Rising Ad Costs Are Not the Threat. Misallocation Is.
Everyone blames rising CPMs. The bigger leak is paying those CPMs on channels that never earned the sale.
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By Joris van Huët, Founder & CEOUpdated 2 min read
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The Wrong Villain
Rising ad costs are real, but they are a manageable headwind, while spending those higher costs on channels that were never incremental is an unforced error that compounds every month. The threat is not the price of the click. It is where the click goes.
Every brand feels the same squeeze: CPMs climb, customer acquisition cost creeps up, margins tighten. It is tempting to treat that as the whole story and go hunting for cheaper inventory. But a cheaper click into a channel that never caused a sale is still pure waste, just slightly cheaper waste.
What Misallocation Actually Costs
If a quarter of your budget sits in channels that take credit without creating demand, rising costs do not just tax your good spend, they tax your wasted spend too, at the new higher rate. You are now overpaying for clicks that were never going to move revenue. That is how a survivable cost increase turns into a margin crisis.
We showed the shape of this in correlation-based budget waste: the leak was there before CPMs rose. Rising costs just made it louder.
Fix Allocation First, Then Worry About Price
Before you fight the auction, fix the map. A causal attribution read shows which channels create incremental revenue and which are passengers.
You cannot control CPMs. You can control whether you are paying them for real demand or for credit theft.
Frequently asked questions
Are rising ad costs the biggest threat to my margins?
Rising ad costs are real, but they are a manageable headwind, while spending those higher costs on channels that were never incremental is an unforced error that compounds every month.How do you measure it?
Upload your Google Analytics export and a causal attribution read estimates each channel's incremental contribution with a confidence score, so you can see which channels create incremental revenue so budget stops leaking instead of guessing.
Go deeper: Causal attribution, explained.
Sixty-second versions of these ideas: Causality Engine on YouTube Shorts.
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Terms in this article
- AttributionAttribution identifies user actions that contribute to a desired outcome and assigns value to each. It reveals which marketing touchpoints drive conversions.
- Causal AttributionCausal Attribution uses causal inference to determine which marketing touchpoints genuinely cause conversions, not just correlate with them.
- ClickClick is the action a user takes to interact with a digital advertisement, redirecting them to a website or landing page. Clicks are a fundamental metric for measuring ad engagement and a primary input for click-based attribution models.
- CorrelationCorrelation is a statistical measure showing a relationship between variables; it does not imply causation.
- Customer acquisitionCustomer acquisition attracts new customers to a business. For e-commerce, this means driving the right traffic to the website.
- IncrementalityIncrementality is the part of an outcome, such as orders or revenue, that a marketing activity caused: the extra results compared with what would have happened without it. It is a causal effect, not the number of conversions credited to a channel.
- RevenueRevenue is the total income generated by the sale of goods or services related to a company's primary operations.