Halfway Through 2022, Meta Is Still Finding Its Footing With DTC Brands

The rebound from the shocks of iOS on Meta’s performance products is being felt unevenly for DTC brands

By Catherine Perloff

In an earnings call in February, Meta said that Apple’s privacy-centric changes to its iOS operating system, which make it harder to both target advertisements and measure their effectiveness, would cost the social giant $10 billion in revenue in 2022. Executives have repeatedly assured investors that they are working on mitigating these challenges—and getting their ad-tech back on solid ground.

Halfway through 2022, marketers at direct-to-consumer-focused and small agencies—who typically rely a lot on Meta compared with larger advertisers—say that in the past couple of months the platform has improved its performance, especially when compared to the beginning of this year and the end of 2021. That said, Meta continues to be much weaker than pre-iOS changes.

“Facebook and Instagram are still part of our mix because we know that it’s beneficial,” said Jason Dille, executive vice president of media at Chemistry, which focuses on national and mid-market clients. “The amount of attributable traffic and orders just is not as great as it used to be.”

Looming economic uncertainty and macro industry trends, coupled with advertisers swearing off Facebook, means that marketers need to work harder to more effectively navigate the platform—and how it fits in their media mix.

Illustrating this murky reality, median cost per purchase—a measure of customer acquisition that compares ad spend to purchases—was $68.20 in the second quarter of 2022, compared to $67.59 in the first quarter. That’s a difference of less than 1%, according to data from 1300 direct-to-consumer brands from ecommerce and software-as-a-service data co-op Varos.

In April 2021, when the iOS changes first came online, median cost per purchase was under $45. Return-on-ad spend, which compares revenue to ad spend, was similarly flat—vacillating between $1.25 in the first quarter to $1.24 in the second quarter. In April 2021, ROAS was slightly under $2.

“Apple’s restrictions are benefiting its own bottom line at the expense of businesses—especially small businesses, who rely on personalized ads to reach customers and grow,” a Meta spokesperson said, pointing to DTC brands who have found success on the platforms and resources the company has offered to help. “We’ve continued to adapt our systems to help businesses succeed—while honoring privacy—and shared detailed steps they can take to maximize performance and measurement.”

The glass half full

Some marketers told Adweek that Meta has recently started to work well again for their clients.

David Herrmann, president of paid social DTC-focused agency Herrmann Digital, said his clients—especially those who are spending over $15,000 a day—are seeing good performance on Meta, comparable to 2018 or 2019, before iOS changes and pandemic boom times for digital advertising. Clients spending $3,000-$5,000 a day can still see good results, but the system responds best at a higher threshold, he said.

“When you wipe out probably 60-70% of the signal that the network was using, it’s going to take a long time for the machine learning to learn it again,” he said. “Facebook’s internal mechanism is[now] re-learning and being optimized off those new learnings.”

Return-on-ad-spend and reporting metrics have improved recently from where they were seven months ago, when they were particularly lackluster, said Jonathan Snow, founder of ecommerce-focused digital agency the Snow Agency.

“[Then] it was just astronomically bad that we were looking at the revenue on the store and it didn’t make sense,” Snow said, noting that it was obvious Meta was underreporting conversions by comparing a client’s revenue and their historical level of ad spend.

Snow also noted an incumbent advantage, saying CPMs were generally higher for new brands when they joined the platform—and then came down the longer they stayed.

But Meta, with its edge in years operating and its consumer data, has performed better post-iOS than other social marketing platforms, like Snap and TikTok, Snow added.

Same old same old

Other marketers said that, since performance declined on Meta in 2021, it has not returned.

“We definitely did see a decline in fourth quarter into first quarter,” said Dille, adding that clients have relied more heavily on native programmatic ads. “We moved money out of Meta. We haven’t necessarily moved it back yet.”

Duane Brown, founder of DTC, ecomm and software-as-a-service focused agency Take Some Risk, said any improvement marketers have seen as a result of Facebook ads can be attributed to higher consumer spending during the spring and summer—and not the platform itself. Brown noted that with attribution metrics on Meta increasingly unreliable, his agency has relied more on Google Analytics.

Also deterring advertisers is rising CPMs, which make it more expensive to acquire customers.

Calla Murphy, vp of digital strategy and integrated marketing direct response DTC-focused agency Belardi Wong, said that Meta CPMs are up 25% year-to-date, corresponding to a 21% drop in Meta spend among clients—and a 40% decline in impression volume. Return-on-spend over the period is a modest 3%.

“The impression declines are impacting our client’s ability to acquire new customers via Meta,” Murphy said.

Given this uncertain landscape, DTC brands, who have historically been reliant on Meta, may need to navigate the platform—and the broader digital media landscape, more effectively.

“Marketing has changed drastically in the year,” Snow said.  “What works a year ago does not work anymore.”