Calculating organic results from paid acquisition
Calculating organic results from paid acquisition
tracking the paid-organic loop through the dark funnel š®
šš¼ Hey friends, this post is part of a series on User Acquisition! Iām going to go over some of the largest problems with UA, and try my best to explain the frameworks I use to solve them.
Previous Post: How the Dark Funnel effects Growth & Marketing
Q: Do you only attribute ROI to what a conversion pixel can track, or do you factor in word of mouth/organic impacts as well?
I recently realized that the way I have been tracking the ROI from my paid user acquisition campaigns for the last 10 years has been absolutely wrong.
For the longest time I have prided myself on being a data driven marketer, at being an early adopter of pixeled conversion tracking, lookalike audiences, and remarketing campaigns the day it was released on Facebook ads.
I set up my conversion pixels, I run Facebook or Google ads at a target CPA, and then I maximize conversions.
The problem with direct ROI attribution is that it almost never accounts for the organic impact of your paid user acquisition.
What does this literally mean?
Products, especially those with PMF, often have very strong word of mouth or referrals, or some kind of organic lever. Unless there are baked in viral loops (think Facebook or LinkedIn), the virality coeffeicient is less than 1, AKA 1 person wont bring in more than 1 other person - which means they also need some kind of paid lever.
With B2B products (or honestly even most consumer products) this usually means that if 100 people discover your product, maybe 30 of them will tell a friend about this amazing new thing and and get their friend to sign up.
Drive 100 acquisitions, and 30 more come in through āword of mouthā (then 9, then 3, etc etc for each time through the loop).
This is where conversion pixels & data driven marketing breaks down and the science of user acquisition turns into art.
Organic growth through the dark funnel
The ādark funnelā is the part of the customer journey that youāre not able to track or attribute ROI towards. For the longest time I have had really strict siloās in my head around every channel of growth.
The world for me was broken down into a pie chart of attribution with rigid walls between each channel.
42% Facebook ads
16% Google SEM
8% Organic SEO
28% User referrals
6% Cold emails
The issue is that what actually drives these users isnāt a segregated strategy, but the combination of all of my channels. Attribution isnāt really a pie chart, but overlapping Venn diagrams.
Facebook ads drive direct acquisition, but they also brand my awareness & creates social proof. SEM captures the moment of intent. SEO comes from creating + ranking strong content that makes me a thought leader. Cold email further saturates my audience who now knows of me already through Facebook & Google ads.
And then once iāve driven 100 users through my āinorganicā efforts, they discover my product and share it with their friends.
Thereās a few key things we need to understand to make correct decisions.
How viral is our product?
Where in the lifecycle does this happen?
What causes users to create referrals/word of mouth?
Itās hard to measure how viral our product is, but you can kind of estimate it by looking at the big picture. AKA, what % of your signups comes from referrals? This question can give a clear high level view of how many organic conversions we can expect to earn off 100 paid conversions.
Itās super important to understand where in the lifecycle do referrals happen. For most products, your users arenāt going to just be referral machines for their entire lifetime.
Usually what happens is that a user will discover a product and then go tell their friends about this new thing they love. Go track this.
If you donāt have the data in your Metabase or whatever to literally create graphs of this, just talk to your users. Sometimes we get so bogged down in our data we forget that we can literally just pick up the phone or write an email and ask our users what we need to know.
Look at the graph of your MoM signups from paid channels, and then compare it to the graph of your MoM signups from referrals. Does it look extremely similar? š
If so, you have a really clear indicator that paid channels are driving early lifecycle organic word of mouth.
Finally, make sure you understand what causes your users to create the referral. This deserves a whole book let alone its own article, but create a system that rewards your users in a way that aligns with your product.
Robinhood rewards referrals with stock (rewards of the hunt)
Y Combinator rewards referrals with placement on a public leaderboard (rewards of the tribe)
Paypal rewards referrals with cash (rewards of the hunt)
Dropbox rewards referrals with extra storage space (rewards of the hunt)
Figure out what makes your users tick and then align the referral program with your product to maximize the virality.
Marketing like itās the 1970ās
Itās a little bit ironic that one of the greatest lessons that digital natives can learn, comes from marketing before the internet was even invented.
The coupon was the OG way that our grandparents were able to (poorly) track conversions through their marketing efforts.
Billboards and magazine ads and radio placements and TV slots. Billions of dollars have been profitably spent on different channels of growth with almost 0 clarity on their direct ROI.
It was possible to profitably scale user acquisition through a dark funnel 1,000 years ago, and itās possible to do it today.
Being data driven is absolutely critical, and we need to be able to track our conversions and channel ROI as accurately as we can. Just donāt forget to ultimately be guided by your blended campaign performance.
No matter how cool it sounds to say āIām a data driven marketer and I donāt look at blended CAC because I track everythingā we exist in a world of blended CAC.
ROI tracking should ultimately be done on a macro blended level. I spent $X amount of money total this month, and all my efforts put together drove 4x that amount (including organic referrals).
The beauty of the coupon isnāt that it gave us perfect ROI tracking channel by channel, but it gave us leading indicators of which channels were working best. Conversion pixels in a dark funnel work in a very similar way.
We might not know the exact ROI of our Facebook campaign, but it gives us a stick in the ground to optimize the ML around AND it allows us to compare our efforts on Facebook against SEM or cold emails or influencer marketing or whatever our other channels are.
This allows us to make optimization decisions on a micro level (this keyword vs that ad image vs different partnerships), yet at the same time scale acquisition on a macro level (spend $2.5M this quarter to drive $10M of profitable LTV).