Q2: META is Dominating the DTC Airwaves... (Week 10)

Meta Ads Issue, Meta CPMs Plummet, Urgency, and some Macroeconomics

Hello Q2 👋

We welcome you. Here’s to a better quarter 🍻. Q1 was largely uneventful with a mixture of low (or no) growth in overall budgets and some funky Meta ad platform issues going on (I’ll get into it below).

March Madness is now a thing of the past; the Final 4 is solidified: UCONN (#1), Purdue (#1), Alabama (#4), and NC State (#11). NC State has been a huge surprise. They’ve been on an absolute tear, with a 9-game win streak that started in the ACC Conference tournament. During this time, they’ve beaten Duke (#4 seed) twice, UNC (#1 seed), and Marquette (#2 seed). Not bad for a team that only won 2 of its previous 9 games.

Nc State Yes GIF by NC State Athletics

DJ Burns - unstoppable force.

1. If Your Meta Ad Performance Tanked in Q1, this is a MUST READ 🚨

I've identified a possible source of a perceived DROP in platform "performance" over the past 1.5 months on Meta ads.

💥 It seems that Meta is NOT processing as many iOS purchase events as it should be, even though the events are occurring & being sent back to Meta💥

Before rushing to judgment and acting, you need to determine if this attribution issue is immediately impacting your business.

THERE ARE 2 POSSIBLE OUTCOMES HERE:

1. Your brand performance is NOT impacted.

2. Your brand performance IS impacted.

I documented a case study and data decision-tree that will help you:

A) Identify and visualize if this is an issue affecting your brand right now.

B) Determine if this attribution issue is causing overall negative business impact for you.

2. BIG SURPRISE: Meta CPMs Plummet 📉

One of my 2024 predictions was that Meta’s CPMs would show YoY increases every quarter. That’s how they were trending heading into the New Year.

Well, that trend pivoted fast. At least in the data set we have at Avenue Z which includes over 1B impressions in Q1 alone.

Meta CPMs are DOWN 17% Q1 YoY ('24 vs '23)

Why?

Perhaps a combination of:

A) Increase in Ad Inventory Placements

B) More DAUs

C) Decrease in Ad Spend on the Platform

Well, we know Meta DAUs are on the rise...

BUT if we dig into (C), the China/Temu effect might explain things the most.

China represented 10% of ALL META AD REVENUE in 2023... China accounted for roughly $13.5B of Meta’s ad revenue of $135B and Temu, the largest advertiser on Meta, spent $2B on Meta ads (accounting for ~1.5% of all of Meta’s ad revenue).

Is China/Temu ad spend on the decline? This little trend line here gives us some reason to believe so.

Temu’s Meta ads library gives us reason to believe they’ve cut spend.

Temu's Meta ad library is showing a decline in live ads, which is basically a direct correlation to ad spend.

I doubt they had a 180 degree pivot in strategy to launch half the number of ads per media spend. So I'm guessing Temu is pulling back ad spend, which lessens pressure on the auctions.

In further support of this, 3 of our top spending clients also saw a decrease in YoY spend in Q1, and their CPMs all also decreased.

Decline in CPMs, if this holds steady, is a great sign for marketers and brands on Meta. However… might not be such a great sign for $META Q1 earnings 👀

Not worried at all for Meta or $META, but nonetheless- keeping an eye on this!

3. Urgency is Everything.

The large don’t eat the small;

The quick eat the slow.

Came across this quote this weekend and it struck a chord.

We’re living in a fast-paced, ever-changing world like never before. Agility and speed to execution are the traits that will highlight whether or not a business thrives or fails. The needs and demands of our customers and peers are changing in response to this. If you stubbornly stick to your long, thought-out roadmap without pivoting when market conditions change, you’re in for a rude awakening.

The sheer size and weight of a business will not outcompete a small, agile, speedy team that adapts to the industry at warp speed.

Urgency is the name of the game. Set goals, set deadlines, and enforce them. You have to keep the ball moving forward.

0-Growth World: How much longer?

Q1 2024 = 0 YoY growth on consumer spend (red line in image above).

We're in another flat year (boring), but this was all expected. Last year (light blue line in image above) and the second half of 2021 (dark blue line in image above) were also 0-growth years. We’ve been in this strange place for 21+ months now, but at least it’s stable.

Until we re-enter a favorable growth environment (as dictated by the Fed and to an extent, the Treasury), I don't expect to see anything much different than this.

Once the Federal Reserve (Jerome Powell) cuts rates in June (expected), it'll send consumer confidence and spend higher. However, what seemed like an almost foregone conclusion that rates would cut in June, the odds are now reduced to a 50% chance of rate cuts in June. This would be troubling and further stall our return to growth.

Beyond the Fed, another thing to look out for is Secretary Yellen and the US Treasury. The TGA (Treasury General Account) is basically the checking account for the Treasury, which is held at the Federal Reserve.

When the TGA grows, so does the spending power for the Treasury, directly increasing liquidity for the markets and economy.

Right Now:

- The TGA is at $800B in fresh powder

- Tax season is upon us & could increase TGA to $1T+

- Target for July is $750B, but Yellen could revise that even lower...

So, the US Treasury could unleash substantial monetary stimulus into the economy and public markets. This is ultimately not entirely clear, but certainly a possibility on the horizon (albeit not immediate horizon).

This would be a huge tailwind for commerce at large.

You can read more about the argument for and against the Treasury economic stimulus in the hyperlinks.

So, between Powell and Yellen, the consumer is bound to improve. If the stars align and both are on our side, we could be in for a fun growth environment.

Is this the calm before the storm? (a good storm)

Perhaps. Only time will tell. But at least we do have a glimmering light at the end of the tunnel.

What I’m Listening to 🎧

Beats of the Week: Kiko Franco Live From Dubai

Kiko Franco is another up-and-comer. He’s now the 3rd Brazilian DJ I’ve featured in my newsletter across 10 newsletters. Brazilian DJs have really been taking the electronic music scene by storm in the past year. I saw him perform in Miami during Music Week a couple weeks ago and it’s safe to say that he’s a star in the making. He’s released some notable remixes of popular songs you may even know. Check him out- no better place to start then this cool live mix he did in the middle of a Dubai desert.

I welcome all feedback. Good, bad, everything in between.

Hit reply, and let’s hear it! 👂

📧 Share your thoughts or what you want me to cover next!

Yours truly,

Jonathan Snow

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