Issue 13 - Binary Battles

Batman vs Superman. Alien vs Predator. Democrat vs Republican. The world is full of battles and binaries.

DTC is no different. Operating a consumer brand is full of is/aught, if/then, and other boolean decision trees, and the end result can either be life-changing success or complete ruin.

To add to the challenge, the conditions for choosing one path over another are usually complex, nuanced, and contingent - shifting from person to person, brand to brand, and situation to situation.

This week we take a look at a few of these binary battles and provide guidance gleaned from some of the best in the DTC community:

• Agency vs In-house

• Meta vs Google

• Email vs privacy

Agency vs. In-house

Cody Plofker, CMO at Jones Road Beauty, kicked off a classic agency vs. in-house debate on Twitter last week.

• First, remember that it's hard as hell to find and retain top talent, says Alex P, author of the No Best Practices newsletter.

  

• Big salaries aren’t always an option, but here’s a brand recognition hack, courtesy of Dave Rekuc, COO at Bambu Earth - build publicly. You’ll get outsized industry recognition for your size.

• Meanwhile, Johnny Hickey has found success with “single-skill solopreneurs” (funny way to say freelancers).

• Freelancers can do the trick, but there’s a lot to figure out on that end too. One of the main challenges is being able to vet talent, whether individual or agency.

• Taylor Holiday thinks your payroll needs flexibility due to eComm’s seasonality, and thus favors agencies & freelance. 

• Meredith Erin, co-founder of Boredwalk, is decidedly against agencies. Briefly summarized:

  • They might be putting interns/juniors on your tasks

  • A FTE (full-time employee) is more cost-effective especially since there is no agency markup.

  • Employees get immersed in your culture and are more likely to give you their all.

  • Agencies often reward spend, not CM. 

  • You can decide what to prioritize in-house whereas agencies might queue you behind other clients. 

Takeaway: As usual, there is no right answer. Top talent is hard to acquire and retain, especially when you can’t offer competitive pay. Agencies and freelancers bring a singular focus and flexibility, but might not have aligned incentives and priorities. 

Alex Greifeld’s hiring framework might help (simplified below). Group company activities by whether they are business critical and part of your competitive advantage, then hire or outsource accordingly. 

Google struggles to leverage Meta’s struggles

Meta has been getting a lot of flak these last few months. 

• Campaigns massively overspent on two separate occasions. 

• Industry-wide reports of consistent ad underperformance.

• A 2-hour outage that cost the company $100 million.

Then, Meta spooked investors with a shaky Q1 earnings report, resulting in a 12% drop in stock value over the past month. Based on our analysis, the reaction is unwarranted – find out more in our issue #12: Rock the Boat.

Well, we know one thing for sure. Zuckerberg doesn’t care. 

Why? Because of the numbers Taylor Holiday shared this week (via Northbeam) highlighting “share of wallet” changes week over week:

TL;DR: Google is losing to a “losing” Meta. 

🙏Sub if you support putting TL;DRs at the beginning rather than the end. 

Google ads budget share is down by 0.31%. Meta ads budget share is up 0.65%.

Wondering what Taylor means by that last sentence?

He’s referencing Performance Max.

The PMax Problem

A little background.

Launched in 2021, PMax automatically optimizes ad placements across Google's entire advertising inventory using machine learning, which means advertisers cannot choose specific channels or sites for their ads. 

Pros: it allows you to advertise everywhere without having to manage multiple campaigns and automates elements such as bidding, targeting, and ad assets creation, thus simplifying management. 

Cons: Lack of control over where it places your ads, along with a lack of transparency that makes attribution difficult (if not impossible). 

This drove a lot of suspicion on behalf of DTC operators who (understandably) like to know where their money is going. 

One theory was that PMax might be mixing less effective ad inventory with more desirable options, potentially diluting the quality of Google's ad services. Taylor jokingly referred to PMax as the “CDO of ad inventory”, i.e. Collateralized Debt Obligations (CDOs), which infamously mixed high-risk financial products with safer ones. As explained by Anthony Bourdain. 

Fast forward March 2023, Taylor and his team at Commonthreadco built a report on statlas.io that illustrates PMax campaign’s delivery breakdown between Search, Shopping, Video, and Display. 

Luke Austin broke down the results in their blog. Briefly:

1. PMax spent more on Search than what the team intended. And a major part of the Search delivery was to branded search terms, which you can’t seem to exclude in PMax. 

2. Non-clickable placements (video, display and discovery) got credit for conversions if users looked at them long enough before clicking at a later stage. 

This leaves quite a bit of uncertainty on how much these placements influenced the click. 

3. Shopping ads consistently generate the most value.

In other words, PMax limits spend on high performers by spreading it out between these and underperformers. 

4. Campaigns get delivered to returning customers. 

–

• A year later, Taylor continues to call PMax a “black box no one knows what to do with”, and people like Nate Lagos, Marketing VP a Original Grain, are wondering whether they should cut their Google Ads spend.  

• Careful, says ex-Googler Ben Kruger: 

Profit-driven PMax? We watched the video and here’s the Cole’s Notes. 

• You can get a PMax performance breakdown by product (he recommends Mike Rhodes’ script)

• Separate top performers and low performers

• Run separate campaigns for them with identical target ROAS

This should result in higher spend for top performers, as ROAS drops the more you invest, and vice versa for underperformers. 

Great, that fixes one problem.

But as Lucian Armasu, CEO at AdsLux replies, it doesn't stop PMax from taking credit for sales driven by other channels with its non-clickable ads. 

Why Meta is winning

While Google’s strategy has been to simplify things at the cost of operator control, Meta’s latest Automated Social Campaign (ASC) update does the opposite (credit: Nick Bauer, Senior Growth Strategist at Kynship.co).

The reintroduction of the traditional campaign → ad set → ad structure grants advertisers more granular control, a shift likely to appease those who were frustrated by the limitations of PMax.

That’s not all. We just came across Sully Tyler’s post while writing this: 

Meta is incentivizing users to buy in-platform as well as brands to sell their products on Shop rather than their own websites. 

Takeaway: Google losing ground to Meta despite the latter’s recent struggles might be the biggest bag fumble of all time. The issue? Google’s reliance on the obscure and frustrating PMax, which operators were left to painstakingly decipher. Google continues to look for ways to prove scalability and incrementality with their ad services, rather than just an artificially high ROAS from branded search. 

Meanwhile, Meta keeps its ear to the ground and has made it clear money is no object – they will aggressively pursue market domination.

PSA: Email deliverability warning

Jimmy Kim from Sendlane has a PSA for email marketers. 

If you’re into retention marketing, you will have heard of the DKIM and DMARC updates from early February this year. They made it so senders need to spend more time on setup, plus monitor things regularly to maintain reputation. 

It’s that or get bounced.

Now, to quote the Dude, new information has come to light. 

User-reported spam rates above 0.3% will be ineligible for mitigation:

Here’s what Jimmy recommends: 

Takeaway: Relatively speaking, retention tactics like email or SMS are much cheaper to administer than your average PPC acquisition channel. But marketers and operators must constantly remain vigilant about privacy, deliverability, and attrition when it comes to their subscriber lists.  

Quick hits

• Want to keep your team organized on Notion? Check out this walkthrough from Jesse Pujji.

• A study by Haus on Meta advertising’s incremental impact on Amazon and DTC sales. Spoiler: they found a bigger effect on Amazon.

• Roku and independent advertising tech firm Trade Desk recently announced a partnership in an effort to improve the buying experience.

• Ampla, a Fintech platform aimed at servicing consumer packaged goods (CPG) brands is up for sale. Any companies using their services should probably start looking for alternatives.