Paid Media
How much should an ecommerce store spend on advertising?
The honest answer is not a percentage of revenue. It is whatever your margin and your repeat rate can carry, with a floor set by how much data the platforms need to learn.
Table of contents
Start from margin, not revenue
The common rule of thumb, spend 10% of revenue, tells you nothing about whether a sale was profitable. Start instead with contribution margin: what is left from an order after cost of goods, shipping, payment fees and returns. That figure is the most you can pay to acquire a customer before the order loses money.
Then add what a customer is worth over time
If a customer orders twice more over a year, you can afford to pay far more for the first order than the first order alone justifies. This is why retention is an acquisition decision. Stores with weak email programmes are forced to bid as though every customer buys once, and they lose auctions to competitors who know better.
The floor nobody mentions
Below roughly $2,000 a month, ad platforms do not get enough conversion data to optimise, and neither do you. Results swing on noise and every week produces a different answer. It is the reason our own free 4-week trial starts at that threshold: below it, no honest agency can tell you what is working.
A workable split
Once you are past the floor, a reasonable starting allocation is roughly 60% to the channel capturing existing demand, 30% to prospecting, and 10% held for testing new creative and audiences. Adjust from there against actual results rather than against a template.
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