is a capital allocation challenge:
our job as marketers is to allocate the resources (ad dollars,
time, expertise, assets) we have to the channels/tactics most
likely to maximize risk-adjusted return.
Everything we do must be in service of that overriding objective.
Unfortunately, the fact is that this is almost never how budgets
are allocated.
Instead, the CEO/CFO tells the marketing team they have a budget
of $2,400,000 this year, and the marketing team (CMO, agency,
marketing director, whatever) dutifully begins dividing the
budget across the fiscal year + advertising channels/initiatives.
Over the past few weeks, weâve already had several 2026 planning
meetings - and they almost always (by default) start like this.
This is the first - and best - piece of advice I can give if you
want to be successful in implementing this approach: when the
conversation starts, push back. Resist the siren song of neatly
allocating your budget across a bunch of channels in order to
placate your client (or your CEO/CMO). Instead, shift the
conversation to the desired results / end state. What is the
outcome that this investment should produce, and over what time
period? What are the other limiting or catalyzing factors
(inventory lead times, new product/feature rollout dates, major
moments, etc.)?
Once you have that information, your job is to develop an initial
allocation that attains or exceeds that performance goal on a
risk-adjusted basis, as quickly and efficiently as possible.
That allocation is almost never equal and it should never be
rigid. Why? Because when you split dollars evenly, you starve
your winners and subsidize your losers. Channels/campaigns that
could scale profitably get capped, all while you shovel more
money into the under-performers because thatâs what the
spreadsheet said to do. When itâs all said and done, the blended
CPA might be on-target, but only because the outperformers
covered for the laggards.
From a fundamentals standpoint, this isnât media planning or
budgeting or risk management; itâs averaging down. Itâs lowering
both the floor and the ceiling for your marketing investments,
when you should be hell-bent on doing the exact opposite.
Investors know this. No one in their right mind allocates the
same capital to Apple and to a company on the verge of bankruptcy
just because both are in the S&P 500. Yet marketers do the
advertising equivalent of this every single day.
Sticking to pre-planned, neat-and-tidy budgets feels good. Equal
(or even quasi-equal) allocation feels fair. But when you put
them together, you end up doing more harm than good.
Survivorship Concentration
--------------------------
The alternative to the neat-and-tidy, pre-planned budgets is
survivorship concentration. Even the name sounds Spartan - but
thatâs not necessarily a bad thing. To be very blunt, this is
exactly how I treat both my personal investments (aside: nothing
in here is investment advice; do your own research, yadda yadda
yadda) and client ad budgets.
Survivorship Concentration has two principles:
Principle #1: Feed your winners until they hit diminishing
returns.
Principle #2: Starve your losers until they prove they deserve
capital.
This is the equivalent of force-applying evolution to marketing
budgets.
Note: this does not mean reckless bets or reactionary cuts. It
means disciplined sizing and dispassionate assessment. As an
example, for a $300k per month budget, maybe 60-70% should be
allocated to your top-performing campaigns/channels. Another
20â30% goes to steady campaigns that reliably hit CAC. The
remainder can then be deployed on asymmetric bets
(tests/moonshots), or held in reserve should one (or more) of
these channels/campaigns/tactics outperform.
This structure is what allows your marketing investments to
compound.
When I first started investing (many years ago), I had lunch with
a fantastically successful investor (he was easily a
centi-millionaire). Me - being the wide-eyed, eager-to-make-money
kid, was all too eager to learn from him. I still remember the
first question I asked: how do you do it? How do you make your
investment decisions? His response was a gem of wisdom I still
adhere to - religiously - to this day: âI donât sell winners to
fund losers. I let my winners run and I kill my losers. The
mistake that destroys your portfolio isnât having losers; itâs
keeping them.â
Advertising works the same way.
When you allow your ad dollars to naturally concentrate in
winning channels/tactics/platforms, the total return on your
investment improves â not because you miraculously got better or
found some new hack, but because you got out of the way.
Similarly, when you cut off losers, your return improves, not
because you figured out that channel/tactic, but because you cut
it off and allowed the capital to flow to whatâs already working.
The simplest way to make this actionable is the Core vs.
Satellite approach:
* Core platforms/campaigns are your Apples and Microsofts.
Durable, proven, scalable. Meta, Google non-branded search, maybe
retargeting or YouTube for some brands. Together, these
channels/tactics form the foundation of the portfolio and get the
bulk of the budget.
* Satellite platforms/campaigns are your biotech or
hot-and-trendy AI startups. Speculative, asymmetric, unproven.
New TikTok formats, Quora, podcasts. They get small allocations
sized like options.
The discipline comes in how you manage the satellites: you want
to ensure they have enough of an allocation to actually produce
results (i.e. if your target cost per acquisition for a B2B SaaS
brand is $2,000, you have to be willing to invest at least 5-10x
that over a period of 4-6 weeks in order to make a determination
on viability; if you just drop $500 into the channel each month,
thereâs a decent chance the channel could be viable but you donât
see it because of sizing issues), but not too much such that are
siphoning dollars with superior risk-adjusted returns away from
the Core.
Over time, youâll see that some satellites will graduate into
core, while most die. Thatâs expected. The goal is not for every
satellite to succeed; itâs for the few that do succeed to deliver
outsized returns without jeopardizing the stability of the core.
This is where most marketers struggle: the definition of a
successful satellite/core approach is a LOT of failed satellites.
This model gives you both resilience and upside. The core is the
steady-as-she-goes compounding engine â itâs predictable and
reliable (assuming you continue to feed it quality assets,
maintain a solid product, etc.) The satellites create the
possibility of breakout wins. Together, they give you a portfolio
that is antifragile: resilient and predictable (thanks to the
core), but still capable of significant upside and
self-evolution.
The Art & Science of Position Sizing
------------------------------------
In investing, you donât sprinkle $1,000 into 500 companies. You
size positions based on conviction and expected risk-adjusted
return. Thatâs precisely the approach we should be taking to
marketing budgets.
Position sizing should follow risk-adjusted expected value:
* If a campaign is out-performing established targets by 30%,
scale it.
* If it is performing at target, maintain it.
* If it misses its performance target (on a reasonable
investment), reduce or eliminate it.
The two mistakes most marketers make in position sizing are: (1)
not factoring risk + volatility profiles into their allocation
decisions and (2) ignoring marginal returns. Letâs take those in
order.
Some marketing platforms/channels/tactics are more volatile than
others - we all intuitively âgetâ this, but most marketers donât
connect that innate knowledge to day-to-day practice.
I saw an example of this in action this week: a potential client
was on TikTok for over a year, and (finally) saw a substantial
surge in sales from Shops about a month ago. Their response was
to quadruple an already-high TikTok budget in response to the
uptick in sales. At first glance, that might seem logical â after
all, there was a surge in sales. The platform was âworkingâ. But
what that massive increase ignored was the history and long-term
risk profile of the channel: this brand had been on TikTok for
over a year, during which time they invested $50,000+, most of
which produced a moderate (but not remarkable) return. There was
ample data that suggested TikTok was a feast-or-famine platform
that, over a longer sample size, lagged their core platform (Meta
+ Google) performance by 10%-25%.
The brandâs rationale when I asked about it was: âThe ROAS on
TikTok during the surge was 8x - which is nearly double what we
average on Meta and GoogleâŚwhy not spend more on TikTok?â
My response was: âYes, but if you expand the timeframe to 90
days, TikTokâs ROAS is 4.5x, which is what youâve consistently
attained on both Meta + Google, without the volatility and
variability. When TikTok is âhotâ, itâs white-hot. When itâs
cold, itâs the Arctic. The problem is you have no idea when itâs
going to be hot or cold, which absolutely kills your business â
you need to know when to order inventory, how to staff, etc. If
youâre going to fund a platform this volatile, the risk-adjusted
return needs to be substantially better than the risk-adjusted
return from other, more stable channels.â
The easiest way to do this: calculate both an expected return
(i.e. TikTok produces a 4.5x average return) and a volatility
index.
The quick-and-dirty approach is a range-based approach to
volatility: take the highest observed ROAS, the lowest-observed
ROAS and the median, then do some quick math: (high-low)/average
= volatility index
For this potential client, TikTokâs ROAS ranged (on a monthly
basis) from 0.85x to 8.15x. Applying the formula from above
yields:
(8.15â0.85)/4.5 =1.62
Then, divide the average ROAS by the volatility index to get a
risk-adjusted expected return:
4.50/1.62 = 2.778.
So while TikTokâs AVERAGE return looked good, the bipolar
distribution of returns makes it significantly less attractive as
a core channel than say Meta, which had a volatility index of
~0.75.
If you want to get more scientific, and you have multiple
observed ROAS datapoints (not just the high and low), youâd
calculate:
Where:
Ri = observed ROAS values,
RË = mean return,
N = number of periods.
That gives you a true standard deviation of returns, which you
can then express as a coefficient of variation (CV):
Which makes it comparable across channels/platforms, since itâs
normalized to the mean.
The one challenge with this method is that channels/tactics with
exceptionally low volatility end up looking staggeringly good.
The solution is to use the risk-adjusted expected return
equation:
Where:
* E[R]] = expected return (mean ROAS or contribution margin
multiple)
* Ď = volatility index (std. dev. of returns, or range á mean if
using simpler math)
* Ď(min) = volatility floor (e.g. 0.5) to prevent absurd
blow-ups when Ď is tiny
* Scale Factor = 0â1 multiplier reflecting realistic budget
headroom (e.g. if channel can only scale to 20% of your total
spend, Scale Factor = 0.2)
This works because higher expected return boosts the score, while
volatility penalizes instability. Flooring Ď ensures stable
channels like branded search donât look artificially perfect.
Scale keeps you honest, so even a high-return, low-volatility
channel with limited growth potential canât dominate the
portfolio.
The second, and related, issue is marginal returns. We see this
all the time in Google Ads - Google pops up a big, red
notification next to campaigns that are performing at or above
your performance target with âLIMITED BY BUDGETâ in all caps â
then (helpfully) shows you a new ârecommendedâ budget, along with
expected changes to both CPA and ROAS.
Take this example, from a current client account:
Currently the client is spending $1,000 per day and driving
conversions at 10% below target ($50 tCPA, $45 actual L30 CPA).
Googleâs recommended budget is $1,500 per day, which they say
will raise the overall campaign CPA to $51.36. That looks
reasonable - and $1.36 over target doesnât seem like much â until
you calculate the INCREMENTAL return:
* Current: $1,000/day at $45 CPA â ~22.22 conversions/day.
* After increase: $1,500/day at $51.36 blended CPA â ~29.21
conversions/day
* Incremental conversions: 29.21 â 22.22 = 6.98
* Incremental CPA: $500 / 6.98 = $71.60
So while the blended CPA only rises to $51.36, the incremental
CPA on that $500 is $71.60, which is 43% over target and ~60%
worse than the current $45 CPA. At target efficiency, the extra
$500 should buy 10 conversions; itâs only delivering ~6.98.
Thatâs terrible.
Obviously, if youâre scaling, you have to accept that some
incremental CPAs will exceed your target; the science will tell
you where the diminishing returns curve starts to bend and the
art is reallocating before the curve flattens your performance.
And, above all else: position sizing must be fluid. A core
campaign might deserve 60% of your portfolio today, but if
marginal CAC creeps out of a safe zone, it should be trimmed. A
satellite might be tiny today, but if it produces three months of
outsized results, it deserves more capital.
Your job as a marketer is not to keep allocations stable or
true-to-spreadsheet; it is to keep allocations aligned with
risk-adjusted expected value.
Rebalancing & Discipline
------------------------
Letâs all be honest for a minute: even great portfolios drift.
Winners balloon. Losers linger. Weâve seen it happen to Warren
Buffett multiple times (though, to his credit, he does fix it) â
and if it can happen to the Oracle of Omaha, it can (and will)
happen to you.
Investors rebalance quarterly or annually, trimming positions
back to target weights and redeploying into undervalued assets.
Marketers should rebalance, tooâŚ.but based on cohort-level
performance:
Here are the questions we ask when weâre determining whether or
not to adjust a clientâs budget:
* Is this core campaign still producing at-or-below target, while
maintaining scale?
* Has this satellite platform demonstrated exceptional
performance over a sufficient period of time to consider moving
it to âcoreâ status? If not, what else do we need to see?
* Has this campaign hit diminishing returns? If not, where do we
expect to see it?
* Is capital still flowing toward the highest expected value
opportunities?
Notice whatâs missing: thereâs no prescribed anything. Instead of
looking for balance or neatness, weâre embracing unpredictability
and asking questions that allow us to identify when weâre
off-track.
Why Portfolio Thinking Wins
---------------------------
The difference between accountants and investors is simple:
accountants spread dollars evenly to make the spreadsheet look
clean. Investors concentrate capital into the
channels/tactics/opportunities most likely to produce compounding
growth..
One guarantees tidy reports. The other builds wealth.
Portfolio construction is where your rules meet reality. Without
it, youâre left with averages. With it, you get outsized
performance. Over time, the advertisers/brands who allocate using
this approach will generate more growth + higher returns from the
same marketing. And the beauty of compounding is that growth
compounds: small advantages month-over-month,
quarter-over-quarter are what produce the outsized winners over
years and decades.
Thatâs the secret. Thatâs why marketers who learn to think like
investors eventually leave everyone else in the dust. Compounding
is often too small to notice until its impacts are too big to
overcome.
----------------------------------------------------
Part IV: Management Rules for Advertising Portfolios
----------------------------------------------------
Portfolio construction gives you the framework, but portfolios
donât manage themselves. Left unchecked, even a perfect
allocation will drift over time. People change. Platforms evolve.
New channels emerge. The economy + macro environment shifts. Any
of those things, on their own, are enough to warrant changes in
your advertising portfolio allocation; all of them, all the time,
demand it.
Investors solve this through management rules: hard,
non-negotiable principles that dictate how portfolios are
maintained, trimmed, and grown over time. These rules are what
keep compounding on track when volatility, headlines and our own
biases threaten to knock your portfolio off course.
Advertising demands the same disciplineâŚand this section is all
about how I manage allocations every day.
Rule #1: Donât Sell Winners to Fund Losers
------------------------------------------
This is the cardinal sin. Itâs the single-worst-thing you can do.
If you take nothing from this issue, please remember this.
And unfortunately, this is exactly what I see every day.
The story usually goes like this: a campaign/channel is
delivering excellent performance, with acquisition costs
consistently below target. Itâs the portfolioâs engine. But
because performance elsewhere is weak, the client wants to take
budget from the engine in order to âgive the other channels a
chance.â
It is pure insanity.
Winners deserve more capital. Losers deserve less (or none). When
you rob your winners to prop up losers, you guarantee stagnation.
At best, you move sideways. At worst, you sink.
Never sell consistent winners to subsidize hopium.
Rule #2: Never Average Down Without a Thesis
--------------------------------------------
Investors know the trap of âaveraging downâ - code for throwing
more capital at a loser because it looks cheap. Sometimes it
works. Most of the time, it doesnât.
Marketers do the same. Campaign at $140 CAC (target $100)? âLetâs
add more budget, maybe we just need more data.â Campaign that
hasnât produced a conversion in 30 days? âLetâs give it another
shot with more spend.â
This is how portfolios bleed.
Averaging down only makes sense if you have a clear thesis about
why performance will improve. Maybe conversion lag explains the
gap. Maybe seasonality suppressed demand. Maybe you just launched
a revamped post-click experience based on your heatmap data
(aside - thatâs something more brands should do) or introduced a
new creative or a new influencer partnership that is a
picture-perfect fit for the platform. Those are all valid reasons
to âaverage downâ in moderation
But absent a thesis grounded in real, objective, quantifiable
data, allocating more capital to a loser is a well-funded prayer.
Rule #3: Cut Quickly, Add Slowly
--------------------------------
A common trait among the best investors I know is this: they
eliminate âloserâ positions quickly and scale good positions
methodically.
Marketers often invert that.
Theyâll keep losers around for months and justify it using the
sunk cost fallacy (â...we already spent $20k, maybe another $10k
will turn it aroundâŚâ) or theyâll scale into winners seemingly
overnight, with the rationale that either the platform has
âturned aroundâ (like the TikTok example above) or because of
FOMO (slash what they read on X/LinkedIn/heard at a conference).
Both are mistakes.
Bad campaigns should be cut ruthlessly. The dollars saved are not
wasted; theyâre freed up to fund higher-return opportunities. And
winners should be scaled intentionally and methodically -
increase budgets gradually while monitoring marginal performance,
so you ensure the incremental returns are there before you keep
adding. It sounds boring (and it is!), but leverage cuts both
ways â when you go from spending $1,000/day on Meta to $10,000 a
day, even a small deviation in performance can be significant.
Cutting quickly and adding slowly prevents both forms of capital
destruction: wasting money on dead weight and suffocating winners
by scaling them past the point of diminishing returns.
Rule #4: Manage to Fundamentals, Not Headlines
----------------------------------------------
Anyone who watches the stock market regularly will tell you that
markets move on headlines â but any successful investor will tell
you that people who chase headlines rarely come out ahead in the
long run.
Advertising is no different.
It seems like every day, thereâs a new shiny object in ad world â
whether itâs a new platform (looking at you, AppLovin), a new ad
format, a new bidding strategy, a new optimization option, a new
creative trendâŚthereâs always something that you âshouldâ be
doing/trying. Pair that with the rumors of demise (âGoogle search
is dead!â âEveryone has left IG for TikTok!â âGen Z doesnât use
email!â) and you have a recipe for absolutely terrible capital
allocation.
Every one of those âheadlinesâ is a siren song, pulling you
toward disaster.
Great management ignores the noise and focuses on fundamentals.
Whatâs the expected value of the channel/campaign/tactic? How
does marginal CAC scale? What is this channelâs actual
contribution margin?
I get the temptation to want to be âahead of the curveâ (and
surplus value does decline with adoption). Itâs cool and fun to
feel that youâre ahead of the curve. But most times, for most
brands, the smart play is to stick to the fundamentals and let
someone else chase the shiny objects.
Rule #5: Stay Emotionally Neutral
---------------------------------
I covered this in Part II, but itâs worth reinforcing here:
management requires emotional detachment.
Campaigns have good days and bad days. CPAs swing. ROAS will be
stellar one day and dreadful the next. If you let yourself,
youâll wonder how the same campaign that delivered massive wins
yesterday can fail so spectacularly today.
The secret Iâve found is that campaigns are noisy in the
short-run and signal-rich in the long-run; if you chase/react to
every spike and dip, youâll drive yourself crazy (and broke)
before you figure out the rhyme or reason behind those swings.
That makes the discipline staying neutral. Donât reduce the
budget on a winning platform because it had a bad Tuesday. Donât
increase budgets on an otherwise-loser campaign because it posted
an outsized number of sales on Friday. Look at the bigger-picture
trends and manage to the signal - not the noise.
Thatâs easy to write. Itâs far more difficult to do when a client
is calling and screaming about how Meta is broken or Google sucks
now and demanding changes (real things that happen to me on a
regular basis!).
When that happens, and when the temptation to change seems
overwhelming, I go back to Warren Buffett. Berkshireâs stock
dropped more than 50% on three separate times. At no point did he
sell or change his approach, because the underlying fundamentals
had not changed. The price swing had nothing to do with the
underlying assets, and everything to do with noisy headlines.
Zoom out. Ask yourself if the change is a symptom of a
fundamental shift OR a symptom of short-term noise. Youâll often
find that itâs just noise. And noise can (and should) be tuned
out.
Rule #6: Respect Diminishing Returns
------------------------------------
Every campaign, every platform, every tactic follows a
diminishing returns curve. For every single one, thereâs a point
where doing more or spending more will not yield a marginal
increase in results. The size, scale and shape of that curve will
vary by brand, audience, platform, tactic, channel â but the
curve always exists.
For example, the first $10k you deploy into YouTube might yield
new customers at a cost thatâs 30% below target. The next $50k
might creep toward your target. And the $100k after that will
blow through it.
For Meta, the first $200k might be below target, and the $500k
after that at target. Itâs entirely possible that you might not
see declining marginal performance until youâre spending well
over $1MM per month. But just because diminishing returns donât
hit until your spend is 20x higher does not mean diminishing
returns donât exist on Meta.
Great advertisers understand + respect the existence of this
curve. They know that scaling isnât about throwing more dollars
until everything breaks; itâs about increasing budgets
responsibly, then monitoring marginal returns.
Bad / inexperienced advertisers ignore the curve and blame
âcreative fatigueâ or âbad audiencesâ when performance falls
apart.
The very best advertisers I know - the ones who are remarkably
good at what they do - have mastered the art of pushing campaigns
to the precipice of diminishing returns, but resisting the urge
to push them over the edge.
Rule #7: Think in Systems, Not Silos
------------------------------------
One of the more curious - and more nefarious - tendencies Iâve
noticed is marketers who manage channels/campaigns/platforms in
silos, not as part of an integrated system.
Meta performance is attributed to Meta.
Google performance is attributed to Google
Programmatic is attributed to Programmatic.
But, in reality, everything is interconnected. These platforms
donât exist in isolation, and they certainly donât perform in
isolation. Paid search drives retargeting. Meta drives branded
search. YouTube drives lift across the board. Linear TV +
out-of-home drive improved performance on Meta and Google (yup,
that lift is real). Direct mail results in massive increases in
branded search.
Itâs all connected.
Itâs easy + tempting to evaluate each channel in isolation, but
the real magic is in the synergy between different
channels/tactics.
------------------------------------------------------
Part V: Contrarian Plays That Produce Outsized Returns
------------------------------------------------------
Most marketers never break out of the spreadsheet mindset. They
optimize inside the rails, never questioning the rules of the
game itself. But if you study the best investors, youâll notice
something: outsized returns often come from contrarian behavior.
Doing what the herd canât, wonât, or refuses to do.
Advertising has its own set of contrarian plays. These are
strategies that feel wrong at the moment (and often produce
visceral reactions), but can produce outsized returns.
Play #1: Scale Into Weakness
----------------------------
Most brands scale when CPMs are expensive and cut when theyâre
cheap. Thatâs backwards.
Think April 2020. While most of the world paused campaigns, a
handful of brands doubled down. CPMs cratered 20â40%, which means
CPA dropped. The brands that leaned in and took advantage
acquired customers at rock-bottom prices.
At the time, it seemed reckless â but nothing could be further
from the truth. If anything, scaling when everyone else was
pulling out of auctions was rational.The two possible outcomes
were: either the world stabilized and youâd acquired customers at
the cheapest rates in a decade, or it didnât, in which case, the
extra $100k you spent on Meta was the least of your concerns.
The same logic applies to seasonal soft spots (late summer
doldrums, Q5) and competitive cycles (i.e., when competitors run
out of budget at the end of the month).
Weakness is opportunity.
The next time you see CPMs drop or Auction insights go blank,
thatâs your signal to push more chips onto the proverbial table.
Play #2: Double Down on âBoringâ
--------------------------------
Marketing is in a never-ending love affair with trendy + sexy.
We all chase it in some way or another - AppLovin, TikTok Shops,
influencer partnerships, shiny betas from Google or Meta - you
name it. We all see the posts on X (or a few weeks later, on LI)
from marketers who claim to have unlocked untold growth from the
new hotness.
But all the hype often masks a different fundamental reality:
most growth happens in the âboringâ stuff. Google non-branded
search, evergreen Meta campaigns, email. None of them are sexy.
Talking about them will not get you the conference keynote or an
interview on whoeverâs podcast is currently in vogue (since itâs
not Collin & mine, at least not yet). But they will deliver
steady, repeatable returns with high scalability.
Those boring, core channels are the advertising equivalent of
dividends. They donât make you look like a genius, but they
produce positive returns, over and over again. Thereâs value in
that, especially when your competition canât help but chase.
Play #3: Exploit Volatility With Flexible Budgets
-------------------------------------------------
Rigid monthly budgets create wonderful opportunities for the
marketers willing to exploit them. Iâve worked with more than a
few brands who had competitors that routinely ran out of budget
by the ~25th of the month. It didnât matter if the other brand
was having a great (or terrible) month, theyâd pause (most)
everything the minute they reached the set monthly allocation.
It took a month or two to figure out the pattern, but once we
did, it became a wonderful recipe for efficient acquisition:
lower targets + spend moderately until the competition exited the
auction, then lever in for the last 5-10 days when CPCs declined
20%-30% (amazing what happens when a couple major advertisers bid
up KWs)
This requires courage because it looks âmessyâ on reports (and
often leads to âweâre pacing under!â âŚbut itâs precisely what
separates smart marketers from the mediocre ones. All markets
(including ad markets) are dynamic. Budgets should be too.
Play #4: Starve Vanity Channels
-------------------------------
Something Iâve noticed - a lot of brands fund channels for
optics, not returns. The CEO wants to see billboards. A major
investor asks about TikTok, so it miraculously finds itself added
to the media plan. The CMO is angling for a speaking gig or an
advisory position, so s/he over-funds emerging channels in order
to increase the âsexinessâ of the pitch (another low-key theme of
this newsletter: betting against sexiness is usually a winning
strategy).
The smart marketerâs job is to cull the sacred cows. If a channel
doesnât produce returns that justify continued investment, it
gets cut, no matter how prestigious, political or pretty it
looks.
This feels contrarian because youâll face pressure internally to
âstay visibleâ or âbe everywhereâ or âget ahead of the trendâ â
but unless doing that produces a tangible return, youâre (almost
always) better off investing in the tried-and-true,
boring-as-all-getout channels.
Play #5: Bet Small on Optionality
---------------------------------
Investors buy options because they offer asymmetric payoff:
capped downside, unlimited upside. Satellites in your ad
portfolio work the same way.
We (typically) start with a 70/20/10 allocation for clients â 70%
goes to the core, 20% to tests and the remaining 10% to moonshot
(read: speculative channels, new formats, etc.). Going in, we
accept that most of the speculative investments will fail, but
the few that hit will deliver 10x returns.
Optionality is a contrarian discipline. Most brands either avoid
bets entirely (too conservative) or swing wildly (too reckless).
The middle path - small, continuous, disciplined bets - is what
produces breakout wins without jeopardizing your entire portfolio
(or getting your agency or CMO fired).
Itâs important to note that these donât guarantee success â
sometimes, youâll just incinerate 10% of the budget. Thatâs the
risk you take when you invest in unproven channels/tactics. That
being said, this strategy creates the conditions for outsized
returns - not just because the strategy works, but because (in
most cases), your competition refuses to play the game.
---------------------
Part VI: The Flywheel
---------------------
Everything up to now has been about discipline - building,
managing and protecting a portfolio that maximizes expected
return relative to risk (so sexy!)
Thatâs 80% of the battle. The remaining 20% is leaning into the
compounding flywheel. Put simply, compounding is the reason
investors become wealthy. And itâs the reason a small set of
marketers leave the rest of the industry in the dust.
Hereâs how it works:
* Efficient capital allocation â More customers at or below
target CAC
* More customers â Larger base for LTV expansion (retention,
upsells, referrals)
* Expanded LTV â Higher tolerance for CAC, which lets you
profitably scale, even when platform economics or macro
conditions seem non-viable
* Higher scale â More data, which improves creative, targeting
and post-click experiences
* Better performance â More efficient capital allocation next
cycle
Each cycle scales with decreasing friction. This is the secret
behind the brands that seem to find a way to grow, no matter what
the market or economy or tech landscape is doing. Everything in
this framework is geared toward unlocking and accelerating that
flywheel.
Why Most Brands Never Get There
-------------------------------
Most organizations (unknowingly) structurally sabotage growth:
* CFOs demand neat, predictable monthly spend - the only thing
this (usually) achieves is capping upside via arbitrary limits
and restricting spend at the very moments when those brands
should be spending more (i.e. at the end of the month or in
otherwise slow periods).
* Management craves short-term wins - which forces day-trading
behavior that kills long-term returns.
* CMOs fear volatility - this prevents brands from leaning into
weakness or concentrating capital.
* Agencies protect revenue streams - which incentivizes
allocation to the channels they manage and inflated reports, vs.
obsessive focus on growth + efficiency.
Put it all together and you have a recipe for stagnation:
accounts that look fine in a spreadsheet, all while failing to
realize their true potential.
The gap between marketers who understand how to build + scale
this flywheel and those who donât isnât small. Itâs not 10% or
20%. Itâs 10x or 100x or 1,000x. Just as there are 10x engineers,
there are 10x marketers.
Put another way: an investor who compounds at 15% instead of 10%
ends up with 4x the wealth over 30 years, a marketer who
compounds efficiently ends up with multiples of the customer
base, revenue, and market share compared to one who just
âoptimizesâ campaigns.
The best part? You donât need to be a genius to do it. You just
need discipline, rules that protect you from bias, structures
that allocate intelligently and the courage to be contrarian when
the market panics.
Thatâs the entire ballgame. Master those things, and youâll find
yourself leagues ahead of your competition.
Thatâs all for this week! I hope you all enjoy the last week of
âofficialâ summer
Cheers,
Sam
Loving The Digital Download?
Share this Newsletter with a friend by visiting my public feed.
---------------------------------------------------------------
-->View the Newsletter Feed (
)
View the Newsletter Feed (
link )
Follow Me on my Socials
(
) (
) (
)
1700 South Road, Baltimore, MD 21209 | 410-367-2700
Unsubscribe (
) | Manage Preferences (
)