(Bloomberg) -- 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 last 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 ROAS 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 added that not all of her accounts were impacted. “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.Advertising Machine

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, like 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.”

The biggest head-scratcher has been the lack of a formal explanation for the issues, leaving ad buyers theorizing and speculating inside industry group chats and text threads. In private conversations, some Meta employees who serve as sales reps and points of contact for marketing partners have blamed the issues on Temu, the Chinese e-commerce giant, according to two advertisers, who asked not to be identified relaying the discussions.

Temu has been on a marketing blitz since spending millions of dollars on six Super Bowl ads in February. The retailer, owned by PDD Holdings Inc., spent nearly $2 billion on Meta ads in 2023, according to the Wall Street Journal, making it the social media company’s largest advertiser. Some other marketers are speculating that Temu’s spending with Meta has been even heavier since the Super Bowl ads.Ad CompetitionSpending big on social media in the wake of a major television campaign, which would be a common strategy, could theoretically offer an explanation for inconsistent prices and performance for other advertisers on the platform. If Temu is spending a lot of money on Meta using its automated system, it could create unusually high competition, driving up ad-auction prices. It’s also possible that Temu’s lower prices — the site is known for cheap products and fast shipping — could simply be taking away sales from competitors.

Not everyone believes that theory, though. Even at $2 billion a year, Temu’s spending would represent just 1.5% of Meta’s total business last year, and Meta’s global advertising business is so big that it’s hard for many to fathom a single entity creating a lasting impact on the entire system. In an email, a representative for Temu said the company has not noticed any advertising issues with Meta, and declined to comment on its marketing spend. Other buyers theorize that Meta is simply dealing with technical issues it hasn’t been able to resolve, pointing to recent outages at the company. On the podcast, Plofker said that Meta engineers have spent more than 100 hours looking into issues related to his accounts and “haven’t found a bug.”

No matter the reason, marketers remain frustrated. It’s also unclear whether the recent friction is hurting Meta’s business, but the company is set to report its first-quarter earnings near the end of April. Analysts project revenue of $36.1 billion, or growth of 26% from the same period last year. 

“The challenging thing, you know, is Meta doesn’t know what’s happening,” Plofker said. “So this could get better in two weeks, this could get better in a month, this could be the new normal. You really don’t know.”

--With assistance from Spencer Soper.

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