Member Exclusive   //   April 2, 2024

DTC Briefing: Why some marketers worry that Meta is ‘broken’

This is the latest installment of the DTC Briefing, a weekly Modern Retail+ column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. More from the series →

On social media, direct-to-consumer marketers have been uttering a similar refrain for the past month: Meta is broken. 

“I’m hearing of many dire stories in DTC,” David Herrmann, an independent media buyer, tweeted earlier this month. “You know Meta is broken when agency people are finally talking about it, they never want to admit performance is off,” Meredith Erin, the founder of gifts and accessories company Boredwalk tweeted. “This makes iOS14 seem like nothing.” 

If you are a marketer, ‘Meta is broken’ is a common gripe you usually hear once a month. Sometimes it is related to bugs in ad managers that are fixed within a week. Or, an overspend issue that Meta makes good on with a refund. Still, direct-to-consumer brands are dependent on Meta for customer acquisition, because it allows startups to reach more customers, for less than virtually any other ad platform.

But, marketers say that this time it’s different: there is something now that feels unique — and more long-lasting — than the other times that Meta has been ‘broken.’

No one knows for sure what’s gone awry with Meta, and different accounts are experiencing different issues. Other brands aren’t experiencing any issues at all. Marketers say that one of the most common issues being reported is advertisers are experiencing more volatility in the distribution of where ads show up, often in the form of increased Reels and Video placements. Meanwhile, brands that use cost caps have reported instances since February where their spend has fluctuated wildly from day to day, with nearly half of their daily budget being spent in just a couple of hours. Meanwhile, brands are reporting other issues, like higher CPMs or lower conversion rates, and wonder if the volatility in ad placement, or the issues with cost caps, are to blame.

A Meta spokesperson said in an emailed statement that “our ads system is working as expected for the vast majority of advertisers,” and that “we recently fixed a few technical issues and are researching a small amount of additional reports from advertisers.”

There are a few other factors that make this scenario different than what most marketers have experienced in the past. For one, the strategy that many marketers have previously employed to solve similar issues (switching up their media buying tactics) has not yet worked this time around. What’s more, the issue has gone on for longer than most marketers are accustomed to. They say these issues have been going on since February, whereas previously, similar issues have been resolved in anywhere from a few days to two weeks. 

“If this persists for another quarter, brands are either going to have to lower their growth goals, or figure out another way to do customer acquisition,” Alex Greifeld, an e-commerce growth advisor said. Greifeld wrote about the issue in her newsletter No Best Practices.

Greifeld said that in talking to brands, the issues being reported range from “seeing higher CPMs than they’ve seen in the past, or lower conversion rates than they’ve seen in the past.” For brands that run cost cap campaigns, “there have been a number of times when those campaigns have overspent or spent above their CPA targets.” 

Matt Breuer, the senior vice president of portfolio and growth strategy at e-commerce holding company Aestuary, echoed this. With cost caps, advertisers can set a maximum cost per optimization event. “Instead of being guaranteed to spend your budget every day at the best performance Facebook can achieve, you set a specific per-event cost target, and Facebook will only spend it if their algorithm believes it can achieve that target for a given ad campaign that day,” Breuer said. 

In turn, Breuer said that people who use cost caps sometimes set a budget that’s higger than they would want to spend every day because if Facebook does believe it can hit a specific per-event cost target, then the marketer would want to take advantage of that.

But, over the past six weeks, that hasn’t been the case for some people who use cost caps. “It’s inside this group where the platform instability has been the most painful,” Breuer said. If there’s algorithm volatility, Facebook “might aggressively spend into these newer placements… so someone who has set up their advertising account based around the idea that they only spend when they can ‘guarantee’ performance is now spending really fast at much worse performance than usual.” 

Herrmann, for his part said in an email that while this was a “major issue” at the end of February, issues around cost cap campaigns and overspending have been fixed since early March.

The challenge when trying to diagnose and fix an issue like this, Breuer said, is that Meta is “close to silent” about if it is ever changing anything in the ads auction. He said the best example of something like this happening in the past was in 2019, when “Meta began slowly introducing more ad inventory inside Instagram Stories.”

Eventually, brands figured out how to better succeed in Instagram Stories. The question, then, is if a conclusion will occur this time.

Meta, for its part, pointed Modern Retail to a couple of advertisers who said they were experiencing little to no issues. Brian Tate, CEO of Oats Overnight, said that his brand has seen “no difference” in performance over the past six weeks. He did note that Reels ad placements had more than doubled for his company over the past six weeks, but that Reels is “one of the more successful placements” for Oats Overnight.

Scott Futterman, CEO of skin care brand Drmtlgy, said that performance started worsening for his brand in mid-February. His brand worked with Facebook to test out new strategies, like experimenting with an anniversary sale and promoting a new product more prominently. In turn, he said performance improved, and Drmtlgy had a “record-breaking” quarter.

Typically, in a situation where Meta ads don’t work as expected, Greifeld said that one of the first changes media buyers make is simply switching up their tactics. If they are running an Advantage+ Shopping Campaign — where more of the settings are automatic or dictated by Facebook’s algorithm — they may want to try running more Campaign Budget Optimization ads, which have more manual settings.

But so far, these pivots haven’t solved the issue. At least among the marketers that Greifeld has talked to, the only thing that has worked to improve performance is “pulling back on spend, which no one wants to do.” Herrmann echoed this, saying “we’ve rebuilt campaigns, we’ve turned off optimizations… nothing really seems to be moving the needle.”

Greifeld said that brands can take a few low-level steps to diversify their customer acquisition efforts. They can run their best vertical video ads on Meta as YouTube shorts. They can look for “non-brand customer acquisition scaling opportunities within Google,” which might include running more text or search campaigns depending on the brand.

If this issue continues to persist for another quarter, Greifeld said, that’s when marketers may have to consider making more long-term changes to their customer acquisition strategy. But it is no one’s first choice.

“[Things like this] definitely happen multiple times a year,” Greifeld said. “But it’s never this persistent.”

What I’m reading 

  • Spindrift is reportedly exploring a sale, according to Bloomberg, after doing more than $300 million in revenue last year. 
  • On an aggregate basis, venture capital deal activity in e-commerce fell 47.5% year-over-year, according to Pitchbook data. 
  • Retail Brew has a breakdown of the biggest retail C-suite moves from March.

What we’ve covered 

  • Brands like Bombas and Natural Life are seeing a rise in scammers who are running fake ads for their products on apps like Facebook and TikTok. 
  • What startups like Tecovas, Liquid I.V. and more are doing for music festivals this year.
  • Canada Goose, Levi and Nike are hitting snags in their quest to build bigger DTC businesses.