Meta's Andromeda AI, The Return of Reach, and Amazon's Profit Crisis

Plot twist: as Meta's AI gets smarter, marketers are getting... simpler?

While Zuckerberg's newest algorithm (named Andromeda, because apparently "terminatorish" names are in) promises to revolutionize ad targeting, some of the savviest brands are throwing it back to the banner ad era. You know, when "reaching eyeballs" was the height of marketing sophistication.

Meanwhile, Amazon sellers are discovering that doubling their revenue somehow equals the same profit – or less. It's like a math problem where everyone loses... except Amazon.

This week, we're diving into Meta's AI revolution, the surprisingly profitable return to reach campaigns, and why Amazon's aggregator gold rush has turned into a cautionary tale. Get comfortable – the future of digital commerce is getting weird.

Today:

• Meta’s Andromeda Announcement

• The Return of Reach Campaigns

• Amazon’s Profit Squeeze

• Quick Hits ← Check our Google’s new open source MMM

Meta's Andromeda Announcement: What You Need to Know

Meta unveiled Andromeda this week, a complete overhaul of its ad delivery system that promises to revolutionize how ads are served across its platforms. Or least that’s what they claim anyways. 

According to Meta's engineering blog, the new system can process "tens of millions" of ad candidates in milliseconds, delivering impressive early results:

• 6% improvement in ad recall

• 8% boost in ad quality for selected segments

• 22% increase in ROAS for advertisers using Advantage+ creative

• 7% increase in conversions for businesses using AI image generation

The system is already processing massive volume - Meta reports that over one million advertisers are using their AI tools to create more than 15 million ads monthly.

Industry experts are taking notice. 

Nate suggests three key adaptations for advertisers:

1. Increase creative volume to feed the algorithm

2. Embrace broader targeting

3. Double down on post-click performance

This all sounds nice, but As with previous major updates to Meta's ad delivery system, advertisers should probably expect some…volatility, to put it nicely. 

The introduction of Andromeda's "hierarchical indexing" system represents a fundamental change in how ads are matched with users, which could explain the high variance in performance some major advertisers are reporting.

Takeaway: While Meta promises significant improvements in ad performance with this update, expect turbulence in the short term as the system stabilizes. 

Smart advertisers will prepare for this transition by increasing creative volume and focusing on post-click metrics, while maintaining sufficient budget flexibility to weather potential performance swings.

The Return of Reach?

If you’re a digital marketing OG from the early days, you probably remember the game was “maximizing impressions” - getting your banner ad in front of as many eyeballs as possible. 

Then came the age of sales attribution, where metrics like ROAS and CPA became king and every ad dollar had to prove its worth in immediate sales.

Now, as CAC skyrockets and more and more brands go omnichannel, digital marketers might be rediscovering the value of reach. 

Blake Driver’s example is a good one: a reach-focused campaign delivered a 5% revenue lift (+$161,308) despite showing zero ROAS in Meta's attribution window.

David Herrmann, who manages several major brands, also argues for a more balanced approach: 

"We prioritize one thing and one thing only: volume. You're getting so focused on the structure that you're losing sight of the prize - creating memorable moments in feeds/stories for potential customers."

The shift makes sense when you consider 4 key factors:

1. About 95% of your audience isn't ready to buy right now

2. Platform algorithms optimizing for conversion objectives increasingly target middle and bottom-funnel audiences. 

3. Last click, short window attribution favored by digital marketers misses a lot of nuance in the buyer journey

4. Selling in multiple channels means less certain attribution as well as a bigger need to drive top of funnel awareness

Takeaway: While conversion campaigns remain important, the rising costs of MOFU targeting are pushing brands to rediscover reach. 

The key is balance - using reach campaigns to build brand awareness efficiently while maintaining performance marketing for ready-to-buy audiences. Those who master this mix are seeing significant lifts in overall revenue, even when traditional ROAS metrics don't tell the full story.

Amazon's Profit Squeeze: Why Brands Are Feeling the Pinch

Why has interest in Amazon businesses collapsed? Sean Frank, CEO of Ridge Wallets, provides a sobering analysis of the platform's challenges:

1. Market Reality Check

•    Overall ecommerce valuations have plunged

•    Example: Solo Stove dropped from $2 billion to under $100 million

•    Amazon marketplace seeing only single-digit growth

2. Declining Profitability

•    "Even if your revenue has doubled since 2021, your EBITDA is most likely flat or down"

•    Amazon employs "200 MBAs dedicated to inventing new fees"

•    Basic functions like customer service now require additional payments

3. Platform Limitations

•    No true customer relationships

•    Much lower lifetime value versus direct channels like Shopify

•    Zero network effects for cross-selling

•    Constant risk of AI-driven account bans with limited recourse

These structural issues are hitting sellers' bottom lines hard. 

Michael Patrón's (he is an 8 fig Amazon seller) data shows average sale prices up 19.9% over the last 12 months, yet profits are declining: "Sellers are making less, consumers are paying more, and Amazon is making more profits without improving services."

The platform's challenges have rippled through the broader ecosystem. 

Amazon aggregators, which raised over $16 billion (mostly in 2021) to buy and scale Amazon-native brands, are now largely defunct or pivoting. Market leader Thrasio, once the poster child of the aggregator boom, is reportedly preparing for bankruptcy. 

The "aggregator" term itself has become toxic, with surviving firms distancing themselves from the model.

Takeaway: Amazon's increasing fees and structural limitations are forcing brands to rethink their channel strategy. 

While the platform remains important for discovery and convenience, Amazon seems dedicated to squeezing every possible dime out of its brands and sellers, while maintaining structural limitations that impede longterm value creation for brands. 

Quick Hits:

• Google releases Meridian, an open source marketing mix model (MMM). 

• Affiliate and referral platform Social Snowball suffered a black hat attack last week, with someone impersonating former employees in emails to their clients.

• Meta and Dropbox are preparing to leave Delaware and move to Texas.

• Barry Hott explains Meta’s category restrictions.