Today in Digital Marketing - BONUS: Meta's Revised "Performance 5" Framework

Episode Date: June 20, 2023

Jake Bailey, Head of Industry, Disruptors and Venture Capital at Meta, talks about a refreshed set of Performance 5 pillars they've developed. He covers off some new best practices for the Conversions API as well, including some shocking ones like recommending you drop all interests targeting.-Each day this week, we are putting an extra episode in your feed — earlier this month Meta recently held its Performance Marketing Summit. Since Meta is such a big part of many marketers' spend, we are replaying some of the most relevant presentations from the summit.This is not a paid placement — Meta hasn't paid for this, and didn't ask us to do this. Also, of course, these are Meta reps at a Meta conference, so it's pretty heavily promotional, sometimes comically so. That said, there are some pretty important things discussed in these sessions — like their take on AI modeling, how they see the future of creative, and a bunch more.If this isn't your jam, you can just delete these — our regular daily newscasts will continue to come your way.Our Sponsors:* Check out Kinsta: https://kinsta.comPrivacy & Opt-Out: https://redcircle.com/privacy

Each day this week, we are putting an extra episode in your feed. Earlier this month, Meta held its Performance Marketing Summit. Since Meta is such a big part of many marketers' spend, we are replaying some of the most relevant presentations from the summit. I should note, this is not a paid placement. Meta hasn't paid for this. They didn't ask us to do this. Also, of course, these are Meta reps at a Meta conference, so it's pretty heavily promotional,

sometimes comically. So that said, there's some pretty important things discussed in these sessions, like their take on AI modeling, how they see the future of creative and a bunch more. If this isn't your jam, you can just delete these. Our regular daily newscasts will continue to come your way. Today's episode is from a session they did called the Performance 5 Framework for Growth. Jake Bailey, the head of industry disruptors and venture capital at Meta, will talk about a refreshed set of Performance 5 pillars that they have developed. He covers off some new best practices for the conversions API, as well as some shocking ones like recommending you drop all interests targeting. Anyway, here you go. Do you have business insurance?

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Be protected. Be Zen. Disruptors are the digital native brands that push the envelope of performance on our platform. They are always asking questions about performance. Speaking of which, by show of hands, how many of you are facing increased competition for performance? Come on, I should see more hands than that. All right. And then secondly, how many of you have been asked to maximize return on ad spend? All right. Okay. You can put your hands down. You want to know what? I have been in your shoes. Truly, I've managed large performance marketing teams and every day is crazy.

You're spinning dozens of plates in the air and you've come here hoping to take back two to three things that will transform performance. Well, good news. Over the next 30 minutes, we are going to have some fun cranking through our latest best practices together. I'm going to share real data showing how each pillar is driving performance for brands

just like yours. Back in 2022, we developed the Performance 5, five data-backed strategies to help you maximize performance. Advertisers have seen huge success with putting these pillars into action. Since then, we've continued to test and refine those strategies and adapted to the AI landscape. So today, I'll share the next evolution of Performance 5,

developed from an extensive meta-analysis across hundreds of campaigns. We believe these updates will lead to better performance. I'll also share the Performance 5 scorecard that will give you clarity on where you can improve, where you're doing well, and surface new opportunities to test. We have so much important content to cover, so let's get started.

Account simplification. The first performance five pillar leverages the power of data signals to drive performance. The more simplified your account structure is, the more potent the signal is for our auction. And in my five years at Meta, I don't think I've seen anything quite as consistent in improving performance.

And that's why account simplification continues to be the foundation of Performance 5. In fact, it has compounding impact in that it increases the effectiveness of the next four pillars. We believe that account simplification is the single most important lever to driving better CPAs. Our system performs best once it's had time to understand how people will respond to your message. And we call this time the learning phase. Every single campaign created has to go through learning

phase. Consider learning phase the first gear when driving a car. If you never get out of first gear, you can never move faster and with scale. So the less time you spend in learning phase, the better your CPAs. In other words, if you're making constant intraday changes to your campaigns, stop. It could likely be hurting your performance. Here are two quick examples of the power of account simplification. Little Passport saw an 89% increase in online purchases and a 57 percent decrease in cost per subscription. Motor Trend similarly consolidated their ad sets and saw a 14 percent lower cost per subscription. Super simple. Now, account composition is also important to unlocking performance,

and this is slightly different from account simplification. For composition, some things to consider might be what's the right media mix for your meta investment? What percentage of your budget should be dedicated to retention versus acquisition? And how about advantage plus shopping campaigns versus your business as usual, which we will talk about a lot later. As a matter of fact, let's switch and see if we can

take a live audience poll. For everybody here, scan your badges. And the question is, what is the optimal percentage of spend that you currently devote to new customer acquisition versus retargeting? Choose the answer that best represents your business. All right. We are going to assume that a lot of you put a higher amount of acquisition and a lower amount of retargeting, which is what we actually would have expected.

An important metric for you to actually take back with you is that you should be spending less than 20% of your time in the learning phase. On average, advertisers who limited the learning phase to less than 20% of overall spend see 68% lower CPAs than advertisers with more than 50% of their spend in learning phase. Simplify your account structure, consolidate your ad sets, keep your audiences broad, and avoid making frequent edits. This is a potent best practice for performance. The second performance five pillar dives deeper into where our system can leverage AI, and that is through automation. Now, if you're a performance five expert, you'll actually notice that this pillar is new. Automation is vital to

maximizing performance. It optimizes for fresh, high-performing creative with minimal manual input. It also gives back time to you and your team so you can focus on other, more important strategies. Automation can also help you achieve a greater scale at a much faster speed. In fact, using automation will get you out of the learning phase much, much faster. You probably heard by now that we've consolidated our automated advertising products under the name Meta Advantage. These AI-powered solutions enhance different elements of a campaign, such as audience, creative, placement, or enhance the entire campaign flow end-to-end.

And this is where we'll be spending most of our time today. The first solution is Advantage Plus Shopping Campaigns, or ASC for short. ASC uses AI to simplify ad creation and dynamically serves up to 150 creatives to your target audience. Now, we've highlighted ASC a few times today already, but I think it is one of the most important ad products that Meta has built in the last 10 years. And that is saying something. All right. We'll see if our slider was working. We're going to try another quick audience poll. As I'm actually really curious.

Wait for it to queue up. The question is, what percentage of your daily meta budget are you spending on ASC today? And you know what? I'm going to take this one. The average that we normally see is usually on around 15% to 20%, which is a good start.

But let's shift forward to what we're actually seeing with a lot of the performance marketers. What we're seeing is that some brands actually spend up to 80% of their daily meta budget on ASC. Now, what's important here is that you actually test the right ratio with your meta team. A great example here is Built Bas. Actually one of my favorite brands. My shirt, my pants today are both from built. I love it. They wanted to scale back time and give a lot more resources to their team.

So they split their full budget 50-50 to assess ASC against their business as usual setup. The test saw a 12% higher ROAS and a 12% decrease in cost per purchase. Jenny Bird saw even more success with ASC as they lowered their cost per purchase and saw higher conversions. We've also seen improvements from an increased budget cap when combined with ASC, which allows for more flexibility in reaching existing customers. Advertisers who ran an ASC campaign with an existing customer budget cap of at least 10% saw a 15% lower CPA and 19% higher ROAS. Now, you might say, of course, targeting existing customers will improve performance. However, if you think about your own shopping behaviors, wouldn't we all want to be retargeted and reminded of brands that we love? Let me drive

this home for you. As an example, many of my own purchases would not have happened otherwise, meaning they were truly incremental. Not only does retargeting build brand loyalty, but it trains the auction to prospect new customers who look similar. Another pro tip for ASC, our most advanced advertisers are combining ASC plus reach campaigns to maximize performance while also reaching net new audiences. Cereal brand Magic Spoon combined its usual Advantage Plus shopping campaign with a campaign combined and optimized for reach,

and they saw over two times incremental purchases with the two campaigns combined. So something to think about. For retail and e-commerce brands with a checkout-enabled shop, using Shops Ads plus ASC leverages machine learning to direct customers to your website or shop on Facebook and Instagram, depending upon where they're most likely to convert. So remember, this is all about making it easier for consumers to complete their purchase. Two strong examples here from both Jansport and Zox, who both saw significant improvements in ROAS and CPA. This is a strong combination

for performance and, more importantly, a seamless consumer experience. Next, we have Advantage Plus Catalog Ads, which allows you to reach new and existing customers with ad creative that is personalized with specific products. While ASC campaigns do allow you to upload a feed, Advantage Plus catalog ads are the best fit for high-skew advertisers with catalogs over 100 products. Women's fashion brand Lulu's is a great example here. They recently compared the performance of ASC combined with Advantage Plus catalog ads versus their normal campaign setup, and using catalog ads plus ASC saw a 47% increase in ROAS. Chloe Simpson, their marketing director, said that catalog ads plus ASC helped them reach new customers and expand their product categories while also seeing results equal to or better than campaigns with years of data. Finally, let's talk about Advantage Plus app campaigns, which help you achieve the highest performance for your app install objectives.

Advantage Plus app campaigns deliver the highest performing creative to the most relevant audience across all placements and requires fewer inputs during campaign creation. It simplifies the audience options and streamlines creative management compared to manual app ads. Now, Say Games has seen really strong success here versus using a manual app campaign setup.

After identifying their best-performing custom event for their title Stealth Master, they decided to test Advantage Plus app campaigns to improve their performance. They increased ROAS by 15% using custom event optimization, and it lowered their cost for install by 11%. Advantage Plus products allow our AI and delivery system more opportunities to consider which ad will deliver the best performance.

And when I explain AI and automation to advertisers, I like to use the mental image of breathing more oxygen into the auction to help your campaigns flourish. So, three things we'd recommend. One, scale Advantage Plus shopping campaigns to at least 30% of your daily meta spend. Two, large advertisers should be testing Advantage Plus catalog ads.

And three, app advertisers should be leaning heavily into Advantage Plus app campaigns. Each of these will give you a lot of time back. So now, let's talk about creative. The third pillar of Performance 5 is focused on creative differentiation, which is all about giving your creative fresh and relatable. Remember, this is important. The expected customer action rate is the most important element of our auction, and this is why creative differentiation is key.

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Be protected. Be Zen. We've seen in our research that people become tired of seeing the same ads over and over again, and that impacts performance. In fact, at four repeated exposures, the associated likelihood of a conversion drops by about 45%. Now, some marketers believe that creative repetitions are helpful up to a point, almost a wherein period, if you will. However, our research shows that there's no evidence for this. Clicks and conversions become more expensive with repeated creative exposures.

And this explains why the companies that I see with consistent, strong performance on our platform are those that are always iterating and shipping new creative. Equipping our system with differentiated creative gives it flexibility to reach more people with creative that speaks to them personally. Again, it's another way to breathe oxygen into the auction and reach net new audiences. Not only is it a better experience for your customers, it's also a better for your performance

and incremental reach. Now, there are two ways to differentiate your creative. The first is by using a variety of concepts in your campaign. And you'll see three examples here in this visual with completely different approaches. As an example, our clients at SandCloud wanted to boost sales of their towels among an older demographic and also wanted to understand which types of motivational messages prompted people to purchase. They differentiated their messaging and developed new ad creative aimed at older audiences.

From there, they ran an A-B test to measure the effect of running it alongside their usual ad creative. And the campaign saw a 30% increase in net new reach compared to its usual creative on its own and a 24% lower cost per purchase when compared to its usual creative on its own, and a 24 percent lower cost per purchase when combined with their usual creative. So the summary here is that creative differentiation really, really works. The second way to differentiate your creative is by leveraging different ad types. Now, there are many formats, but I wanted to highlight Reels and partnership ads.

Reels is the future of entertaining storytelling on mobile. And as Mark mentioned on our last earnings call, consumers are spending 24% incremental time engaging with Reels content. It is truly where the next phase of performance marketing will unfold. In fact, we found in a study by a third party It is truly where the next phase of performance marketing will unfold. In fact, we found in a study by a third party that two-thirds of people surveyed have purchased a product or service after watching a reel.

And that's more than any of our competitors. Now, partnership ads, formerly known as creator ads, are another way to unlock increased performance. Leveraging creators is a key to unlocking net new audiences. Businesses that add partnership ads to their media mix, on average, have reduced their cost per acquisition by 19%. Our partners at Sweetgreen tested a campaign with Reels Optimized Creative versus their standard creative. And the test saw a seven times incremental lift in sales with the Reels Optimized Campaign and a 14% lower cost per purchase when compared to their standard creative assets.

Just incredible results. Across the board, advertisers are seeing success with creative differentiation. So we recommend that you mix up concepts like motivators, barriers, and value propositions. And remember, one of the most consistent indicators of future success that we see is when advertisers are regularly iterating on creative. Listen, we know this is sometimes easy to say, but also hard to do. So we've enlisted some great partners who can help you achieve your goals. Our partners are experts at helping brands leverage the full benefits of differentiated creative. And our business accelerator program is a great way to leverage fully funded engagements with partners who can create net new assets for your brand.

So ask your meta team if you're interested. Next, let's talk about your customer data. This pillar is important because the better you're able to build robust, high-quality and safe customer data strategies, the more you can increase loyalty, retention and lifetime value. Meta's ability to understand the value of your customers will help you reach your most valued targets and especially during periods of focused profitability. Many of you have taken the first step by implementing the conversions API. If you have not done this, deprioritize everything else and start here. This is the foundation on which everything is built for performance on meta. Conversions API is centered around data-driven

marketing, which just by implementing itself drives a 13% improvement in cost per result. But as I mentioned before, implementation is only the first step. To see the full benefits of the Conversions API, you'll need to shift your focus to data quality. And we recommend four quality checks that you can make in Events Manager. The first quality check is Event Match Quality, or EMQ, which indicates the efficacy of matching your customer information.

Matched events help you deliver your ads to people who are most likely to take the action that you care about. The stronger the signal that you send us, the more our machine learning can efficiently optimize. So you should optimize for the highest EMQ score possible. Talk to your meta team. The second quality check is to have a redundant setup,

meaning you should share the same events to both the conversions API and the meta pixel. Now, while this may sound counterintuitive, this is really important because the Conversions API allows you to share website events that the Pixel may lose due to web browsers. Ray-Ban, as an example, reached 36% more people and saw a 10% increase in online sales in its Facebook and Instagram ads

when using both the Metapixel and the Conversions API versus just the Pixel alone. The third quality check is to deduplicate. That means that where you have redundancy, you must also have deduplication. We should only keep one of the redundant events that are being sent from both the Pixel and the Conversions API. We also recommend that you keep audiences broad to prevent accidental audience duplication. In fact, we highly recommend that you remove interest audiences unless you have proven otherwise with tests.

In almost all cases, removing interest audiences improves performance. The fourth and final quality check is data freshness. Data freshness means that you share your events in real time or as close to real time as possible. The sooner you share your events with Meta, the better our ad delivery system can evaluate how likely a person is to take action. So remember, a high-quality conversions API setup is so important.

Everything flows downstream from this. All right. Ideally you'd put all these strategies into practice right away. But if I had to pick three to focus on, I would say one, combine the conversions API and the pixel. You are behind if you're not already doing this. Two, optimize for a high EMQ score. And three, send high quality data that indicates customer value information. Now, a pro tip for some of our most sophisticated brands, they send us differentiated signals for

their average customers versus high LTV, which allows them to bid more aggressively towards their high LTV targets. So that's something to think about. The fifth pillar is results validation. Now, just before I came on stage, you heard about Meta's latest measurement techniques and how important it is to be able to confidently measure results. I have never seen a company scale up successfully on our platform without strong measurement. Measurement is key to answering critical business questions about the true value of your marketing and which channels are driving the most impact. Good measurement drives real results, and we've seen in our business that businesses that run incrementality experiments actually see higher ad performance.

In fact, businesses that run 15 experiments in a given year to determine their strategies will see about 30% higher ad performance that year compared to a business that ran no experiments. And having the wrong measurement strategy can have massive implications on the long-term success of your company. And listen, I'm just going to say it. Last click attribution undervalues ads on meta by 47% when compared to results from Lyft studies that we've run. Relying only on last click is a race to the bottom, and we see this over and over again. I'd also like to highlight a few techniques that will be important for most of you here in the room. Note that support for some of these techniques

varies by business. The first, which most of you are familiar with, is A-B or split testing, which lets you compare two versions of an ad strategy by changing variables such as ad image, ad text, audience, or placement. The second is conversion lift, which measures conversions to better understand the incremental value of meta, independent of your other marketing efforts. Now, one type of conversion of testing that I'm super excited about is called channel lift. This strategy shows that many advertisers are missing out on opportunities or hitting diminishing returns because they're

relying on false attribution. Now, we recently worked with the team at Brumate to use a Channelift study to understand the true impact of their meta media across all of their channels. And the insights they gained were pretty astounding. They uncovered a 67% undercrediting of incremental conversions on meta. And of those, 72% came from search, SMS, email, and organic channels. In other words, Meta's attribution multiplier was twice as valuable in customer acquisitions than what they had believed. Now, had they only relied on last-click attribution, they would have never uncovered this. Hans Harris, Brumate's director, said that being empowered with this type of clear and actionable data has given them a leg up over

their peers and helps them make better media mix decisions. So if you want the same advantage, talk to your account team about how to run this type of test. All right, back to the list. These last two may be best for larger advertisers. The third one here is GeoLift, and true to its name, geo-based testing is an approach to measure lift at a geographic level. In this test, conversion activity in certain geographical areas are compared to conversion activity in control areas. And finally, MMM is a cross-media measurement tool that uses statistical regression to quantify the impact of both marketing and non-marketing activities. MMM can help us understand how changes in spend across channels affect

overall ROI. Listen, there's no shortage of measurement solutions available, but I highly recommend that you develop a testing plan with your meta team. Hold each other accountable. A strong measurement foundation is one of those tried and true signals of future company success. I know that a company is going to be successful when they show up with strong measurement. Okay, we have covered a lot today, and let's be honest, even I'm surprised that I have made it this far. But, thank you, I want to share three game-changing opportunities

to drive performance that fall outside of the Performance 5. These last few tactics our most advanced advertisers are already adopting and seeing fantastic results. The first is optimizing your site speed. Simply put, it is impacting all of your conversions and marketing spend. Last year, we partnered with 15 advertisers across several verticals who had site speed scores rated poor or medium, and we matched them to third-party partners to create faster landing pages. On average, those brands saw 9% lower CPAs and a 15% average conversion rate improvement on those faster destination pages. The second new tactic is expanding to new audiences by moving further up the purchase

funnel. Overinvestment and lower funnel campaigns can cause plateaued performance. Some of our most successful advertisers are optimizing for more mid-funnel objectives like landing page views, add to carts, broadening their targeting, or using creative differentiation to get in front of new audiences. The third is bid multipliers. Bid multipliers allow advertisers to bid up or down on specific user groups without impacting auction liquidity or constraining their audience. This strategy is best for advertisers who believe that certain audiences are more valuable and they want to increase delivery to those specific cohorts.

So if this sounds like you, talk to your meta team about how to get access to bid multipliers. As we close, if you take any action from today's presentation, you should write down these three things. Ready? First, commit to a testing plan with your meta team. Fast track what we've shared today because we already know that it works. Second, move past last click measurement. It is truly holding back your business.

And third, ask your meta team for a customized performance five scorecard. Wait for it. Ta-da! I love the energy. We've developed this brand-new scorecard based on the strategies we've talked through today. This includes the most important tactics and benchmarks that you should work towards to maximize value. Once you've implemented the tactics on this scorecard, you can confidently go to your board and CEO and say, we are maximizing ROI on meta.

Thank you so much for being here today and for building with us.