Marketing attribution used to be very simple. “Hey Frank, did our sales go up after that National campaign or what?”

A blunt instrument, to be sure. But simple. 

Sophisticated digital marketing brought direct attribution to the table, with the promise of specificity and granularity. “Hey Joan, how many sales did that video creative in the scaling campaign make last week?”

From a bazooka to a rifle shot. Machette to scalpel. 

But those in the arena these days know that digital marketing is fraught with challenges. Attribution windows, last click versus multi-click attribution models, the fracturing of the user journey across different devices, sales channels, and touchpoints, etc. 

The tools and options we have are legion. Brands have powers that previous generations of advertisers could only imagine. But things are no longer simple.

With the introduction of increasing privacy measures on devices and the end of cheap money as the ZIRP era retreats, attribution has become more difficult to track just as the need for clarity around profit vs topline sales growth has swelled. A double whammy.

Good news might be on the horizon, though. Meta’s big announcement at its Performance Summit indicates we’re moving in the direction of optimizing not just for “reach” or “sales” but for incremental profit. 

2024 might be rock bottom for DTC. But it’s also the year of incrementality, and Sean Frank from Ridge is bullish for Q4. 

In this edition of The DTC Times:

• What Meta is Doing for You

• The State of ecomm / You’re not alone

• Should You Even be Worrying About Incrementality?

What Meta is Doing for You

Early reports from the Meta Performance Summit are in, and there are some interesting tidbits for DTC operators. 

To start things off, if you’re a regular reader, you might remember our coverage of the creative testing debate that occurred a couple weeks ago. 

It featured Andrew Faris, staunch detractor of creative testing campaigns, vs. Jess from Fire Team who held the opposite view. In truth, most people are on Jess’ side. 

Including Meta. 

Credit to David Herrmann.

So, what was this summit about?

Contrary to what we’d have you believe, the world does not revolve around DTC, so the core of Meta’s message was targeted toward big retailers, and brands like Hulu. 

The message: your money is in good hands with Meta. General trust-building based on how much Meta spends on computing power, and how smart their models are, etc.

Then, Meta went hard on AI.

The future of marketing is AI. Not a hot take, since “the future” of most things is (currently) AI. 

But Meta really doubled down on how every aspect of their service will be reinforced with artificial intelligence. This includes campaign optimization, placement selection, creative generation, and audience targeting.

Oh, and they want you to use ASC+.

ASC+ stands for Advantage+ Shopping Campaigns. A hands-off, automated campaign setting that lets the AI take over and maximize results. 

People are generally dubious of these due to their tendency to go for low-hanging fruit, i.e. middle and bottom-funnel audiences that would have probably made a purchase anyway. 

But we digress. 

Meta kept repeating that users who went from 30% to 70% budget in ASC+ saw great results. “Please use it” is what we heard. 

Also, reels are it.

Peter Czepiga, founder of Flighted.co, was at the summit and reported that Meta is going hard on Reels. 

People spend about 50% of their time on Instagram in reels, and Ads that use a 9x16 placement and adhere to Reels safe zones have a 35% lower CPA on average in their internal tests.

Meta’s performance 5.

Meta shared a set of best practices they recommend for success on their platform. 

Of interest (sourced from Daniel Pearson from @growwithbamboo):

• Simplify your account structure

• Ashvin Melwani-from-Obvi’s takeaway is that audience overlap will be penalized more than it used to. 

• Do your conversion lift studies. 

And now for DTC…

Taylor Holiday and many other DTC operators have long had to deal with customers asking them to optimize for 3rd party metrics like GA4 last click, or some Triple Whale number. 

The issue is, this simply isn’t possible without connecting these platforms to Meta so you can optimize for the selected metric in-platform. 

At least, it wasn’t possible. 

To Taylor’s and the DTC world’s excitement, Meta rolled out the ability to integrate and optimize your Meta campaigns for 3rd party analytic results.

This has serious implications for Meta’s incrementality-based advertising. 

Incrementality is the ad world’s north star metric. It means finding out how much net new demand an ad or platform is driving for you, rather than simply harvesting (or taking credit for) existing demand. 

An example: 

Say you own a corner hardware store in a small town. You hire a local kid to hand out flyers with a 10%-off coupon on a street corner. One day, a local man drives past the store, sees your store, and remembers he needs to pick up a hammer for a home project he just started. He parks, gets out of his car, and is handed a flyer with a discount by the kid. 

He happily takes the flyer to your store and receives the 10% discount, even though he already intended to buy a hammer from you anyway. Not knowing any of this, you happily give the discount and assume the flyer kid promo was the thing that helped make the sale for you. 

To bring this back to the real world, this is often why Media Buying Gurus recommend turning off 1-day view attribution on Meta. The assumption is that these are “fake” (that is, non-incremental) sales that the platform is taking credit for. 

Currently, to figure out an ad’s incrementality, brands have to run conversion lift tests. Essentially, they let an ad run on a test group of users, while hiding from a control group. The difference in conversions is equivalent to the ad’s impact. But this is a relatively clumsy, correlational method to figure things out. 

Now, with 3rd party integrations, the amount of data available to train Meta’s models is about to soar. 

Takeaway: Meta is the big dog when it comes to advertising, especially DTC advertising. While this year has been difficult (to say the least) for marketing on the Facebook and Instagram platforms, Zuck and company are clearly focused on continuing to improve things. If they can crack the incrementality code for consumer brands, it will be a massive win for both DTC operators and Meta itself.

The Definitive State of eComm (by Sean Frank) / You’re Not Alone.

Sean Frank from Ridge was at both the NYC and SF Meta summits. Over the course of those two weeks, he spoke with over a hundred founders, including leading brands that represent billions in gross median value across eComm. 

Great sample. 

Luckily he took some notes of everything he heard and shared a series of insights on the state of DTC. 

Let’s jump in. 

1. Sales 

Top of mind for everyone. 

On average, most brands are flat on revenue YoY but spending less, prioritizing profit, and trying to dig themselves out of the funding hole.

2. The bell curve

According to Frank’s research, about 10% of brands are growing a lot, i.e. 50% or over, with the fastest growth measured in supplements or classic CPG. These outliers are also spending the most and have avenues for additional funding. 

Next, about 40% of brands are shrinking between 10-33% YoY, possibly due to inventory miscalculations. 

Which leaves about 50% of brands slightly down, flat, or up. Not much spend, nor growth here, a lot of cutting agencies and people. In fact, Sean found that about 20% of brands have let 10% of the people go, while more and more brands push for a return to the office. 

3. Funding

Ampla, a popular lender in eCommerce due to its preferential rates, is struggling financially and looking for a buyer. As a result, they’ve tightened or frozen credit lines, leaving many of the brands they courted out in the cold. 

Frank says this created a vicious cycle of missed payment orders, a lack of funds for inventory leading to less sales, meaning less money and so on.

Ampla’s struggles seem to be part of the larger DTC hangover since the death of the ZIRP era. Nevertheless, new lenders like Wayflyer have stepped up, although not exactly with the intent to fill the gap left by Ampla. They turn down 90% of people, says Frank, and only lend to those who don’t really need it. 

Ironic, but traditionally banks have usually operated this way. 

As a final point, VCs are cold on DTC unless you’re in healthcare, wellness, or beauty. For everyone else, profitability is the new sexy, not just growth. 

4. Meta and AI

Frank says that, without a doubt, Meta has been more unreliable this year. 

If you’re in the DTC Twitter space or read our newsletters, you’re aware how much debate Meta’s ad performance has sparked this year. If anything, this supports Frank’s point. 

His take: it’s because we’re in the early days of AI implementation and it’s going through growing pains. 

However, Meta enabling 3rd party data integration is great news for the development of its AI, and Frank is bullish on Meta’s AI. 

He tips his hat to TikTok but reminds us that the volume is still peanuts compared to Meta. The biggest brand he knows is doing $130k / day there, i.e. 1/10th of their sales. 

5. Morale

After the bull run of the last decade, DTC has had a correction and this new, sustainable normal needs some getting used to. Many have had to make hard calls. 

His takeaway: 2024 might be rock bottom for DTC. Which means there’s nowhere to go but up. 

But wait…

Could it be? 

Yes, it's Taylor Holiday adding to the story with his usual data-driven gusto. 

And the results:

Top-line growth across the board. Profit? We’ll see.  

The bottom line is that money is still coming in, but it isn’t bountiful. Unless you are in some of the lucky industries (health, wellness, and beauty), only operational excellence will separate the winners from the rest. 

Takeaway: If you’re feeling down as a DTC founder, you’re not alone. There are plenty just like you, and you’ll find them at these summits. Better times might be coming, though. Buckle down.

Should You Even be Worrying About Incrementality?

With all this talk about incrementality-based advertising, we thought we’d finish with a look at when and why you should even worry about the metric. 

Olivia Kory is building Haus.io, where they help to automate marketing incrementality testing. She explains that it only makes sense to hire Haus when your business can’t untangle which of its channels is driving growth. 

For instance, you might be growing so fast organically that you can’t just turn off paid to see its impact on the top line. Or you are an omnichannel business selling across Amazon/retail in addition to DTC, and there are halo effects at play (e.g. someone seeing your products at Costco, then later buying online). Olivia typically sees these problems occur somewhere between the $5-10M annual ad spend. 

If your brand is small and nowhere near these “problems”, you don’t need to worry about incrementality as much, at least when it comes to your tech stack and the purchasing of expensive SaaS to help you sort all of this out. 

That doesn’t mean you shouldn’t think about it.

 Remember the shop owner and the flyer boy. 

Sean Frank (him again), notes that this can be the problem with most loyalty programs in this thread. 

The point of stuff like loyalty, or discounts, or coupons, or referral programs should be to drive net new sales. The problem is, it’s very difficult to deliver these perks to the folks who need them to make the sale, rather than to the people who would have bought anyway. The former means you are landing new customers and growing your user base. The latter means you’re handing out money for nothing. 

Takeaway: Discounts, incentives, and advocacy/loyalty programs are all entrenched in the fabric of DTC at this point. If you’re a smaller or medium-sized brand you probably don’t need sophisticated tech to help you tease apart incrementality, but you do need to understand it on a fundamental level. Are you building up your consumer base or simply giving away your profits? 

Quick hits

• Apple is releasing a new ad performance and attribution kit after the previous one (SKAN) failed to satisfy users. 

• Instagram rolls out new partner ad functionality.

• Wondering what to ask when gathering zero party data? Knocommerce recently released a spreadsheet of 200 post-purchase survey questions.

• An article on why DTC brands need retail partnerships to land VC funds.

• Related: VC deals in e-commerce dropped significantly in 2023.