HomeNotificationsNewslettersNextShare
Direct-to-consumer brands are demanding accountability from the ad industry, and it could finally shake up how agencies and TV networks work
Advertising

Direct-to-consumer brands are demanding accountability from the ad industry, and it could finally shake up how agencies and TV networks work

the good place

NBC

NBC's "The Good Place."

  • From specialized agencies to new TV programs, the ad industry is courting direct-to-consumer brands.
  • But DTC brands do not have deep pockets for marketing.
  • Instead, the goal of agencies and sellers in getting DTC business is to prove that they can measure ads with data-backed approaches that the DTC brands require. And maybe in the future, DTC brands will start to spend more on marketing as the industry grows.
  • TV execs in particular are leaning into DTC brands, which traditionally have not advertised on TV.


There's an sizable shift in the advertising industry from Fortune 500 brands to direct-to-consumer brands.

Not only are DTC brands flipping around traditional business models from packaged goods brands or retailers, they're also rippling across the industry and causing everyone from publishers to TV networks to tweak how they work.

Over the past few years, the advertising industry has grappled with transparency and challenges in measurement as marketers increasingly demand proof that their marketing dollars work.

Here are a few of the major concerns currently circling the ad industry at a broad level:

Enter DTC brands. Unlike traditional or Fortune 500 brands, DTC companies are hesitant to invest in marketing if it doesn't drive a sale or conversion, which is causing the industry to prove to marketers of all stripes that its ads are working.

Grooming startup Harry's, for example, has separate teams for performance-based and brand marketing, but both work together to make their efforts as efficient as possible.

"What we don't want is for the teams that are thinking on the longer term, brand-orientated measures to be leaving money on the table," said Lorna Peters, VP of marketing at Harry's. "We have those teams of people sharing their work and bouncing their ideas off of the more performance orientated teams."

Advertisers are courting small budgets from DTC brands to prove that advertising works

Whether it's lip service or not, the advertising industry is bending over backwards to accommodate for DTC brands that often have small, ROI-focused budgets.

Indeed, evidence is building that the rise of DTC brands could make the ad industry finally accountable to advertisers.

"Ultimately the rise of direct-to-consumer brands buying ads of all types will make the advertising industry more accountable, and I think more flexible," said Dave Morgan, CEO and founder of Simulmedia. "It's encouraging for a lot of media channels - the question from a macro [level] will be 'will the ad industry grow because of this?' Or 'are we going to see some big brands go away and these are the replacements?'"

However, DTC brands do not have deep pockets for marketing, meaning that winning business from the group of brands won't necessarily turn around sluggish ad markets and returns.

"There's no question that these are not companies that will spend seven figures for creative, which is table stakes for so much of the large agencies. It will not make substantial media budget commitments, which is table stakes for the large holding company media agencies - the budgets grow with sales," Morgan said.

The TV industry needs to get shaken up to bring in small advertisers

Across the board, DTC brands are becoming less reliant on Facebook and digital platforms and are eyeing traditional media like TV, out-of-home, and print. But purchasing and measuring a TV spot is expensive and dominated by media buyers with deep expertise and lots of money.

Last week, NBCUniversal and ad agency Giant Spoon partnered to launch a program designed specifically to make that process a little bit easier.

This Is Us

NBC

NBC's "This Is Us"

Working together, NBCUniversal and Giant Spoon will offer DTC brands joint resources for media strategy and planning resources for TV and digital video. The program also acts like a consultancy for DTC brands and provides them with data science and research teams.

"As these brands mature, they need to scale and they are acknowledging to get that reach, there's one place they need to go," Linda Yaccarino, NBCUniversal chairman of advertising sales and client partnership, told AdAge. "There's no better way to build immediate scale and build your brand than with premium video versus the limitations of performance-based advertising."

And last month, Simulmedia rolled out a national TV marketplace specifically for direct-to-consumer brands. Morgan said that when DTC brands started coming to Simulmedia a few years ago, without an agency or the big budgets that were required to buy national TV ads, the firm would tell them to come back once they were bigger, but quickly realized that it was a bigger trend across several DTC brands.

"We thought 'they'll just grow up and graduate to working like we had with the Home depot or a Walmart,'" Morgan said. "Then it really hit home a year and a half ago that it was going to take a fundamentally different product and approach."

In one example, DTC brands wanted to see daily reports of the performance of their ads when Simulmedia was used to doling out weekly reports for other clients, he said.

And while other big brands work to fine-tune their targeting, DTC brands experimenting with TV ads do not necessarily want their spots to be targeted. Instead, they wanted ads to widely air so that they could then analyze which spots were performing the best.

"They wanted campaigns that would start very broadly early so that they could learn - it ultimately starts really cheap because if you're doing a lot of targeting, it's going to be more expensive because you're limiting the delivery," Morgan said.

Publishers are also feeling the heat

For years, publishers have pitched labor-intensive and pricey native ads with the goal of mimicking either editorial content or high-quality work produced by big agencies. But because both direct-to-consumer brands and are focused on sales, publishers have begun to retool their native advertising businesses to include more data and results.

"So much of advertising is moving to the bottom of the [sales] funnel now," said Ian Schafer, a former agency exec who founded ad agency Deep Focus. "With the explosion of direct-to-consumer brands, [their] ad spend has gone towards customer acquisition."

Casper

Casper

An ad for Casper

It could be tough to get the ad industry to change how it works

Whether or not big advertising partners can win over DTC brands remains to be seen, but it will be intriguing to see how ad partners choose to set up plans for working with DTC brands.

Unlike how many agencies and publishers operate, DTC brands rarely have put out requests for proposals (or RFPs) because it requires them to earmark a certain amount of ad spend for the future, said JB Osborne, CEO and cofounder of Red Antler, a Brooklyn-based agency that specializes in working with startups and direct-to-consumer brands.

"If you're planning out your budget and marketing and media spend a year ahead and you're committing to what you're going to do, that doesn't put you in a position to be thinking in real time," he said.