When managing subscription-only ad campaigns, Facebook’s attributable return on ad spend becomes nearly meaningless. Profitability rarely ever happens after the first purchase but typically comes from a user’s lifetime value as they submit recurring payments months into the future. The first purchase is all about getting a customer's foot through the door rather than getting an impressive ROAS in Facebook Ads Manager.
As subscription-only brands function significantly differently than your traditional DTC brand, I wanted to determine a set of benchmarks specifically for subscription-only clients. Below is a breakdown of the blended cost per 1000 impressions, clicks, and subscriptions for 13 subscription-only DTC brands advertising in the United States in the month of March 2021.
The brands have been ranked in order of the average cost of their monthly subscription. Brand 1 has the lowest average cost of about $20 per month and Brand 13 has the highest average cost of about $50 per month. All data was pulled directly from Facebook Ads Manager using a 1-day click, 1-day view attribution window.
Despite the highest average monthly subscription sitting just above $50, the average CPA across this group of brands is $107. In order to determine a CPA that’s profitable for your subscription-only brand, you’ll have to use historical data to determine the average length of time a subscriber sticks around. For example, if your monthly subscription cost is $20 and your average customer stays subscribed for 6 months you’re looking at a $120 conversion value. If a ROAS of 3 is required for you to reach profitability, you’re looking at a first-purchase CPA goal of $40.
Depending on a customer’s lifetime value, many brands are even willing to offer drastic discounts and promotional offers on month 1 in order to gain that initial subscription. You can see above that brands 4 and 10 have some of the lowest CPAs. It’s not a coincidence that those two brands out of the group of brands above offer the largest month 1 discounts to entice users to subscribe.
In short, when managing a subscription-only ad campaign I lean on a core set up to drive success: a great first-month offer, a strong landing page, and a CPA goal formulated using the average subscriber lifetime value to guide performance optimization. If you have these three items, you’re on the right track. Pair these with phenomenal ad creative and you’ll be scaling in no time.
If detailed targeting is used to "guide" ad delivery, how far off is the DTC equivalent of Facebook's Automated App Ads?
The second post in our paid search account audit series in which we take a look at search keyword match type distributions.
It’s time to admit the days of relying on a social platform’s native ads manager to evaluate and optimize ad performance are likely coming to a close. In 2021, Blended ROAS will be our first step as advertisers to overcome this wrench in platform attribution.