The Truth about Etsy Ads

Some people say you have to max out your Etsy ad spend to get traction on Etsy. Today, I’m sharing my viewpoint on this and the alternatives that I’ve found to work better with a better ROI for both time and money.

Introduction to Etsy Ads

In this post, I’ll explain my position on Etsy ads, when to use them, how much to spend, and the best 3-5 alternatives to ads. I’ll also show you the biggest mistake I see with Etsy ads so you can stop making it today.

Traffic Strategies: Organic vs. Paid

My team and I meet hundreds of Etsy sellers every month, and a major question we like to ask is about their traffic strategies. I find this to be the root and/or symptom (both really) of many issues. I want to know:

1. What are you doing for organic traffic?
2. What are you doing for paid traffic?
3. How successful are you in both?

I always, always, always preach organic first. Why? Because of the type and quality of the data you receive back and the margins you can build into the foundation of your business when you have consistent organic traffic baked in.

The Data: Organic vs. Etsy Ads

Let’s talk about the data. With Etsy ads, you can see what searches lead to your product and turn off irrelevant keywords, but you don’t know why customers didn’t click in after they viewed it. Etsy ads don’t tell you anything about how competitive your value proposition is or what types of customers you’re successfully or unsuccessfully targeting.

With organic methods, you can actually get qualitative feedback from customers early on about your product. You’ll know specifically what they like or don’t like and why. You’ll learn what to change about the product to establish product-market fit and gain a faster understanding of exactly who the market is for that product. Views and visits don’t tell you if you are successfully targeting a profitable customer.

Etsy ad data will leave you with more questions than answers. Organic traffic methods give you data to refine product-market fit.

The Longevity of Organic Methods vs. Etsy Ads

Organic methods will withstand the test of time compared to Etsy ads. Ads are like a machine that you have to keep feeding money into. The money is gone, poof, and you have very little to show for it sometimes.

With organic methods, you are getting your product links out there all over the place, and in some cases, these links will grow with a compounding effect for many years—like 5-10 years. This is invaluable because you take an action once, for example pinning something, and years later that pin has driven 100,000 warm leads to that listing, and it didn’t cost you anything.

Effective Organic Strategies

What are the organic strategies I’m talking about? It’s basically anything unpaid, including:

• Pinterest
• Facebook
• YouTube
• Instagram
• TikTok
• Blogging
• Email marketing

I always recommend exhausting these methods before turning to Etsy ads.

Limitations of Etsy Ads

Etsy ads also have some categorical and product type limitations. For example, certain types of products like loss leaders or low price point digital products would NOT be good products to run ads to. Since you cannot control the cost per click, you could easily end up in the red. You want a lot of margin dollars to play with to allow for unpredictable customer acquisition spend, meaning more than $1 of profit.

The Biggest Mistake with Etsy Ads

Let’s get into the biggest mistake people make with Etsy ads: they think they are making a profit when they are actually losing money. Sometimes, it’s a shockingly huge loss.

Example Scenario

I was talking to a guy about his shop, and he was spending $100 a day on Etsy ads. In a month, that was $3000. His revenue each month was $5000. He was pretty happy with himself and said the Etsy ads were working.

Are you kidding me? I thought to myself. These were physical products, and he was shipping them.

His cost on these products was way higher than $2000. If they were only $2000, he would be running his shop at a 60% margin. But he wasn’t. He was running at a 20% gross margin, which meant that out of $5000 in orders, he was only profiting $1000 because his costs of product/shipping were $4000. And now, on top of this, he’s spending $3000 on Etsy ads. So he’s actually in the negative $2000 monthly. He thought he was making $2000 because of his ad spend report.

Understanding ROAS and COGS

Let’s say you are spending $10 a day to advertise one listing, which is a $20 t-shirt. Let’s say that Etsy says your ad spend was exactly $10 and your ROAS (return on ad spend) was 2. You might think, that’s great! I spent $10 to make $20. Not at all. You are actually losing $5 because your COGS (cost of goods sold) is $15.

So the point is, you have to look at your Etsy ad spend as part of the cost of that product itself. It is a variable cost, which means it is unpredictable, and you have to know your margins very well to be successful with Etsy ads.

Alternatives to Etsy Ads

If you do any ads at all, they’re not going to work if you don’t know how to do SEO. Actually getting any traffic at all, whether paid or organic, requires SEO. So if you’re just listing things on Etsy with the idea that you will figure out SEO later and at least get traffic now first, you’re completely turned around. It’s going to be an expensive lesson to train Etsy ads to learn your product and the appropriate search terms if your SEO is not good.

People see ads as a quick fix and a way to get traction, but it can be a big money pit if you do not know what you’re doing.

Recommended Ads Platform

Lastly, if you are determined to do ads, I would not recommend Etsy ads due to the lack of control over what you spend and what your bid is. If you’re going to spend money on ads, I’d recommend Facebook ads. Not Pinterest, not boosting IG posts—FB ads.

Conclusion

In conclusion, while Etsy ads can seem like an attractive option for boosting your shop’s visibility, they can quickly become a financial drain if not managed correctly. Organic traffic methods provide more sustainable and insightful data, helping you to refine your products and target your market more effectively. Always focus on building a strong organic foundation before venturing into the world of paid advertising. If you do choose to use ads, ensure you have a solid understanding of your costs and margins to avoid costly mistakes.

By focusing on these strategies, you can build a successful and sustainable Etsy shop without falling into the common pitfalls of Etsy ad spending.