5 Signs You're Wasting Ad Spend (And How to Fix It)

E-commerce brands collectively waste billions on ineffective digital advertising every year. According to Proxima's 2024 analysis of over $5 billion in digital ad spend, the average e-commerce brand wastes 20–40% of its ad budget on audiences, placements, and campaigns that generate little to no return.

For a Shopify store spending $10,000/month on ads, that's $2,000–$4,000 going down the drain every month — money that could be reinvested into profitable campaigns or used to improve margins.

The worst part? Most merchants don't even realize they're wasting money because they're looking at the wrong metrics or relying on inflated numbers from ad platforms. Here are the five biggest warning signs that your ad budget isn't working as hard as it should be.

This is the most common and most deceptive sign of wasted ad spend. Facebook says your ROAS is 4x. Google says your ROAS is 5x. But when you look at your actual Shopify revenue, the numbers don't add up.

This happens because of attribution overlap. Both platforms use their own attribution models to claim credit for conversions. A customer might click a Facebook ad on Monday, then search your brand name on Google and buy on Wednesday. Both Facebook (7-day click attribution) and Google (30-day click attribution) will claim that sale.

How to fix it:

• Stop relying on platform-reported ROAS as your source of truth
• Use your actual Shopify revenue as the baseline and compare it against total ad spend
• Calculate blended ROAS (total revenue ÷ total ad spend) to see the real picture
• Use a unified analytics tool that connects your Shopify store and all ad platforms to de-duplicate conversions

Your blended ROAS from your Shopify data is always more accurate than the sum of individual platform ROAS numbers.

Branded search campaigns — ads that target your own brand name on Google — almost always show phenomenal ROAS, often 10x–20x. But here's the problem: most of those customers were already going to buy from you. They searched for your name, which means they already knew about your brand.

Spending heavily on branded search is essentially paying for traffic you'd get for free through organic search. While there are valid reasons to run branded campaigns (defending against competitors bidding on your brand name), they shouldn't consume more than 10–15% of your total ad budget.

How to fix it:

• Audit your Google Ads spend breakdown — separate branded vs. non-branded campaigns
• Calculate ROAS for non-branded campaigns separately. This is your true acquisition ROAS
• Cap branded search spend at 10–15% of your total Google budget
• Redirect the savings to non-branded Shopping and prospecting campaigns

If your blended Google ROAS drops significantly when you exclude branded search, it's a sign that your prospecting campaigns need work.

Getting lots of clicks but few sales is a clear indicator that something in your funnel is broken. The industry average conversion rate for e-commerce is around 2.5–3%, but this varies significantly by traffic source and product type.

Low conversion rates with high click volume usually point to one of these issues:

• Targeting mismatch: Your ads are reaching the wrong audience. They click out of curiosity but have no real purchase intent.
• Landing page disconnect: The ad promises one thing, but the landing page delivers something different. This is especially common when ads link to a generic homepage instead of a specific product page.
• Price shock: Your ads attract interest, but visitors abandon when they see the actual price, shipping costs, or lack of social proof.
• Mobile experience: Over 70% of e-commerce traffic is mobile. If your site loads slowly or is hard to navigate on mobile, you'll lose most of those clicks.

How to fix it:

• Review your ad audience targeting — narrow it to people most likely to buy
• Ensure ads link to relevant product pages, not your homepage
• Test your mobile checkout experience thoroughly
• Add reviews, trust badges, and clear return policies to reduce purchase friction

Set-it-and-forget-it doesn't work in digital advertising. Ad fatigue — when your audience sees the same creative too many times — sets in quickly, typically within 7–14 days for Facebook ads. Creative fatigue leads to declining click-through rates, rising costs, and wasted spend.

Beyond creative fatigue, ad platforms' algorithms constantly evolve. What worked last month may not work this month. Audience behaviors shift, competitors enter and exit the market, and seasonality affects performance.

How to fix it:

• Review campaign performance at least weekly — check CTR, CPC, and ROAS trends
• Refresh ad creative every 2–3 weeks before fatigue sets in
• Test new audiences monthly — lookalikes, interest-based, and broad targeting
• Set up automated rules or alerts for campaigns that drop below your target ROAS

The most successful e-commerce advertisers treat their campaigns as a living system that requires regular attention, not a one-time setup. Even 30 minutes of weekly optimization can dramatically improve results.

If you can't quickly tell someone how much it costs to acquire a new customer through paid ads, you're flying blind. Customer Acquisition Cost (CAC) is the total amount you spend on ads divided by the number of new customers acquired. It's the flip side of ROAS and equally important.

For example, if you spent $5,000 on ads last month and acquired 100 new customers, your CAC is $50. Whether that's good or bad depends on your average order value (AOV) and customer lifetime value (LTV).

How to fix it:

• Calculate CAC monthly for each ad platform separately
• Compare CAC against your AOV — if CAC exceeds your profit per order, you're losing money
• Track CAC trends over time. Rising CAC with flat revenue signals increasing waste
• Understand your LTV:CAC ratio — healthy e-commerce businesses target a 3:1 ratio minimum

InsightIQ automatically calculates your CAC, ROAS, and LTV across all connected platforms, giving you a clear picture of exactly where your money is going and whether each dollar of ad spend is generating profitable returns.