Depesh Mandalia reveals his Campaign Budget Optimization perfect recipe

Depesh Mandalia - cover

Welcome to the 6th episode of  My Grand Venture Heroes. For this occasion we had the amazing opportunity to meet Depesh Mandalia, internet marketing entrepreneur and author of The Ultimate CBO Cookbook.

It’s great to have you here Depesh.
The first thing I would like you to do, for who doesn’t know you, is to present yourself and tell us about your CBO cookbook.

I’m Depesh Mandalia, my background has been in online marketing for about 15+ years and more recently with Facebook Ads, but I actually started as a developer, trying to understand landing pages and user journey; from there I fell into online marketing and SEO, and then paid search. 

In 2009 I lost my income, I was struggling and I started looking on how to make money without a job, and I fell into affiliate marketing. Since then I began to be interested in this whole entrepreneur life, I made some income but also some big mistakes, and when I lost a revenue I started experimenting with more channels.

From that moment, I went all in on Facebook, experiencing the fastest scaling at that time. That was my realization:  something big was there and I needed to be part of it.

Then I bounced between different businesses consulting as a freelancer until when, in 2017, I decided to start an Facebook Ads agency.

In 2018 I was also developing internal training programs for my media buyers and a friend suggested me to sell the material online, and I did it and within six weeks we had done  100K in online sales and it was amazing! And then one thing led to another and before I knew it I was in Bangkok where I met with the uDroppy team, and now I’m speaking on stage and going to masterminds, my world has exploded from being good at Facebook to now influencing many other people.

And you know, when I was 10/12 years old I wanted to be a chef, but my dad said that men don’t cook, so as a young twelve year old I thought “oh okay, so I can’t be a chef”, of course I didn’t realize that it wasn’t true and I left that as a career, but it kept inspiring me in the way I see marketing right now, and I think I became a marketing chef.

So when it comes to campaigns, I see things as ingredients: you put the right ingredients into your marketing, and then your methods. So, if you’re doing YouTube, or Facebook, or Google, your methods change but often the ingredients are similar! And it’s just like cooking a chicken dish and a meat dish, some ingredients are the same but then the methods are different.

And that’s what I constructed into the CBO cookbook. I wanted to create a step by step guide on how CBO works, that was supposed to be a really light PDF to give away for free, but then, as I started to spend more and more time creating it, I realized it was more a training program. And the way I set it up was: here are the ingredients, your avatar, your account setup etc, and here’s your method: step by step, this is how you do it.

R: WOW, the metaphor is beautiful. Congratulations for that and thank you for sharing these things with people, we’re all very grateful for it, because this is a community where you have to share value, so while you’re growing, you’re allowing other people to grow.

Best Dropshipping Products 2020

D: Yes, that means so much. You know, there are a lot of negative sides when you start selling courses, there’s a lot of hate and abuse. I was about to gave up at some point, but then, around September- October, one guy messaged me saying he took my course and that without it his business wouldn’t have happened, and that really touched me, it was a whole different realization: selling online courses isn’t just about making money, there’s something else, and that is the thing that drives me now.

Now let’s start talking about CBO and defining the topic. What’s happening starting from Feb 27th and who will it impact?

CBO is Facebook’s newer way of managing budgets, so rather than set budgets at different ad-sets for your different audiences, you’re now setting it at a campaign level and letting Facebook decide where to spend it. 

Facebook introduced this back at the end of 2017, and it took me about six or seven months to understand it and start using it, but when we did we created a mega case study, because we took a an e-commerce store from a few million in revenue up to 16M $ in about 4-5 months, and a big part of that was done through CBO. It was huge, not only because we could scale more predictably, but also because it was the least stressful scaling I’d ever done and that came down to CBO.

And then Facebook announced that CBO was going to become mandatory, that was on September 2019, and then they moved it to February 2020. What is actually happening is that Facebook is doing it in waves, the first on Feb 27th, but what I’ve been trying to stress to people is: don’t wait for CBO to become mandatory, try to be ahead of the curve; start using it, start testing it, start seeing how it works.

There are 7 million+ advertisers on Facebook, and I’m pretty sure 6.9 million people are not going to understand what CBO is, until it happen. And part of the blame falls on Facebook because is such a big change and it’s not just a shift of budgets from ad sets to campaigns, the whole algorithm changes, and they haven’t done a good communication job at all. 

R: Yes, I really agree on the fact that switching to it now is good, also to stay ahead of competition. 

You said something very fascinating to me, while you were describing your first experience with CBO, that you had no stress and you were able to scale in peace. It’s fascinating because this is what uDroppy is about: “Marketing on you, the rest on us”, we do all the heavy lifting, and Facebook is kind of doing the same thing.

So, no stress into managing your budget. But what does this mean? What should a good advertiser focus on at this point?

The biggest problem advertisers have with Facebook is predictability and not knowing what’s gonna happen today, let alone tomorrow or next week. From what I’ve seen, and I’ve tested millions of dollars on CBO, it brings you stability when you understand what the inputs are that it needs, for example how you construct your audiences, how you build your ads, how do you actually transition from a testing phase to a scaling phase, and the optimization that goes in between that. 

Advertisers don’t understand there are steps that you need to follow, and when you get those steps right that’s when consistency and predictability occur, because you’re giving Facebook the right data but you’re also understanding what to look out for. 

It’s not about spending 10K a day and expect everything to work automatically; before I hit 10K a day I’ve already spent 2/3/4 weeks on getting everything ready, and understanding the numbers so when I start scaling is predictable.

 

Audiences and creatives are fundamental for CBO, but you have to test them. So, what I would like to understand at this point is, what do you test first? And how do you test them.

First of all, I start off with my avatar: when I’m building my avatar up, no matter what product I’m selling, I try to understand what’s the problem I’m solving or what’s the new opportunity I’m creating; these are the two things that you have to worry about, so that you can understand which are the different pain points, or different ways to communicate.

From there I start my test plan, understanding my potential audiences for that particular product and writing a copy that brings those pain points in.

There’s a principle in marketing called AIDA, it’s Awareness, Interest, Desire and Action, and I use that a lot in creating ads and sales funnels.

I wonder for example, how do I get someone interested in my ad? The thumbnail is the biggest thing that sticks out, whether you’re running a video or an image, the image makes the difference, and then the next part is the first few lines of your copy

So you want a great thumbnail, you want the copy in the first few lines to appeal to that avatar’s pain points or to the opportunity, so that you build awareness and interest, and then the desire comes from actually connecting the pieces; and that’s where I win, I spend at least one or two weeks on the research, going deep into my avatar, thinking about pain points, looking at competitors, trying to pull out different angles, then I start to construct my ads, and just at this point start testing them.

So, what I do, let’s say I’ve got five audiences, I would test the same three ads in those five audiences and then by process of elimination start to see which ads and which audiences worked, so you try different image, different copy, and in that way you build your super ads; and then you start looking at adding budget, optimizing, working on CPM, conversion rate, and AOV, because if you’ve done the groundwork in building your ads, you’ll have much more predictability in these things as well.

R: It’s not just the robots let’s say, there is a big preparation phase, and it’s a way of being responsible and organized. Thank you very much. 

 

Do you believe that now, with CBO, some behaviors are going to be obsolete?

Yes. I mean, some of the strategies will still work, so for example when you want to scale fast and you want to duplicate an Ad set,  you can still do that at a campaign level, but for example for those people that like to fine-tune their Ad sets and run particular budgets, CBO won’t necessarily help. But there are different ways around that, some people are literally treating CBO the same as an Ad set, so they have one campaign, one Ad set and then some ads but then they have like 50 to 100 different campaigns running, that can still work, but it doesn’t take advantage of CBO and especially doesn’t reduce your stress. 

So can it work? It can. But is it gonna give you the benefit of CBO? Probably not.

 

There’s another thing I wanted to ask you about obsolete behaviors: a lot of people believe that nowadays, especially with CBO coming, the famous $5 per day campaigns will be over. What do you think about this?

Some people treat Facebook Ads like a roulette table, and that’s what the $5 a day test does.  It will continue to work, but like I said there’s over 7 million advertisers on Facebook, and out of that probably 6.9 million are just wasting money on Facebook, and what Facebook is trying to do is to give them more support.

So CBO is obviously one of the ways, the other way is Power5, that is Facebook’s way of saying, to e-commerce owners in particular, here are five ways to give your account a better structure, give FB’s algorithm better data, and give you less stress and a better performance.

There’s a small minority of people, maybe 50,000 advertisers around the world, that really know their stuff, and Facebook will let them do their job. But above all, Facebook is trying to work on the majority, on the 6.95 million people who don’t really know what they’re doing. This is where they are going to drive more revenue. 

So I think some of these hacks will still continue working, it will maybe get slightly harder and complex but the thing is those hacks sit in a lack of knowledge and information.

There are people, like myself and I’m sure other people you speak to, that  work to show people there is a better and less stressful or more profitable way of doing things, than what Dropshippers were doing in 2015-2016.

Facebook is such a more mature a channel, it’s more regulated, there’s more privacy concerns and data concerns.. it’s a different place. And I think if you don’t understand that you’re gonna continue to get people with business managers being shut down, accounts been banned and Ads being disapproved. As an agency owner it’s my responsibility to make sure my clients understand it, but I work closely with Facebook, and I still don’t understand policy properly, because it’s a mess.  But you have to try and work within that boundaries.

So yes, maybe $5 campaigns will probably continue working and people will continue hacking, but it’s gonna suddenly get harder and harder and probably less profitable as well.

What’s the budget to start with? The minimum budget that you could consider to work, especially for newbies in dropshipping.

Absolutely. I’ve been dropshipping since 2016, and you know back then it was a typical Aliexpress model, and I wouldn’t start testing a product with less than $500.

So, for people that don’t have money, let’s say you are working nine-to-five and you see e-commerce as your way out of that, you need to have at least $500, not just to run Ads, but to burn, because you can’t expect that $500 to turn into $5000, or even to get $500 back. 

Ideally when we start doing our testing now, we’re looking at thousand dollars per product to really really give it a test, because within that we’re testing to find the right products, the niches, the audiences, the funnels. And once we hit that thousand dollars mark, if we don’t feel we can build this into something profitable, then we move away.

And I think that’s where a lot of people get stuck. Maybe they’ve spent over a $1000, and it’s still not working, and they keep throwing money at it. So I think you need to have a cut off and be really really strict with that.

And then, as you start to pick up momentum, you’ll probably find you need to spend less and less money, because your research in the product becomes so much better. So I think that’s the balance: when you’re starting out you’ll probably spend a lot more money in testing, but as you start to get deeper into the world of e-com you’ll start to understand trends, niches and patterns a lot better and you’ll spend less time testing and more time on just churning out lots of these ideas as well.

Let me ask you something else for newbies, because a lot of people that are looking at this video right now have just started.

For who doesn’t have a seasoned pixel, for who doesn’t have a lot of traffic, for who doesn’t have those 50 conversions per week that Facebook asks for.. what can they do? what would be your advice to these people?

When you are a newbie, you’re learning a lot of things at the same time, so you’re learning good marketing, good product research, good Facebook advertising, sales funnels etc so there’s lots of things that they need to learn as they’re going along. That’s one of the reasons why a solution like uDroppy is so good, because you’re obviously handling so much more for them as well, and they can focus on one thing at the time.

They can focus on the media buying, get really good at media buying, understanding customers, avatars and audiences,really finesse that, and then work with you guys on your side of the product. Here is where I think the big wins are.

You can’t expect that you’re going to become a millionaire without putting the effort in, it doesn’t work like that.

So my big tip for newbies is to spend time to read and research and get the understanding of what they’re getting into.

Also, as a newbie, when I start doing my own dropshipping I picked out interests that I had passion in, for example my first dropshipping store was  sneakers, and I wanted to create a store with different colors, patterns, designs and stuff.. I quickly found out that you can’t easily resell other brands but yeah, start with your passion, but it doesn’t mean that your passion is going to be the one that’s going to scale up, because quite often you’ll find different opportunities.

So I would advise a newbie to spend time reading and researching, to find opportunities: you have to be looking around, there are so many events going on, like Presidential year, or Mother’s day, it’s about looking at what’s around you in terms of events, trends and opportunities..

R: Yes, breaking down everything and going through it a piece at the time. This is a great advice because after all who does e-commerce have to have a thousand skills and be able to perform in a thousand ways, and that leads to confusion, because you have to organize everything and that can be challenging and you might lose focus. So stay focused, this is the method.

One more thing I wanted to ask you. Where do you see Facebook going in the future? Facebook is known to be extremely customer centric, so where will this decision in CBO bring us? Where is it gonna bring the customers? Will lead to more trust? And especially do you believe that something like this will eventually have traffic costs go down a little bit?

I’ll start on traffic cost, because this is a big topic. Every Q4, for example end-of-the-year Christmas sales everyone is complaining about high CPM, but CPM is also a punishment from Facebook to say “Your Ads are not good enough” or “Your landing page is not good enough”. And that’s something you can control, and also when it comes to competition you can bump the competition out by things like manual bidding.

So, when it comes to CPM I think there are ways around it.

If anyone wants a tip on the best placement for Facebook right now is still Instagram stories. Instagram stories are so underplayed and it’s because people don’t understand how to create the stories, that’s the biggest problem. You can still get cheap CPM, the competition is lower, but it’s not a direct sales platform, it’s a brand platform, it’s an awareness platform, it’s an engagement platform.

15-second Ads that hook people in and get them into a lander which expands what this story is. Something like that make a big difference, because you’re playing in a space where not everyone is, so in terms of CPM there are still opportunities to get good prices and I think that’s where for me the tactical side of Facebook advertising comes in. So, get your strategy right, understand your avatar, build your creatives, do your testing, I often do a lot of testing in Facebook news feed first, find angles and audiences that work and then shift them over to other platforms like Instagram and IG stories and stuff like that.

Those opportunities will still exist, and there’ll be also other new ones, Facebook is enabling Ads on search, there are Ads in groups… you always have new things at Facebook to look at, and to give advertisers more choices.

I think for the next 12 months Facebook will still go through growth, in my opinion there’s no other platform right now that comes close to Facebook, because they have the mass and the targeted capability.

Where it goes in 2-3 years time is gonna be dependent on governments and policies, and I think those are the only things that can bring Facebook down right now. 

2020 for me is about being smart with your marketing, understanding performance marketing, which affiliates and dropshippers are great at, and then combining that with brand marketing and building experiences and funnels that bring the customers from “I don’t know who you are and I don’t trust you” to “I absolutely want to buy your product”  and that’s going to be a big part of how to make Facebook accounts work in 2020.

 it has been for many years but I don’t think people are paying enough attention to it and I think that’s where I’d urge people to focus on

So, rather than sell the product why don’t you talk about problems, you can create a cool informative video which is talking about the problem and just then retarget the people that watched the video with your products, which it’s solving that actual problem. And all of a sudden you get cheap CPM because you’re running video and you’re building high quality audiences.

Do you believe it TikTok is competition?

D: Not yet.

R: Yes, well I kind of figured that out from what you said so far, but I had to ask. Do you have TikTok by the way?

D: Good question. This weekend I did my first TikTok video, up until this point I just never had time, and I thought I was old, and it was something for Millennials, but I can see why people enjoy it. I did a few videos with my wife and the baby and it was cool, it was fun, and it’s actually so easy to go viral.. you just need a good video, good hashtags and you can literally go from zero to a hundred. 

This weekend I realized it’s no different from watching TV or YouTube videos, people want entertainment right? And with this kind of entertainment anyone has a stage, anyone can be a star, and I can see how people get hooked into it and 5 minutes turns into 15.

So the question is, how do you monetize that? Right now it’s about influencers, so I think the biggest threat that TikTok has is probably for Instagram, then we’ll see if they’re going to impact Facebook.

R: Well then I will come look for you on TikTok of course! 

Anyway we get to the end of our interview and I want to thank you so much because it has been really  entertaining and full of value. 

Thank you very much!