Meta vs influencer seeding. What's the opportunity cost?

While the iOS changes are no longer breaking news, after three years of running our agency, we've heard fewer e-commerce founders blaming Facebook for killing their business. The real lesson is to never rely too much on your trusty landlord, Mark Zuckerberg, and instead learn to diversify your growth strategy to mitigate risk.

As a founder, you have to weigh the opportunity cost of acquiring cold users outside of paid social. Facebook may seem more scalable, but the trade-off is poor algorithmic targeting, expensive auctions, and limited control. So how does using micro-influencers compare to standard paid social, and is it all what they say?

Meta’s audience targeting is actually pretty bad

Let’s say your creative averages a 2.5% click-through-rate (CTR), so 2.5 out of 100 impressions click on your ad. Of those, you have a 5% conversion rate (CVR) meaning 0.125 out of 100 people actually purchase the product. That’s a 0.125% hit rate, which is solid by Meta’s standards.

This also means Meta’s targeting is ineffective 99.875% of the time. The real question is: how comfortable are founders with being wrong that often, and what does it cost them compared to alternatives? In a multi-touch attribution (MTA) world, where users engage with multiple touch-points before purchasing, that 0.125% assumes a perfect 1:1 correlation between Meta’s reported sales and your Shopify sales data - which is unlikely if you’re running ads elsewhere that it deserves the full credit.

Now to add to that, you have a very important metric called your cost-per-mille (CPM). This is essentially the rent you pay Meta to show you ad to 1000 people. The higher the CPM, the more expensive it is to reach people, and here’s the equation:

CPM = (bid x estimated auction rates x ad relevance) + Competitor adjustment

Meta controls the auction, so CPMs fluctuate based on competition and targeting relevance. If your audience or creative is too specific, Meta struggles to find users, increasing CPMs when it goes after a broader wider net of potential customers. The key is balancing high CTR with specific creative to help Meta find likely shoppers faster, while also going broad enough that you’re not limiting your pool of potential buyers.

For example: With stable CPMs, $10,000 may buy 500,000 impressions at a $20 CPM (a median to optimistic assumption). At a 2.5% CTR and 5% CVR, that translates to 625 purchases. Results vary by niche, creative, competition, and pricing, but this serves as a baseline for this experiment.

How does influencer seeding compare in terms of targeting?

For comparison, let’s examine audience quality in the influencer space. Spam or irrelevant followings typically range from 5-20%, increasing with larger influencers as bot activity scales (more incentive for bots to promote their junk on larger accounts). A 50K-follower micro-influencer (relatively small caliber) likely retains 80% real, relatively engaged followers if their audience closely aligns with your target demo.

Now, take a creator with 50K followers on Instagram and another 50K on TikTok, so 100K total. They might charge $2,000 for 2 posts and 2 stories. While some followers overlap, we can conservatively estimate 50K total impressions per single post. If 80% of those followers are high-intent and we apply Meta’s 5% CVR, that equates to (50K x 80%) x 5% CVR = 2,000 sales.

[The key assumption here is that the 2.5% clicking a Meta ad are as likely to convert as the 80% engaging with an influencer post, both at a 5% CVR.]

Even if we slash the influencer CVR down by 75% just for sake of comparison, that’s still 500 sales. Spending $2,000 on a 50K-follower influencer for that return is a no-brainer, especially since the content can be repurposed for ads. Now, instead of spending $10,000 on Meta for 625 sales, you could gift products to 5 influencers of that caliber, potentially driving 2500 sales on the same budget.

Are investors warming up to alternative methods?

All of this relies on circumstantial assumptions, but these are still conservative assumptions. Many brands have seen massive success using influencer seeding and ambassador partnerships without relying on paid ads as their primary growth driver.

But how does this resonate with investors? Venture capitalists want to focus primarily on growth, as I’ve candidly (maybe a little too much so) elaborated in the past. As a result, any paid acquisition method needs to promote a relatively ambitious and aggressive approach to convey your optimism. While general sentiment around e-commerce is still low, an investor will want to understand how you’re going to scale - and fast.

The primary benefit of paid ads is scalability, not necessarily targeting accuracy. If you told an investor that you wanted to negate PPC and focus on influencer seeding, they’d need to see evidence of how it’s as scalable. Making sure your best foot is forward in the pitch deck doesn’t always have to align with the most efficient way of getting to the finish line.

However, as influencer marketing becomes a bigger pillar in e-commerce and CPMs keep rising across the board, founders may start diversifying sooner rather than later. For bootstrapped businesses struggling to raise capital, it could be a wiser, more targeted approach to promoting product lines than sliding into the abyss that is Meta’s black box.