This question comes from Emma.
“I’ve been testing YouTube Ads as cold traffic for my ecommerce store. There are thousands of placements being targeted, and my products are proven winners on Facebook. My cost per click for YouTube Ads is $1.50 on average, but my product page does not seem to be working very well.
So I’m thinking that my cost per click is too high to make it work. Or maybe I need to improve my funnel to make a higher conversion rate.
Those are my questions. Thanks a lot.”
I actually replied to Emma here to get a little more information.
I wanted to know:
- What’s her product?
- Why isn’t it working?
- How much is she selling it for?
- What’s her lifetime customer value?
What I found out is that it’s a product selling for about $30.00, and it’s just a one-time use product. So there are no repeat customers here. There’s no reason for someone to buy this product more than once. And she says that the profit margin here is between $15.00-$20.00.
Based on that information, yeah, this is going to be really tough with YouTube Ads.
The average cost per click is about $1.50. That’s actually not bad. You could work on getting that down. In many markets where I’m running ads, the average cost per click is actually a lot more than that. But it can get lower. You could probably get that down to $1. The lowest I’ve really seen as around .50 cents or .75 cents per click. But at that point, your targeting is so specific that you’re probably not getting too many clicks at that price.
If Youtube ads are going to work, you should be able to make it work at $1.50 per click. That’s not the real issue here. The issue is that you’re only making $15.00 to $20.00 profit per sale and you’re only making one sale per customer. So that means you basically one out of 10 people who click on the YouTube ad needs to purchase this $30.00 product. Is that likely to happen? Probably not. YouTube Traffic is good. But for one out of 10 people to actually spend money, it’s going to be a really tough sell.
I can compare this to ads I’m running now for a client where the product is actually less than $10.
But it’s a digital product. So almost all of that is profit. And that’s not actually the goal. Again, selling the $10.00 product is not the goal. The goal is to sell higher-priced products. There are upsells, including the very expensive upsells down the road like $5,000 masterminds and $30,000 high-end masterminds.
So with this campaign that I’m referencing, it is not actually profitable. We’re not trying to profit selling a $10 product on YouTube with a couple of sells. The average order value is about $35. And that’s actually about the average cost to make a sale. We’re about breaking even on the front end. But the back end is where the money is being made.
So in your case, Emma, where it doesn’t sound like you have any type of backend, I don’t think you’re going to be able to profit from YouTube ads.
If you really improve your conversion rate on the website, if you work on some new videos and some more specific targeting, you might be able to get your cost per click down enough (where maybe) you’re breaking even, or maybe making a little bit of money.
But I don’t think that’s what you want. You don’t want to just make a little bit of money. You actually want to run a campaign that’s profitable, that’s worth it to run. If this is your only product, YouTube probably isn’t right for you. If you’re not married to this product, then maybe explore other products.
It sounds like you are doing some things very well on YouTube. You’re focusing on placement targeting which is good. You are getting clicks for a decent price. If you were to find a different product that allowed for higher profit margins that could really take off for you, don’t be afraid to do that too.
In fact, that might be the right solution for you here, to branch out into a different product or service that plays a little more nicely with YouTube because it has a higher profit margin.
What’s the bottom line?
YouTube really is hard if you have a low-priced product, especially if it’s not a product people are going to buy over and over. If you had some kind of a face cream, where people need a new container of it every month, then it might work to sell a $15.00 product because, over time, they’re going to spend a lot more than $30. But for a one time sale (like what Emma is dealing with here), I just can’t see it working.