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Hey everyone and welcome back! In this video, I’m going to share with you my exact low-budget Etsy ad strategy. Now, it probably goes without saying but I highly, HIGHLY recommend that you go back and watch my first video on Etsy ads.

In that video, I explain what Etsy ads are, how they work, their limitations, and also how you actually turn them on. So, if you haven’t watched that video, I’d strongly recommend you do so. Here’s the link to that video:

How I Use Etsy Ads To Boost My Free Traffic & Sales

Now, let’s get started on my strategy. And it’s a strategy that people have emailed me a lot to ask about: after I revealed on the YouTube channel I showed how I turned $25 into $142 in sales in a new Etsy store with ads.

#+caption: ad performance graph
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file:../../_share/media/img/step_05/lesson_05/ex01a-performance.png

And yes, before anyone asks: not only did my ads break even after you add in my production and shipping costs, but I actually made a profit on that $142 as well.

Yep: because the profit margin on those products were anywhere from 30% to 40%, depending on the item. And so, I’d have to check the exact items I sold that day, but the profit margin was around 15-20%, even with the ad costs included.

Plus, as I explained in the last video on Etsy ads, when I run the ads, not only do I make money from the sales that I make from the ads, but I also make money from the increased sales that I get from Etsy’s free, organic traffic.

And though that free traffic is actually the majority of my sales and traffic, I’m still very happy to have the paid ads because they are a small yet important chunk of traffic. While Etsy ads are important to me, I am not about to pretend here that they don’t have limitations.

But of course, as I said in the last video, there is a downside to Etsy ads: and that is that when you first turn them on, Etsy will ask you to run your ads for 30 days.

Yep. It does this, so that it can test your ads with a bunch of search engine phrases, to see which ones get the most clicks from viewers, so it can narrow your ad down to the phrases that actually work. But, as I also said, that is kind of a slow process.

So, you know what? In my experience, I’ve found that I can usually figure out if a product converts well with ads, after spending about $10 Per Product on ads.

Now you might be thinking, well Sarah – is it better for me to spend $10 on ads per product like you recommend or be patient and wait the full 30 days which Etsy recommends?

And I’ll be honest with you, I’m sure the data I could collect on which products do well with ads would be even more accurate, and more optimal, if I ran my ads for the recommended 30 days.

But, usually, I’ve found that once a product has been about $10 on ads, the data that shows whether it converts well or not is going to be similar to if I just let that ad run for the full 30 days. So I’m happy to end my ad on that 10 dollar-spend mark because it’s usually both cheaper, and it’s quicker.

So here’s what I’ll do: I’ll come and turn an ad on for a product. And then, I’ll let Etsy run an ad for it, keeping an eye each day on the money it’s spent on clicks for it.

#+caption: ad feautres
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file:../../_share/media/img/step_05/lesson_05/ex02a-ad_choice.png

Once it reaches $10 spend for the product, I’ll then see if the ad is at least breaking even for sales. For me, that is usually a 3x return or higher. This ad for example had a 4.57 return. Which means for every dollar I spent, I made $4.57 back in product sales.

#+caption: results on using an ad
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file:../../_share/media/img/step_05/lesson_05/ex02b-ad_results.png

This of course begs the question of Sarah, if I run my ad for 10 dollars, what ROI number should I be looking for?

And well, unfortunately, I can’t just give you an exact number to look for, which would be much more convenient. Instead, the real answer is that it depends on what the profit margin is on the products that you are selling.

Based upon that, you can figure out what your break even point is, you can then figure out what each individual ROI you are looking for.

So, for example, let’s say you had a product with 50% profit margins. In which case, you might want to see an ROI of 2. In other words, for every $1 you spend, you make $2 back in sales.

#+caption: if the profit margin is 50% you need 2 times back in sales
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file:../../_share/media/img/step_05/lesson_05/ex03a-roi_2.png

Whereas, if you had a product with smaller profit margins of let’s say, 20% profit margins, then you would likely want a higher ROI. You might for example want a ROI of 5. For every $1 you spend, you make $5 back. 

#+caption: if the profit margin is 20% you need 5 times back in sales
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file:../../_share/media/img/step_05/lesson_05/ex03b-roi_5.png

This is also why, as you can probably see, some items are better suited for ads than others. If you have some products in your store with small profit margins of 5% to 10% it may not even be worth running ads for them at all.

Because to be successful with an item that has 5% profit margins, you’d need an ROI of 20. As in, for every $1 you spent, you made $20 back in sales. 

#+caption: if the profit margin is 5% you need 20 times back in sales
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file:../../_share/media/img/step_05/lesson_05/ex03c-roi_20.png

That is a LOT and would be VERY unlikely to achieve. So it is probably not worth advertising products with a super low profit margin like that.

In saying this though, there is a strong argument that depending on how much money you have, you might want to consider NOT breaking even and actually make a small loss as your target ROI number.

And that is because remember, as we’ve discussed in the previous video: the more sales you make, the more reviews your store gets. And the more reviews your store gets, the higher your conversion rates because customers are more willing to buy from a store with more reviews due to the social proof. 

And of course, the higher your conversion rates, the more Etsy is willing to promote your store in its free traffic algorithm which earns you more money.

So, if you can afford to aim for an ROI that is technically making a slight loss, this might help you make more money in the long term. Because it will increase your sales, which will help increase the free traffic that Etsy sends you as well in the long-term.

But again, this depends entirely on your personal position because remember, business isn’t really a sprint, it is a marathon. Being sustainable in your approach to running a business will help you not burn out and stay running the entire race.

So I personally think that if it would place someone in a bad or uncomfortable financial position to run at a loss in the short term, that it is not a good idea. Instead, I think it is a much better idea to only spend and invest money into a new business venture that is actually sustainable. 

Either way, running at a small loss is entirely up to you. It is just something to consider.

But yes, back to the ad strategy. If a product reaches $10 in ad spend, and meets my ROI, like this product here did, I keep the ad on.

#+caption: ad ROI target met
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file:../../_share/media/img/step_05/lesson_05/ex04a-roi_target_met.png

But, if it doesn’t, I’ll then just turn the ad off.

#+caption: ad ROI target met
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file:../../_share/media/img/step_05/lesson_05/ex04b-turn_off_ad.png

And look, here’s the thing right.  Currently, there is no way to automate this process. I can’t ask Etsy to turn off the ad after it reaches $10. And so, unfortunately, this is a manual process to manage this. But, luckily, it is very quick to do.

I just open up the ads each day, and check to see if the ads for the new products I’m testing have reached $10 or not. And if they have I decide if I’ll keep them on, or turn them off. And it honestly just takes a few seconds to check. 

The most important thing though, is to keep in mind that you also need to manage your ad budget well. And to explain why – see here, how as each hour progresses, more of my ad budget gets spent? I chose $25 for my ad budget for this store because I knew it would last me throughout almost all of the day, based on the number of products I was advertising, which was about 100.

#+caption: ad performance graph
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file:../../_share/media/img/step_05/lesson_05/ex01a-performance.png

If I had opted for my ad budget to be just $5, then I probably would have run out of money for ads in the morning. Which wouldn’t have been good because as you can see, my best time is the afternoon and early evening. So you want to manage your ads so that you won’t just run out of money before then.

#+caption: best time for ads in the afternoon
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file:../../_share/media/img/step_05/lesson_05/ex05b-best_time_for_ads.png

And so there are 2 ways you can do that. One is to, like me, increase your ad budget. Or two, you can set your ad budget to be low, say $5 a day, or even $1 a day, but also only test a few items at once. Because in general, $20 to $40 will allow ads for around 100 items to run throughout a whole day.

So if you want to reduce your ad budget down to say, $5 a day, then you can opt to turn on ads for about 15 to 25 products. And this leads to a common question that I get asked which is this: Sarah, which products should I test first? Because you might be watching this, and already have 50 or 80 or 100 or 200 plus products in your store.

So, out of all of those, how do you pick just 15 to 25 to test? Well, I’d recommend doing 2 things. Firstly, I’d look over my items and see which ones have already had sales organically with customers. If organic, free traffic customers are purchasing your products, testing those winners first is a great idea.

But then, secondly, if you don’t have enough products that way, I recommend using your own personal judgment. Which products do you think are best? Which do you think are the most clever that you’ve created? Give those a go first, and then go through your products batch by batch.

Now of course, there is something else that you’ll need to keep in mind: and that if your $10 ad tests successfully results in items that are selling well, like this ad here did, then you’ll need to add them into your budget.

#+caption: ad ROI target met
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file:../../_share/media/img/step_05/lesson_05/ex04a-roi_target_met.png

For example, let’s say you had a $5 a day budget. And you tested 20 items. And you had 2 successful products in it that made sales. Great! 

Well then. When it comes time to test a new batch of products, you’ll want to increase your ad budget so you could keep these ads on for those 2 winning products.

So now for example, you might try out another new group of 20 items for $5 a day, but, actually set your ad budget to $6 or $7 a day while also keeping the ads on for those winning products that you’ve found.

Of course, this is less of a financial burden if you have successful winning products, because the sales they make will be paying for the extra money you’ve added to your ad budget.

And another question people often ask me is this: OK Sarah, if $5 a day on average is enough to test 15 or 25 items throughout an entire day, how do I know where I fall on that spectrum?

How do I know if I can advertise 25 products, or 20, or 15, or maybe even less, without running out of ad budget too quickly in the day? 

And it’s a good question and, unfortunately, there is no easy answer to this. This will also be a manual process. But it’s honestly pretty quick. Just open up your computer or phone occasionally throughout the day, and check in on your ad spend. If you see that you’ve run out, then you know to either increase your ad budget, or to turn some ads off for tomorrow. 

And I do have to stress that again, running Etsy ads is optional. You do not need to run them, to have a successful store. Obviously I’m very happy to be running ads since I’m making money from them, but if you don’t want to run ads, that is fine, you can stick to free traffic.

Because remember: I and others are constantly getting sales to new Etsy stores, without running any ads. If you’ve watched my previous videos in this course, you’ll know that in my latest store, I started making sales within the first 2 weeks of it being open.

#+caption: ad performance graph
#+attr_html: :width 800
file:../../_share/media/img/step_05/lesson_05/ex01a-performance.png

And Etsy won’t even currently let a new store run ads for 2 weeks. So all of those sales were made organically from free traffic.

So no: Etsy ads are NOT required to be successful at all. They are just nice to have. 

Thanks for watching, and I’ll see you in the next video.