The ultimate guide to performance marketing | Timothy Davis (Shopify)

Timothy’s background (0s)

• This chapter introduces Timothy Davis, the guest speaker, who is the head of Performance Marketing at Shopify. He has extensive experience in the field, having consulted for companies like Pinterest, LinkedIn, and Eventbrite.
• The episode will focus on Performance Marketing and paid growth, covering topics like when to start investing, how to run tests, which platforms to prioritize, and what to look for in agencies.
• The episode is designed to help viewers understand how to kickstart or improve their Performance Marketing investments and includes practical advice and insights from Timothy's experience.

Understanding performance marketing (2m31s)

• Performance marketing and paid growth are often used interchangeably, but they can have different meanings. While both focus on measurable results, "paid growth" typically refers to online marketing efforts, while "performance marketing" can encompass both online and offline strategies, including affiliate marketing.
• Performance marketing is essentially marketing that can be measured for its effectiveness. This means tracking results and analyzing data to understand what works and what doesn't.
• In recent years, offline marketing strategies have become increasingly relevant in the context of paid growth. This is because offline channels can also be measured and optimized for performance, making them a valuable part of a comprehensive marketing strategy.

The importance of paid search (6m31s)

• Paid search is a valuable tool for most businesses. While some companies may rely heavily on other channels like SEO or word-of-mouth, paid search offers a user-driven approach that can be effective for a wide range of industries.
• Paid search is becoming increasingly important due to platform changes. Platforms like Google and Meta are prioritizing paid content, making it more difficult for organic listings to gain visibility. This trend emphasizes the need for paid search strategies.
• Paid search is user-driven, making it a targeted approach. Unlike disruptive media like social media ads or YouTube ads, paid search ads only appear when users actively search for relevant keywords. This targeted approach can lead to higher conversion rates and a better return on investment.

Identifying growth potential (8m39s)

• Identifying potential for paid performance marketing to drive significant growth (70-80%) involves analyzing user data and identifying channels where your brand is already performing well. For example, if your brand is seeing strong engagement on TikTok, consider leveraging similar platforms like Snapchat to reach a wider audience.
• Leverage analytics tools like Google Analytics to understand where your users are coming from. If you're already seeing traffic from a specific platform, consider increasing your presence and investment on that platform to maximize reach and engagement.
• Paid performance marketing can be particularly effective when users are already finding your brand organically. By amplifying your presence on these channels, you can significantly increase your reach and drive substantial growth.

Case studies: Hairstory and Ipsy (9m54s)

• Hairstory and Ipsy were successful with Google Shopping, but data revealed significant traffic from Meta and TikTok. The speaker and his team decided to test small campaigns on these platforms, starting with customer testimonials on Meta and experimenting with available options on TikTok.
• Creative strategies that worked on Meta did not translate well to TikTok. This highlighted the importance of tailoring content to specific platforms and user experiences. The speaker emphasizes that different platforms have different user mindsets and require unique approaches.
• The speaker recommends identifying platforms where customers are already engaging and then focusing performance marketing efforts there. He also suggests using the "Signs of Life" approach, which involves small-scale testing to see if a platform shows potential. If positive results are observed, a more comprehensive campaign can be developed with appropriate creative, messaging, and targeting.

Experimenting with new platforms (12m22s)

• Start with your own data: Utilize your existing customer base to create lookalike audiences on the new platform. This provides a strong starting point for testing, as these audiences are highly correlated to your existing customers.
• Experiment with different lookalike percentages: Begin with a 1% lookalike audience, which is the most closely tied to your existing customers. Gradually increase the percentage (2%, 3%, etc.) to see how the performance changes. This helps identify the optimal lookalike audience for your campaign.
• Don't be afraid to fail: It's crucial to create an environment where experimentation is encouraged, even if it doesn't lead to immediate success. Each platform is unique, and learning from failures is essential for understanding the platform's nuances and user behavior.

Choosing the right platforms (18m57s)

• The speaker recommends exploring Google, Facebook, Instagram, and TikTok as potential performance marketing platforms. Google encompasses various services like YouTube, Google Search, and the Google Display Network, offering diverse advertising opportunities.
• The speaker emphasizes the importance of video marketing, particularly on YouTube, due to its strong performance and potential for growth. However, consistent creative refresh is crucial for maintaining engagement.
• The speaker suggests starting with Google Search and then expanding to Meta (Facebook and Instagram) as a beginner. If video content is available, YouTube is also recommended. TikTok is a viable option if data indicates user presence on the platform.

LinkedIn for B2B marketing (20m23s)

• LinkedIn is a powerful platform for B2B marketing, but it is also expensive. The targeting options available on LinkedIn, such as targeting specific job titles, industries, and companies, can be very effective. The speaker provides an example of how they used LinkedIn to target decision-makers at Coca-Cola to overcome their concerns about security and recency.
• Google Search is generally recommended as the starting point for performance marketing. However, the speaker emphasizes that the choice of platform should depend on the audience and the creative assets available. If the target audience is not active on Facebook, it may be more effective to focus on Google Display Network (GDN) or YouTube.
• Video ads are performing well on YouTube. The speaker recommends using emotional appeals in video ads to create a lasting impression on viewers. They also suggest that companies should invest in building a "flywheel" for video ad production, either internally or through an agency.
• Emerging channels for performance marketing include podcasts, connected TV (CTV), and VR advertising. The speaker believes that podcasts are currently performing well for those who can measure their effectiveness. CTV is also a promising channel, and repurposing YouTube creative for CTV can be effective. VR advertising and AI-powered advertising are still in their early stages, but the speaker believes they have potential.

When to start investing in paid growth (27m56s)

• When to start investing in paid growth depends on your goals and the demand for your product. If you need quick results, paid advertising should be started immediately. However, if you are looking for long-term growth, SEO may be a better option.
• Paid advertising can be used to build awareness for a new product. This is especially important for products that are not yet well-known or have a low search volume.
• It is important to have product-market fit before investing heavily in paid advertising. This means that your product should be something that people actually want and are able to purchase. If you don't have product-market fit, your ads are likely to be ineffective and may even damage your brand.

Common mistakes in performance marketing (33m33s)

• Lack of Deep Dive Analysis: Agencies often apply a cookie-cutter approach, failing to delve into the specifics of each client's needs and data. They may rely on automated bidding and generic strategies instead of meticulously analyzing keywords, ad copy, targeting, and conversion funnels.
• Insufficient Time and Resources: Agencies with large client portfolios may struggle to dedicate enough time and resources to each account. This can lead to neglecting crucial tasks like landing page optimization, user experience improvements, and thorough data analysis.
• Overlooking the Importance of Communication and Collaboration: Agencies may not prioritize open communication with clients and internal teams. This can result in missed opportunities for improvement, as well as a lack of transparency and accountability.

Working with agencies and consultants (37m41s)

• Agencies and consultants are valuable resources for getting started with paid growth. Even experienced consultants like Timothy Davis believe in using agencies to establish a strong foundation. He recommends starting with an agency or consultant to set up your paid marketing efforts and define clear milestones for future growth.
• The goal is to eventually transition paid marketing in-house. As your business scales and spending increases, it's important to have a plan for bringing paid marketing in-house. This could involve hiring a data scientist, a creative specialist, or even replacing the agency or consultant with a full-time employee.
• Open communication with your agency or consultant is crucial. Have honest conversations about your goals and the potential for transitioning to an in-house team. A good agency or consultant will be supportive of your growth and may even be willing to adjust their role or fees to accommodate your evolving needs.

Hiring for performance marketing (40m36s)

• The most important quality to look for in a performance marketing hire is their ability to analyze data and identify the "signal" amidst the "noise." This means understanding which metrics are truly important for achieving campaign goals and ignoring irrelevant data points.
• Timothy Davis, the speaker, emphasizes that teaching someone how to use specific platforms like Google Ads or Meta Ads is relatively easy. The real challenge lies in helping them develop a strong data-driven mindset.
• Davis draws a parallel between his love of baseball statistics and his approach to performance marketing. He explains that he's always been fascinated by analyzing data and finding ways to optimize performance, whether it's a baseball lineup or a marketing campaign.

Metrics that matter (47m33s)

• Focus on Ad Strength: Timothy Davis emphasizes the importance of focusing on ad strength metrics, particularly in Google Ads. He recommends analyzing reports that show expected click-through rate, landing page experience, and ad relevance. By identifying areas where ad strength is below average, marketers can take action to improve it, leading to higher quality scores and increased impressions.
• Leverage Google's Feedback: Google provides valuable insights within its platform to help improve ad strength. These insights include suggestions for improving headlines, descriptions, and keyword usage. Davis encourages marketers to actively utilize this feedback to optimize their campaigns.
• Partner with Experts: Davis highlights the importance of working with platform partners, such as those available at Shopify, Google, Meta, and LinkedIn. These partners can provide valuable industry benchmarks and guidance on metrics like CPC, conversion rate, and CAC, which vary significantly across industries and companies.

Competitor analysis and CPC insights (54m43s)

• Google, Facebook, and LinkedIn can provide valuable insights into your performance marketing campaigns by comparing your metrics to those of your competitors.
• While they cannot disclose specific competitor names or data, they can provide anonymized information about your competitors' click-through rates, conversion rates, and cost per click (CPC).
• This information allows you to understand your relative performance within your industry and identify areas for improvement, such as lowering your CPC if it is higher than average.

Custom reports and data visualization (56m15s)

• The speaker is asking if the report shown is a custom-developed report that highlights key metrics or if it's simply an export from Google Ad Manager.
• The speaker clarifies that the report is an export, meaning it's a visualization of data already available within the Google Ad Manager account.
• The speaker emphasizes that all the data presented in the report is accessible to every user within the Google Ad Manager account.

Understanding impression and click share (56m38s)

• Impression share and click share are important metrics for understanding ad performance. Impression share measures how often your ads are shown, while click share measures how often people click on your ads when they are shown.
• Focusing on click share is more important than maximizing impression share. Click share indicates that your ads are reaching the right audience, while a high impression share might just mean your ads are being shown to people who aren't interested.
• Visualizing data can help you understand the relationship between impression share and click share. By comparing these metrics across different campaigns, you can identify which campaigns are effectively targeting the right audience and which ones need improvement.

True competition metrics (59m10s)

• Jacob Brown's "True Competition Metric" utilizes auction insights to create four new metrics, two of which are "position above rate" and "amount of times they show and we don't." These metrics, when combined, reveal how often a competitor outranks you in all auctions you're eligible for, providing a more accurate picture of genuine threats than simply observing your own position and impression share.
• This metric allows for a baseline comparison over time, enabling you to see how your competitors' performance changes in response to your own bid strategies, keyword optimization, and ad copy adjustments. This is particularly valuable in the context of smart bidding, where manual bid adjustments are less common.
• The speaker emphasizes the importance of using this report to identify true threats rather than relying on assumptions based on personalized search results or tools like SEMrush, which may not accurately reflect the competitive landscape.

Attribution and incrementality (1h2m14s)

• Attribution is the process of assigning credit to marketing channels and campaigns to understand where growth is coming from. Multi-touch attribution, which gives credit to all channels a user interacts with, is preferred over linear attribution, which assigns equal credit to each touchpoint. However, attribution alone doesn't reveal whether a user would have converted without seeing the ad.
• Incrementality testing, such as A/B testing or conversion lift tests, helps determine the true impact of paid advertising campaigns. These tests measure whether the ad led to incremental growth that wouldn't have happened otherwise. Companies like Netflix and eBay have conducted such tests and found that some paid advertising campaigns were not as effective as initially thought.
• To measure incrementality, companies can leverage in-platform tools or partner with platforms like Google, Meta, and TikTok. These platforms offer tools and support for running incrementality tests. However, it's important to have a significant budget (at least $50,000 per month) to ensure enough data for meaningful results.

Building a performance marketing team (1h8m52s)

• The first hire for a performance marketing team should be someone who is data-driven and can identify valuable information amidst a lot of data. A salary of around $50,000 is a good starting point for this role, but the actual salary will vary depending on the company's budget and the specific requirements of the position.
• The next two hires should be a creative individual and a dedicated data scientist. The creative person will work closely with the data-driven individual to ensure that the marketing materials are aligned with the company's performance goals. The data scientist will be responsible for conducting incrementality testing, creating reports, and building analyses that will improve the team's overall performance.
• The data scientist plays a crucial role in supporting the performance marketing team by providing insights and analysis that would be difficult for generalists to achieve on their own. Their work ultimately helps the team to succeed by providing a strong foundation for decision-making and performance reporting.

Creative and ad copy collaboration (1h10m53s)

• Creative and ad copy collaboration is crucial for success. The creative team, often graphic designers or brand specialists, should be given some creative freedom, but ultimately their work needs to be aligned with conversion goals. Performance marketers should be able to write effective ad copy, but it's important to involve the creative team in the process, as they may have a better understanding of the target audience. No idea should be discarded without testing, as even seemingly simple ad copy can outperform more complex options.
• The ideal title for this role is often "Growth Marketing Specialist" or "Growth Marketing Manager." This reflects the multi-faceted nature of the position, as individuals in this role will likely be involved in various tasks, including performance advertising, spreadsheet creation, and other projects. As the team grows, specialists can be hired for specific areas like paid search, but starting with a generalist is often the best approach.
• Hands-on work in ad platforms is essential. Performance marketers should be actively managing campaigns in platforms like Google Ads and Meta Ads, rather than just discussing strategy. This includes setting up tests, tracking results, and making adjustments based on data. A calendar should be used to schedule tests, track deadlines, and ensure regular reporting. This hands-on approach allows for continuous optimization and learning.

Managing workload and hiring strategy (1h15m48s)

• Managing workload and hiring: The speaker emphasizes the importance of avoiding "bloat" in organizations by carefully considering the need for new hires. They use a calculator to track team workload, factoring in meetings, PTO, and other commitments. If the team consistently shows a "red" workload, indicating more work than available time, they initiate a conversation about hiring.
• Ops Cadence: The speaker describes a spreadsheet-based system called "Ops Cadence" that outlines the frequency of various performance marketing tasks. This system helps ensure accountability and transparency within the team, allowing everyone to know when specific activities are scheduled.
• Training new hires: The speaker highlights their commitment to training new hires, emphasizing the importance of bringing them up to speed quickly and effectively.

Training and onboarding new hires (1h20m52s)

• The goal is to shorten the time it takes for new hires to make an impact, ideally from the typical 90 days to 45 or even 30 days. This is achieved by quickly immersing them in the company culture, processes, and expectations.
• Early responsibility is key. New hires should be given ownership of projects or tasks right away, allowing them to learn by doing and gain confidence. This approach is more effective than lengthy onboarding processes.
• Clear expectations and consistent communication are crucial. New hires should be given clear instructions on what is expected of them, and regular check-ins should be conducted to provide guidance and support. This includes demonstrating best practices and encouraging efficient workflows. It's also important to remember that new hires won't be perfect from the start, and there will be opportunities for both parties to learn from each other.

Impact of ATT on performance marketing (1h24m41s)

• The App Tracking Transparency (ATT) framework introduced by Apple significantly impacted how cookies, attribution, and tracking work online, leading to concerns about the effectiveness of performance marketing, particularly for platforms like Facebook.
• Despite initial concerns, performance marketing has continued to thrive, with strategies adapting to the new landscape.
• The impact of ATT on performance marketing is mitigated by the use of tools like "scan" which provide attribution and measurement for iOS devices, ensuring that marketers can still track and optimize their campaigns effectively.

The power of creative in ads (1h25m56s)

• The power of creative in ads is often underestimated. A strong example is Dollar Shave Club's video ad, which resonated with both men and women. Effective creative should tell a story and evoke emotions, creating a lasting impact on viewers.
• Competitors may be bidding on keywords related to your company, but it's not always malicious. Google's "close variant" feature can lead to accidental bidding on similar terms. Before assuming malicious intent, check if the competitor is using your brand name in their ad copy, which is against Google's policy.
• Monitor your competitor's ad performance over time to identify consistent patterns. A sudden drop in your traffic might be due to a competitor's campaign, but it could also be a temporary error or a competitor learning and adjusting their strategy. Don't overreact to short-term fluctuations; focus on long-term trends.

Using AI in performance marketing (1h29m47s)

• AI in Performance Marketing: While AI has been used in performance marketing for years through features like smart bidding and ad copy recommendations, its impact is becoming more significant. AI can be used to automate tasks, generate creative content, and optimize campaigns, but it's important to be aware of potential malicious uses.
• The Importance of In-House Creative: Hiring a dedicated creative person can be beneficial for performance marketing, as it allows for faster iteration and better alignment with brand tone and style. While AI can help with creative generation, it's not always a replacement for human creativity.
• Forward Thinking and Backwards Planning: A key strategy for successful performance marketing is to have a clear vision of future goals and then work backward to develop a plan to achieve them. This involves identifying emerging channels, setting performance benchmarks, and developing a roadmap for testing and scaling.

Lightning round (1h37m16s)

• Recommended Books: Timothy Davis recommends three books: "Daily Stoic" for its stoic philosophy, "Great by Choice" for its insights on success, and "Deep Work" for its focus on productivity.
• Favorite Recent Movie/TV Show: Davis enjoyed the nostalgic "X-Men '97" and highly recommends the Indian action film "RRR," despite its length.
• Favorite Recent Product: Davis enjoys "Magic Mind," a caffeine-free focus shot, and is a fan of the company's founder, who uses Shopify to sell the product.
• Favorite Life Motto: Davis believes "Happiness is dictated by expectations," meaning that our happiness is determined by how we manage our expectations.
• Most Influential Person in Career: Casey Winters, a friend and mentor, introduced Davis to Google Analytics and inspired him to pursue a career in digital marketing.
• Interesting Fact about Casey Winters: Winters is an exceptional tennis player, having been ranked in the top 10 in Louisiana despite not playing for a year.