DTC advertisers, once reliant on Facebook and Instagram, are looking at different—and less expensive—marketing platforms

“A lot of people are in this real trial-and-error period,” said one founder.
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Grant Thomas

· 5 min read

Before Naomi Blackman co-founded the apparel brand alder, she helped other DTC clothing brands find new customers using Facebook and Instagram. “It was really a cheap place to acquire customers,” said Blackman, who began advertising alder on those same platforms in 2020.

This year, though, it’s a different story. In some cases, Blackman said, the cost of acquiring a new alder customer through a digital ad has nearly doubled compared to a year prior.

“Obviously, it’s a stressful situation for a lot of young brands,” Blackman said.

Other DTC brands are experiencing the same sticker shock. Marketers say they are seeing rising digital ad rates, compounded by iOS privacy changes that have hurt the effectiveness of Meta advertising, just as economic concerns about inflation and consumer spending intensify. The confluence of factors is prompting DTC brands to experiment with other marketing channels.

“A lot of people are in this real trial-and-error period,” said Laura Burget, co-founder of skin-care brand Three Ships. “They’re just trying out so many different things to see what sticks.”

Meta misfortune

Rising costs appear to stem from several factors. Chief among them are Facebook and Instagram, which have seen “gigantic headwinds,” according to Polly Wong, president of Belardi Wong, an agency whose 400+ client base is ~90% DTC brands like Allbirds. CPMs on Meta platforms for its clients are up an average of 19% YoY through September.

That surge is partially due to simple supply and demand. On Meta platforms, increased competition for ad space in the early days of the pandemic drove up costs by as much as 50% at some points, Wong said.

Meta ads are also performing less effectively thanks to last spring’s iOS 14 privacy updates that have made it harder to target customers as precisely. Wong said both platforms’ performances have been “completely diminished,” and some brands we spoke to said those iOS changes ushered in a period of considerable challenges. Wong said the return on ad spend for its brands on Meta platforms was down 23% year over year in January.

“The efficiency has gone down and the visibility into your marketing numbers has gone down, so it means you don’t necessarily know what’s working,” Three Ships’ Burget said. “You’re having to spend more to be able to determine what’s working.”

Wong said some of her clients have cut back spending on Meta, while others, including Three Ships, have kept their spend flat. 

Rising rates

Marketing costs are increasing on other channels too. On connected TV platforms, CPMs have increased around 10% year over year, said Ben Speight, EVP, director of client services and strategic initiatives at the performance marketing agency Lockard & Wechsler Direct.

Influencer rates are also becoming pricier. Both Three Ships’ Burget and alder’s Blackman said rates for working with influencers have climbed, which could partly stem from creators fighting to be paid higher rates. (The typical cost per click for influencers comes in at around $10, compared to around $2 on Meta platforms, Burget said.)

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“It’s five times more expensive, and we don’t get five times better conversions or performance out of it,” Burget said.

That has led to a lessened investment in influencer marketing, at least among some DTC brands. A year ago, influencer marketing was responsible for about half of Three Ships’ annual marketing budget. This year, Burget said, it’s down to 10% of the brand’s $1.25 million marketing budget.

Thanks, TikTok

As advertising costs increase, DTC brands are eyeing new channels, and high on the list is TikTok. Wong said she’s seen some spending shift to the platform, and clients from home-decor brands to apparel and footwear are seeing “some significant success.”

Jim Phillips, head of growth at DTC intelligence platform, said CPMs on TikTok are more cost-effective than on Meta platforms. “If you are a smaller brand, it’s easier for you to test the waters because you can do so with less marketing budget,” Phillips said.

Ashleigh Lockerbie, co-founder and CMO at Better Booch, said the kombucha brand is trying to leverage organic marketing channels.

“We have to be willing to go into other more organic channels to bring down the blended cost of acquisition, because we can still make ad spend make sense if we have good blended numbers,” Lockerbie said.

Foam hair-dye brand Hally Hair, which debuted last year, said “you have to be a bit more precise and thoughtful” about how and when to run ads on Meta platforms, founder and CEO Kathryn Winokur told us. TikTok, where Hally Hair has amassed 10.7k followers, is the brand’s best performing sales channel.

Alder is also leaning into TikTok, working with creators to help promote the brand while also regularly posting organic content from the brand.

Long game

Some brands told us that rising ad rates have prompted them to rethink how they connect with potential customers. At Three Ships, Burget said the company has shifted its focus to developing “compelling, entertaining, and educational” creative to hopefully pique interest across social platforms while also building out a mail-order sampling program.

Customers who receive samples “have a higher [lifetime value] than customers that we acquire through regular means, like Facebook and Meta ads,” Burget said. “We’re just kind of playing a long game.”

Alder is focused more on email marketing, creative, and experiential marketing aimed at bolstering a community of repeat purchasers, Blackman said.

“It will be a benefit to a lot of brands to stop thinking just about cheap acquisition and start thinking about how [to] really build a relationship with their customers,” Blackman said.

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