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From Shopify VP Analyzes Customer Acquisition Cost on Google and Meta

How could the detailed CAC analysis by merchants affect Alphabet Inc.?

Possible What happens if… A possibility worth considering, not a forecast.

Merchant focus on CAC may pressure Alphabet's ad performance The use of advanced analytics by merchants, such as Scott Kramer, to calculate Customer Acquisition Cost (CAC) across channels like Google and Meta, is driving a demand for greater measurement precision. By excluding past customers from future campaigns on these channels, merchants are focusing on incremental reach and true customer value. This increased sophistication in measuring return on investment puts pressure on advertising platforms, including Alphabet Inc., to prove the efficiency and value of their ad spend in a market where costs are rising on every channel.

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How it reaches Alphabet Inc.

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The facts so far

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  • Scott Kramer uses Shopify’s analytics to identify its CAC across various channels, including Meta, Google, and ChatGPT.adweek.com
  • Kramer excludes past customers from future campaigns on those channels.adweek.com
  • The reports note that costs are rising on every channel.adweek.com
  • Meta still claims the majority of ad spend for many brands.adweek.com

Why it matters

For Alphabet Inc., which relies heavily on digital advertising revenue, the increasing sophistication of advertisers poses a structural challenge. As merchants become better at measuring true incremental value, they gain more leverage to demand higher performance and better ROI from platforms like Google, potentially pressuring the existing ad pricing and performance models.

This trend is part of a broader industry shift where marketers are grappling with a fragmented customer journey and evolving customer behaviors. Experts note that calculating CAC is becoming more complex than ever, requiring brands to adjust for different messaging and targeting strategies to drive incremental reach.

What we don't know yet

  • Will Alphabet Inc. develop new measurement tools that satisfy the demand for incrementality?
  • Will the rising cost of advertising lead to a shift in budget allocation away from major platforms?

What would change this answer

Alphabet Inc. releases new, highly accurate measurement tools for incrementalityThe pressure on Alphabet's revenue model would likely ease, as advertisers would have a clearer path to proving ROI.
Ad costs continue to rise across all channels without corresponding gains in efficiencyThe pressure on Alphabet Inc. would increase, potentially leading to a reduction in ad spend or a shift to alternative marketing channels.

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  • About Lifetime Value (LTV)

    If merchants are calculating Customer Acquisition Cost based on incremental reach, how does the calculation of Customer Lifetime Value change the pressure on advertising platforms?

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The full eventShopify VP Analyzes Customer Acquisition Cost on Google and Meta Everything aboutAlphabet Inc.

Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.