Deep Dive Wednesdays

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Crys A.
July 17, 2024

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DEEP DIVE WITH IBRAHIM

FB Catalogs Ads And Why You Should Try It

Happy Wednesday!

I hope you’ve been having a great week so far!

Today, I’m going to spend the newsletter diving into catalog ads—the cheat code that a lot of the brands I’ve been consulting have been using with a high rate of success.

Alright… for today’s newsletter, I want to cover a topic that I haven’t discussed before. This is specific to Meta Catalog Ads, but it’s pretty universally applicable to any channel that lets you run catalog ads.

I’m going to explain catalog ads, how to create them, which brands should or shouldn’t use them, why they're worth using, and how to maximize efficiency. I’ll also share some compelling stats that I saw about their performance in 2023 for a handful of DTC brands.

Alright, let’s get into it..

So what are catalog ads (aka DPA ads), and how do you create them?

Catalog ads are essentially native ads, but for your brand’s entire product catalog. Meta automatically creates these ads by pulling the product information and images directly from your Shopify store (or from a large CSV file) and then serving it to users based on their interests, behavior, and interactions on and off the ad platform.

In general, catalog ads are great for one thing and one thing only: and that’s advertising large catalogs of products for your brand all at the same time.

If you only have one or two SKUs, these ads don’t make sense. But if you have 20 to 100+ SKUs, these ads are great. I would even argue that you could spruce up a smaller catalog of products (~10) if you use something like the Marpipe-enriched catalogs.

For the purpose of this newsletter, I’m going to explain how catalog ads work on Meta, but they’re also available on other ad platforms, including TikTok, Snap, and Pinterest.

For Meta in particular, to set up catalog ads, you just need to go to your Meta Business Manager and navigate to the “Facebook Commerce Manager.” You will click the "Create a Catalog" button from there. After that, you need to choose your catalog type (which should be eCommerce for almost everyone reading this) and then follow the prompts.

At this point, you have a few options.

  • You can upload a .csv from your PIM (Product Information Manager)

  • You can connect to Shopify (or BigCommerce) and select the products you want in your catalog, click “Create” and have Meta import the information

  • You can also use Shopify, which has a plugin tool, to import a richer data set

When I first spoke to Marpipe, I learned Shopify’s Meta integration for catalog ads isn’t the best way to import. Instead, they recommend using a tool like Feedonomics or GoDataFeed, or if you want something free, then Flexify. Depending on the size of your catalog, preparing the files and importing all of your SKUs could take anywhere from a few minutes to a few hours.

The beauty of catalog ads is that you can import hundreds of items from your product library into your catalog collection all at once. This is obviously super valuable for anyone who has a lot of SKUs.

Once a catalog is created, you can run your DPA ads just like any other campaign. You just need to create a dynamic ad campaign in Ads Manager and select "Catalog Sales" as your campaign objective.

Set your budget, publish, and you’re live. Meta will then automatically place these ads all over the platform just like any other campaign. You can use custom audiences for more specific targeting or go with an Advantage+ campaign—I would recommend doing the latter as Meta is pretty good at optimizing on its own.

The cool thing about catalog ads is that they pull the product image and description directly from your .csv info. For marketers who don’t have an incredible creative department cranking out ads left and right, this is by far the easiest possible ad type to create for brands. Meta will automatically pull the product photo, product title, and description and then let you run it as is. That said, if you want to unlock the true power of catalog ads, you need to change the designs, which I’ll talk about in detail.

How well do Catalog Ads/DPA ads actually work?

For context, I’m not affiliated with Varos or Marpipe… Varos is just a great tool for understanding how your ad account is performing against everyone else.

In the report, Varos analyzed data from 3500 Meta ad accounts that collectively spent more than 4 billion dollars last year. When I read through the report, here were the numbers that really stood out:

According to Varos, catalog ads were by far the highest-performing ad type for the brands they reviewed as part of this study in 2023. For the brands in this cohort, the average ROAS of catalog ads was 3.075x, while traditional static or video ads were at 1.725x. That means catalog ads performed 78.3% better than other ads last year for these brands. Now, I should mention that we don’t know how much spend is being accounted for here, but I’ve seen DPAs generally perform very well. Sometimes to the same spend levels as your other ads, but they are absolutely efficient and should be a part of your strategy, primarily if you have a lot of SKUs.

The best-performing month for static and video ads saw a 2X average ROAS, while the best month for catalog ads saw a 3.4X average ROAS. What was even more surprising was that the click-through rates of regular product image ads were consistently much higher than those of fully designed ad creatives. On average, catalog ads had a 36% higher CTR. The annual average CTR of a catalog ad was 1.17x, and the annual average CTR of a custom static or video ad was 0.86.

Why are catalog ads outperforming?

The team at Varos predicted two reasons why this could be happening.

  1. The rise of ASC

  2. The rise of Facebook Shops

As many people know, so much of Meta is turning into their Advantage+ shopping campaigns (also known as ASC campaigns), where Meta uses their massive data library to serve your ads automatically. It’s basically the AI of ads management, where they do the full-funnel targeting, testing, and budget optimization for you without your help.

To me, it’s pretty obvious that the future of advertising is going to continue to get more and more automated. I feel confident that Meta is just going to continue pushing these fully automated products like ASC onto brands, and catalog ads are no different. This is pure speculation, but it’s also possible that Meta is quietly juicing the performance of catalog ads as they want anyone with large SKU libraries to use it.

In the future, I believe all links will go to in-app shop experiences, which I’ll talk about in a second, or directly to PDPs, which is what catalog ads do. Not only do your PDPs need to be optimized as if someone is coming for the first time, but so do your catalog ads.

#2 is the rise of Facebook shops**. I**t seems like the future of commerce might be directly integrated into social networks and ad platforms. TikTok shop is pushing for this, Meta is pushing for this, and I expect platforms like YouTube and X to follow.

The deepest moat in commerce is always the distribution and the ability to reach your customers. Yes, the website and storefront play a critical role, but without traffic, these stores wouldn't have sales, and so Meta (and the other platforms that control ads and distribution still have an extremely unfair long-term advantage).

All of the data that Meta derives from its ads and native Facebook shops program continues to feed its algorithm for its ASC campaigns and catalog ads. It seems like it’s only improving, so it makes sense that their automated catalog ads are also outperforming.

Another reason is that Meta has richer data on your products when you upload your entire product catalog via a massive CSV file. Meta reads all of the inputs to know exactly what you sell so it can serve your ads to more relevant users.

Meta knows that you have size 11 Italian-made brown leather shoes for $140. It also knows which users shop for size 11 brown leather shoes on their platform. It knows who’s shopping for size 9 black leather shoes as well. Since you have the option to run ads to the entire product library dynamically, it will pick and choose who is the right user to serve an ad to for this specific SKU.

Which brands shouldn’t use catalog ads?

As I mentioned at the top, catalog ads only make sense if you have a large catalog. Single SKU brands, SaaS brands, and companies trying to get you to download an app aren’t good candidates either. If you don’t have a large product catalog, it doesn't make sense. For now, just stick to traditional static and video ads.

For brands that can crush it with catalog ads, I immediately think about beauty and apparel, footwear, supplements, furniture and home goods, food and beverage, and general accessories. Basically, it is anything that has a ton of SKUs.

Flights, hotels, Airbnb, and event ticket providers like StubHub can also do well with catalog ads for the same reason—they have a ton of SKUs.

When it comes to fashion and apparel data that I’ve seen, the Marpipe x Varos report showed that these brands had a 50% higher average ROAS when using catalog ads vs traditional static or video ads last year. They also saw that their CTRs were, on average, 40% higher. This data was from a sample size of 1000 brands.

For brands operating in the beauty space, the ROAS was 48% higher. Again, these are not small brands with a small sample size. This study was on 3500 companies that spent $4BN on Meta ads last year.

Replacing UGC — A New Approach to Ads

Over the last few years, UGC-style ad creative has been one of, if not the most dominant new trend for how many DTC brands produced their ad creative. Every brand I know was trying to make “ads that don’t look like ads,” and they wanted to partner with creators to make content that felt more authentic and native.

Although these ads can still work, I feel that in 2024, UGC ads will become much more saturated, and consumers will see through the noise. As I’m sure you’ve seen, consumers are calling out brands in the comment section when they see “organic” UGC-style ads that were clearly sponsored. Consumers are getting better at sniffing out the BS, and they’re getting to know when they are being sold.

In my view, consumers are feeling serious ad fatigue from traditional creative and don’t want fake UGC content and reviews. If they want to buy something, they just want a photo of the product that leads to the exact PDP or landing page. This is part of why catalog ads are crushing right now, and I think we’ll see more of this in the years to come.

How to supercharge your catalog ad creative

That being said, the best way to go above and beyond is to update your creative. Inside Meta, you have limited capabilities regarding catalog ads.

With tools like Marpipe, you can generate unlimited creatives to test and run with your catalog ads. Think of them as Canva or Figma for catalog ads. Marpipe provides a simple drag-and-drop visual editor that lets you change background colors, add dynamic text and tags, generate AI-driven design and copy concepts, and more.

You can add your logos, brand colors, and you can even add dynamic filters for sales that are synced up with your PIM that can change in real time. It’s an incredibly powerful tool for anyone who wants to see how it works.

The 3 must follows to succeed with Catalog Ads

Okay, I know we’ve covered a lot, but I just wanted to share a few more high-level insights before we wrap up. In my opinion, the three things that you need to get right when it comes to catalog ads are:

  1. The Setup (i.e. making sure that you have a rich data feed to import into Meta)

    For this, you want to optimize the data that you're providing Meta by keeping product titles short and including as much context in the description that Meta’s platform can learn from to serve your ads better.

  2. Creative optimization

    Here, you want to use a tool like Marpipe to apply creative best practices to your catalog ads. You want to ditch any white backgrounds, add your logos and brand colors, and add overlay text, discount tags, or other relevant CTAs to make your ads pop more in the feed.

  3. Channel Diversification

    Once your catalog is set up, your creative optimized, and you are achieving a healthy ROAS, you should consider expanding to other channels like TikTok, Snap, and Pinterest to test your catalog ads there as well.

Wrapping Up:

In conclusion, I definitely think more brands should be testing catalog ads. I know they are already a big deal for large brands, but I think they are going to become even more important for large SKU DTC brands this year.

The data tells us that this strategy is outperforming. When I see data like this, I always feel like it’s your job as a marketer or brand owner to test it for yourself and see how it works. The stats I’ve seen internally for some of the clients I’ve been consulting with are quite compelling.

If you try running catalog ads this month, let me know how it goes for you after you run it for 30 days!

Alright folks, that’s it for today. What did you think of today’s deep dive? Please let me know here.

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