Paid Advertising 101: A Complete Guide for Startup Marketing

You cannot solely rely on organic marketing when it comes to running a startup, especially when you are just starting out. A little kickstart can help a lot to bring in those first few leads aka revenue. And paid advertising can easily make it happen.

In this post, we’ll share our insights and 5 key areas to consider when strategizing for your paid advertising:

1. When to consider paid ads
2. Which platform and who to target
3. How much to budget for
4. What metrics to track
5. How to optimize for results‍

When should you use paid advertising for startup?

Should you start running ads?

Paid ads is a good idea in these two scenarios:

1. You are early in product building: Your goal is to get early batch of users and test your messaging, targeting etc. At this point, you need to set realistic expectations with your ROAS and CAC.
2. You’ve found product-market fit and ready to scale: You roughly know what resonates with your audience. At this time, you can start focusing on cost efficiency.

Paid ads can be your powerful growth channel given the right investments.

Pros:

• It is scalable, unlike other growth channels such as Product Hunt, Newsletter.
• It produces high volumes of data rapidly, helping you learn and iterate faster.

Cons:

• It takes at least 3 months for campaign to be cost efficient / profitable. Ad platforms need time to learn from your data.
• You need to allocate substantial resources (effort, time, money) to launch great campaigns.

A common pitfall for startups venturing into their first paid ad campaigns is losing momentum after a few weeks, resulting in wasted funds and missed learning opportunities.

Hence, before jumping into paid ads, ask yourself:

• Have you exhausted other cheaper growth channels that could help you improve your website conversion rates, messaging and targeting?
• Can you commit to 1 to 3 months of resources and spend?

Which platform and who to target?

Choosing which type of paid ads and platform for your digital ads ultimately depends on where your users are. Think about your target audience’s demographics, interests, and behaviours, which platform suit their profiles?

The common types of paid ads include:

• Search engine advertising (Paid Search): Google ads, Microsoft or Bing ads
• Social media advertising (Paid Social): Facebook ads, LinkedIn ads, TikTok ads
• Display advertising
• Video advertising
• Native advertising

What is Paid Search?

Paid search advertising is a type of digital marketing strategy where brands place their ads in the search engine result pages (SERP) of Google, Bing, and other search engines.

It’s great for driving traffic and getting high-quality leads, and eventually customers.

What is Paid Social?

Paid social advertising is a method of advertising your product or service on social media to a targeted audience.

It’s great for building brand awareness and retargeting specific audience.

Comparison between Paid Search and Paid Social

Tip: Don’t just spray-and-pray. Do a competitive analysis to find out where and who your competitors are targeting. Learn about their Ideal Customer Profile and messaging that resonates.

How to allocate budget for paid ads?

If you’re just starting out, consider allocating an amount that's manageable enough to risk, yet substantial enough to collect meaningful data.

If your budget is too low, it takes longer for the ads platform to optimise your campaigns, thus lower performance and slower learning for you.

If your budget is too high, your ROI will be low as paid ads is subjected to the law of diminishing return.

• For Paid Search: High budget for product with low search volume means that ads will show for random low intent keywords.
• For Paid Social: High budget for product with small audience means that ads will either be (1) shown to random people or (2) very frequently to the same group of people, making them desensitised or even have negative sentiment to the brand.

Tip: Try out this template we use to get an estimate of budget, conversions and customer acquisition cost.

How to measure paid ads performance?

You can't improve what you don't measure.

Below a list of digital marketing metrics you should know, sorted by importance in the context of paid advertising.

Tip: Compare your metrics against industry benchmark or other channels.

How to track your marketing KPIs effectively?

If you have started acquiring customers from multiple sources, it is essential to measure and track various KPIs and break them down by channel. This allows you to understand:

• Which channel drives the best quality traffic?
• Which channel is the most cost-effective?
• Which channel should be scaled?

Building a Minimum Viable Marketing Analytics Stack

Struggling to find answers to the questions above? Setting up a minimum viable marketing analytics stack could help.

If you’re just starting out, the end product can be as simple as having a spreadsheet where you manually update KPIs regularly (weekly/monthly). However, the key is to have reliable sources from which you can obtain each metric value.

At a later stage, you may want to invest time and money to build a data analytics pipeline that provides access to raw data and allows you to create custom dashboards.

The following diagram shows the high-level architecture of a marketing analytics stack:

Essential components

Data sources:

• Web analytics platforms: Google Analytics (free), Mixpanel, Posthog, Amplitude, Heap.
  • Ensure UTM tagging is done correctly at every customer touchpoint to accurately measure channel or ad-level performance.
• Acquisition channels: Google Ads, Facebook Ads, etc.
• CRM/Sales app: Hubspot, Shopify, etc.

ETL tools to transfer data from source to destination:

• No-code ETL platforms like Airbyte or Fivetran.
• Marketing-specific tools such as Supermetrics or Funnel IO.

Reporting tools:

• Visualization tools like Google Data Studio, Metabase, or PowerBI.
• A reliable spreadsheet.

How to optimize ad campaigns?

• Iterate with A/B tests: Compare different variations of ad copies and creatives to see which perform better for you.
• Avoid costly paid ads mistakes by analysing competitors’ ads: Which of your competitors’ ads survive the test of time What USPs do they focus on? How much budget and effort have they invested?
• Leverage on industry trends: Adapt based on seasonal changes, algorithm updates, new creative directions.

Final thoughts

We've just uncovered the 5 key areas to consider when strategizing for your paid advertising.

From when to run paid ads, targeting platform and audience, budgeting, metrics to campaign optimization - the exciting journey has only just begun.