The More You Spend on Ads, the Bigger Your Losses — Should You Cut Your Budget?

If losses accumulate with every sale, you should reduce advertising. SOULPAPA Marketing reduced daily ad spend from 5 million won to 50,000 won.

Why do losses grow when you increase advertising spend?

In a structure where money leaks with every sale, advertising only magnifies that loss. When you increase ad spend, orders increase, but the loss per transaction also multiplies at the same rate. One brand we managed also saw revenue rise month after month while debt kept growing. In this situation, don’t be fooled by the revenue number—stopping advertising is the priority.

At this point, many CEOs rush to expand channels or go international. They’re expanding their business to avoid anxiety, but if the underlying structure remains the same, losses will only expand with it.

Why don’t agencies tell you to reduce advertising spend?

Most agencies receive a percentage of executed ad spend as commission (marketer’s fee). Suggesting a reduction in ad spend essentially means asking the agency to cut its own income. That’s why agencies rarely bring this up first.

We decided that your business surviving comes before our commission. Continuing to recommend advertising while in deficit is not curing the disease—it’s administering poison. Especially if you’re borrowing money to fund advertising, you must stop immediately.

What should you do after reducing advertising?

If advertising efficiency isn’t working continuously, you should question the brand fundamentals, not the advertising technique. We reduced ad spend on acquiring new customers and invested that money and time in three things:

• Re-examining customers: Reorganize STP from scratch to clarify whose specific inconvenience (need) this product solves.
• Refining strengths and messaging: Establish your unique competitive advantage (USP) and the appeal message (proposition) you’ll deliver to customers.
• Building a repurchase structure: Design reasons for customers who’ve purchased once to return.

Data is only a tool to support this decision. If you increase ad spend looking only at ROAS, the numbers may look good but your account will be empty.

Frequently Asked Questions

How are advertising agency commissions determined?

Typically, they are set as a percentage of executed ad spend (marketer’s fee). So as ad spend increases, the agency’s income also increases proportionally.

Does revenue decrease if you reduce ad spend?

Visible revenue may decrease immediately. However, if the structure was one where every sale resulted in losses, losses will decrease proportionally as revenue decreases.

Why isn’t advertising efficiency working?

Most often it’s not a creative or bidding issue, but because who you’re selling to (targeting), your unique strengths, and the message you’re delivering are unclear.

How do you increase repurchase rate?

First find the real reason customers buy this product, then structure the product experience and messaging so they have reasons to buy again.

SOULPAPA Marketing looks at whether there’s a structure for sales without advertising before deciding how much to spend. While we have experience operating e-commerce brands directly and achieving ROAS 300%, when we see a deficit structure, we recommend reducing advertising even if it means forfeiting our commission. Our work isn’t advertising services—it’s brand asset building (Hero Branding) where value accumulates over time.

Original in-depth analysis: Why did the advertising agency give up its marketer’s fee and reduce ad spend to 1/100th?

Insights from Soulpapa Marketing — Korea’s digital marketing agency.
Original Korean article: https://soulpapa.co.kr/2026/09/18/gwanggobi-jeokja-gwanggo-chuksohaeya-halkka/