Businesses that rely on Facebook and Instagram advertising to stay afloat have noticed something startling over the past two months: Meta Platforms Inc.'s normally reliable ad system is faltering.
Social networking juggernaut Meta, which uses algorithms to automatically determine when and where to most effectively show advertising messages across its various apps, has been hammered by major performance issues, according to numerous marketers. The cost of running ad campaigns is up significantly, while results are mixed and ensuing sales are down -- and there has been no formal explanation from the company, ad buyers say.
"It's brutal out there," Cody Plofker, chief marketing officer at makeup brand Jones Road Beauty, said on the Operators podcast last week. "There is something just terribly broken about Meta right now."
One media buyer, who asked not to be identified to preserve relationships at Meta, said that all the major metrics used to determine the cost of a digital ad campaign have gone up significantly. The cost per 1,000 ad impressions -- views by potential customers -- is up by a factor of two or three in the past couple of months. Cost per click, which calculates how much an advertiser ends up paying each time someone clicks on a link in an ad, has risen by about the same proportion. Several other marketers described similar jumps, though each campaign cost is slightly different.
Those more expensive ad campaigns are cutting into businesses' profits. A marketer's return on advertising spending, known in the industry as ROAS, has also notably fallen for several advertisers. Carly London, who runs an agency called Sometimes Curly and manages more than $100 million in Meta-related advertising spending per year, said she saw a 20% to 40% drop in return on advertising spending for a few of her accounts over the past two months without any explanation. In practice, that means that a marketer used to making $3 in revenue for every $1 spent on Facebook ads would suddenly be making closer to $2 in revenue -- a meaningful difference when brands rely on predictable results to budget and manage product inventory.
"Normally you can find some new creative winners, try a new campaign structure, try some different strategies and kind of find some winners," said London, who said that not all of her accounts were affected. "We tested all these things and still have struggled to recover."
Rok Hladnik, whose Flat Circle agency manages several million dollars in Meta-related advertising spending each month, said the past few months have been an outlier for his clients, too. "What we're seeing right now is definitely on another level," he said.
Meta acknowledged that there have been glitches, but disputed the notion that they were widespread.
"Our ads system is working as expected for the vast majority of advertisers," a company spokesperson said in a statement. "We recently fixed a few technical issues and are researching a small amount of additional reports from advertisers to ensure the best possible results for businesses using our apps." The media site Modern Retail previously reported on some of the ad-system problems.
Meta has spent years establishing itself as one of the most important digital advertising channels in the world, and its algorithms have been fine-tuned to show people the right ad at just the right time. The company's platforms, led by Facebook and Instagram, accounted for roughly 22% of the global digital advertising market in 2023, according to the research firm Emarketer, trailing only Google at 27.4%.
For many small businesses, advertising on Meta is an essential driver of revenue, especially because of the company's automated system and the ability to precisely target users, which often lead to more sales and fewer wasted advertising dollars.
Meta's unpredictability the last few months has meant new struggles for advertisers. In response, some have pivoted their budgets to internet competitors like TikTok or Alphabet Inc.'s Google.
London, who's still bullish on Meta and says that the ad performance for some of her clients just recently improved, said she had pulled back spending from Facebook and Instagram and instead tested new platforms, such as Snap Inc.'s Snapchat and Pinterest Inc. Plofker, too, said he cut his Meta budgets by 30% to 40% and moved money to Google's YouTube, TikTok and television.
"This is an amazing time to be Google or TikTok," one advertiser said, adding that the friction at Meta "is the best marketing campaign they could ever hope for."
Information for this article was contributed by Spencer Soper of Bloomberg News.