Cutting Wasted Ad Spend and Increasing PortCo Margins: A New Era of Data-Driven Profitability

For Operating Partners and Managing Directors, driving margin improvement and profitability in portfolio companies (PortCos) requires more than just cutting costs—it’s about optimizing resources. In marketing, this means moving away from outdated approaches like “cutting marketing spend” and instead viewing it as a critical lever for growth. By embracing data-driven strategies, leveraging tools like nova (more on that later), and focusing on incrementality testing, you can reduce wasted ad spend, scale marketing efforts efficiently, and ultimately increase PortCo margins. Let’s dive into how you can make smarter marketing decisions that directly impact your bottom line.

The Former Cut Marketing Mindset: A Thing of the Past

Historically, when businesses faced financial pressure, marketing budgets were often the first to be slashed. The rationale was simple: cut costs to protect the bottom line. However, in an era where consumer attention is fragmented and digital channels dominate, the idea of cutting marketing spend to save money is no longer a smart strategy. The key shift today is viewing marketing as an investment rather than a cost. When done right, marketing can serve as a critical lever to drive profitable growth and accelerate margin improvement.

Rather than focusing solely on cutting costs, the new paradigm is about optimizing marketing spend to achieve higher-quality leads, better customer acquisition, and more profitable revenue streams. The goal isn’t just to spend less but to spend more effectively. This approach, when aligned with overall business objectives, has the potential to create a direct and measurable impact on the bottom line.

Common Sense Isn’t Always Common: Why Marketing Spend Often Misses the Mark

One of the most common pitfalls in modern marketing is the tendency to prioritize vanity metrics like attributed ROAS (Return on Ad Spend) instead of focusing on the metrics that matter most to the business: revenue, profit margins, and customer acquisition costs. This misalignment can lead to stagnating growth or, worse, declining revenue and squeezed profitability.

According to Burac.ai’s Chief Strategy Officer, Ben Dutter, many companies incorrectly prioritize KPIs based on incomplete or misleading data. This often looks something like:

• Attributed ROAS in Channel A looks great.
• Attributed ROAS in Channel B looks poor.
• Budget shifts toward Channel A.
• Revenue declines and profitability takes a hit.

This situation happens far more often than many realize, especially in large organizations with complex marketing ecosystems. The problem isn’t the data itself—it’s the misinterpretation and misallocation of resources based on that data. The real business metrics—revenue, margin, and efficiency—should always take precedence over channel-specific or attribution data. This is where adopting a contribution-focused mindset (as opposed to attribution-focused) can make all the difference.

ROAS: A Vanity Metric in Isolation

ROAS is often treated as the gold standard for measuring marketing effectiveness, but it’s a vanity metric when not contextualized within broader business goals. For instance, ROAS tells you the return on ad spend for a specific channel, but it doesn’t account for the true cost of customer acquisition or the diminishing returns of overspending on certain channels.

In many cases, businesses are attributing conversions that would have happened organically anyway—resulting in inflated ROAS numbers. This is where the concept of diminishing returns comes into play. Simply increasing spend on a high-ROAS channel doesn’t necessarily lead to proportional growth in revenue or profits. In fact, it often results in wasted spend as the marginal return diminishes.

Incrementality: The Key to Measuring and Deploying Smart Marketing Spend

The solution to these challenges lies in the practice of incrementality testing—the process of isolating and measuring the true impact of marketing efforts on business outcomes. Incrementality testing allows you to quantify the actual lift driven by your marketing campaigns, helping you identify which channels, campaigns, and tactics are truly contributing to growth.

Enter nova, a proprietary technology from Burac.ai designed to make incrementality testing easy and actionable. nova leverages machine learning and AI to analyze vast amounts of first-party and ad platform data, providing insights into which efforts are truly moving the needle.

With nova, you can:

• Forecast revenue trends and optimize marketing spend based on predictive models.
• Identify high-value customer segments and target them more effectively.
• Measure incremental impact and adjust spend to focus on the highest-contributing efforts.

nova: Powering Incrementality for Scalable Growth

Burac.ai’s nova platform has already helped businesses generate over $3 billion in incremental revenue. By using nova’s machine learning capabilities, companies are able to make smarter, data-driven decisions that align marketing spend with their overall business objectives.

For PortCos, nova can be the difference between wasting ad spend and driving profitable growth. By focusing on the true incremental impact of marketing activities, businesses can maximize ROI and achieve sustainable, scalable growth while maintaining healthy margins.

The PortCo Impact: Scaling Profitably with Business Objectives at the Core

For Operating Partners, leveraging incrementality testing and data-driven marketing optimization has several critical benefits:

• Improved Margins: By cutting wasted ad spend and reallocating budget to high-impact channels, PortCos can improve profitability without sacrificing growth.
• Scalable Growth: With a clear understanding of what drives incremental revenue, businesses can scale their marketing efforts with confidence.
• Data-Driven Decision Making: Moving away from vanity metrics ensures that marketing decisions are aligned with the company’s financial goals.

In today’s competitive landscape, the ability to optimize marketing spend is a key differentiator. By adopting a contribution-focused mindset and leveraging advanced tools like nova, Operating Partners can help their PortCos achieve sustainable growth and maximize value creation.