Real Talk: Are Etsy Ads Worth It?
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Many Etsy sellers question whether or not they need to be doing Etsy Ads for their shops as a way to bring in more sales. But it can be hard to know whether or not these ads will work for you. Are Etsy Ads worth it?
Let’s cover what you need to know about Etsy Ads and if they are worth it for your shop or not!
How Do Etsy Ads Work?
Basically, Etsy ads work through a bidding system, which means that there are ad auctions where your listings actually compete against other sellers’ listings for the paid advertising space in search results. So what helps determine this?
Part of what influences that is how likely shoppers are to click on your listings and your bid amount. Etsy will give listings a quality score that will give an idea of how likely buyers are to click on one of your items. A few of the things that go into this score are your listing and shop history, and having strong titles and tags.
So if you want to give your listings a better chance at winning an ads auction, you really would just need to improve your listings as you would to bring in more sales.
The Bid Amount
A big part of Etsy ads is the bid amount, which is the highest amount you would pay for one click on a listing. A higher bid can mean that you get a better placement, so if your listing has a low score, it may need a higher bid to be successful. And, you’ll only pay the bid amount if a shopper clicks on your ad.
So here are some things that determine your bid amount:
If your listing is relevant to the search results
Etsy will look at how closely your listing tags and title fit the search terms from the buyer. They also take into account if the buyer used any filters, such as not fitting in their price range or shipping to either location. That way if your listing doesn’t fit what they are searching for, it won’t be shown.
The likelihood of them purchasing your listing
They also take a look at different factors from the buyer that may increase their chances of purchasing, such as the time of day, their past searches, or even the device they’re using. Etsy uses these factors to ensure that the bid amounts on ads reflect the value of being in that ad placement for an Etsy seller.
Bids can always change to keep your ad competing against other listings in a given auction. So a bid may be higher or lower, but basically, the goal is to get your ad the best placement with the lowest cost.
How are listings ordered in Etsy ad placement?
Once the specific listings are selected, Etsy will add them to the designated ad spots in the search results. The order in which these are placed depends on the same process as above. This means the bid amount, how relevant it is to the buyer’s search, and the likelihood that it will be clicked. This all determines the order.
An Example of Etsy Ads
We can break this down to make it a little simpler. Maybe you sell handmade baby shoes in your Etsy shop and you are charged a maximum of $.05 cents per click with a maximum daily budget of $20.00. This would mean that you pay a maximum of 400 clicks a day with Etsy ads if you get that many clicks.
But if you only have 200 people click on your ad on that day, then you would only pay $10.00. There’s just an example of how it could potentially look like for you!
Your bidding will fluctuate over time
Something to remember is that Etsy uses an algorithm to determine how much you should pay per click to help you increase your revenue. But, this doesn’t change your daily limit, that will stay the same. But your pay-per-click may change to a number that seems effective to Etsy.
How to Set Up Etsy Ads
To turn on Etsy ads, you will navigate to Shop Manager and then click on Marketing, then Advertising. Then you can set your daily budget, which is the maximum amount you’re willing to spend to advertise your listings per day.
The default minimum daily budget is $1.00, and you can change your budget at any time. Once you start advertising, your items can be shown all throughout Etsy, which includes Etsy search, category pages, and market pages on Etsy.com and the mobile app.
Etsy has a helpful article they wrote on setting up ads.
What Etsy Ads stats should I check?
If you decide to turn on Etsy ads, then give it about two weeks to let the algorithm run its course.
Etsy publishes information reviewing the performance of your ads here but we recommend the following.
After two weeks, check the ROAS or “return on ad spend” metric under manage listings.
In this example, you can see from the ROAS column that the seller is earning $2 for every $1 spent on ads.
That is a positive return on ad spend and worth keeping on the ad running.
Some sellers will leave on an ad with a ROAS closer to 1 since their profit margins can afford that and they know Etsy likes to see activity on their listings.
More sales, even when just breaking even, could be good for a shop overall.
This is something more true for digital product sellers on Etsy who have better profit margins.
Many handmade sellers are switching over to digital products because of the profit margins and ease of selling the products. Read our previous post to learn more about selling digital and printable products on Etsy.
How to turn off Etsy ads
You have the option to stop advertising specific listings or turn off Etsy Ads completely. Here are the steps to do so:
- On Etsy.com, click Shop Manager.
- Click Marketing.
- Click Etsy Ads.
- Click Other options.
- Click Turn off Etsy ads.
The best thing to do is probably run ads on specific listings and not the entire shop after giving Etsy a chance to check out how ads run in your shop for a few weeks.
How Much Does it Cost to Run Etsy Ads?
What’s great about running Etsy ads is that you get to decide how much you want to be spending. You can choose to pay as low as $.02 per ad or $.10 cents per ad. It’s all up to how much you want to put into it!
But something to keep in mind is that since ads are a bidding system, if a person also sells the same item as you, if they have a higher bid per click then they are going to be seen more than you.
So if you are only bidding $.05 per click, and someone else is paying $.20 per click, then Etsy is going to give them priority. But there are other ways for you to make sure your listings are seen rather than paying more.
Budgeting your Etsy ads
When you are setting up your Etsy ads, you get to choose what you want to be the most money you’ll spend in a day. There are days where you spend that full amount, and days you will spend less, but it will never be more.
It’s important to remember that you are only charged when a customer actually clicks on your ad, and if a buyer sees your Etsy ads campaign but doesn’t click, then you aren’t charged. You also need to remember that your cost per click is determined based on the price of your listing and the amount of sales that Etsy expects per click.
So if Etsy thinks that buyers are likely to buy an expensive product, then the CPC will be higher so that your ad shows. Obviously, your budget depends on your inventory and how much you want to spend, but Etsy recommends a daily budget of $3-$5.
You need to do something that you think works best for you and maintain it for at least 30 days. If your budget is small, then simply invest in ads for a few of your best-selling items. For new shops, you may want to wait until you receive a few more sales and reviews, and make sure your listings are optimized.
How Much to Spend on Etsy Ads
So how do you decide how much you want to spend on Etsy ads? How do you determine what your daily budget should be? Your daily budget should be generally based on your average conversion rate, as well as the average cost per click that you’re charged by ads. If you use the number of expected visits that you think it will take to make one sale, the daily budget can be estimated based on the average cost of ads and how many sales the seller wants per day.
This will be different for every seller depending on your profits, but here’s an idea of what the formula looks like:
Your average cost per click x (100/conversion rate) x the number of sales you want per day.
How Etsy ads are set up is that as a seller you can set a daily budget and choose which listings to advertise, but Etsy is the one choosing the keywords and the cost per click. You can’t set a limit for the CPC, and can only do this for the maximum daily spend.
So something important to keep in mind is that since as a seller, you can’t control your CPC, sometimes your budgets can be spent quickly if Etsy chooses a higher CPC. This all depends on where the ad shows up, the time of day, etc.
How to calculate your cost of ads per sale
If you want to figure out your cost of ads per sale, you first start with your conversion rate. Take a look at your ads data and see what your conversion rate is, and say that your numbers are that you had 96 orders this last year with 3,124 visits, which is a 3.1% conversion rate.
This means that you would need to have somewhere around 33 buyers click on an ad before making one sale. Every shop is going to have a slightly different conversion rate, and if you are a newer shop or haven’t run ads before, you can use your conversion rate for your whole shop to give you a better idea.
Next, you will figure out your average CPC by taking the amount you’ve spent and dividing it by the number of clicks on your ads. For example, say you spent $184 on ads and got 791 clicks, then the average CPC would be $.23. If you haven’t run Etsy ads before, you can always use $.25 as an estimate.
Then you will multiply this average CPC by the number of visits you need to make one sale. So this would be $.23 x 33 which equals $7.59, and this would be the average amount needed to spend on ads to make one sale.
Ads and your profits
Basically, your profit from running ads is going to depend very much on whether your customers buy one or more items, your average order value, and your profit margins. So to set an actual budget for your ads, you have to figure out if you’re happy with the profit you have for each sale after the cost of ads, and if you aren’t then you can change how much you want to pay per day.
You also have to take into account how many more sales you can handle. So if you can take on a lot more sales then you are able to set your budget higher. But if you only have room for another sale or two per day, that can help you come up with a number for a budget and know where you need to set a limit.
There’s a lot that can go into setting a budget for ads. It takes time to figure out what works best for you and your business!
Can You Advertise on Etsy Without Paying?
No, unfortunately, you are unable to advertise on Etsy without paying fees. This is both through ads and being listed on the “featured” page. But, there are so many other ways that you can promote your listings without having to pay for ads.
But if you’re looking for a more simple way to get your listings out there in the form of advertisements, then you have to be okay with the investment that comes along with it. It all depends on what you see working for your listings and how you want to get your products out there!
When is it Generally a Good Idea to Test Etsy Ads?
Starting ads when you have a brand new shop on Etsy isn’t always the best idea. When you don’t have many reviews or sales behind your shop, you may just be wasting money using ads.
So maybe you give your shop some time and start to promote your products elsewhere, like social media platforms. Once you start bringing in more sales and reviews to show the quality of your products, then you can start ads and potentially bring in more sales to your business!
Before you run an ad make sure:
- Your listing photos look great
- You understand the search intent of the customer
- You already have sales on that listing
Some sellers jump into running ads too early and it can be a waste of money. They haven’t optimized their listing for sale yet.
Tips for Advertising on Etsy
So what can help you be more successful running ads on Etsy? One of the tips that come straight from Etsy is to promote all of your active listings. Then, after about a month, you can reassess and figure out which listings are performing well. Then only promote those plus new listings. You can also adjust which listings to promote based on the seasons, as some may be better around specific holidays.
You also will need to pay attention to your listings’ return on advertising spend. Look at the revenue that you are generating per $1 that you spend. Calculate your current advertising spend by looking at your total revenue for the last month. Then divide that by your total advertising cost.
You should also pay attention to your click-through rate. If this number is low, you may want to make changes to your title, photos, tags, and description.
These are just a few things to keep in mind when advertising on Etsy to bring you more success!
How to Use Etsy Ads Effectively
If you are running Etsy ads and not finding any success, there are a few different things you can look at. Ask yourself these questions:
- Am I using all 10 images for my listings?
- Are my product descriptions compelling?
- Are my images eye-catching?
- Are my listing tags and titles relevant to what I’m selling?
Once you go through these questions, you may realize that there are some opportunities for growth and improvement. You can start making these changes, and you may begin to see more results from running Etsy ads.
What about Etsy’s Offsite Ads?
Etsy offsite ads are different and promote your listings on Google and social media platforms. Etsy is in control of these. All sellers are automatically included in the Offsite ads program. You can always have the option to opt-out unless you have over $10,000 in sales in the past year.
The way that Offsite ads work is that Etsy and Google work together, along with social media platforms, sending data about your shop and listings. So the platforms use this data to match the most relevant Etsy listings to what buyers are searching for.
So when a buyer clicks through an Offsite ad with one of your listings and then purchases from your shop within 30 days, that order will be attributed to the ad. You’re only charged a fee when a shopper clicks on your ad and purchases from your shop. So if they don’t purchase, then there is no fee.
The amount of the fee depends on the revenue that you have made on Etsy in the past year. If you made less than $10,000, you will be charged a 15% fee for any orders attributed to Offsite ads. If you made at least $10,000, then you will have a discounted fee of 12%. Some sellers feel unhappy with how high these fees are. But, the exposure that listings can get could be very worth it!
If you want it to be more likely for your listings to show up on Offsite ads, it’s important to make sure your listings have great SEO. You have to optimize your titles, tags, photos, etc.
We love Etsy offsite ads around here since many platforms require you to pay to have your ads shown. Etsy only requires you to pay if the offsite ad results in a sale. That’s amazing – free ads!
Handmade sellers may need to price offsite ads into their profit margins accordingly. Here is more information on how offsite ads work.
How to Know if Etsy Ads Are Worth It
So what is a way to know if Etsy ads are worth it? One way to do this is to keep track of the profit for each item sold, and how long it takes to make that item. Calculator the profits made through ad sales, then subtract the cost of the ads to get the net profit.
Divide the net profit by the hours that it took you to make your items. This will give you your hourly profit. If your hourly profit is really low, then that can tell you that ads might not be worth it! If, however, you are happy with the ROI then ads may be a good option for your shop.
ROI is the amount that you make after all expenses are taken into account. This isn’t the same as ROAS (return on ad spend). So ROI is a much more accurate way to figure out whether ads are worth it for you!
Take the time to calculate this in your business and figure out whether ads are the right option for you or not!
How else can I increase sales?
Sellers really should start by using keyword research tools to do the following:
- Pick products with the best chance of selling before even making them
- Optimize their listings for SEO
These improvements should happen before even starting to run an Ad.
We know many 5 and 6-figure sellers who have taken our E-Printables online course and ads were not an important part of their strategy.
If you need help getting started with SEO, we recommend picking a tool such as eRank and learning how to use it. We wrote a review of eRank.
Etsy ads are something that can be very beneficial for some sellers, and very costly and ineffective for others. It depends on every shop whether it is something that will bring in more sales for you, or if it will just bring in more costs for your business.
Make an effort to figure out whether ads are beneficial to you and your business!