"Alibaba's Own Data Says Small Ad Budgets Are Worst"

Alibaba.com publishes a table to convince sellers that bigger ad budgets work. It does prove that. In the same five rows it also proves something absent from the slide notes: the first leads you buy are the most expensive leads you will ever buy.

Advertisers on Meta and LinkedIn already have vocabulary for the mechanism, even if nobody has priced it. Meta's delivery system wants roughly fifty optimisation events per ad set per week before exiting the learning phase, and costs inside that window run twenty to forty per cent above steady state. The standard formula falls out of it -- target cost per acquisition, times fifty, divided by seven, is your minimum daily budget. LinkedIn lands in similar territory, about fifty conversion events a month per campaign with a floor near fifty to a hundred dollars a day. Google's smart bidding wants thirty to fifty conversions monthly.

Every one of those is an event count. None of them is a price. I have not found a single published curve showing what an additional lead costs at each level of spend, as against what the whole budget averages out to.

Alibaba's training material contains a table you can build one from. The same training also describes [how paid and unpaid products are merged inside AI-search ranking](/blog/merged-ranking-ai-search).

## What Alibaba published

The deck for Keyword Advertising -- the pay-for-performance product Alibaba still calls P4P internally -- carries thirty-day per-account averages grouped into five spend tiers. Two columns matter. Converted at roughly 7.1 to the dollar:

| Tier | Monthly P4P spend | Inquiries | Cost per inquiry |
| ---: | ---: | ---: | ---: |
| 0 | $23 | 43 | $0.55 |
| 1 | $380 | 53 | $7.20 |
| 2 | $765 | 77 | $9.90 |
| 3 | $1,025 | 108 | $9.50 |
| 4 | $1,640 | 176 | $9.30 |

The caption underneath, in the original, says P4P spend is proportional to a seller's premium listings and inquiries and that higher-tier accounts get better results. Read as averages that is exactly what the table shows. Spend more, receive more, cost per inquiry settling around nine dollars once you are off the bottom.

## The column Alibaba left out

An average across a whole budget is useless for a budget decision, because the decision concerns the next increment and not the mean. So:

| Step up | Extra spend | Extra inquiries | Marginal cost each |
| --- | ---: | ---: | ---: |
| 0 to 1 | +$357 | +10 | **$36** |
| 1 to 2 | +$385 | +24 | $16 |
| 2 to 3 | +$260 | +31 | $8.40 |
| 3 to 4 | +$615 | +68 | $9.00 |

The first step is the expensive one, by a factor of four. Getting off the bottom tier costs thirty-six dollars for every additional inquiry. Every step after it lands between eight and sixteen.

Now look at the bottom tier again, because it is the whole argument. Those accounts spend about twenty-three dollars a month, which is functionally zero, and receive forty-three inquiries. Whatever produces those forty-three, it is not the ad budget. So your first three hundred and fifty-seven dollars buys ten inquiries at thirty-six each, while forty-three were already arriving for nothing.

That is not diminishing returns. Diminishing returns runs the other way. It is an entry price: below it Alibaba's ad product prices badly, above it the product prices normally.

And Alibaba's own recommended on-ramp sits almost exactly at the worst point on that curve. The entry-level managed package is 3,500 yuan for twenty-one days against a floor of fifteen guaranteed inquiries, which is about thirty-three dollars each -- within rounding distance of the thirty-six-dollar first step. The cheapest way in is priced like the worst way in, because it is the same thing.

## Three reasons to distrust my table before you use it

I would rather write these than have them thrown at me.

The bottom tier's forty-three inquiries are an organic baseline, not ad output, so the first step's marginal cost is partly an artefact of setting a paid number against a free one. I think it belongs in the calculation anyway, because it is exactly the comparison a seller faces when deciding whether to start spending. It is not clean and I am not going to call it clean.

The tiers are self-selected. Accounts spending more are probably better-run accounts with better listings and more experience, none of it controlled for. This is a correlation table. Getting the real spend-response curve means running the spend yourself, and by then you have paid for the answer.

And the same table carries a third column that quietly undermines its own caption: premium listings per account, climbing from nineteen at the bottom tier to a hundred and fifteen at the top. Alibaba reads that as advertising building premium listings. Its own case study reads the other way. On a slide labelled BAD CASE, one advertiser bought an identical keyword through two of its own accounts, one holding forty premium listings and one holding two hundred and seventy-seven, and the second performed materially better. Inventory quality drives ad performance, not the reverse. Which means a good part of what the tier table demonstrates is that better shops spend more -- a different claim entirely, and a much less useful one for anybody deciding a budget.

## The rule

Any channel with a learning phase has an entry price and you can usually estimate it before paying it. Take the channel's stated event threshold, multiply by its mature cost per event from published benchmarks, treat the product as your floor, then decide whether you can cross it in one move. If you cannot, the honest answer is not to spend less. It is not to spend.

The expensive version of this mistake is rarely ads. It is the two-week pilot of anything with a learning curve -- a data vendor, an outsourced SDR team, a new sequence -- killed on numbers generated entirely inside the window where the numbers are supposed to be bad.

I lean toward channels with no entry price at all. A research pass across five hundred companies costs me a couple of dollars in API calls and yields fifty-seven contactable accounts, [broken down in full here](/blog/ai-outbound-pipeline-yield), and [the second pass over that list](/blog/cold-email-second-pass-cost) is close to free. Neither has a learning phase, which is most of why I keep running them. That is a bias, not an argument, and it is not licence to test a paid channel badly. The marketplace's [numeric lead-quality guarantee](/blog/lead-quality-guarantee) is a different kind of offer, and it deserves different arithmetic.