Limited Supply Podcast Summary
Episode: S11 E10 - Breaking Down the Marpipe Report: Catalog Ads + DPA
Host: Nik Sharma
Release Date: March 12, 2025

Introduction

In Season 11, Episode 10 of Limited Supply, host Nik Sharma delves into the intricacies of catalog ads and dynamic product ads (DPA) by dissecting the Marpipe Report. This episode offers valuable insights for Direct-to-Consumer (DTC) brands aiming to optimize their advertising strategies. Sharma not only presents the findings of a comprehensive $2 billion catalog revenue analysis but also explores the distinct approaches of second-time founders compared to their first-time counterparts. Additionally, he shares a case study involving incrementality testing with House, providing actionable takeaways for scaling brands.

Marpipe Report Breakdown

Marpipe, a SaaS company specializing in enhancing catalog ads across platforms like Facebook, TikTok, and Snapchat, collaborated with Sharma Brands to analyze $2 billion in catalog revenue. The report highlights the superiority of enriched catalogs over plain catalogs, demonstrating significant performance improvements across various metrics.

Key Findings:

1. Return on Ad Spend (ROAS):

   • Enriched Catalogs achieved almost double the ROAS compared to plain catalogs.
     "If you used enriched catalogs versus plain catalogs, your ROAS was basically just about double." [01:30]

2. Average Order Value (AOV):

   • A 76% increase in AOV was observed, indicating higher customer spend per order due to more engaging and on-brand catalog ads.
     "Customers are spending a lot more per order because these catalog ads feel very on brand." [02:15]

3. Customer Acquisition Cost (CAC):

   • There was a 47% reduction in CAC, allowing brands to acquire customers at nearly half the cost.
     "Brands are getting customers for nearly half the cost." [02:45]

4. Conversion Rates & Cost per Purchase:

   • Conversion rates surged by 53%, and the cost per purchase dropped by 41%, showcasing enhanced efficiency.
     "There’s 53% higher conversion rates and 41% lower cost per purchase." [03:10]

5. Platform-Specific Insights:

   • Facebook has been particularly focused on catalog ads, introducing video catalog ads that allow for dynamic and engaging content without the need for custom videos for each product. This innovation led to a 40% increase in sales and 50% more views compared to static ads.
     "Brands that are leaning in saw a 40% increase in sales and 50% more views compared to the static ads." [04:20]

6. Future of Catalog Ads:

   • Sharma anticipates catalog ads becoming increasingly integral, especially with advancements in AR and smart glasses, transforming traditional advertising into immersive experiences.
     "I think catalog ads are very much a part of the future." [05:00]

Second-Time Founder Differences

Sharma shifts focus to second-time founders, highlighting ten distinct behaviors that set them apart from first-time founders. Drawing from his interactions with clients launching their second brands, he identifies patterns that contribute to their accelerated success.

Top Ten Differences:

1. Aim to Innovate, Not Compete:

   • Second-time founders prioritize creating proprietary products rather than merely improving existing ones.
     "They say okay, what can I do here that no one else has done?" [06:30]

2. Relentless Focus on Distribution:

   • Unlike first-time founders who may be product-centric, second-time founders emphasize expansive and aggressive distribution channels.
     "David, for example, just launched weeks ago and it's already in my local bodega next to my apartment." [07:10]

3. Prioritize Quality Over Discounts:

   • They seek the best agencies and partners, valuing expertise and results over mere cost savings.
     "They just want the best work possible." [07:45]

4. Rapid Response and Execution:

   • Decision-making is swift, with second-time founders responding within 24 hours to maintain momentum.
     "They don't take more than 24 hours to reply." [08:20]

5. Metrics Focused on Units Sold and Profit:

   • Their KPIs are strictly tied to sales and profitability, disregarding vanity metrics like social media impressions.
     "All they want to know is are we selling units and are we making profit." [09:00]

6. Elimination of Non-Driving Marketing Activities:

   • They avoid marketing efforts that don't directly drive sales intent, such as unrelated sponsorships or excessive influencer partnerships.
     "They just focus on getting product in people's hands." [09:35]

7. Expert Barter Negotiation:

   • Second-time founders excel at bartering, securing mutually beneficial deals without significant financial expenditure.
     "They’re really good at making barter deals." [10:05]

8. Hiring the Best Talent:

   • Emphasis is placed on attracting top-tier talent with competitive compensation, often including equity stakes.
     "They’re really here to find the best people, trust them like CEOs of their departments." [10:40]

9. Smart Capital Management:

   • They strategically fund their ventures, leveraging various financial instruments and avoiding misaligned investors.
     "They fund it in a much smarter way." [11:10]

10. Learning from Past Mistakes:

    • Having previously navigated the startup landscape, second-time founders leverage their experiences to avoid costly errors.
      "They've already made the mistakes, so they don’t make as many costly mistakes as a result." [11:45]

Sharma notes that approximately 50% of the brands he’s launched recently are led by post-exit founders, underscoring the effectiveness of these strategies.

House Test: Incrementality Testing with Lalo

In the final segment, Sharma discusses a practical application of incrementality testing using House, an incrementality testing software, in collaboration with his client, Lalo, a baby products brand.

Test Overview:

• Objective: Determine if optimizing for "Add to Cart" events yields similar or better efficiencies compared to traditional "Purchase" objectives.

• Setup: A three-cell test on Meta:

  • 40%: Purchase objective campaigns
  • 40%: Add to Cart objective campaigns
  • 20%: Holdout group

• Findings on Meta:

  • Initial Meta metrics were discouraging, but the House holdout revealed that "Purchase" objectives were only 2% more incremental than "Add to Cart", indicating that the latter performed nearly as well.

  "Add to Cart performed extremely well, only 2% less incremental than what we normally run." [12:30]

• Expansion to TikTok:

  • A similar test on TikTok involved a two-cell setup:
    • 60%: Traffic campaigns (upper funnel)
    • 40%: Holdout group
  • Results showed a 12.5% lift in new customer revenue and a notable increase in returning customer revenue, demonstrating TikTok's efficacy as a prospecting tool.

  "We saw a 12.5% lift in New customer revenue on TikTok." [14:00]

Key Takeaways:

• Flexibility in Ad Objectives: Testing different campaign objectives can uncover untapped efficiencies, especially in omnichannel distributions.
• Platform-Specific Strategies: What works on one platform (e.g., Meta) may yield different results on another (e.g., TikTok), emphasizing the importance of tailored approaches.
• Incrementality Testing: Utilizing tools like House allows brands to measure the true impact of their ad spend beyond traditional attribution models.

Conclusion

Nik Sharma’s deep dive into the Marpipe Report, coupled with his exploration of second-time founder strategies and practical incrementality testing, provides a comprehensive guide for DTC brands seeking to enhance their advertising efficacy. By leveraging enriched catalogs, embracing innovative distribution tactics, and strategically testing ad objectives, brands can achieve sustainable growth and superior returns on their marketing investments.

Notable Quotes:

• "If you used enriched catalogs versus plain catalogs, your ROAS was basically just about double." — Nik Sharma [01:30]
• "They say okay, what can I do here that no one else has done?" — Nik Sharma [06:30]
• "They’re really here to find the best people, trust them like CEOs of their departments." — Nik Sharma [10:40]
• "Add to Cart performed extremely well, only 2% less incremental than what we normally run." — Nik Sharma [12:30]

Stay Connected:

For more insights and detailed analyses, subscribe to the Limited Supply podcast on your preferred platform and join the conversation with Nik Sharma through his newsletter or social media channels.