How Much to Spend on Etsy Ads – Etsy Marketer

How Much to Spend on Etsy Ads –

Hey i’m cody i’m the host of the etsy marketer channel uh on this channel we uh teach you how to promote your etsy shop uh so today’s uh video is going to be about how much to spend on your etsy ads this is based on a blog post that we published in the past if you like content like this where you’re trying to learn how to increase your sales on your etsy shop and

Get more really traffic to it hit the subscribe button we do videos like this pretty regularly and if you want to get this seen by more people and we appreciate it uh hit that thumbs up button and that helps us out so today’s video is sponsored by market see market t is a tool that helps etsy sellers download their customer emails names and order details with one

Click as he makes it hard to get this customer information out this is a way for you to start doing that email marketing to your customers know who your best your most valuable customers are and then also it builds a bridge between your etsy shop and your mailchimp account all right cool so let’s dive into the topic how to spend or how much to spend on etsy ads so

Really when you think about this i’m going to talk today over kind of the mental like strategy and really the math that we use to measure the effectiveness and see how much you should spend and then also talk about some nuances with etsy ads in comparison to other channels like google ads for example um so uh how you get to this page you go to marketing go to etsy

Ads and it shows you all the listings that you’re uh basically promoting so this account is one of my throwaways what it markets mainly is svg so digital downloads so your data will probably look different it probably won’t have such a small row as and we’ll talk about what that is in a second but how you should think about this is what you you’re thinking about

It is like that every dollar that you put in what do you get back in turn so what you’re wanting to look at is the row as for all of the ads that you’re running so for example when we look at the last 30 days 12 in ad spend has been spent on uh this uh uh not today sucka svg and it’s getting in row as less than a dollar which means that we’re actually spending

More money to get that transaction to happen um so why are we running ads in the first place right like the whole idea behind these is that we’re trying to get more traffic to go to our shop more sales to happen but you have to do that profitably so what you have to consider and take into account is the actual cost of the uh of the product that you’re selling

So you’re looking at three things and again i’ll show you this in the spreadsheet here sorry four things um you’re getting the data for the revenue the cost of goods sold the ad spend and then that helps you calculate the revenue the roads and the margin so when we look at this uh when we look at etsy as an advertising channel uh what you need to think about

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Is that return on ad spend that you’re seeing and you’re gonna see that some products they’re gonna perform way better than others so for example this floral horse svg that gets uh that for every dollar in ad spend we put in it get uh it prints a dollar and 14 cents in contrast when we look at this sunflower paw print for every dollar we put in and it prints a

Dollar ninety six cents so you have to think about the total costs of the account um that are uh associated with uh that transaction so again we had a listing fee of 15 cents so we have to incorporate that in there um so that this probably actually is like a and not netting uh a positive uh a sum so that’s something that it’s not again because it’s a digital

Download it’s a little bit different um what say for example and we can actually use this as a segway into talking about the actual revenue talking about the actual sales data um say you had an item that was a revenue of thirty dollars a cost of goods sold so that was the production cost of five dollars and your ad spend to get that transaction was 15 right so

When we look at the total revenue that’s generated that is this number here um this is actually profit sorry um and so then profit then is the rev total revenue minus the cost of goods sold minus the ad spend so this is that ad spend that you’re giving etsy for that transaction to happen right and you’re paying for that click so some of these things that you can

Look at and this is another thing to point out right this actually has a lower ctr you’ll hear this a lot click-through rate um so it has a lower ctr but it has a higher return on ad spend which means that that even though fewer people are clicking through to make this purchase the ones that do are more likely to make that purchase and be more revenue positive

For us so you’ll actually see accounts where it’s like they will just turn off ads entirely to um to products that aren’t producing any sales so like for example if i get to the kind of bottom of my barrel and a better way to look at this is to filter by instead of the add views do it by the budget spent so i can see um this one for example 12 spent but only 47

Cents or sorry but a row as of i’m 47 right so i’m basically putting a dollar in and getting 50 cents out so that’s a negative it’s a negative sum of money that i’m making off of that same thing here with this one as well uh same thing here so what you’ll see people do is they’ll actually turn off their losers and only allocate budget to their winners especially

Big accounts that have doubt you know tens of thousands or thousands of skus will do this um only focusing on their winners because that’s the best allocation of their limited resources so with that we’ll jump back in so let’s uh let’s talk about this from the top so you the you sell an item for 30 the cost of goods sold so they get that out the door all the

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Production costs and you need to incorporate what’s the listing fee what’s the transaction fee on etsy what’s the um what’s the cost of goods sold the actual materials et cetera the ad spend so again that’s what you pay etsy for that transaction and the profit so the profit is a formula and then to calculate the row as it’s the total revenue that’s generated by

The ad spend and what margin is is margin is the profit uh divided by the revenue so this is when we think about this you’re making a 33 margin which means that for every dollar somebody pays you through the etsy platform 33 cents of that goes into your pocket and that’s your you know what you get to take home and what your business is actually making all right

So this is all great finding dandy and the one thing you have to think about um again why i always talk about the cost of goods sold in relationship to the roads you can have a positive proas but an um but a negative uh margin or sorry a zero like a zero a dollar margin so what that looks like is here so say you have a product again selling it for 30 but the cost

Of goods sold is 15 instead of five so your total profit is zero so your but your row as right which is again the same number can still be two thousand so you could or sorry it’s uh it’s not two thousand it still could be two hundred percent or which equates to 2x in revenue based on your ad spend so it can be the same row as but you’re not making any money your

Margin is zero so then you have to make the business decision like hey does this make sense for me to run ads so a lot of the times the best way to do this is you want to run ads for all of your listings right and then you want to look at the data to identify okay which of those listings have the greatest return or the on ad spend or greatest row ads so this is

An example of one 16 cents resulted in 299 so 18x return on ads so what does that what does that equate to when we think about it what that means is that we would put 18 into an atm into a money machine oh sorry we’d put one dollar into a money machine and 18 and 69 cents would come out another way here to think about it we’d put it has a row as of 12 so we’d put

One dollar into this money machine and we get 10 cents out so now to get back to how much to spend on etsy ads how much you spend on etsy ads is determinant on those factors right so what is the return on ad spend and then what is the return on ad spend in relationship to the margin that you’re making if it’s not profitable you don’t want to put out more money

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There so once you’ve determined that and once you’ve determined which ones of your listings you get the greatest return on money with you want to allocate as much ad spend as you can to those that still allow for you to be profitable right so what you’ll it’s called a diminishing margin of return so basically what you’ll see is as you like increase ad span there

Will be a point where it just doesn’t pay you back anymore so you have to find that threshold that’s healing um i believe like i i’ve only seen this happen on a couple accounts that i’ve ever done consulting for before um a lot of the times what ends up happening is that the uh etsy will actually like put a limit on the amount you can put spend daily and i’ve

Seen this for some big accounts you know accounts that do five million plus a year on etsy um those accounts what ends up happening is that etsy will say hey we’re going to put a cap at say 550 a day that you can spend you could put your daily budget at 2 000 right like you could have selected all of these specific listings that you think uh that are you that you

Know or that are the most profitable to you but etsy won’t spend that money because it puts that kind of um it puts that uh governor on your you know that limitation on your on your account and this largely has to do because uh to they don’t want you know certain accounts to dominate an entire sphere and you know basically take up all the ad space uh by having a

Greater budget um there’s a lot of things there and this is why i always advocate for people like you think about etsy as a single channel that you sell online not the only channel that you sell online um you want to use etsy as a revenue channel but always have those other places especially things you own you know i’ve seen people where they’re selling on etsy

They’re selling on amazon and randomly etsy will ban them and then amazon almost only 20 of their revenue and they don’t own any of that data but they can own their etsy customer data um and but it just takes them time to get their you know for example shopify shopify shop um up and going so i always advocate like think about etsy as a channel that you’re selling

Not the only channel that you’re selling on or not the end all be all so cool um yeah if you have any questions please comment below um again subscribe to this channel if you want to learn more about how to grow your etsy shop i do videos like this regularly and you can go and read more um about this strategy with the link in the description of this video so super

Excited to share this with you have a good one

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How Much to Spend on Etsy Ads – Etsy Marketer By Etsy Marketer