"I think Meta's stopped working for us"
Ridge's CEO offers some question marks but what does it mean for smaller brands?
This post will be particularly pertinent for brands spending less than £50k per month on Meta.
Last week, Sean Frank, the CEO of wallet company Ridge posted some a downbeat end to 2024 for Meta Ads.
In his book, 2024 was as bad as the iOS14 year except today, there are now other opportunities around.
As an agency owner I am also highly exposed to people with growth issues. The ones where we get in depth in these are when I speak to those founders and heads of marketing or growth. But I also see lots of these discussed on LinkedIn and X as well.
Reading Sean’s post, I’m sure lots thought ‘hmm, it’s not just us then.’
But there’s also some important distinctions to be taken from Sean’s post.
Ridge spend $6m/month on Meta
If we take his daily stat and monthify it, then Ridge are spending $6m a month on Meta. That’s a huge amount and puts them into a very small bracket of advertisers.
Not only that, but it’s a US-centred company. Now we’re the rare UK-centric newsletter talking about startups, DTC, and growth. But let’s try to extrapolate that donwards:
The US population is 5x the UK’s
US GDP is 8x the UK’s
Average US salaries are 2x those in the UK
Nationwide there’s far more disposable income per person as well, despite often higher living costs
So as Brits, when we see someone talking about spending $6m per month, if we were to scale that down by 5-8x depending on metric, you’re looking more at a $750k-$1.2m per month level of spend.
Maybe £1m per month? Much more manageable, and I bet you can name a few companies at that level that you know. But we’re still distinctly in outlier territory now.
But this doesn’t stop the problem I hear from many founders: we’re struggling to grow. We mostly grow from Meta. We seem to have stopped growing. Is it Meta?
How much should I be growing?
I talk about product-market fit a lot.
And almost every founder I talk to says they have it. But product market fit is about making your whole business work and be viable. Having a product that satisfies the market requires you to get it into the hands of those people.
The notion of product market fit also stems heavily from startup culture where as Paul Graham says,
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup”
Therefore for your company to be a startup it by definition needs to be able to grow fast and big.
When I ran Wine List we had 500 people who absolutely loved us. And I mean really loved us. Couldn’t believe it when we went under. But we didn’t have a mass market proposition. PMF requires a growth engine that you can believably scale towards unicorn status. Wine List was not, it turned out, a startup. Though it may have made a reasonable lifestyle business for someone if they wanted to.
For most consumer product businesses, having 500 people who love you means nothing unless, a year later, it’s 1,250 people, and the year after that it’s 3,750, and then 10,000.
Product market fit requires you to have a business that can scale 3x per year
‘We’re not hitting that? Is the problem Meta or us?’
There is growth out there: 2024 successes
2024 has had its turbulence for sure. And while I’m about to share some of Ballpoint’s success stories, I should point out we’ve had a few instances this year when we couldn’t make the channel work. We threw the kitchen sink at it and contribution margin didn’t improve, spend didn’t grow.
But we’ve also seen some overwhelming success.
We saw a brand who hadn’t been able to spend more than £5k per month scale up to £60k last month, in under 12 months
We 2.5x one brand’s contribution margin in cash terms who was already reasonably established
We’re forecasting a 10x spend growth from £20k to £200k with another client December of last year to December of this year
We’ve turned one client around who was starting to experience multi-year decline only to have their best November in 3+ years
I say this to demonstrate that serious growth is still available on Meta. If you’re stuck on five figures of spend and want to get up to six, it is absolutely possible within the realms of the channel. And once you’re at six, so too is it possible to get to seven.
Is it our product or the marketing?
The problem with this question is the answers manifest in the same way: high CPAs.
For each of those four examples above, they’d all had at least 12 months, if not multiple years, of stagnation before this growth.
In many cases we had to try to answer the question: “Ok, is the problem we haven’t cracked the marketing for this level yet?” Or, more existentially, “is this just the total size of the market?” Or perhaps more simply, “has Meta just stopped working for you too?”
When you’re spending $200k per day – or the UK equivalent of $33k per day – you can probably safely assume at those sorts of scales you might be hitting a ceiling that is not just product-related. That probably is Meta to a certain extent. And the way to break through that ceiling is likely a problem of distribution, full funnel marketing, or product range.
But a lot of the anxiety about paid social often comes from brands spending £5k or £25k per month.
At this stage, one of a few things has happened:
You’ve reached the ceiling of your audience, i.e. you don’t have venture-scale PMF*
You’ve not figured not how to run Meta for your product and customer yet
At this stage, the problem isn’t Meta. It’s most likely you. You just need to work out if it’s your product and its TAM, or your marketing.
Quick straw poll
Hit reply and let me know: What did you spend November 24 compared to November 23 on Meta?