When Facebook Loses Its Edge

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Across Common Thread Collective’s portfolio, last year’s marketing efficiency rating (MER) was 4.98.

MER is our North Star metric, sometimes called blended ROAS: total sales ÷ total ad spend. An MER of 4.98 means roughly 20% of revenue was spent on paid acquisition.

Of that 20% in ad spend, Facebook represented 67%. The median ROAS was 1.99 on 1-day click, 1-day view.

Marketing Efficiency Rating, Sales and Return on Ad Spend ROAS 2020-2021

Because ~1% of Shopify’s gross merchandise value (GMV) flows through CTC’s clients, we can reasonably apply those figures to Shopify’s $120B in total sales.

Back-of-the-napkin math: Facebook represented an estimated $16B in spend and $32B in revenue.

In Apr.–May of 2020, +60% of our brands saw record-breaking turkey phone data revenue. The source? Facebook’s arbitrage — underpriced ad costs — and its data-fed, customer-hunting algorithm:

Client Revenue YoY: Website Conversion Value via Facebook 2020

Today, Facebook’s wind is waning.

This sapped power comes in the form of restrictions to the data that’s fueled Facebook’s advertising algorithm for years. The two great innovations in Facebook’s ad product are the Pixel and optimizing for conversions.

Both of these features depend on access to an endless stream of purchase behavior and intent signals that allows Facebook to place ads in front of people at the perfect moment.

Suddenly, there are two legitimate attacks on that data warchest: