Struggling with high CPMs or low conversion rates on Meta this year? I’m going to dig into why Meta might be broken, when we can expect things to get better, and what to do in the meantime.
This content first appeared in the No Best Practices newsletter on 03.31.2024.
There has been a lot of talk on Twitter/X about Meta Ads being “broken”. This has happened before, but it’s never lasted longer than a few weeks. This time, many brands have seen soft performance for all of Q1.
Typically these periods of soft Meta performance are tied to a code update that makes the ad targeting algorithm less effective. One example: Meta usually pushes a big code update to prepare for Q4, so brands see 1-2 weeks of soft performance some time in October or early November. Think of this as Meta kicking its own core algo into “learning mode”
That’s not what’s happening this time. There have been several platform outages and bugs since the start of 2024. And Meta did push some new business manager features live in Q1. But there is no obvious cause/effect relationship between poor performance and a specific code push or platform outage on Meta’s side.
To complicate things further: only some brands are seeing poor performance. Others are doing fine. But there isn’t a pattern that separates the winners from the losers.
The brands experiencing the “brokenness” are typically seeing at least one of these things:
- CPMs that are much higher than they’ve ever been historically
- CVRs that are much lower than they’ve ever been historically
- Cost Cap campaigns over-spending, or spending above their CPA targets
- Volatile performance–3x ROAS on Monday, 0.4x ROAS on Tuesday
This volatility is making it really hard for brands to hit their profitability targets and decide how much to spend on ads. Some brands have been able to manage volatility by reducing spend, while other brands have turned ads off entirely.
Based on what the community has been sharing, there are three possibilities for what’s going on here:
- Meta’s algorithm is losing effectiveness and the company doesn’t know why. They’ve been struggling to fix the issue for months.
- Something is wrong with Meta’s algo or ops and they don’t care, because most advertisers are still spending. DTC brands and small businesses are actually a small fraction of Meta’s revenue by dollar volume. The big boys are still spending on pageview campaigns or whatever, so why worry?
- The macro environment is changing. We’re entering a recession or reaching a tipping point re: the number of brands in the market. Either way, total in-market demand is in decline.
What all three of these possibilities have in common: they’re outside of our control, there is no way to predict an end date, and no one is coming to save us (sorry!).
What Can I Do Today?
If you’ve seen inconsistent Meta performance in Q1, or you can’t hit your KPIs, here are some things you can do right now:
Stop The Bleeding
Now is the time to reduce daily ad budgets if you’re consistently missing your KPIs. Monitor performance and see if a lower level of spend reduces volatility.
Some brands and agencies have also reported success with limiting or removing the more algo-driven features on Meta. Review your ad breakdown by placement for Q1 2024 and compare to Q1 last year. Are there specific placements (ex. FB Feed on desktop) that are underperforming by a much wider margin than others? If so, try relaunching those campaigns with the underperforming placements excluded.
Test New Formats & Strategies
If video testimonials usually kill it for you, it’s time to test statics. If static carousel ads always bombed for you in the past, give them a try. If your best ads are usually iPhone photos, try polished product photos or text-only graphics.
Same goes for media buying–test cost caps, ASC campaigns, CBO & ABO. Test broad, interest targeting and lookalikes. Basically–try the things you thought you’d ruled out. You never know. Just don’t allocate too much budget to this.
Finally–consider changing up your core offer and/or running a promotion. Some brands have seen offers/promos get their CPAs back to a profitable place. Make sure you update your target CPA based on the margin hit you’ll take from the promo.
Adjust Your 2024 Forecast
Develop a 2024 forecast scenario that assumes Meta performance for Q1 will not improve through the rest of the year aka Q1 is your new baseline for CAC. Forecast Q2, Q3 & Q4 CAC up accordingly.
Given this forecast and the resulting sales, how would you adjust your media budgets, inventory buys, and other investments for the year? You will probably want to pull back on your “stretch” investments now.
If things turn around, great. But, speaking from the perspective of someone who saw ~50% of her co-workers laid off during COVID, it’s better to be conservative and maintain a strong cash position, especially if you’re bootstrapped.
Diversification Quick Wins
Everyone is talking about diversification. But there is a reason so many brands lean on Meta ads: they really are the best at finding relevant in-market demand.
The Meta creative playbook doesn’t always work for other paid channels. For example, images tend to outperform video on Reddit, and it’s rare that a “banger” Meta ad will perform as a TikTok ad. Despite these challenges, there is some “low hanging fruit” re: channel diversification.
You can run your best 9:16 video Meta ads as Youtube shorts. Here is a step by step guide on how to do this. Some brands are seeing similar performance to Meta at lower levels of spend.
If you’re running a Google PMax campaign, you can review your keyword reporting to identify potential scaling opportunities for non-branded keywords. If Google Shopping performs well for your brand, you can set up a shopping-only PMax campaign with returning customers & brand terms excluded.
If your brand captures a lot of email addresses from cold traffic (usually through a popup), you can try increasing email frequency and revisiting your welcome series/offer. Converting more email leads can translate to lower CAC.
A lot of the programmatic features that make Meta ads so powerful are now available for the direct mail channel. You work with a vendor to pixel your site, then send out prospecting mailers/postcards based on lookalikes of folks who convert with you. The level of scalability here varies from brand to brand, but it’s an easy test to run.
Finally, you can test Twitter/X ads (if you’re not morally opposed to that). Chris Orzechowski has a good newsletter that outlines the basics of campaign setup. The brands scaling on Twitter seem to be more direct response-focused (info products, supplements), but Jones Road Beauty also found success with Twitter ads.
Again, this is an easy test because the creative lift is low. Text posts and simple statics perform well. Good copywriting and targeting are your big levers.
That’s it in terms of “low hanging fruit”. You probably won’t reach Meta levels of scale on these channels, but they can help offset some lost revenue. If you want a scalable, sustainable solution, you’re going to have to build some new capabilities…
What Can I Do Longer Term?
It feels like the DTC community has been debating the pros and cons of true channel diversification ever since iOS14. Will this event finally push the community “over the edge”? If the issues persist for another quarter, it might.
Truly diversifying away from paid media and in-market demand capture is really hard, because it requires you and your team to develop new core competencies.
Here are a few alternative paths to scale that you might want to explore. Just be aware that you’ll have to learn about how to succeed in these channels, and you’ll probably need to bring in outside experts if you want to succeed.
You won’t be able to recycle your Meta ads, or get your head of paid social to “crush” these channels on day 1. And 1DC ROAS is not the best way to measure success here.
Wholesale
AKA selling to retailers like WalMart, Target, Macys, Nordstrom, etc. Definitely get some outside help navigating this space if you’re a first timer, because it’s hard to get your foot in the door and easy to lose money when you do. Despite these challenges, wholesale is a key distribution strategy for many of the world’s biggest brands. No time to start like the present.
TOF Video (Youtube, Connected TV)
The creative “best practices” are different. So is the measurement methodology. But this is a proven way to build your own awareness, which you can then harvest on Meta and Google at a lower cost vs cold traffic.
TV can be a goldmine if your core customers are boomers. One boomer-focused founder I know cut Meta spend entirely in favor of TV.
Content-Driven Email
Build a content-focused email newsletter about your product vertical, or about something that your core customer cares about. Use zero party data (surveys) to learn more about your subscribers. Then use that information to close them.
This is why Ridge bought Everyday Carry. It’s why Glossier started with Into The Gloss. But you have to do this right. You need to publish content folks actually care about, and keep the hard selling to a minimum.
To see how some of these newsletter funnels work in practice, sign up for the content newsletters associated with info product brands. I Will Teach You To Be Rich is a good example.
Organic Social Content
Barry Hott (the “make ugly ads” guy) recommends that creative strategists start brand new IG & TikTok accounts, then use those accounts to follow organic pages related to your product category. Ex. if you sell makeup, follow beauty bloggers.
Take this concept one step further and create an organic IG or TikTok account related to your category, but make the content completely customer-focused. Don’t talk about your brand at all. Share helpful info and make rants and memes about their pain points.
Boost the most popular posts, grow your following, and market to your engaged audience when it gets big enough. Bonus: whitelist ads through the page to enjoy higher CTRs and (usually) lower CPMs.
Again–the content actually has to be good for this to work.
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