DTC #104: Tiktok ads is beating Facebook ads🤷
DTC #104: Tiktok ads is beating Facebook ads🤷
I didn't run Facebook ads in 2018. Heard they were cheap. Not anymore. One customer costs 100+ USD, without including fixed costs. Tiktok gets you customers for under 30 USD. How's that?
👋 Hola! Welcome to Out of Singapore. I am Shan and I write about building new businesses. Running a brand day to day is complicated. I aim to share insights that might help other business owners or managers.
I want to thank you everyone for reading last week’s edition. There was a huge interest, from subscribers as well as non-subscribers, on what had happened. If you missed reading it, here is the summary - we don’t have much cash to spend this year. So we decided to conserve cash by stopping spends on the new skincare brand for Singapore. This is a cyclical problem in business where slow down in business could spiral into low cash in the bank, further leading to closure of business verticals or the entire business. Amen 🙏
Four months back, I wrote about how amazing is the Tiktok Shop. If you haven’t read, please check the link below. Our journey on Tiktok has not been the most pleasant. Slowly the funnel on TikTok has started working.
Today we will focus on Tiktok Ads, a part of the Tiktok ecosystem and pitch it against Facebook. I will use real life data points from our January spends in Singapore.
Before that, a quick overview of the Tiktok Ecommerce eco-system
TikTok - Short form video content platform
TikTok Live - Livestream section of TikTok
TikTok Shop - Marketplace platform hosted on the Tiktok app. Brands and sellers can open their online stores here.
TikTok Ads - Advertising platform of TikTok that let’s you run ads to drive traffic or conversion to your website or TikTok shop.
At the current moment, this is the one of the most comprehensive social commerce platform in the world. Some others are WeChat, Xiong Hong Shu, and Line. Facebook social commerce features are limited to USA and nowhere close to Tiktok’s.
Today, we will talk about
Problem with Facebook ads
How Tiktok is beating Facebook ads
How are we winning on Tiktok?
Our Tiktok plan moving forward
Let’s get going!
#1 What is the problem with Facebook Ads?
We should start this section with two key questions:
What is the purpose of advertising?
Companies pay advertising platforms to get customers for the business.How do you choose which platform to use?
The advertising platform that can give expected exposure (impressions, reach) and leads to purchases at a profitable cost.
Till now, Facebook has been the leader in discovering new customers. Facebook and Instagram audience try out new brands and products. All DTC brands have fundamentally been built on Facebook platform.
However, over the last 4 years Facebook has gotten progressively expensive to acquire customers. In fact the costs are now prohibitive for new brands. The customer acquisition cost hovers above USD 100. In simple terms, it means apart from your fixed and variable costs, you need to make at least USD 100 on the product. This translates into a product pricing of USD 150+. This essentially outprices large number of businesses from Facebook advertising ecosystem.
At this point, Facebook ads by itself have become too expensive to touch by bootstrapped brands. One could suggest to use Instagram (and Facebook) social media content in conjunction with Facebook Ads. However, creators on Facebook ecosystem has tasted money. Creating content on Facebook itself is expensive.
How does TikTok fare against this situation?
#1 Tiktok is 5x cheaper to acquire customers
Let’s look at the numbers below. These are data from our January 2024 ad spends. Confidential numbers have been made relative to give you an idea.
Look at the last metric, CPA (cost per acquisition). We get customers on Tiktok at 5 times lower cost than Facebook! A 23 USD acquisition costs changes the game for customer acquisition funnel. It makes the a business profitable, and allows to scale advertising spends.
Let me summarise this table for you
Exposure - We spend 10x more money on Facebook ads to get 8.5x more impressions.
Cost of exposure (CPM, cost per thousand impressions) - The cost of exposure is relatively similar.
Engagement - 1% of the Facebook users clicked on our ads vs 1.8% of Tiktok users.
Cost of engagement (CPC, cost per click) - We spent 4 times more on Facebook to make someone click on our ad compared to Tiktok.
Acquisition - We spent 5 times more on Facebook to get a purchase compared to Tiktok.
#3 How are we winning with TikTok Ads?
It has been 4 months of trials and errors on Tiktok. In Dec and January, we finally saw the full funnel working. Now let’s get into details.
We are winning on Tiktok ads since we are utilising the complete ecosystem that makes our customer acquisition funnel cheap.
What is this Tiktok customer acquisition funnel?
Exposure via Tiktok content. Some content is posted on our channel and others are posted on creator pages. This gives us consistent presence on users social media feed.
Consistent livestreams to convince users. We partner with creators, as well as host livestreams on our channel every few days. These sessions are designed to convince users. They get to interact with the host, ask questions and make a choice to buy. We make it sweeter by throwing in a deal.
Tiktok Ads to nudge users while they are browsing Tiktok. Users have seen content about our products on Tiktok, may have seen a few livestreams selling our brand and then they come across on ad during their scroll session. This is a nudge that works wonderfully to convert users into a customer.
Tiktok Shop to make the purchase. Website bounce rates can be as high as 60-80%. To take a user from TikTok or Facebook to the website and then nudging to buy is a leaky funnel. Tiktok shop takes away this leak and ensures consumers seamlessly can checkout and keep a track of their orders.
These four pillars are helping us get users at a cost that makes sense for building a sustainable business.
#4 How to scale Tiktok sales channel now?
Now that execution and cost is clear and justifiable, we need to scale up this channel. Here is how we are planning to go about it.
Scale TikTok content by collaborating with creators.
Run collaborative ads on these Tiktok content.
Streamline livestreams by working with a fixed set of ~3 creators.
Update livestream roster every few weeks to tap into the latest successful live streamers.
Consistent Tiktok ads using UGC content.
We will not do livestream boosting anymore since it hasn’t resulted in significant uptick.
I am hoping Tiktok sales channel will start giving competition to Shopee and brand dot com channels soon. It is already significant, just not very consistent.
Thank you so much for reading this edition. I am humbled by your continuous support. If you found it helpful, please like and share. It will go a long way in helping me. Thanks!
I have been working on the concept for a sexual wellness brand for sometime (albeit slowly). Yesterday I visited 3 retail sec toy stores. My feelings went from being surprised to horrified with the businesses. I will be writing a few blogs on this in coming weeks, but here is a primer -
Casanova Store - Located in prime and crowded Pagoda street in Chinatown, this was a store stuffed with all possible sex toys. Not the best brands or quality. It was just stuffed. The store employee doesn’t understand English. Her only help was - “if you like big, then take this. If you like small, take this”. Hahaha. I zoomed out of the store.
Hedonist - This was located in the Oasia building, one of the prime properties in downtown Singapore. They have another brand by the name of Genvie. The person in charge was welcoming, however, they need appointment to visit. So I booked time for next Sunday. They also have a private space to host hen parties.
Kinky.sg - I was so annoyed by them that I do not wish to link their website. Their address is fake. It feels like you are picking up a prostitute in a ghetto. I called them, a girl came to pick me up. Went to the 9th floor of an HDB building and lead to house which was turned into a retail store. Toys bought from marketplace or Alibaba being sold from an HDB apartment. I was disgusted after this experience.
This will be a developing story, including some market study.
Okay, I stop here today. It has been late.
What’s Jisoo upto? She has been shooting for this brand called Alo Yoga. I don’t much about it but I am definitely piqued. Here is some BTS for your eyes.
Okay, bye now. Take care :)