The DTC landscape is splintering.
→ Big brands are pulling back to protect margins.
→ Scrappy DTCs are spending more (often because they have no other choice.)

Nothing is easy right now, but the choices are buckling down and fight. Or die.

This edition breaks down:

• Developing second-order impacts from tariff policy

• Why top-of-funnel campaigns are quietly making a comeback

• How Meta’s new attribution functionality may expose over-reported ROAS

• The creative production system that’s helping brands scale profitably, even as costs rise

Plus: what to watch in macro trends, incrementality, Reels performance, and why reshoring is a trap for most operators.

Let’s dive in.

MACRO

🛑 Big Brands Are Pulling Back

Ramp’s April data shows:

• 54% of businesses froze or reduced ad spend.

• 61% of retailers cut budgets. (Eric Glyman)

Why? Larger brands are reducing spend in top-of-funnel and brand-building channels (TV, print, out-of-home). They have cash reserves and are shifting into margin defense mode, bracing for softer demand and rising costs.

🔥 Small and Mid-Market DTC Brands Are Spending More — Out of Necessity

• Varos and Statlas report YoY ad spend up 8% among DTC brands.

• Meta CPMs rose 10%. (Dave Rekuc)

• ROAS declined.

• New customer revenue down 5%, even with increased discounting.

• Average discount depth increased to 10% of order value.

Why? Smaller brands are more reliant on performance marketing.
They lack diversified revenue streams or cash buffers, so they’re pressing harder on paid media to maintain growth and cash flow, despite diminishing returns.

In other words:

• Big brands are playing defense.

• Small brands are taking bigger swings just to stay alive.

⚠️ Supply Chain Volatility Persists

Brands hoping to ease margin pressure through cheaper logistics have found temporary relief. Container prices have collapsed from pandemic highs — one operator recently paid just $400, down from $22,000 at the peak (Steven Borrelli).

But operators are already warning: when U.S.–China trade talks resume, port congestion could snap back to 2021 levels or worse.

And the 145% tariff rate applied to many SKUs remains a structural threat to margin health.

Today’s freight cost relief is likely a temporary reprieve, with a bigger storm forming on the horizon. Plan accordingly.

🏭 The Reshoring Trap (Sean Frank’s Key Insights)

As logistics costs and tariffs squeeze margins, many brands are considering domestic production as a potential escape hatch. But as Sean explains, reshoring often creates more risk than relief:

• Country of Origin laws in the US are vague and punitive.

• Even 90% USA-made products often can’t qualify as “Made in USA.”

• Legal risks are real and costly. (Olaplex settled a $5M lawsuit for a minor compliance issue.)

• Big lobbying industries get exceptions. Small brands don’t.

• Other countries (Germany, Japan, Italy) offer far more flexible origin rules.

For many DTC brands, reshoring adds legal and financial risk without solving the underlying cost challenges. Without legal resources and significant margin buffers, domestic production becomes a liability, not a solution.

📝 Macro Takeaway

• Big brands are retrenching and defending margins.

• Small brands are pressing harder on paid media to maintain revenue, despite worsening returns.

• Freight costs are dropping before a new huge supply chain problem emerges.

• Reshoring is mostly impractical for brands without scale and legal clout.

For most, revenue flatlining is now the baseline. Strategic pivots, not brute-force spending, will define the next growth chapter.

TRENDS

👉 The Return of Upper Funnel: Why TOFU Campaigns Are Getting More Love

For years, the DTC media buying mantra has been simple: Conversion first. Optimize for purchases. Cut anything that doesn’t drive immediate revenue.

But cracks are now forming in that approach, and some sharp operators are taking a second look at upper funnel (TOFU) campaigns.

👁️ A Surprising Lift from “Useless” Traffic Campaigns?

Jessie Healy flagged a case that challenged conventional wisdom:

• One DTC brand ran traffic campaigns expecting little value beyond cheap impressions.

• Direct conversions? Zero.

• But ASC (Advantage+ Shopping Campaign) ROAS improved significantly while the traffic campaigns ran.

Historically, most media buyers would’ve paused these campaigns instantly.
But Meta’s recent limits on cold audience targeting have changed the equation.

"A year ago, I’d have said shut it off," Jessie noted. "But now? I’m not so sure."

🔎 What Other Media Buyers Are Are Seeing

Several experienced buyers jumped into the debate:

Phil Kiel explained why ignoring direct conversion results misses the bigger picture:

• Traffic campaigns can lower CPMs, improve frequency balance, and support overall account resilience.

• Lift tests often reveal that conversion campaigns perform better when traffic campaigns feed the funnel, even without direct attribution.

Sarah Levinger added deeper psychological context:

• Traffic campaigns help prime identity fit (“Do I see myself in this brand?”).

• They build emotional coherence, turning scattered ad impressions into a meaningful narrative.

• And they feed Meta smarter signals, improving downstream conversion targeting.

Calvin Carr agreed, but with an important caveat:

🧠 Why This Shift Matters

This isn’t just a tactical adjustment. It signals a broader trend:

• Meta’s cold audience signals are degrading. Brands can no longer rely on conversion-only campaigns to find and grow audiences.

• TOFU campaigns now teach the algorithm who to convert — not just when.

• Incrementality testing is becoming mandatory. Without controlled lift tests, you won’t know if upper funnel spend is working or wasting budget.

If your performance campaigns feel like they’re shrinking or recycling the same audience pool, the problem may not be your ads. It may be your missing upper funnel.

📌 Takeaway: TOFU Is Back In Style

✅ Test traffic or video view campaigns to prime your funnel.
✅ Measure with incrementality tests, not last-click attribution.
✅ Audit your broader marketing mix — if other channels are already doing the priming, paid TOFU may be optional.
✅ Accept that 2025 media buying is as much about shaping signals as driving sales.

TACTICS

Incrementality, Attribution & Creative Systems

As acquisition costs rise and platform algorithms evolve, the brands seeing sustainable success are rethinking how they measure performance and produce creative.

Let’s dive into 3 major developments shaping the next wave of paid growth strategy.

1️⃣ The Silent Shift: Meta’s Incremental Attribution Reporting

Meta quietly rolled out a new Incremental Attribution setting in Ads Manager this spring.

Unlike traditional attribution windows (1-day click, 7-day click, 1-day view), this model estimates the incremental impact of ads, filtering out conversions that would have happened anyway.

Why it matters
According to Barry Hott (full tweet thread here), early data shows that incremental results usually sit somewhere between 1-day click and 7-day click. Crucially, view-through conversions (especially for warm audiences) are often massively overstated in default reporting.

Barry’s warning:

• Retargeting and warm audience performance may have been artificially inflated for years.

• Brands and agencies relying on 7dc/1dv (7-day click, 1-day view) attribution without audience exclusions will likely face a major reality check.

Barry also shared examples where accounts with 7dc/1dv settings showed strong performance…until incremental reporting revealed the real results were 30-50% lower. He breaks this down in detail in the above YouTube explainer.

Reminder: Incremental reporting shifts credit toward true prospecting performance. Brands over-reliant on retargeting and warm audience spend will need to rethink where and how they allocate budget.

2️⃣ Placement Evolution: Meta’s Generative AI & the Rise of Reels

On Meta’s Q1 earnings call, the company revealed that its new generative AI ad recommendation model improved Facebook Reels conversion rates by up to 5%.

David Herrmann was among the first to spot this trend. As early as Q1, he noticed Reels spending surging in accounts he manages, often delivering the highest CTRs across placements—even when ROAS was inconsistent (full breakdown in his thread).

Why it matters

• Reels is becoming a core performance placement, not just a branding channel.

• Advertisers without a Reels-first creative strategy are already falling behind.

• Catalog feeds connected across campaigns are more important than ever, as Meta’s AI leverages product-level data to optimize creative recommendations and delivery.

David’s advice is simple: “If you’re not connecting your catalog to every ad, you’re missing out.”

3️⃣ Creative Systems: Volume, Diversity & the Discipline of Testing

While measurement and media buying are changing, creative production systems have become the hidden edge for scrappy brands.

Ron (@ron_ecomm) shared a recent case study where his brand:

• Increased ad spend 4.3x YoY

• Reduced CAC by 17%

• Scaled from 70 to over 400 active ads

His full strategy is outlined in this Twitter thread.

Ron’s playbook:

1. Quantity first — produce volume before refining.

2. Diversity second — test a wide range of concepts and formats.

3. Quality third — emerges naturally through iteration.

His team seeds 100 packages/month to creators, using that content to fuel creative volume and diversity.

Why it matters
Many DTC brands:

• Lack the volume of ad testing required for Meta’s ASC and Advantage+ algorithms to thrive.

• Over-focus on creative perfection, under-invest in consistent production.

• Forget that quantity → diversity → quality is the proven progression.

Ron’s reminder: “Uploading shit ads is way better than not uploading at all.”

🔎 Takeaway: Mastering Modern Paid Growth

The old playbook
❌ Chase reported ROAS (often inflated by view-through conversions).
❌ Retarget heavily.
❌ Obsess over perfect creative before launching volume.

The new playbook
✅ Use Incremental Attribution to understand real ad impact
✅ Exclude existing customers from prospecting campaigns where possible.
✅ Adapt to Reels and Meta’s AI-driven placements 
✅ Build disciplined creative systems:

Brands that align their measurement, media buying, and creative systems will scale more predictably and avoid the costly false signals that have plagued legacy paid growth models.

Quick Hits

• Clever AI content hack: Make the different models FIGHT EACH OTHER

• Unprecedented! Amazon is now redirecting users back to DTC sites for items Amazon doesn’t sell

• Google Studio can now watch your ads…and tell you how to improve them

• Google PMAX releases comprehensive channel reporting and visualization

• FREE WEBINAR: The New Cost War: Navigating Tariffs & Surviving the Margin Squeeze