Mastering A/B Testing in Paid Ad Campaigns: A Guide for Startup Founders

What is A/B test in paid campaigns

A/B tests are controlled experiments conducted to compare two variants of the same ad to determine the one that performs better with the audience. It lets you compare two versions of an ad strategy by testing categories such as landing page, audience type and targeting, ad placement, ad creative, and even budget.

A/B tests are crucial for optimizing ad campaign performance and maximizing ad ROI. In this blog, we’ll cover when and how to run A/B tests for your ads, how you can optimize them and see results.

Why A/B testing matters for startup paid ad campaigns

A/B testing provides a structured approach for startups to validate assumptions and optimize customer journeys. It also allows you to focus on factors that can spur growth. 

By systematically testing different variations of your products, services, or marketing strategies, startups can continuously iterate and improve their offerings based on real-world feedback. Here are other reasons why A/B tests matter for startups’ paid ad campaigns.

• It helps you understand audience preferences.
• It supports data-driven scalability.
• It reduces the risk of failure in your ad strategy.
• It promotes faster learning, testing, and adaptation.

Startups like Databricks achieved 2x CTR and conversions by A/B testing opening questions (control) and a hyperlink (the variant) in the first line of their ad copy.

What good A/B tests look like

To run a proper A/B test for your paid ads, here are factors to note; 

• A specific goal: Be clear on what you want to achieve.
• A clear hypothesis: Focus on a single variable.
• Ideally, test one change at a time: To be clear on what made the difference.
• A sufficient sample size: Determine the sample size needed with power analysis, using online tools like calculators. The sample should be representative of your target audience. 
• Adequate test duration: The rule of thumb says one week to a month, but this could also depend on your sample size, budget, and statistical significance. 

When not to run A/B test

Despite the key benefits of running A/B tests, it’s important to note that effective A/B tests require adequate time, sample size, data, and money.

Hence, before running an A/B test, ask yourself: Is A/B test really needed? Is the test outcome potentially a significant needle mover or just a marginal gain, vice versa? 

Below are some instances where an A/B test may not be the best idea, and what you can do instead:

Insufficient traffic or time constraints

Low traffic and low budget mean that experiments would typically take too long to deliver statistically significant and meaningful results.

What if you don't have adequate numbers to detect a win within a reasonable time?

• Use your judgment instead of data: Ship the idea if it’s good or skip it if it’s risky. Iterate fast.
• You may still test, if you believe there’s an opportunity to learn something valuable, e.g. identifying your early adopters through ad messaging.

Also, an A/B test may not be suitable if you have a limited number of users in certain stages of the funnel. Consider an ecommerce store that has high website traffic but low checkouts. There will be no need to test checkout.

High implementation or costs‍

When you don't have enough users, tests could take longer to reach statistical significance. That leads to more time invested and higher costs. Also, you want to avoid taking shortcuts to create and maintain the tests as that could lead to technical debt.

The ethical angle‍

When your product is not yet clearly formed, you may be tempted to test reliability improvements or bug fixes. Although such tests might validate some of your solutions, they do not provide value to your users.

The key takeaways: If you have just launched a new product or just getting started with your first paid ads campaign, A/B tests may not be ideal yet. Considering the time and effort needed, it may be better to focus on shipping big ideas and prioritize faster shipping, and increasing traffic and user base. Reaching out to a startup marketing agency could be a great idea to jumpstart your paid ad strategy, given their experience and expertise.

Setting up your A/B test for paid ad campaign

Setting up your first A/B test can be challenging, but following the steps below can help you get into it. Here is a reminder before setting up your test.

• Ensure that the two versions are similar, with only one variable changed.
• Test as small of a change as possible.

By doing so, you can be confident that any difference in performance can be attributed to the change made. It’s also essential to be open-minded, as you may need to change some of your preconceived ideas.

Defining goals and metrics

To conduct A/B tests in paid ad campaigns, clarify objectives and formulate solid hypotheses to guide the test. Identify the problems you want to solve and why. Doing so will enable you to formulate clear objectives and metrics, such as:

• Increase sign-ups by optimizing ad headlines.
• Increase conversion rate in ad copy.
• Increase proposal booking from the landing page.

Next, create a hypothesis. That is—your educated assumptions about the expected performance of one variant over another. For instance, you may hypothesize that an ad with product images will generate more engagement than one with images of people. 

Your goals and hypothesis must be clear and measurable. Consider previous data and your target audience. You can also base your hypothesis on industry practices or the findings from your competitor’s ad analysis.

Choosing what to test

You can A/B test various elements of a paid ad campaign, and here are some of the most common ones to consider.

• Headlines and calls to action (CTAs): By headline and CTA variations. 
• Images and videos: By changing composition, style, colors, or highlighted elements.
• Descriptive text: By language, tone, or length.
• Creatives, ad copies or the landing page on Facebook.

Executing A/B tests in paid ad campaigns

Once you’ve outlined your goal and decided on what to test, you’re ready to execute your A/B test. Start by;

Creating variations

To create test variations, consider messaging that taps into various audience emotions, such as excitement, urgency, or fear of missing out (FOMO). You can also reorder visual elements to determine which grabs the most attention. Here are other tips for designing compelling ad variations.

• Vary the USP: Highlight different benefits or unique selling points in each ad variation.
• Ad formats: Try different formats, such as vertical vs. horizontal video. 
• Vary your CTA: Try phrases like "Learn more" vs. "Get started" "See Our Newest Styles" vs. "Shop Now!" etc.

Here is a typical way to create variations for an A/B test. Imagine you are promoting a fitness app for personalized workout plans. You can create a campaign and have different ad sets under it, with each ad set being a different angle or theme, as follows:

• Targeting professionals with limited time
• Weight loss seekers
• New parents who want to stay fit

Inside each ad set, you can test 2 to 3 creatives, one headline and ad copies. Each platform has a tool to help manage your paid ad A/B tests, as follows:

• Google Ads experiments
• Facebook Ads split testing
• Facebook Ads manager
• LinkedIn Campaign Manager
• AdEspresso

Running your test

After creating variations and picking a test tool, set a sample size and an ideal duration. Most ad platforms provide guidance on sample size and test durations. For instance, Meta recommends testing for 7 to 30 days, but 4 to 5 days may also work, depending on your budget and audience size. 

In some cases, you can run ads until it gets to 10k impressions. You can stop your test early under some conditions, such as;

• If the cost per click (CPC) is higher than your CAC average.
• If both cost per mille (CPM) and CPC are high.

Analyzing and interpreting results

Examine the metrics you defined, such as cost per acquisition (CPA), conversion rate, click-through rate (CTR), etc. Next, identify the patterns in the A/B test result. Look out for specific elements that contributed to any performance improvements. Here are a few questions to consider when analyzing your A/B test result:

• How does the goal metric compare between the test variants? How does it impact your secondary and counter metrics too?
  For instance, if your goal is to increase app downloads, monitor CTR. If your goal is to increase CTR, you also want to keep an eye on the bounce rate.

• Was the test result close to your hypothesis?
• Which ad variant was more effective?
• Is there adequate data to back it up?

Avoiding common pitfalls and biases in interpretation

When analyzing test results, try to keep an eye on the big picture. Here are some common pitfalls and how you can overcome them.

• Overlooking external factors: When analyzing A/B test results, it is essential to also factor in the impact of seasonality.
• Confirmation bias: Sometimes, founders stop tests without letting them run for longer because the current result aligns with their preconceived ideas.
• Overlooking long-term impact: While some tests may show promising short-term signs, always consider if they are viable for your long-term ad strategy. 

Making data-driven decisions

Compare the test variants and identify the best-performing ones. If there is a clear winner, for instance, conversion goes up by 30%; you can adopt the test result and discard the poor-performing variant. 

Integrate the winning variants into ongoing ad campaigns or use them to inform new ad campaign strategies. Also, share the learnings with other teams to drive product decisions.

Analyzing results should not be a one-off. Always track your ad campaign performance and use periodic A/B tests to refine and optimize your ads.

Case study: Databricks doubling its CTR and conversions with A/B tests

Using LinkedIn ads, Databricks set out to increase awareness for an event moving from in-person to online. They created a LinkedIn Message Ads campaign and used A/B testing to tweak the subject line and copy. They tested two subject lines and three messaging iterations. 

The copy of two messaging variations opened with a question. The third included a hyperlink in the first sentence of the copy and stated the event details upfront.

At the end of the test, they discovered that the open rates of all the Message Ads variations were over 70%. However, CTR and conversions for the third variant were around 2x higher than the other two versions.