Ad strategy Marketing budgets E-commerce
There’s a specific kind of frustration that comes when you’re spending more to get in front of people, but the register isn’t ringing any louder. You’re doing the same things that worked last year, maybe even spending more to do them, and the return just sits there. It’s not a crisis yet — it’s worse. It’s a slow drain that makes you question whether the whole channel is broken. And the numbers back that feeling up: returns on advertising have declined nearly 30% in the past few years as costs rise and competition intensifies. That’s not a blip. That’s a structural shift in how the auction marketplace works now.
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📋 What we’ll cover
- Why the same playbook stops working
- Cut what isn’t earning its keep
- Quality Score is still your cheapest lever
- Diversify before you’re forced to
- Rethinking what success looks like
Why the same playbook stops working
If you’ve been running paid ads for more than a couple of years, you probably remember when you could increase your budget and see a fairly predictable lift in sales. That was the 2022 mindset — aggressive listing, heavy ad spending, and growth followed. But the e-commerce industry is still stuck in that mindset, and by 2025, that playbook is starting to show its cracks. The problem isn’t that ads stopped working. It’s that the conditions changed while the strategy stayed the same.
Paid search has matured into a competitive auction marketplace rather than an underpriced growth channel. More advertisers are competing for the same keywords, and platforms like Google optimise for their own revenue and user experience, which pushes cost-per-click upward. When you combine that with reduced organic visibility — which forces more businesses toward paid ads — you get a system where simply increasing spend doesn’t translate to proportional growth anymore. Customer acquisition costs have increased by 10–15% while competition has intensified. That’s not a seasonal fluctuation. That’s the new baseline.
~30%Decline in advertising returns over the past few years as costs rise and competition intensifies. That means for every dollar you spent before, you’re now getting about seventy cents of the same result — unless something changes in how you spend it.
The temptation is to assume you just need better creative or a slightly different audience. Sometimes that helps. But the structural issue is that the auction itself has gotten more expensive, and your bids are competing against businesses that can afford higher costs per click because their margins or lifetime values justify it. High-value industries like legal, insurance, and B2B SaaS push CPCs higher across the board because they can afford to. If you’re selling a lower-ticket product or running thinner margins, you’re effectively priced out of certain keywords whether you want to admit it or not.
That doesn’t mean you stop advertising. It means you stop pretending the old rules still apply.
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Cut what isn’t earning its keep
Before you do anything else — before you test new platforms, rewrite your landing pages, or build a funnel — your first move must be to eliminate wasted spend first to ensure you’re not funding inefficiency. Most accounts have campaigns, ad groups, or keywords that are burning budget without contributing meaningfully to revenue. They just happen to be running on autopilot because nobody looked at them critically in the last quarter.
Run a Search Terms Report for the last 90 days. Look for high-impression, low-click-through-rate terms. Those are the ones inflating your costs without giving you a chance to convert. Add them as negative keywords, or create dedicated ad copy and landing pages that actually match the intent behind those searches. The goal isn’t to get more clicks. It’s to stop paying for clicks that were never going to convert in the first place.
This is also where you need to be honest about channel quality. Simply increasing ad spends doesn’t translate to proportional growth anymore, and some channels are worse offenders than others. CPCs are rising 14–18% on Google Search, 12–16% on Meta, and 18–22% on LinkedIn in 2026. If you’re on a platform where your cost per acquisition has crept above what your product can sustain, the answer isn’t to optimise harder — it’s to shift that budget somewhere else. Perfora, for example, cut its reliance on e-commerce platform advertising from 35–45% of annual marketing spends to about 20%, redirecting nearly 80% toward YouTube and Instagram. That’s not a small tweak. That’s a strategic reallocation based on where the returns actually were.
🔍 Where to look first
- Pull your Search Terms Report for the last 90 days and identify terms with high impressions but low CTR — add them as negatives or build dedicated landing pages.
- Check your campaign-level cost per acquisition against your product margin. If the math doesn’t work at current CPCs, pause the campaign, don’t just lower the bid.
- Review which platforms are delivering the best cohort behaviour and long-term value, not just top-line acquisition metrics. A cheap click that never buys again is still an expensive click.
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Quality Score is still your cheapest lever
There’s one factor in the ad auction that you can control directly, and it doesn’t cost more money to improve. Quality Score is influenced by expected click-through rate, ad relevance, and landing page experience. A higher Quality Score can lower your cost per click because the platform rewards relevance. It’s not a magic fix, but it’s the closest thing to a lever that doesn’t require a bigger budget.
The practical side of this is less glamorous than most people want it to be. It means creating granular ad groups instead of throwing a dozen keywords into one campaign. It means mapping search terms to query intent so your ad copy actually matches what someone typed. It means using all the ad extensions available to you — sitelinks, callouts, structured snippets — because each one gives the platform more context about your relevance. And it means making sure your landing page delivers what the ad promised, quickly and clearly, without a bunch of friction.
This is where a lot of accounts bleed money without realising it. Someone clicks an ad for “leather work bag” and lands on a category page full of backpacks and totes. The platform sees that mismatch, and your Quality Score drops. Your CPC goes up. And you wonder why the campaign isn’t working. The fix isn’t more budget. It’s making sure the ad and the landing page are having the same conversation.
⚠️ The mistake that trips people up most
Treating Quality Score as a one-time setup rather than something that drifts over time. As you add new keywords, change copy, or update landing pages, your relevance can shift without you noticing. Set a monthly reminder to audit your top campaigns for ad relevance and landing page alignment. A small drift in Quality Score can quietly inflate your CPCs by 20% or more before you catch it.
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Diversify before you’re forced to
When one platform’s costs become prohibitive, the instinct is usually to double down and try to optimise your way out of it. Sometimes that works. More often, you’re just burning time and money on a channel that has structurally shifted against you. The smarter move is to diversify before you’re forced to — while you still have the budget and the runway to test properly.
There are real alternatives that don’t get the same auction pressure. CPCs are typically 20–40% lower on Microsoft Advertising (Bing) compared to Google, partly because fewer advertisers compete there. If your audience skews professional or older, that shift alone can stabilise your costs without sacrificing volume. Similarly, moving from broad Google search to more targeted platforms — or from Instagram to Pinterest or TikTok — can help you find pockets of demand where competition, and therefore cost, is lower.
The goal isn’t to abandon your main channel. It’s to build a portfolio of acquisition paths so that when one gets expensive, you’re not stuck. iD Fresh shifted focus toward building product and brand pull to reduce dependency on paid channels entirely. That’s a longer play, but it’s also a reminder that the most reliable way to reduce ad costs is to need fewer ads in the first place.
💡What this looks like in practice
I’ve seen people spend months trying to fix a Google Ads account that was never going to work at their price point, simply because they assumed the platform was the only option. The moment they tested a less competitive channel — even one with lower volume — their cost per acquisition dropped enough to make the whole business model viable again. It’s not about finding a magic platform. It’s about finding the one where your competitors aren’t all standing in the same spot.
If you’re running a business from home and the rising cost of ads is eating into your margins, this is also the point where you might want to look at how you’re structuring your customer journey beyond the click. Understanding what a sales funnel actually does — and how to build one that turns visitors into buyers without relying entirely on paid traffic — can change the math significantly. There’s a free webinar that walks through the essential building blocks of a high-converting funnel, including how to attract higher-quality traffic and improve lead generation without just throwing more money at ads. It’s worth a look if you’re tired of the auction dictating your margins.
You can check out the free training on building a repeatable sales process if you want to see what that shift looks like in practice.
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Rethinking what success looks like
The hardest part of rising ad costs isn’t the financial hit. It’s the mental shift required to stop measuring success by volume and start measuring it by efficiency. Most of us got comfortable with a certain cost per acquisition, and when that number creeps up, the instinct is to chase the old number instead of recalibrating what a good result actually looks like under current conditions.
Gaurav Manchanda, founder and director of Nimida Group, put it well: “We’re far more focused now on channel quality, cohort behaviour and long-term value rather than just top-line acquisition metrics.” That’s the shift that matters. A customer acquired at a higher cost who buys repeatedly and refers others is worth more than a cheap click that never comes back. But you can’t see that if you’re only looking at last-click attribution and same-day ROAS.
This is also where better execution — not just higher spending — becomes the key differentiator for growth. The brands that are navigating rising ad costs well aren’t the ones with the biggest budgets. They’re the ones that test campaigns first and only scale what works, that focus on efficiency rather than reach, and that build enough brand pull to reduce dependency on paid channels over time.
If your sales are flat while costs are rising, the question isn’t “how do I get back to where I was?” It’s “what do I need to do differently now that the landscape has changed?” The answer usually involves some combination of cutting waste, improving relevance, diversifying channels, and rethinking what a good customer is worth over time. None of it is quick. But it’s more reliable than hoping the auction gets cheaper.
🤔 Pause and ponderIf you had to cut your ad budget by 30% tomorrow, which channels would you keep, and which would you let go — and what does that tell you about where the real value actually is?
📌 So what actually changes?
Rising ad costs aren’t a temporary problem you can outspend. They’re a signal that the channel has matured, and the strategy that worked before won’t work now. The practical shift is from spending more to spending smarter — cutting waste first, improving relevance second, diversifying before you’re forced to, and measuring success by long-term value rather than last-click volume. You don’t need a bigger budget. You need a better system for deciding where each dollar actually earns its keep.
I know how easy it is to keep doing what used to work, especially when you’re busy running everything else. But the auction doesn’t care about your habits. The brands that adapt are the ones that survive the shift — not because they had more money, but because they were willing to look honestly at what was actually working. You can do that without a big team or a huge budget. You just need to be willing to stop funding things that aren’t earning their place.— Marianne