“Performance marketing will play an important role to drive growth, but only after the “brand” is dialed-in. 

I recently happened upon a Tweet thread by Faheem Siddiqi. If you don’t follow Faheem, maybe you should.
It’s not often you see such actionable information being delivered by a Facebook “insider“. Faheem used to be in the Client Partnerships division of consumer products and e-commerce at Facebook.
He’s also managed or directed over $250 Million in ad spend on Facebook. So he’s got the cred!
In this article, I’m going to show you an exact thread that he made…with a little commentary noted as such.
If you’re advertising on Facebook, THIS is the kind of data that you need to be absorbing.
It’s not the pablum spewed in the many groups on Facebook. So here we go.

1. After observing $250M+ in ad spend on @facebook, I’ve noticed that DTC brands that scale very quickly have a few things in common:

  • High margins & high AOV
  • Business model is focused on retention
  • Cross-border activation is simple
  • Product is a consumable & impulse buy

Takeaway: BUILD A BRAND!!!

2. Metrics observed:

  • 70%+ GMs (varies across sectors. Beauty: 80% while food/bev: 30-40%)
  • $100+ AOV (non subscription)
  • Retention (subscription): 1M is 85%+, 6M is 50%+
  • LTV/CAC: 4X+ (plz identify your payback period (PB).

Marketers love LTV but rarely discuss PB

 

Takeaway: The days of slinging crap on Facebook are just about over. Sure, there are some people who are doing well. But their hackery is short-lived.

The average non-branded, non-unique, no audience operator doesn’t have a future on Facebook.

 

Brands are striving to reach the $100.00 AOV KPI which allows profitability given the current volatility and CPA costs.

“Data = $$$!”

  • Conv rates on site (all traffic in GA): 3%+. (Note: very high AOV items don’t often see 3%+. Price and volume trade-off is a thing).
    Ad metrics on FB/IG:
  • CTRs (link-through): 1%+
  • CPMs: <$10
  • CPCs (link-through): <$1

3. High margin & AOV:
Strong margins have to be built into pricing strategy. All else being equal, most brands play oCPM & CAC game on FB/IG.

There isn’t anything wrong w/ that as long as brands do it responsibly & not lose sight of profitability. Performance marketing can get addicting.

4. Business model focused on retention.

Best brands prioritize retention. New customer acquisition (NCA) can get expensive fast. Ensure a solid retention program is in-place. This will help brands become profitable faster, ensure healthy LTV/CAC ratio & impact payback period.

5. Cross-border activation.
Smaller products that are easily shippable overseas make it easier to diversify against single-channel-market risk.

There was a period in time, where CPMs in Australia were 1/3 of what they are in the US. GDP per capita in AU is similar to US.

“But In The Facebook Groups We’re Told About Methods That Make Scaling Easy!!”

6. Impulse buy (or easy gifts for others). Shorter sales cycles. If the consideration phase is long, you end up spending more money on retargeting, messaging, creative, etc. which drives the cost up.
Attribution is also (somewhat) easier since sales can happen within 1-day click window.
7. The golden era of DTC brands scaling quickly on FB was 2013-2017. Auction dynamics have obviously changed as competition has increased. Many successful DTC brands became relevant during this time frame.
8. The next gen brands that are now entering the market, however, will find it difficult to achieve those advertising and DR metrics.
They might achieve components of it in the early stages but it’ll be hard to sustain once they increase ad spend.
9. The next gen brands will have to actively think of unconventional ways to become top of mind for consumers. They will prioritize the “brand” above all.
It will be defined by digital experiences, customer experiences, product quality, etc. etc. This will help create a moat.
10. Performance marketing will play an important role to drive growth, but only after the “brand” is dialed-in.
Performance marketing & particularly @facebook & @instagram will be used to amplify the “brand.”
11. Circa 2013-2017, a strong growth team could scale a DTC brand. The “brand,” however, was not top priority.
It was about maximizing CAC or ROAS intra-day. Everything else was secondary. There was an arbitrage.
That no longer exists. You have to think creative-first.
12. How will brands in 2019 and beyond scale? That’s a topic of discussion for another day. (Faheem teased us…guess you’ll have to follow him on Twitter to see when he drops that nugget)
Notes:
  • Most brands consider revenue over time as a function of LTV from customers. It’s simple math.
  • Ideally they do GP analysis to better understand their EBITDA/GP ratio; esp if they’re not DNVB & operate as a retailer. GP is better.

    Retention: correct for non-subs brand.

And here’s where the separation occurs. You’ll now need to focus on building strong communities around your brand. So much opportunity to poach markets will be seen as ad slingers who don’t build communities can be absorbed.

  • Building communities is critical to performance marketers
  • “Impulse” can have a broad definition. Impulse above is referenced as an “easy decision” or a no-brainer. If the “brand” is great, then ppl will come back to buy again and again which influences LTV/CAC, reduces PB period if first sale CACs were high.
  • The above metrics are not benchmarks. There are plenty of great brands that don’t have those numbers & were able to achieve success on the platform by expanding into different categories, had fantastic retention, launched into new markets, etc.

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Takeaway Learned?

Well, first and foremost, get your nose out of these Facebook groups and start interacting with major players who are working the platforms for major advertisers.

You are missing out on the real actionable data and ever worse, you are missing the breadcrumbs as to where Facebook is headed and what they are looking for from its advertisers.

All of us are pretty much seeing that business as usual is not business today on the social platforms. The game has forever changed.

It’s tilted towards favoring brands that are cultivating communities and who are NOT going for the immediate sale to cold audiences.

We all know people who are making money doing just that, but the number is becoming smaller and smaller. Hackery will not survive.

If brands want to thrive in the next wave of social advertising, she added, then we (as marketers) need to return to our roots and examine conversion actions as only one piece of the larger picture. By shifting the initial campaign goal from CPA (conversions) to CPM (impressions), marketers can build a foundation for a more engaged, qualified audience pool with more efficient ad spend. Marketingland

Like it or not, we’re now in a machine-learning based environment. And that means your hackery will not work for long.

 

It might even get you banned. If you’re serious about building a long-term brand, you have to act like the USER is first in mind. Conversions CAN’T be in the forefront any longer.

 

Unless you are satisfied with short term results.

You will now need to build engaged communities and seek to educate, entertain and QUALIFY prospects BEFORE going in for the sale.

And you’re going to have to do this in a true omni-channel manner supported by quality content.

Obviously, this will relegate many ecommerce operators to the scrap heap. That’s fine. Just make sure it’s not you!

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