The Linx Scaling Methodology for E-Commerce YouTube Ads
Guest Contributor: Shash Singh has over 6 years of experience in the digital marketing space. Shash is the CEO and head strategist for Linx Digital, and has extensive experience with both Facebook and YouTube ads. He has a passion for scaling businesses through paid traffic, and helping clients achieve massive growth.
In this post, I’m going to go over the Linx YouTube Scaling Methodology for Direct to Consumer e-commerce brands….
This is the same methodology that helped our client Indestructible Shoes generate over $1 million in revenue with YouTube ads at a 2.09x ROAS.
It also helped our Expert YouTube Ads student Mike Arigouzo generate over $1.5 million with YouTube advertising this year alone!
This is the same methodology we use for all of our e-commerce clients.
Step 1: Run Diagnostics and Discover If Your Product Will Work on YouTube
During the first phase, you need to look at your existing funnels, numbers, and your business to understand if YouTube will work for you or not, as well as how you can change things so that YouTube actually works well for you.
In general, this is what we are looking for in terms of products to scale on YouTube:
- High acceptable cost per purchase, you should be able to afford at least $40/purchase. That usually means an AOV in the $60 to 100 range depending on your margins.
- High conversion rate on your store. This means that whatever page we’re sending traffic to should convert at 3% MINIMUM.
- You need to be able to pay at least $1 to $1.50 per click and still be able to be profitable/sustainable.
Why do we look for these?
If you can only afford to spend $20 to $25 to acquire a customer, you’ll need very low cost per clicks or very high conversion rates to make things convert.
Normally, with YouTube, cost per clicks can be on the higher side.
Now, if you don’t fit those requirements, don’t despair. We can still make YouTube work.
Even if your current offer is lower-priced, you can come up with a new offer or bundle to sell on YouTube to acquire customers.
Or if you run some sort of subscription offer, you may need to swallow the fact that you’ll lose some money on the front end to acquire customers at scale.
Or if your conversion rate is lower, you can improve it through split testing, and trying out funnels and advertorial pages. Getting to 3% is quite reasonable.
Step 2: Script and Product High-Converting Video Ads
YouTube is 80% creative and 20% everything else. Creative is king, and one great video ad can generate millions of dollars of value for your business.
That’s why it’s important to place an inordinate amount of effort into creative.
There’s a certain formula that works on YouTube. You need to be able to grab attention, show them that the product works, demonstrate social proof, and have a very clear call to action. Preferably, you can also make them laugh or feel other strong emotions.
Creative is part art and part science.
The Science part is the numbers, the most important of which is the click-through rate.
The art part is more intangible, it’s what makes your ad connect with the viewer. Yet it’s equally as important.
How do you consistently build video ads that deliver results on YouTube?
The answer is having the right system and team for it.
The way we do it is by having a team dedicated to building creative and partner production agencies to help us do it.
We have a creative coordinator, whose job is to project manage the whole creative production process, write scripts, and analyze the results of various edits. He is responsible for managing the whole creative machine.
We have a head video editor and a sub-team of video editors that take raw footage and turn them into high converting video ads according to our Secret Video Formula.
We also have production partners, who are video production agencies who create live-action video ads, which almost always perform the best (and outperform voiceover video ads).
It’s really important to emphasize that being cheap on creative is a short-term strategy.
These video creatives will help you scale your video ads and the right one can make you millions by itself.
But they are also extremely useful as Facebook video ads. Our clients almost always use our YouTube ads for their Facebook ad account and our ads typically outperform their image ads.
Not to mention that these ads can be used as hero videos for your website, or for your social media.
That’s why I roll my eyes when a 7-Figure E-commerce store owner says that spending a few thousand dollars on a test production is “too much”.
Video just works better and allows your brand to connect with customers in a way that images cannot.
Step 3: Plan First Round of Campaigns and Launch According to the Expert Media Buying Formula
Once we have the creative, we go into the first round of media buying.
It’s important to acknowledge that YouTube is far more different than Facebook when it comes to media buying.
It’s initially a lot harder to build momentum, but long term, YouTube wins in terms of sustainability and scale.
YouTube is a long term play for the following reasons:
- The scale possible on YouTube is massive.
- YouTube builds a very strong brand presence that goes beyond direct response.
- Google doesn’t randomly ban ad accounts left and right.
The downside and the price you pay is that YouTube is harder to make work initially. It requires persistence and a lot of testing. The first week can be pretty bad.
We typically find that we’ll test a massive number of audiences to find a few key ones that work.
However, the upside is that after you feed Google enough data, you can make huge broad audiences work.
For example, we’ve often made campaigns with just pure demographic targeting work.
That won’t happen initially, but you need to slog through the first couple of weeks of losses and test a ton of audiences to hit initial profitability.
It may take a month or two to start hitting your goals KPI-wise. If you’re lucky, it may happen in one week. But expect it to take a bit longer than Facebook Ads initially.
Once we have two weeks of data in, we usually have a few audiences that are working and know where to go next in terms of audiences and creatives.
The main metrics that we are viewing to gauge performance is CTR, CPC, Cost per add to Cart, and Cost Per sale.
For our initial campaigns, we’ll be using Maximize conversions, and the goal is to test 3-5 creatives and 4-5 different audiences over the first couple of weeks.
Step 4: The Holistic Optimization Phase (Creative, Targeting, and Funnel)
If you’re lucky, you’re immediately very profitable and can dive straight into scaling.
However, chances are that you get mixed results. Perhaps a couple of campaigns are profitable but the others aren’t.
At this point, you need to analyze the data to understand what’s going on.
If click-through rates are consistently low (below 1%), then perhaps your creative needs to be redone. This is common when brands try to shoehorn their winning Facebook creative into YouTube. A healthy click-through rate is 1.3% or higher for E-commerce, but 1 to 1.3% can still work.
If your click-through rates are looking good, but your Cost Per Clicks is still too expensive, it’s likely a sign that you need to test other audiences. We typically see that Custom audiences (intent or affinity) typically are the sweet spot in terms of CPMs while still maintaining high conversion rates.
On the other hand, if you’ve tested a wide variety of audiences, and your CTR is good, then perhaps you need to try another landing page to increase your conversion rate. For YouTube, I recommend getting to a conversion rate of 3%.
Keep in mind that the same landing page may have different performance with Facebook Ads. That’s why you want to have unique landing pages for YouTube to measure performance.
The reason we call this stage “Holistic Optimization” is because we’re looking at the whole picture, and not just the ads. We want to ensure that we’re looking at creatives as well as funnel performance. We fix whatever we think is the weak point.
Step 5: Prepare for Scale: Make Sure the Numbers Will Work
At this stage, you’ve established profitability at a lower scale, anywhere between $300 and $500/day. You’re hitting KPIs and your goals.
Now your goal is to scale your spend while maintaining KPIs.
Something to consider is that your cost per acquisition will go up a bit as you scale. This is a fact of life. The more you spend, the more you’re competing against the “Big Boys” who will outbid smaller brands and advertisers. The reason they can do this is because their lifetime value is much higher, hence they will pay more per customer.
It won’t be as bad as Facebook, but you need to be prepared for costs to go up somewhat.
This means that you will need to ensure that your email marketing, cross-sells, and upsells are all set up. You want to be able to bite the increased cost per sale when you’re spending 10x more. This means you’ll want to increase your conversion rates, AOV, or CLV prior to increasing spend.
So, make sure you have a gameplan for improving your conversion rate or increasing your Average Order Value or Lifetime Customer Value before you start scaling hard.
Once you have a gameplan, the fun begins….
Step 6: Implement the Linx Scaling Formula to Scale to $10,000/day or Beyond
Now we get into the fun parts.
In terms of scaling, the way we scale campaigns is by increasing the budget and by testing new audiences.
We do NOT duplicate campaigns to increase the budget as that has had very mediocre results for us. This isn’t Facebook Ads.
In terms of budget increases, we need to do it conservatively, preferably at less than 10% a day for higher spending campaigns. You can increase it by 20% a day for lower spending campaigns (let’s say under $200/day).
You also want to be testing new audiences aggressively and scaling the ones that do well.
The last part is testing more video ads. You want to make sure that you have a variety of video ads being tested in case your top-performing creative slows down. The creative needs to be a monthly thing, with new variations and concepts being added every single month. If you get stuck on one creative, you’ll be in trouble if it ever slows down.
We scaled Indestructible Shoes to $25,000/day revenue from YouTube Ads by following this whole six-step process. The biggest key to success was how we aggressively tested creative and the client’s willingness to work with us on shooting new video ads every single month to add new variations to the mix.
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