Many cosmetics founders underestimate the true cost of advertising. Marketplaces and social platforms earn more from ad fees than from sales commissions. This article explains how advertising costs impact your P&L, why platforms are structured this way, and how to build a sustainable ad strategy that supports brand growth.

1) The reality of ad-driven platforms

Platforms like Amazon, Coupang, TikTok, and Meta profit heavily from advertising spend. Their business models are designed to maximize ad revenue, while seller fees and sales commissions are secondary.

This means that visibility often depends less on product quality and more on ad budgets.

2) How ad costs impact cosmetics brands

Cosmetics is a crowded category with high competition. Ad costs can quickly erode margins if not managed carefully:

• Overbidding on keywords leads to rising CAC.
• Relying solely on paid traffic creates dependency.
• Ignoring organic channels reduces long-term sustainability.

3) Metrics to track: CAC, ROAS, LTV

To ensure advertising supports profitability, track:

• CAC (Customer Acquisition Cost): total ad spend ÷ new customers acquired.
• ROAS (Return on Ad Spend): revenue generated ÷ ad spend.
• LTV (Lifetime Value): how much a customer spends over their relationship with your brand.

If CAC exceeds LTV, your ad strategy is unsustainable.

4) Smarter ad spend strategies

• Start with small test budgets and scale proven campaigns.
• Balance paid ads with organic SEO, influencer partnerships, and content marketing.
• Continuously optimize creative, targeting, and bids.
• Review platform ROI monthly and reallocate budgets accordingly.

5) Financial checklist

• Include ad spend as a fixed cost in your P&L.
• Calculate breakeven ROAS before scaling budgets.
• Monitor blended CAC across all channels, not just paid.
• Invest in organic growth channels for resilience.

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