Darcelll

Is $ODD's marketing hit a one time event or an ongoing issue? I've spent 6 digits a year before on Meta ads, so am fairly well qualified to answer. Oddity Tech basically had a very high converting ad/ad set that outperformed the others. This was the "Try Before You Buy" promotion. Why is it high performing? Because it offers something that appears to cost virtually nothing upfront other than shipping fees. People are much more likely to make a purchase for makeup that has a $5 total (just shipping) on the checkout page than the full price. This ad set was so high performing that without it, Oddity now expects Q1 revenue to decline by 30%. At their current ad costs without this ad program they said they are "not profitable at first order." Hence, it was the TBYB ad set that was driving most of their profitable sales. Notably, Oddity appears to believe the penalty from doing their TBYT ads are permanent, as they said the fix they identified is to "rebalance" and "reduce reliance" on Try Before You Buy ads, and instead do more "standard product" ads. Per them, the fix isn't appealing to Meta to remove the penalty. The fix is to stop doing those types of ads. They say, "try before you buy isn't a dependency for us." But they are also saying they aren't profitable without it at present. AKA, other ads are not profitable. It is true that it takes time to calibrate ads. And new ads are less profitable. So we can expect some improvement in ad performance. However, a standard product ad will drive significantly less conversions than a near free product ad. We cannot expect the new ad types to deliver the same ad performance as TBYB. We also don't know if those will actually be profitable once given more time to scale. The entire business model is under major risk right now. TL;DR 1. A single ad set with a single advertiser was the predominant driver of profitable performance. 2. They pushed this single ad to the max, Rather than have diversity of marketing channels and ad types. This shows the business has fragility and not robustness. 3. The new ads will likely perform worse than TBYB, but we don't know how much worse. They could be profitable, or not. It's managements guess as much as ours. 4. The factor that is apparently most important to the business is not their "tech stack", but their Marketing CAC. Based on what happened, it wasn't their unique proposition that made them get great sales, but a single marketing ad. Although this business has dropped in share price significantly, a business saying it isn't profitable at current economics is a very risky business. Can it get better? Yes. But it can also remain with unprofitable growth economics. Complete unknown.