Wasted Ad Spend: How to Identify and Mitigate the Problem

Digital advertising provides invaluable opportunities for brands to reach customers and scale their businesses. However, with the average cost per click across Google Ads rising YoY and conversions varying greatly depending on targeting and messaging effectiveness, wasted ad spend has become a pressing issue. Reports show that in Q1 2022 alone, over $134 million in digital ad budget was wasted globally, an increase from $104 million in the previous two quarters. Retail saw the highest waste at $31 million, followed by insurance and finance.

Source: Mumbrella Asia-Pacific Ad Waste Report

This ad waste directly impacts marketing performance and budgets. By identifying the problem areas and optimizing efforts, brands can improve campaign ROI and allocate spend to high-converting channels. This guide covers tactics to pinpoint and reduce wasted ad spend from a data-driven marketing perspective.

The Far-Reaching Impacts of Wasted Ad Budgets

Before diving into mitigation strategies, it‘s important to understand the scope of the issue and the tangible consequences wasted ad investments have on businesses:

• According to analytics firm Analytic Partners, over 50% of total display ad budget amongst brands is wasted due to poor data practices and targeting. This adds up to nearly $100 billion globally based on current expenditure.

• Software giant Hubspot found that owners significantly overestimate conversion rates from their advertising efforts, indicating extensive waste as spending fails to generate expected performance. Their survey saw companies assume a 34% conversion rate from campaigns on average, while in reality seeing only a 2% rate materialize.

• Research conducted by Systems and Software showed wasted ad spend actively depresses marketing ROI. In an A/B test where one campaign eliminated wasted impressions and clicks and another did not, the optimized effort achieved 54X greater return-on-spend over two months time.

• Wasted budgets directly siphon dollars away from initiatives that could effectively grow the business. Media giant GroupM states at least 25% of spend could shift from underperforming channels like TV and print ads to higher-converting efforts like paid search and TikTok influencer campaigns if waste addressed.

Facing these detrimental impacts, callibrating ad investments to minimize waste presents an incredible revenue growth opportunity. The following sections explore approaches to pinpoint and curtail wasted spend.

Step 1: Analyzing Campaign Data to Locate Areas of Waste

The first step is gathering performance data across all digital campaigns to spotlight potential waste accumulating excess costs without contributing meaningful business value.

Metrics to examine across initiatives include:

Table: Key campaign metrics that may indicate waste when thresholds breached

For example, a display retargeting campaign showing CTRs below 0.5%, 75% bounce rates and 1.2 pages per session signals extensive waste. The ads are failing to engage users, and those who do click ultimately leave the site quickly without converting.

Compare metrics across placements, creatives, landing pages, audiences etc. to uncover worst and best performers. Discrepancies highlight optimization opportunities. If any campaigns demonstrate these warning signs, it presents opportunities to optimize targeting and on-site experiences to reduce wasted clicks and impressions.

Step 2: Implement Campaign Optimization Best Practices

With performance data insights exposing waste, next implement key optimizations to boost campaign efficiency:

1. Improve audience targeting

Layer additional demographic, behavioral and geographic filters onto ad groups to prevent ads from showing to disinterested users in irrelevant contexts. Targeting misalignments waste budgets.

2. Refine messaging & creatives

A/B test ad copy, calls-to-action, imagery and video to determine which creative elements resonate best with your target customers. Align creatives to the viewer and their context.

3. Enhance landing pages

Ensure landing pages seamlessly transition visitors from ads by echoing messaging and visual identity. Provide clear next steps through high-contrast CTAs to convert visitors into leads and customers.

4. Expand negative keywords

Add non-relevant, low-converting keywords and low-intent query terms to campaign negative keyword lists to avoid wasting spend on unwanted traffic. Review search terms reports to find candidates.

5. Shift budget across high & low-performing placements

Continually compare returns across publishers, sites, videos and other placements. Increase bids and budget for outperforming placements while scaling back poor performers.

"We use strict ROI targets across campaigns coupled with daily pacing reports to dynamically shift budgets to the specific publishers, ad sizes and geographies providing the highest converting users" notes Acme Co CMO John Smith.

6. Implement attribution modeling

Use data-driven attribution like algorithmic or position-based to understand true value each touchpoint brings rather than last-click. Optimize channel mix accordingly.

Testing and optimizing campaigns based on latest data will reveal the strategies that provide the greatest impact and value. Reduce wasted spend through minor continuous improvements.

Optimization Case Study: Food Brand Increases ROAS 86%

Health food delivery brand VitaMeals used the above optimization tactics to boost Facebook and Instagram campaign return-on-ad-spend (ROAS) from $1.32 to $2.46, a 86% increase, allowing them to scale budgets profitably and acquire more customers through ads.

By layering additional demographic filters to target fitness-focused young professionals and excluding low-intent users only browsing social media, they improved audience quality and relevance. Testing 6 ad creatives to personalize imagery and captions doubled clickthrough-rates. And enhancing their order completion rate by 12-15% through checkout page streamlining and retargeting helped convert higher funnel traffic from these optimized ads.

Step 3: Diversify Channels to Guarantee Value

Beyond optimizing existing initiatives, brands can mitigate wasted ad spend by diversifying into channels that guarantee customer conversion value before investments made:

1. Leverage bill-per-customer models

Platforms like Compado only charge when a new lead or customer actively signs up through their exclusive publisher network, ensuring each dollar spent generates measurable impact.

Compado CSO Joschka Weltgen confirms "with over 10,000 publishers, most conversion rates when users sign up for our partner brands exceed 10%, much higher than industry averages of 2-3%, delivering exceptional value per impression bought."

2. Launch affiliate marketing partnerships

Rather than paying simply for impressions, clicks or engagements which may not deliver downstream conversions, affiliate programs deliver new customers from influencers, podcasters and publishers and provide commissions strictly per acquisition. This shifts risk off brands onto partners best adept at driving authentic referrals.

3. Invest in reliably high-converting online channels

Allocate larger portions of media budgets into channels with consistent, scalable conversion potential including paid search, connected TV, streaming audio and out-of-home ads in addition to owned assets like on-site optimizations and email.

Shifting budgets to converting channels

A recent Mediacom US analysis on behalf of retailers indicated paid search and streaming audio ads, for example, together average 49% higher conversion rates compared to social media ads and online video.

Transitioning investment away from lower-performing brand building channels into these reliably converting options can rapidly accelerate customer acquisition and ROAS through qualified audiences and simplified attribution.

Step 4: Maintain Mindfulness in Advertising Spend

With global digital ad spend rising over 25% annually, it presents a major growth channel for brands if managed thoughtfully and strategically. The key is paying attention to how each dollar spent contributes to objectives and whether returns validate current budget allocations.

Ongoing mindfulness practices include:

• Analyze performance and retention by source to inform budget & bid decisions
• Optimize for conversions with messaging, landing pages and targeting
• Diversify across converting channels beyond temporary fads
• Understand true value through multi-touch attribution modeling

Brands fostering cultures that question media investments and consistently improve will sustain scaling success. Adoption of technology solutions like Compado providing guaranteed customer conversions per dollar can minimize waste concerns. When signs of excess waste cut into growth emerge, act decisively to redistribute budgets into channels producing the highest, scalable returns.

Through identifying optimization gaps, implementing incremental campaign improvements, shifting into high-converting channels and maintaining mindful allocation habits, brands can position themselves to navigate the increasing complex digital advertising landscape and scale marketing ROI efficiently even as costs increase and options multiply. Eliminating wasted ad spend empowers sustaining the rapid business expansion social platforms, streaming publishers and influencers have unlocked in the modern digital-first era.