Marketing Isn’t a Channel Problem. It’s a Capital Problem.

Australian businesses spent $17.2 billion on digital advertising in FY25. That sounds like a market that knows what it’s doing. It doesn’t.

Next&Co’s media audits found that 44% of digital ad spend is wasted on average. Not 5%. Not 10%. Nearly half. That’s not a rounding error. That’s businesses pissing money away because nobody is stress testing where it goes or whether it comes back.

The problem isn’t how much Australian businesses spend on marketing. We’ve written before about the gap between spend and maturity. But this is a different problem. It’s not about how much. It’s about how you decide where to put it.

Here’s what happens in most organisations. Budget gets set at the top. Someone decides the number. Then it gets divided across channels based on what happened last year, adjusted slightly for whatever’s trending this quarter.

Nobody asks whether the channels deserve the money. Nobody checks if the return on last year’s spend justified the allocation. They just sit there and decide, oh, this is how much we’ve got and this is all good.

I’m yet to see on a large scale sort of enterprise budget where people try to do anything clever. Even at Gartner’s survey level, where budgets sit at 7.7% of revenue and 59% of CMOs say they don’t have enough, the response is still to distribute what you’ve got across the same channels as before. It’s muscle memory. The world has changed but the allocation hasn’t.

That’s the channel distribution mindset. You start with a budget, you carve it into channels, you defend each line item. It’s comfortable. It’s familiar. It doesn’t work.

The moment you stop thinking about marketing as a channel distribution problem and start thinking about it as a capital allocation problem, everything changes.

Capital allocation is what finance teams do. They look at every dollar and ask: where does this generate the highest return relative to the risk? They stress test. They model scenarios. They hold reserves. They build hierarchies of value.

Marketing should work the same way.

I think the most broken thing in how Australian businesses allocate marketing budget is that they’re not stress testing the value that the return on their investment provides. A lot of it is legacy. Someone sent this much to this channel five years ago, and nobody’s really tracking whether it works. What you see is outdated spend that doesn’t deliver any outcome. Even at enterprise level, it’s large and poorly understood.

The moment you run econometrics, repackage it as dynamics modelling, and suddenly the company can grade their own homework, you get really good results. But that causes a loss of confidence in the system because nobody understands what you’re doing or whether it actually works. So you get into a position where they can’t push back because it’s a risk. What if it goes wrong? Instead of just pulling the trigger.

If you treat marketing as a capital allocation problem instead of a channel distribution problem, you stop defending budgets and start building trust. The maths speaks for itself.

Nobody ever builds bottom up. They just sit there and decide how much they’ve got and where to divide it. What you should do is understand your acquisition model, identify where you need to invest and why, then build a hierarchy of value. If you could do all the things in the world, what order would you do them in? That’s your allocation.

I don’t believe in committing a hundred percent of your budget upfront. What you do is lay a little bit in your back pocket because most of the stuff will work at ninety percent, and then you’ve got flexibility. You can absorb shocks, move faster, support other parts of the business.

On a marketing front, you look one level up and ask: do I actually need this much acquisition spend this year? Maybe I go into retention mode instead. Cut the media spend, triple customer support because it’s more efficient to keep them than keep bringing them in and letting them go.

This is the part most budget frameworks miss entirely. They assume the mix is fixed and you’re optimising within it. The real question is whether the mix itself is right.

Bottom-up budgeting doesn’t mean spending more. It means knowing why every dollar is where it is and being able to defend it with maths, not precedent.

The principles work whether you’re running a corner shop or a $50 million enterprise. The scale changes. The logic doesn’t. You start with what you need, you rank it by expected return, you build upward. You don’t start with a number and divide it.

Things will go wrong. Campaigns will miss. Channels will underperform. That’s not the problem. The problem is what you do next.

If you mess up, don’t just come in and say you got it wrong. Come in with a theory. Come in with a plan. Anyone can mess up. You pay me to fix it. What matters is that you take the feedback on board, you acknowledge you were wrong and you reflect on why it didn’t work. Then you come back with a genuine reason: this is what I thought would happen, this is what happened, this is where I got it wrong and here’s what I’m thinking now.

Your ego shouldn’t drive communication. Nobody cares about your ego. There are only a couple of things that matter in a business that aren’t numbers on the board. Numbers on the board, that’s the lifeblood. Everything else is noise.

Don’t throw nine hundred thousand dollars in the last ten weeks of a quarter just so it looks better on the statement. That’s silly. It’s panic dressed up as strategy and it burns trust faster than anything.

No one’s gonna shoot a hundred from a hundred. What matters is that every miss gets a theory, a reason and a direction.

You can’t allocate capital well if you can’t measure what’s working. And most businesses can’t.

We’ve scored more than 500 Australian businesses across 50 industries on six dimensions of marketing performance. Data and tracking is the weakest dimension across the board. The businesses that score highest overall are the ones that score highest on measurement. It’s not a coincidence. It’s the foundation.

If you don’t know which channels are generating returns and which are burning cash, you’re not allocating capital. You’re distributing hope. And hope doesn’t compound.

The fix isn’t complicated. It starts with knowing what you’re measuring, why and whether the numbers you’re looking at actually connect to revenue. Most businesses have dashboards full of metrics that don’t answer the question that matters: is this dollar working harder than that dollar?

The more decisions you make, the more data that you get. If you make decisions faster, you get even more data. If you look closely at those decisions, you get even more again.

This is how capital allocation becomes a compounding advantage. Every cycle of invest, measure, adjust gives you sharper data for the next cycle. Businesses that hold the same allocation year after year because it’s “safe” are actually falling behind. They’re not reducing risk. They’re freezing their learning.

You don’t need to know every single thing. You just need to know which direction and why and then what you do from it. If you do that enough times, you’ll win.

Ground your base understanding, a logic, a principle, and an outcome. Then move.

If you want to see how your marketing stacks up against your industry, start a Lens scorecard. It takes ten minutes and you’ll walk away with a benchmark report that shows where every dollar should be going.