Which is your best paid channel?

At some point, in every startup that is doing well, it’s time for “growth”. You have validated that you’re solving a problem, certain people are willing to pay for your product or solution and now you want to focus on finding more of that kind of people. It’s pretty common to turn to paid channels at this stage.

You can reach new potential customers at scale relatively quickly. You don’t need to increase your headcount a lot for this, just give your well-raised money to those marketing platforms where your ideal customers are hanging around: Meta Ads, Google Ads, TikTok Ads, Youtube Ads… you name it.

Until here everything sounds great, right? But as with almost everything in life, there are pros and cons. We’ve seen the brighter side, but the not-so-bright side is that paid channels are becoming increasingly expensive every year. And it’s tough to make your economics work.  

The reason why is that the main marketing channels are overcrowded, and every click and conversion costs more today than yesterday. Of course, you can optimize your campaigns and still have good results but it’s a shared thought that is way harder than some years ago.

Does this mean that you should not do paid channel marketing at all? Nope, you know better than anyone else what’s the best way to go to the market for your business. But it’s definitely worth it to calculate the customer acquisition cost (CAC) of your channels and focus on those that are performing really well.

Let’s see how you can do this with Latitude in a few minutes!

How to calculate CAC the right way

When it comes to calculating CAC, there are many ways to approach it. We’d say that you can go very granular and include absolutely everything that is involved in getting a new customer: advertising, salaries, tools… But to start things off in a simpler way, let’s just focus on how much money we spend on a given marketing platform and how many customers we get from that activity.

As you might be aware, tracking the spend is (should be) quite easy, but tracking new customers or certain conversions is getting more complicated since there are usually multiple touchpoints with your ads before a user decides to purchase your product. We recommend that you check this comprehensive guide to marketing attribution models so you can build your own before starting to calculate CAC for your paid channels.

Once you have your conversions set up and you’re able to track new customers coming from a specific paid channel, it’s time to start building your CAC dashboard with Latitude.

Let’s say you’re running the two most common paid channels: Google Ads and Meta Ads. At Latitude, you’ll be able to connect these data sources straight to your account and combine it with other sources. But what we see is that this data ends up frequently in spreadsheets, so for this example, we have all of our data in Google Sheets.

Building a CAC dashboard

Now we have everything we need to start building a CAC dashboard including Google Ads and Meta Ads. Just follow these steps.

Signup & Connect for free

Go to Latitude’s website and sign up for free. You can connect a data source in a couple of minutes and it’s completely free. No charge on your side and you can start querying your source as much as you want. Not a bad deal, right?

On the main page, let’s go to Settings -> Data sources -> Add new data source -> Select Google Sheets Connector. Then, you just need to copy and paste your Google Sheets URL and you are set up. Remember to add both your Google Ads Sheet and your  Meta Ads!

Calculate CAC for Google Ads

It’s so cool to build your queries in blocks because it allows you to be very granular and focus on specific data points without missing the ultimate goal. Let me explain. First, you need to get the total amount of daily spend in Google Ads, the total amount of conversions from Google Ads and you want to group those by month. So let’s run this query really quickly:

SELECT
	month,
	SUM(daily_spend) AS google_total_spend,
	SUM(conversions) AS google_total_conversions
FROM {{$1}}
GROUP BY
	month
ORDER BY
	month ASC

And from here, before you deep dive into CAC, you easily can have an evolution overview of both total spending and conversions. Let’s just add a line chart and a bar chart, so we can have them in the final CAC dashboard.

Google Ads Spend Chart:

Google Ads Conversions Chart:

This alone gives you so much valuable information. What happened with conversions in May? And in November? And why did the spending increase in October? Now you have important questions to answer.

But you were here for the CAC, right? Let’s select both previous calculations and divide total spend by total conversions:

SELECT
	month,
	ROUND(google_total_spend / google_total_conversions) AS 				google_ads_cac
FROM {{$1}}

And add a line chart in one click.

Google Ads CAC Chart:

Congrats, you got it! Mmm, it seems that “holiday months” are performing better than others. Is there some seasonality in your product or service? That’s another interesting question you definitely want to answer so you can forecast better next year's business plan.

Calculate CAC for Meta Ads

Now it comes to the turn for Meta Ads. You can simply replicate the same path that we followed for Google Ads and you’ll get there.

Meta Ads Spend Chart:

Meta Ads Conversions Chart:

Meta Ads CAC Chart:

Combining CAC(s)

But what if we want to have a clear comparison between the performance of both paid channels. Then, we can join them. And you don’t even need to know how to perform JOINs in SQL. You can simply use one of our transformation blocks called “Join” (of course). Select month = month and add a line chart so you can display both in the same graph. Beautiful, isn’t it?

Channels CAC Chart:

Wrapping up

Okay cool, everything is calculated now. Both Google Ads and Meta Ads are showing similar performance, so you might want to dig deeper. Stay tuned for the upcoming Data Apps! You can create a view so anyone in your Marketing team (or Management team) can access your paid channels CAC. Just select all the blocks with charts and create a new view.

Also, you can effortlessly share these calculated CACs.

It’s your turn now. Go ahead and start building your own CAC dashboard in a matter of minutes with Latitude.

Make sure to create a free account today!