Direct-to-consumer brands lower their Facebook ad spend and turn to radio, print, and Instagram as competition for space has made Facebook ads too expensive
Four years ago, when Rich Fulop founded Brooklinen, the direct-to-consumer luxury bedding startup, the customer acquisition strategy … Tweets: @ross_sergeant and @jeremysliew Tweets: Ross Sergeant / @ross_sergeant : On the Facebook platform, there are 6 million advertisers for the 2 billion users. That 333 users for each advertiser. As expected, market forces have increased the cost of advertising so much that, in some cases, even radio and outdoor are a better buy. http://digiday.com/... @jeremysliew : .@Facebook is an economically efficient and therefore fully priced customer acquisition channel for brands. That makes it hard for startups to break through relying on that channel alone. http://digiday.com/... @Digiday
Context & Ripple Effects
Brooklinen is the archetype here: Rich Fulop built the bedding brand on Facebook's targeting engine, the same playbook behind the e-commerce ad campaigns the New York Times profiled at the end of 2017. But weeks before this piece, advertisers were already re-examining their Facebook commitments as average ad prices climbed and GDPR made targeting harder.
The math in Ross Sergeant's tweet explains why: six million advertisers chasing two billion users leaves roughly 333 users per advertiser, and Jeremy Liew's framing — an economically efficient, therefore fully priced, acquisition channel — means the arbitrage that made DTC viable on Facebook is closing.
First-order effects
- Direct-to-consumer brands like Brooklinen are actively rebalancing budgets away from Facebook toward radio, print, and Instagram, directly trimming demand growth on the platform's core auction.
- Facebook loses its most measurement-sophisticated advertisers first — the performance buyers who set clearing prices — putting upward pressure on the remaining bidders' costs.
Second-order effects
- Instagram, owned by Facebook, is positioned to recapture much of the fleeing budget, meaning Meta may lose little revenue even as its namesake platform's pricing power gets tested.
- Legacy channels get a demand tailwind: if radio and outdoor can beat Facebook's cost per acquisition for some buyers, as Sergeant suggests, local media inventory gains pricing leverage it hasn't had against digital in years.
Third-order effects
- The pattern held after this article: analysts later flagged Facebook and Instagram ads reaching a saturation point, and CPMs that had cratered during the 2020 lockdowns rebounded from roughly $1 to nearly $5 by November — structural scarcity, not a cyclical dip.
- Rising acquisition costs compound across shocks: small businesses later cut personalized-ad marketing again under Apple's ATT (as the Financial Times reported), pushing DTC economics toward diversified or owned-channel acquisition as the default rather than the exception.
The trend: Paid social is maturing from a cheap DTC growth hack into a fully priced auction, forcing consumer brands to treat channel diversification as a permanent operating discipline rather than a temporary hedge.