How the Dark Funnel effects Growth & Marketing

doing our job blindfolded 🙈

👋🏼 Hey friends, this post is part of a series on User Acquisition! I’m 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: "Advertising doesn't work at scale", and other myths about growth 👀

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Q: I can’t attribute more than 50% of my conversions, how can I possibly optimize and maximize my campaigns?

Marketing has evolved to be so data driven that saying something like “Yeah I spent $1,000,000 and honestly have no ability to directly track the ROI” sounds borderline insane. 🤯

Yet, this is the reality of growing a product where users make their most important buying decisions in places you can’t track.

AKA, the Dark Funnel.

It’s really hard to have an honest conversation about the Dark Funnel. Thankfully I have close to 0 shame, otherwise imposture syndrome would start to set in. Is the Dark Funnel real, or am I just a bad marketer?

Are my UTM links set up right? Are my conversion pixels firing? Am I using the right tools to track multiple touch points across a multi channel campaign?

Maybe I’m just bad. Maybe that’s why I can’t track the actual impacts of my marketing.

Maybe if I don’t say anything they wont notice. 🙄

Here’s the thing my brilliant talented friends. It’s not you. There are parts of the customer journey, that sometimes make up the bulk of your ROI, that you just are not able to track. The Dark Funnel is real, and it’s not your fault.

What causes the Dark Funnel?

In my opinion there’s 4 major drivers of the Dark Funnel & why you’re not able to properly track your ROI.

1. Organic referrals / word of mouth

2. Channels that are hard or impossible to track (hello organic Instagram?)

3. Users with privacy/ad blockers

4. iOS 14 tracking issues & the “general trend of privacy”

Word of mouth is often the #1 channel for truly amazing products, and it is also the hardest channel to track. Even if you have a referral campaign or ask people where they heard about you, you are going to be missing probably a minimum of 30-50% of these conversions.

And completely forget about the multi touch attribution of word of mouth factoring in ads. (You saw a Facebook ad, then got a cold email, then your friend told you about it so you signed up.)

Some channels are just flat out hard or impossible to track. Organic Instagram doesn’t even let you link so good luck tracking that. SDR teams are going to have a VERY hard time knowing how many Facebook ads their new sale saw. Doing a form of Influencer Marketing? Your best bet is going to be a discount code maybe 50% of people will actually use.

More and more users now use ad blockers and privacy software. iOS 14 completely screwed up our Facebook conversion tracking & there’s a giant trend in general towards providing more privacy to users.

The truth of the matter is evil marketers like myself who want to know every little thing about our users had it really good for the last 10 years, and the future is one where users have drastically more privacy.

Optimizing user acquisition within a Dark Funnel

No matter how you grow wether it’s organic virality effects, Facebook ads, an army of SDR’s, or some growth hacky “I leveraged Etsy’s blog to drive billions” strategy, growth & marketing is fundamentally a game of deploying resources to drive users.

So how do you deploy resources correctly, when you aren’t able to directly track the ROI?

Short answer? You track each channel to the best of your ability, but you make the ultimate decisions looking at the big picture.

This varies a bit depending on the company, but when dealing with strong issues from a Dark Funnel, I track a blended CAC on a MoM basis.

• I spent $1M in January and we had 1,000 sign ups, generated X revenue

• I spent $2M in February and we had 1,800 sign ups, generated Y revenue

• I spent $3M in March and we had 2,500 sign ups, generated Z revenue

When doing this it’s extremely important to understand the lifecycle of your referrals/word of mouth, the lifecycle of your users, and how to use confidence intervals to measure LTV.

For many products, word of mouth is an early lifecycle event. You see a Facebook ad, discover a new love for a product, and then tell your friends. If your word of mouth chart looks identical to your paid charts, this is probably the case.

“Look at the big picture” is messy, and a shitty answer, and I’m sorry.

But if you deeply understand what’s driving different parts of your growth, it works.

Usually your funnel isn’t 100% dark. Usually you’re able to tell where a bulk of your users are coming from. The key is to use attribution tracking to the best of your ability to judge what is most effective, optimize for what’s proving effective, and then tracking ROI on a blended scale.

Give influencers discount codes. Use the conversion pixels that still work. Use UTM links in your emails. Ask your users where they heard about you.

Even if 50% of your funnel is dark, you’ll still be able to understand “out of everything I’m doing, what is doing it the best?” and then optimize for what works best.

Keep doing that, keep a strong positive ROI on an aggregate level, and your campaigns will get more and more efficient even in a Dark Funnel.

My CEO asked what the ROI of XYZ campaign is

The Dark Funnel creates two kinds of problems. The first is actually just being able to do your job when you can’t track where half of your ROI is coming from. The second is trying to explain to your boss why you’re spending money on things when you don’t know the exact ROI.

Take it for what it’s worth, but here’s my fundamental belief around this.

There are things you do that are the core drivers of growth.

• Facebook ads

• Google ads

• Sales

• etc etc etc

Then there are things you do that lubricate growth.

• Increase activation rates through a new onboarding flow

• Decrease churn by fixing product issues or hiring an account management team

• A referral program that increases the natural rate of referrals

• etc etc etc

Disclaimer: Some products can be so lubricated that they don’t need anything to drive growth. 1 user generates 3 more.

I mentally break this down into what can I do that pushes the product forwards, and what can I do that makes it easier for the product to move forwards when it’s being pushed.

If you can’t properly explain “Facebook ads (channel XYZ) are the core channel that drive our users, and then when they discover our product and fall in love, they refer their friends early on in the lifecycle” you’re basically screwed.

You have to understand how the whole thing impacts ROI, and then communicate that.

1. Communicate the fact you exist within a Dark Funnel and some attribution tracking doesn’t exist

2. Communicate how word of mouth is impacted by user acquisition efforts

3. Communicate how activation rates, engagement, and churn, will impact the ROI of user acquisition

4. Show a month over month report that shows blended CAC is improving, and that the ROI is positive

This is honestly the secret of the strongest growth/marketing teams I have ever been a part of, is that they did an amazing job communicating and selling internally the impact of their campaigns.

It’s not enough to be technically good at your job, other people who don’t understand marketing at all need to believe it.

If you don’t communicate it, especially when dealing with a Dark Funnel, it’s going to get attributed to “organic growth” that didn’t come from your campaigns, “and like why are we even paying these growth/marketing guys anyways”?

And then they will fire you, turn off the campaigns, and the organic growth will disappear. 😐