CTV Could Be a Game Changer for Struggling DTC Brands
DTC brands earned lavish praise from the advertising world for their mastery of performance marketing, especially on social platforms. Brands like Allbirds, Dollar Shave Club, and Bonobos showed they could succeed on the basis of direct relationships with consumers. It was a particularly compelling value proposition for an ecosystem already moving toward first-party data due to privacy concerns.
But as AdExchanger recently covered, the dream hasn't worked out as well as many DTC brands and their backers hoped. Many DTC brands have sold or are trading for cents on the dollar. And first-party data, long upheld as the holy grail of modern marketing, has proved expensive and difficult to capitalize on.
Don't count out DTC brands just yet. Their access to first-party data isn't the only digital advertising trend that appears to prime DTC brands for success. The growth of CTV is another factor that could propel DTC brands' comebacks.
Why? Because CTV will be a great channel for brands that understand the economics of performance marketing, fine-tuned targeting, and emerging ad mechanisms like shoppability. And DTC brands are known to excel in all three of these categories.
CTV's Performance Economics
CTV is a premium channel with high-attention audiences. And for the value CTV offers, CPMs are low — especially considering that advertisers can buy media on quality platforms like Hulu and Peacock with $20 CPMs. These economics are particularly favorable for DTC brands given their hyper-focus on performance.
For marketers attached to pixel-based measurement for assessing their CPAs, CTV's performance may not be immediately evident. Sure, CTV isn't as straightforward to measure as display, nor does it offer the clearest lower-funnel signals.
But the kinds of progressive marketers known to work at DTC brands understand that just because CTV doesn't lend itself to pixel measurement — which itself will become less reliable — doesn't mean that CTV is inefficient. In fact, when viewed through media mix modeling (MMM) and incrementality, CTV is incredibly performant.
For example, pixel-based signals may indicate to a marketer that their display CPA is $5 while their CTV CPA is $20. But when MMM and incrementality are taken into account, that marketer's CTV CPA will turn out to be $3 or $4. DTC brands get that to fully assess CTV's performance and impact; they will have to make this measurement paradigm shift. And they'll be quick to grasp that while competitors hesitate and adhere to the metrics of the past.
Targeting
Along with performance, CTV increasingly offers fine-tuned targeting. Of course, brands can target specific channels or shows. But they can also leverage contextual targeting to find content likely to overlap with their audience even when it's not obvious. For example, an athletic brand can target sports-related content no matter what channel or show that content appears on (as opposed to just buying Sunday Night Football or ESPN).
CTV also puts specific, IP-based demographic signals at brands' disposal. Brands can target by gender, age, income level, and more on CTV, without having to rely on open web signals such as third-party cookies. Marketers can also onboard their first-party data — such as prospect lists, email lists, and postal addresses — to start with a lower-funnel focus and hyper-target their converters and lookalike audiences at scale.
Again, DTC brands have been quick to embrace new channels and approaches in the past, and whereas legacy brands will take longer to stop buying CTV like it's traditional linear TV, DTC brands will move fast to capitalize on the digitization of the channel.
Shoppability
The third CTV trend DTC brands will jump on before competitors is shoppability.
More and more consumers want to shop from their TVs. According to a Samsung Ads and Kerv Interactive survey, 55 percent of smart TV viewers remember seeing a shoppable ad, and 50% have interacted with one.
These numbers show that the current shoppability demand-supply landscape is at an imbalance, with large opportunities for brands to streamline shopping experiences and drive conversions. DTC brands will be more than willing to capitalize on the opportunity.
Jumping on shoppability can be as simple as placing a QR code in an ad. But brands can also go further by integrating browsing and buying directly into the TV program viewing experience.
CTV Is a Tailwind for Forward-Thinking Brands
The DTC future hasn't panned out quite as rosily as expected, but things can change with the growth of CTV. With their data-driven, innovative mindset, DTC brands are well positioned to take advantage of the channel's performance, targeting, and emerging ad mechanisms. Because it was that mindset that took DTC brands to the top of digital advertising in the first place — and it will now facilitate their comebacks.
The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.
Mike Hauptman is CEO and founder at AdLib.