A situation that ranks among the top 3 most frustrating for sellers: advertising is running, orders are coming in, revenue seems stable — yet profits are falling. This means that money is “leaking” at one (or several) points: advertising has become more expensive, conversion has dropped, costs have risen, delivery has worsened, returns have increased, or you started buying “the wrong” traffic.
In this article — practical diagnostics for Mercado Libre:
- how to understand what exactly is eating into profits;
- which numbers to look at first;
- what to do today to stop the decline;
- what to set up this week to restore profitability.
Why Profits are Falling Even When Advertising and Sales Exist
Profit is not “revenue minus advertising.” On marketplaces, profits often dwindle due to a combination of factors:
- DRR is rising (advertising is consuming a larger share of revenue)
- card conversion is falling → you are buying more clicks per order
- price/discounts/promotions are changing → margin per order is decreasing
- commission/logistics/storage costs are rising
- returns/redemptions are worsening
- inventory/delivery are declining → sales become “more expensive”
- advertising starts to cannibalize organic traffic (you are paying for what would have been bought anyway)
The main point: profits fall either because order costs have increased or because the margin per order has decreased. Diagnostics is about finding out exactly where.
Quick Diagnostics in 15 Minutes: “Where is the Leak?”
You need to answer 5 questions:
- Revenue (orders/sales) — is it falling or holding steady?
- DRR — is it rising or stable?
- CR (card conversion) — has it fallen or not?
- Average margin/net profit per order — has it changed?
- Is the problem localized (a few SKUs/campaigns) or across the entire store?
Next — “decision tree”.
Step 1. Check: Is Profit Falling Due to Advertising or Margin?
Scenario A: Profits are Falling, DRR is Rising
This means either advertising has become more expensive, conversion has dropped, or you are directing traffic incorrectly.
Next, check:
- CPC/CPM/bids (if data is available)
- Card CR
- Campaign structure and queries
- Inventory/delivery (often a hidden reason for falling CR)
Scenario B: Profits are Falling, DRR is Not Rising
Then advertising is not the main culprit. Most likely:
- Price/discounts have reduced the margin
- Commission/logistics/storage/fines have increased
- Returns have risen (redemption has dropped)
- Cost price/purchase price has changed
Step 2. Check “Unit Economics in Reality” (the Most Useful Table)
Create a simple table for at least the top 20 SKUs:
- Selling price (actual)
- Marketplace commission
- Logistics/delivery/storage (actual for the period)
- Cost price
- Gross margin
- Advertising expenses per SKU
- SKU DRR
- Returns/redemptions (if applicable)
- Profit per order (estimated)
You don’t need perfect accounting, you need dynamics: “yesterday vs today” / “last week vs this week”.
Step 3. Top 8 Reasons: Advertising Exists, Profits are Falling
1) DRR Increased Due to Falling Conversion (CR)
Classic scenario: the card has started selling worse, but advertising continues to drive traffic.
Check:
- Advertising CTR (if it has fallen — the problem is in the creative/offer in the results)
- Card CR (if it has fallen — the problem is on the product page)
- Ratings/reviews
- Price and competitiveness
- Delivery time
What to do today:
- Stop/cut campaigns on SKUs with falling CR
- Update the first screen of the card (cover + benefits)
- Check the price in the results for keywords
2) Advertising Has Become More Expensive (Auction/Bids/Season)
Sales are holding steady, but the “cost per order” is rising, and profits are being consumed.
Check:
- Increase in CPC/CPM/bids
- Increase in expenses with the same revenue
What to do today:
- Limit budgets for campaigns
- Move “broad” queries to test mode
- Lower bids where there is no profitability
- Keep exact queries and the best SKUs
3) You Started Buying “The Wrong” Traffic (Broad Semantics)
Clicks are there, but orders are fewer or they are “expensive.”
Check:
- Which queries/platforms are generating clicks without orders
- The share of “broad” queries in expenses
What to do:
- Separate campaigns into “exact” and “broad”
- Cut broad campaigns with limits and stop rules
- Exclusions/negative keywords where applicable
4) Margin Has Fallen Due to Price/Promotions/Discounts
A very common reason for “profits are falling,” even if advertising is fine.
Check:
- Actual selling price (after discounts)
- Participation in promotions
- Change in “net price” on hand
What to do:
- Recalculate margin at the current price
- Raise the price or change the discount mechanics
- Shift advertising to SKUs with better margins
5) Commissions, Logistics, or Storage are Rising
On marketplaces, these expenses can quietly “eat” into profits.
Check:
- Change in delivery/storage expenses over the period
- Fines, paid services
- Distribution across warehouses
What to do:
- Optimize warehouses/supplies
- Clean up slowly moving SKUs
- Reassess packaging (if it affects logistics)
6) Returns Have Increased / Redemption Has Worsened
Advertising drives sales, but money “doesn’t stay” due to returns.
Check:
- Increase in returns for SKUs where advertising was scaled
- Reasons for returns (expectations mismatch, size, quality)
What to do:
- Adjust the card (honest photos/size chart/FAQ)
- Improve packaging/assembly
- Temporarily reduce advertising on SKUs with a high return rate
7) Inventory/Delivery Have Worsened, and Advertising Has Become “More Expensive”
When delivery times have increased or inventory at a key warehouse has run out, CR drops, while advertising continues to spend.
Check:
- Inventory levels across warehouses
- Delivery time in results
- Share of cancellations/non-deliveries (if visible)
What to do:
- Reduce advertising on SKUs with poor delivery
- Redistribute inventory
- Avoid driving traffic to areas that will soon be OOS
8) Cannibalization of Organic Traffic
Advertising has “captured” sales that would have happened anyway, and profits have fallen due to additional advertising expenses.
Signs:
- Advertising sales are growing, but overall turnover is almost nonexistent
- Organic traffic is falling, advertising is rising
What to do:
- Separate campaigns into “protection” and “growth”
- Reduce budgets for campaigns without incremental effect
- Carefully test reducing budgets for 2–3 days on suspicious campaigns
What to Do Today: Checklist to “Stop the Profit Decline”
- Identify the top 3 campaigns and top 5 SKUs by expenses
- Turn off/cut everything that spends but doesn’t generate orders (or generates orders that are too expensive)
- Check CR of cards for the guilty SKUs
- Check the price in results and delivery time
- Recalculate margin at the current price (after discounts)
- Shift budget to SKUs with better margins and stable conversion
Weekly Plan: How to Restore Advertising Profitability
- Set target DRR by SKU (Hero/Growth/Test)
- Rebuild campaign structure: exact separately, broad separately
- Set stop rules (limits and “stop conditions”)
- Improve cards for SKUs where advertising is scaling
- Increase transparency of unit economics: margin + advertising + returns
Common Mistakes in the “Advertising Exists, Profits are Falling” Situation
- Cutting advertising blindly without understanding where the leak is
- Optimizing bids when the problem lies in the card/price/delivery
- Looking at overall DRR without seeing which SKU is burning the budget
- Ignoring returns and “net price” after discounts
FAQ
Why is revenue holding steady while profits are falling?
Because the “cost of sales” has increased: advertising/logistics/returns/discounts have eaten into the margin.
How to understand that the problem is specifically with advertising?
If DRR is rising and expenses are increasing faster than revenue — advertising (or conversion) is the main candidate.
Can simply lowering bids restore profitability?
Sometimes yes, but if the card CR has dropped or the price has become uncompetitive — lowering bids won’t help.
Conclusion
When advertising exists but profits are falling, the focus should not be on “how to increase sales,” but on how to restore the profitability of a single order:
- DRR and cost per order
- Card conversion
- Price and margin after discounts
- Logistics/commissions/storage
- Returns and redemption
- Inventory and delivery
- Cannibalization of organic traffic