​​By 2024, Insider Intelligence predicts those dollar amounts will rise to nearly $161b and $52b, which isn’t a surprise considering almost 64% of consumers made regular purchases directly from brands last year.

DTC brands are responding by investing heavily in traditional and digital ad formats, although the uncertain economy is putting pressure on many of them, including those at SmileDirectClub, who decreased spending by 7% YoY through May. 

Overall, DTC brands spent nearly $4.3b on ads through May 2023, representing a 13% decrease from the same time last year. Meanwhile, the number of DTC brands buying ads fell by 5% to 760.

Despite decreases in spending every month of 2023, some DTC brands are still opening their wallets.

It’s a 50-50 Split for DTC’s Top Advertisers

Technology is the lifeblood of the DTC industry, with a click on a phone or computer often the only thing separating consumers and their intended goods or service. Despite that, DTC advertisers are still embracing the non-digital side of the advertising world. 

Through May, DTC advertisers spent 53% of their dollars on digital formats (down by 14% YoY to $2.2b) and 45% on TV (down by 11% YoY to $1.9b). They also spent on print ads, which dropped by 38% YoY to $70mm. 

Five DTC advertisers stood out—Casetify, DraftKings, The Farmer’s Dog, MapleBear (Instacart), and Wix.com—who combined to spend more than $443mm through May or 10% of the investment from DTC companies.  

Advertisers for Casetify (owned by Casetagram), for example, increased spending by 168% YoY on the heels of the launch of Flexi Band for Apple and Samsung watches, its first “Style Lab” Pop-Up Experience, and becoming the official tech accessory partner of Coachella. 

The big spending from advertisers at Casetify comes in the wake of rapid growth—since launching 12 years ago, Casetify has sold more than 15mm phone cases. We can attribute a good chunk of that growth to its investment in advertising, much of which lives inside social media channels. Through May, 99% of Casetify’s ad dollars went to social media channels, with a big focus on video formats. 

Meanwhile, advertisers for DraftKings increased spending by 23% YoY, with the bulk of spending (79%) going to TV ads across cable (up by 393%) and broadcast networks (up by 69%). 

While the traditional-heavy strategy isn’t new—440 gambling advertisers allocated 69% of their ad dollars to TV and print ads through October 2022—it flies in the face of the industry’s quest for profitability. 

After years of flashy campaigns, including a fleet of Ubers that look like chariots and betting in space, the industry has collectively prioritized profit—or so it seemed. 

David VanEgmond, a former FanDuel and Barstool Sportsbook executive, said, “You’ve seen the industry pull back and say, ‘Wow, fighting for market share got pretty ugly in terms of losses.”

The ongoing investment in traditional ads instead of their more measurable digital counterparts could indicate that companies aren’t marching toward performance and efficiency at quite the expected pace.

Advertisers for MapleBear (brand name: Instacart) also spent big, increasing their investment by 127% YoY. Similar to their contemporaries in the gambling realm, advertisers for MapleBear spent 80% of their dollars on TV, many of which went to a Super Bowl ad. 

For MapleBear, spending comes not only as Instacart fights for more of the eCommerce grocery pie, but they bolster their digital ads business and capitalize on the rise of retail media.  At the heart of this initiative is Instacart Marketing Solutions, which aims to help retailers create marketing campaigns that “attract, engage, and drive affordability for customers on Instacart-powered eCommerce websites and apps.” 

“We know affordability is top of mind for consumers across the country right now. It’s also top of mind for our retail partners, who are looking for more ways to help their customers save when accessing the groceries and goods they need,” said Chris Rogers, Chief Business Officer at Instacart.

He went on to say, “With the launch of Instacart Marketing Solutions and our expanded loyalty programs, we’re developing new technology tools that empower retailers of all sizes to create strategic digital campaigns and unique loyalty programs that engage their customers, grow their business and, ultimately, help customers find more savings at checkout.”

Instacart also recently partnered with Roku to help advertisers measure the impact of TV ads on eCommerce purchases via first-party data. 

The big moves from MapleBear and Instacart aren’t surprising, considering nearly 30% of Instacart’s revenue comes from advertising. In fact, eMarketer predicted that Instacart’s digital ad revenues would grow faster than TikTok, Amazon, and Apple in 2023. 

This intense competition from the likes of Walmart, Kroger, and Amazon (Amazon Fresh, Amazon Pantry, and Whole Foods delivery and pickup), as well as the push for more ad revenue, will continue to influence how MapleBear promotes Instacart. 

That strategy will continue to evolve, but it’ll likely include podcast ads, which increased by more than 1,000% YoY to more than $2mm as MapleBear invested in primary pre-roll ads on popular podcasts such as Fantasy Football Today Podcast, Make Me Smart with Kal and Molly, and Happier with Gretchen Rubin. 

Finally, advertisers for Wix.com and The Farmer’s Dog increased spending by 174% YoY and 109% YoY, respectively. For The Farmer’s Dog, much of that spending went to a Super Bowl spot, Forever, telling the story of Ava and her Labrador retriever, Bear, as they grow up.

Jonathan Regev, co-founder and CEO of The Farmer’s Dog, told PEOPLE that he hopes the ad encourages people to make healthy changes in their pet’s life to increase their happiness and longevity. Advertisers for The Farmer’s Dog also invested in TV ads across reality, sitcoms, movies, and action/drama shows.

An Industry Primed for Ad Spending 

Brands like Allbirds, Casper, and Warby Parker ushered in the DTC revolution years ago and revolutionized the consumer world in the blink of an eye. 

But established brands are catching up. Since 2011, Nike has grown DTC sales from 16% of revenue to 35%, while Adidas outlined plans for DTC sales to make up 50% of its revenue by 2025. Under Armour has also expressed a desire to grow its DTC model. 

The continued emergence of established brands will push an already rapidly growing industry even further—and as they do, ad dollars will follow to keep companies one step ahead of the competition. 

For more insights, sign up for MediaRadar’s blog here.

Isaac Newton discovering gravity. 

The Continental Congress adopting the Declaration of Independence.

What do all of these events have in common? 

They happened after Friedrich Jacob Merck took control of the Engel-Apotheke, which would eventually become one of the world’s biggest pharmaceutical companies. 

If that name doesn’t ring a bell, maybe its current one does: Merck. 

Yes, that Merck—the same one that reported $48.7b in sales last year. 

In the more than 4 centuries since Merck’s inception, it’s seen a thing or two—including the evolution of pharmaceutical advertising. 

Unfortunately, we can’t travel back in time and witness this evolution, but we can see how pharma companies spent their ad dollars last year. 

Here’s what you need to know about how pharma companies—new and old—spent their ad dollars in 2021. 

Pharma Advertising in 2021: Spending Stalls

After spending increased by 32% YoY in 2018, it’s come to a halt. 

In 2019, pharma ad spending increased by 2% YoY, driven primarily by a 6% boost in TV buys. 

In 2020, spending was flat, despite a siloed boost to digital, which increased by 74% YoY as consumer buying habits changed during the pandemic. 

In 2021, spending went up by 1%.

While declining or stabilizing ad spending typically indicates that trouble’s brewing—struggling companies usually don’t have the fund to spend on advertising—in this case, it points to the immunity of pharma advertisers, especially when considering the pre-pandemic increase in spending. 

In 2021, the top-spending categories accounted for 43% of all spending.

Diabetes is number one, accounting for 12% of total spending, followed by Psoriasis (10%), Arthritis (9%), HIV/AIDS (6%) and Breast Cancer (6%). 

TV was the media of choice for advertisers in these categories, with Diabetes holding the top spot. 

Digital spending lagged considerably, although the HIV/AIDS category increased its digital spending to 28% (others allocated between 5% and 16% to digital).

A Closer Look at Pharma Ad Spending in 2021

Despite relatively little to write home about in terms of overall growth in spending, there’s plenty worth noting if we look a little closer.

There are more advertisers than ever

It would make sense that the sluggish spending would also come with a similar trend in the number of pharma companies buying ads. 

But that’s not what happened.

In 2021, the number of pharma companies buying ads for different prescription drugs increased by 17% and 15%, respectively. 

A big part of that had to do with the fact that 48 new companies jumped on the advertising bandwagon (more on them in a bit). 

The increase in the number of advertisers and ads is easy to understand. 

The FDA approved 50 new prescription drugs last year.

But why didn’t spending follow suit? 

It likely has to do with two factors: 

Even though the pandemic didn’t lead to a mass exodus, many likely adopted a more reserved approach to buying pharmaceutical drugs. 

The new entrants may also have been ramping up spending as they determined if their drugs took hold in the market, similar to how a startup dips their toes gradually when entering a new industry.

New advertisers in 2021

In 2021, 50 new prescription drugs came on the market. 

Yet, only five accounted for 75% of the nearly $135mm spent, including Cabenuva (HIV/AIDS), Verquvo (Cardiovascular), Xolair (CSU) (Allergy), Orgovyx (Cancer) and Ponvory (Multiple Sclerosis).

Of these new entrants, there were a couple of interesting insights. 

For starters, Cabenuva was the only one that bought TV spots. 

Those ads came in Q4 when it spent more than $1mm on spots on ABC, A&E, CBS, CNN, Fox, NBC and the USA, accounting for 75% of the total TV spend. 

Meanwhile, Verquvo and Xolair invested in print ads. 

More than a third of Verquvo’s print ads ended up in Better Homes, 14% in Southern Living, 12% in Woman’s Day and 9% in The New England Journal of Medicine. 

The remaining (8% or less) went to Country Living, Popular Mechanics, TV Guide, Cardiology Today, The American Journal of Managed Care and The American Medical Association. 

Xolair dedicated 30% of its print ad spend to Better Homes & Gardens, 27% to People, 9% to Women’s Health, 7% to Country Living and the remaining were 6% or less and included Us Weekly, Southern Living, Time, InStyle and Allure. 

Finally, Orgovyx and Ponvory were the two that invested anything substantial in digital, allocating 84% and 92%, respectively, to digital ads. 

The contrasting behaviors could have something to do with the companies manufacturing them (Sumitovant Biopharma and Johnson & Johnson) and their willingness to veer from the age-old approach of investing the bulk of ad dollars in print and other traditional formats. 

Those commercials aren’t going away

It’s 2022 and most advertisers are shifting their ad dollars to digital. 

Surprisingly (or unsurprisingly), pharma advertisers aren’t following the leader. 

Instead, most of them are sticking to what they know best: TV spots. 

In 2021, TV spots accounted for more than 70% of total spending, increasing by 3% YoY from 2020. 

That said, spending on print ads decreased by 22% YoY due mainly to a decrease in ad buys in People Magazine (down by 44%), Good Housekeeping (down by 25%) and Health (down by 21%). 

The only print publications in the top 5 that saw an increase in spending were The New England Journal of Medicine (increased by 22%) and Better Homes & Gardens (increased by 4%). 

The increase to The New England Journal of Medicine could signal a greater shift from industry advertisers to focus more on healthcare professionals (HCPs) instead of consumers. 

Overall, the shift away from print is undoubtedly a result of the rise of telehealth during the pandemic as more opted for digital interactions with HCPs instead of face-to-face ones at the office—the same offices that littered the waiting rooms with magazines. 

Digital ads are (slowly) becoming popular

While it’s impossible to ignore pharma advertisers’ adoration for TV, our data shows that many of them are finally experimenting with digital. 

In 2021, digital ad buys increased by 60% YoY. 

The number of prescription drugs advertising digitally increased by 19% YoY. 

Looking specifically at how these advertisers spent on digital, we see that video increased by 32% YoY, with 99.5% going to YouTube. 

Meanwhile, digital display saw a 59% increase in 2021, which took total spending beyond $378mm as Abbie and Sanofi SA increased their spending on display by 138% and 330%, respectively. 

Still, digital accounts for just a fraction of spending and will take years to even remotely catch up. 

But, it is a start and should continue to rise as telehealth takes hold and more digital-first HCPs enter the workforce. 

For now, expect most pharma advertisers to stay the course and stick to what they know. 

At the same time, this presents an opportunity to more forward-facing advertisers to start building out a digital strategy that’ll unquestionably become the foundation of their approach for years to come.

For more insights like this, sign up for our blog.

According to research from Diffusion’s 2022 Direct-to-Consumer Purchase Intent Index, the number of Americans who intend to make at least one purchase from a DTC brand dropped from 79% in 2021 to 65% in 2022. 

The top reasons people say they’d choose a traditional retailer over a DTC brand are:

• Free and quick delivery
• Lower costs
• Better sales
• Physical convenience and accessibility

These challenges are against the backdrop in which new data restrictions are making traditional DTC advertising channels (like Facebook) more difficult to lean into. Like all brands, DTC companies are leaning into their first party data and changing their advertising strategies.

Being a DTC brand is tough—they need trustworthy advertising partners to rely on.

In a saturated field that is marked by change, how are you going to prove that you and your advertising services can deliver results for DTC brands?

Understand your DTC advertising prospects: Get to know the market first

If you are seeking to sell into the DTC market, you need to understand the overall landscape. 

Nearly all types of industries—from mattresses to braces—are represented in the DTC segment today. But what was once a field for darling brands with highly compelling creative, is now fiercely competitive. 

Take Casper, for example. It was one of a kind in 2014. Today it has more than 200 competitors.

Those brands are funded by investors eager to jump on the gravy train. Venture capitalists invested roughly between $8 and 10 billion in DTC brands between 2019 and March 2020, per TechCrunch. And that was before the pandemic made direct relationships with consumers even more important. 

This “direct brand economy” has evolved over the last several years. 

MediaRadar saw the most growth within the DTC market take place between 2018-2019, when the market grew 18%. This growth was marked by both companies in the DTC market, as well as the number of products they were advertising. 

During the beginning of the pandemic (2020), the number of brands advertised grew by 14% YoY, but the number of DTC companies in the market only increased by 5%. This isn’t surprising: established DTC companies could take advantage of a nation opting for home delivery.

While the pandemic fueled growth in 2020, we saw the market stabilize in 2021. In fact, we saw the number of DTC companies and product lines decrease by 4% and 5% respectively.

We began to see leading brands with significant DTC segments make acquisitions, like when Lululemon gained Mirror. Though, most leading DTC brands remained independent due to their high valuations. 

At the same time, mature national brands expanded into DTC (see Kellog’s Cheez-it brand and PepsiCo).

Not all category leaders have managed their brand’s perception well. Away, for example, lost its luster when their founder turned out to be running a cutthroat culture of intimidation. 

As brands try to build their brand and hold on tightly to customer love, they are actively buying advertising spots. This makes it an interesting and attractive target for ad sales teams.

Next: Understand DTC media buying patterns 

MediaRadar reviewed ad spend of over 3,300 DTC brands in 2021. This analysis took into consideration print, digital and national TV formats. 

While some DTC brands expanded into national TV advertising during the pandemic, digital continues to reign as their overall advertising medium of choice. 

We also noticed seasonality of DTC ad buying. Q1 and Q4 are when the biggest ad buys take place each year.

Online Video and OTT are new drivers

DTC brands have long favored digital advertising. In 2021, 66% of DTC brands that we reviewed were advertising using digital display ads. Despite data changes, Facebook remains a big source of digital ads for these brands.

Online Video, mostly YouTube, is a driver for digital ad revenue from these brands. 30% of DTC brands used online video to advertise in 2021. 

The new kid on the block, OTT also benefited from DTC companies favoring video advertising. This medium grew over 62% YoY with nearly 500 DTC advertisers using OTT ads to promote their products. 

In 2020 brands slowed down spending on OTT in favor of other digital channels. However, they changed course in 2021.

Not all categories behave the same.

As the DTC market has evolved, each brand and category of products has created their own niche go-to advertising strategy. 

Some DTC brands within categories like Finance, Home Furnishings and Pharma rely largely on their national TV buys. On the other hand, DTC brands in categories like travel, beverages and hobbies are leveraging digital advertising in a bigger way.

Retail

The retail category saw the following highlights:

• Growth: An increase of 2% growth in 2021
• Total spend breakdown: 36% digital, 5% print and 59% TV.
• Shifts in digital formats:
  • Overall Digital spend: Moved to 36% of total ad buys. 
    • Video spend: increased 70%. 
    • Social media increases: Facebook 4% and Snapchat 55%.

Driving Factors:

• 1-800-Flowers.com experienced a 465% 2021 growth. 
  • Their digital spending increased over 800% in 2021.
  • Their Facebook grew over 1000% 
  • Their Video increased nearly 30 times of its 2020 spend.

Finance

The finance category saw the following highlights:

• Growth: Finance increased 13% in 2021. 
• Total spend breakdown: Digital 30%, print 1% and TV 69%. 
• Shifts in Format:
  • Digital was up 32%
    • Display showed a 25% increase 
    • Video increased by 88% 
    • Podcast was up 46%. 

Driving Factors:

• Intuit was up 102% YoY was a driver in the 2021 digital and TV increases. Their video spend increased 174% and TV saw a 95% jump.

Prospect for individual brands that are a great fit

DTC brands want to increase brand awareness and sales growth. They want advertising partners who understand their needs and can see where their best opportunities lie. 

The best way to find brands that you can support best is by doing some homework first.

We have two suggestions for quick ways to segment DTC prospects:

• Use ad sales intelligence software to filter and research individual DTC brands: In MediaRadar, you can specifically choose DTC as a search filter option in your Power Prospecting or Missed Business Reports.
• Review IAB’s list of the 250 direct brands worth watching. There’s a lot to work with here but it will take more manual research.

Once you highlight your brands, take a step back and ask who is leading them and how. Do they value traditional experience, do they only do work with their in-house team or have they publicly announced they’re seeking new partnerships?

Take a look at past work, where their gaps are and be ready to speak to the unique value that you bring. Each brand has its own story and you should bring an elevated level of personalization to your pitch. 

Show how your metrics align with their goals

DTC companies rely on metrics to optimize sales, marketing and service. To win over their business, you’ll need to present compelling information on what you can deliver. 

After you do your research on your prospects, you should have an understanding of their industry, spending patterns and other profile factors. How do they compare to your current customers? 

If you have concrete results from your services with similar clients, share them.  Continue tracking and studying how ads running on your platform impact the client’s business. 

Basic guidelines for the sales conversation

You’ve done your research, you’ve scored your leads and are working on compelling cold emails. Remember these core principles to guide the conversation:

• Speak to their needs first and foremost: You’re not here to sell ad space; you’re here to help them grow their brand.
• Speak their language from beginning to end: Whether a campaign is built to build awareness or drive sales, DTC brands highly value creativity and great customer experience.
• Give them a chance to speak: The best sales reps are those who listen well and understand the prospect. Truly get to know them and what they want so that you can deliver.

Top DTC brands win in a crowded market by having a laser focus on customer experience. It permeates product strategy, delivery, customer service and – you guessed it – marketing priorities. To sell to these brands, ad sales teams and agencies should follow their example.

Flexibility may not be the key word in marketing these days, but professionals still need to drive the most return with their budgets. Targeted, automated purchasing helps them do just that.

We’ve seen a surge of advertisers begin buying programmatically this year. As we dove into the subsets of buyers and their buying behaviors, we identified two major trends. 

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

1. DTC spending keeps climbing

We all know that direct-to-consumer brands were uniquely positioned to benefit from the pandemic. Distinguishable brands already had their online stores up and running, and their digital marketing strategies in place.

Even though they were in an advantaged position, accuracy and efficiency became even more important in the increasingly competitive eCommerce market. 

As a result, brands increased programmatic spending, often in new premium programmatic formats. DTC companies typically increased their ‘experimental budget’ to 5-15% during the pandemic to see what worked best. 

Brands, like Poppi and Olly, for example, shifted significant portions of their marketing budgets to Amazon DSP.

“The endless digital shelf has provided new opportunities for companies to expand their brand,” said Allison Lewis, vp of commerce media at Wunderman Thompson Commerce, per Digiday. “Creating a robust media strategy that includes Amazon is vital to continue to grow as a digital brand.”

According to our data, DTC companies have spent $879 million on programmatic in 2021 so far (Jan – May), which is up 26% from 2020. In the same period last year they spent $697 million.

Even as foot traffic in brick and mortar stores increases, DTC programmatic spending is not levelling off. 

2. TV advertisers may use OTT to guide Addressable TV campaigns

Addressable TV is the dream of TV advertisers—delivering relevant ads based on household targeting, rather than program targeting. 

And it’s expected to surge over the next two years. eMarketer predicts that this format’s spending will increase 75% to $3.6 billion by 2022. 

This shift comes at a time when streaming is starting to cool off (slightly). According to a recent report from Omdia, consumers have hit their ceiling for how many streaming services they’re willing to use—and yes, this includes AVOD services. 

Pay TV is “largely stable and SVOD continues to grow.” But when it comes to ad-supported streaming, the report stated that “a significant number of users are eschewing AVOD and instead increasingly consuming content via paid alternatives.”

While OTT grabs headlines and is full of potential, TV advertising still dwarfs the young format that has very limited inventory. 

Interestingly, we’ve even seen OTT spending decrease. OTT advertisers have spent $55mm in 2021 YTD (Jan – May), which is down 40% from 2020 in which they spent $91.4 over the same period.

Though spending has decreased, it’s worth noting the number of brands increased slightly YoY (2.3k in 2020 vs 2.6k in 2021). This suggests that OTT advertisers may be using programmatic to test the efficacy of their campaigns, and then strategically place spend where their programmatic efforts were successful.

OTT advertising may influence the way TV advertisers run their cross channel campaigns, but it hasn’t become a mainstay for brands yet.

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.

But Facebook prices are rising and other digital options are proving themselves. Will Facebook always be the darling of DTC advertisers?

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

DTC Brands Say They Want to Diversify Media Buying, But By How Much?

Facebook has long been a useful platform for DTC brands to reach and build relationships with their customers. But some brands are hesitant to heavily rely on one platform. 

“From a growth standpoint, there’s always this looming fear of being solely dependent on Facebook and being overly dependent on Facebook,” Matthew Michaelson, Smalls co-founder and CEO, told Digiday. Smalls, a cat food manufacturer, has added TV, direct mail and affiliate marketing to its mix. 

This doesn’t mean reallocating budgets doesn’t come without setbacks. It takes several learning curves to jump into new forms of paid media. But marketers are so wary of the upcoming changes in the digital marketing landscape, it’s worth the upskilling. 

Between the antitrust hearings and cookie-less future of the internet, marketers want to diversify their spending. 

“Diversification away from Facebook is the biggest conversation I’m having,” said Jeromy Sonne, managing director of Moonshine Marketing. He noted that it’s still the biggest tool for brands and they will continue to buy on the platform, but they’ll also be experimenting with other formats. 

For many DTC brands, fear isn’t driving diversification, but Facebook pricing is. Pricing is expected to surge this year as the economy rebounds. Some brands have reported paying CPMs between $14-$17 on Facebook, compared to $3-$5 on other social media platforms.

“The economy is set to come roaring back, and there’s a lot of competition to get in front of consumers who have been sitting on built-up savings they haven’t been able to spend this past year,”  said Ross Shelleman, CEO of Aisle Rocket. Shelleman said brands could expect to see rates increase at least 30% on Facebook.

Even though brands may have various reasons to spread out their investments, many keep coming back to the platform that consistently drives ROI. DTC advertisers like ImperfectFoods, HelloFresh, Peloton and Grove Collaborative have diversified their spending—but they still lean on Facebook and Instagram. MediaRadar data suggests that other DTC brands are spending in a similar fashion. 

MediaRadar Insights

In the first quarter of 2021, 794 DTC brands spent $363.4mm on Facebook*. Across all other digital platforms with programmatic spend, 1.4k DTC brands spent $62.9mm.

On Facebook, spend from DTC brands is up 8% from Q1 2020. But spend from all other platforms is down 28% over the same period.

Even though the pandemic created the opportunity for DTC advertisers to break into other marketing platforms, social media has traditionally been the darling of DTC brands, where they have built their loyal customer base. It appears that this hasn’t changed.

Top spending DTC brands on Facebook in Q1 2021 are: 

• Wish
• Wayfair
• AirBnB
• Peloton Bike
• Curology.

Though diversification may be a big talking point right now, DTC brands are still invest in Facebook advertising to a great degree. 

*MediaRadar only measures brands who have spent over $30k in a year from a sample size of 2 million users.

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy. 

However, the data suggests that DTC brands had other plans. Where did they funnel their advertising dollars instead?

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

In Face of Tight Competition, DTC Brands Increased Their Online Advertising

With the increase in online shopping during COVID, it only made sense that DTC brands would see a surge in purchases. Companies like Chewy, Casper, and Wayfair saw revenues rise at the beginning of the pandemic. However, analysts say that profits were cut by raising prices of online customer acquisition—aka advertising. 

Online ad prices dropped at the beginning of the pandemic, but they returned to pre-COVID levels quickly. And the costly thing for these brands is that many DTC industries are saturated markets. 

Tyler Higgins, leader of the retail practice at global management consultancy AArete, explained to Retail Dive, that when a consumer clicks or searches for a mattress brand, “all of a sudden they’re getting mattress ads from three or four different brands.”

It’s true—our data backs it up. Between January and November of 2020, there were 2,517 DTC brands placing ads online. This is up 44% from the 1,732 DTC brands placing ads in 2019 in the same period. 

As the holidays rolled around, even more brands placed online ads. In November 2020 alone, there were 1,308 DTC brands advertising, which is more than any other individual month in 2020.

Our current data doesn’t currently include December numbers, but based on the current trajectory, we estimate that DTC brands spent roughly $1 billion by the end of the year. 

Considering that DTC spend was depressed in the earlier part of the pandemic, this hints that the overall DTC advertising market is growing. OTT-specific spend from DTC brands, though, is a different story.

DTC Brands Cut Back on OTT, While Others Jumped In

At the beginning of the year, pre-pandemic, DTC brands were each spending an average of $152 thousand a month on OTT advertising. We expected to see continued active spending in OTT through the year—however, this was not the case. By November, the average for spending per brand dropped to $50 thousand. 

These cuts led to a significant drop in total spend, from $14 million in January to only $3.5 million in November.

We want to note: the decreases in spending were not coming from a select few industries or leading brands. They were spread across the board. The top 5 DTC brands in OTT, for example, followed the same trend as the full population of DTC brands, meaning that this low average can’t be blamed solely on smaller DTC brands.

This significant drop in spending is surprising because in January, DTC brands made up a whopping 35% of all OTT spend. And over the course of the year, OTT spend declined every consecutive month. By November, DTC spending made up just 8% of total OTT spend. 

At the same time, both overall OTT spending and overall DTC spend sharply increased at the end of the year. October and November sales on OTT channels were double any prior month since February 2020. 

While DTC brands pulled dollars out of OTT, other companies started pouring theirs in. At the same time, DTC brands were still spending more, just on other digital channels. Digital spend from DTC brands increased 22% between January and November 2020. 

As 2021 progresses and the economy finds its footing, DTC may begin investing more in the OTT space again. But for now, it appears that their advertising budgets are being funneled elsewhere.

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy. 

With social distancing, working from home (WFH) and mask requirements, people are prioritizing different cosmetics than they would’ve in past recessions. Direct-to-consumer (DTC) brands are doing particularly well, as online shopping for makeup is becoming more common.

Continue reading to learn how the industry is transforming and how DTC cosmetic brands are changing up their advertising.

We encourage you to subscribe to our blog for the latest data surrounding the advertising industry. We will provide daily updates as COVID-19 continues to make its mark on the US economy.

Cosmetics sales are changing due to COVID-19

Prior to the pandemic, most makeup and cosmetics were bought in-store.

Roughly 85% of beauty-product purchases prior to the COVID-19 crisis were bought in person. Even when you narrow in on shopping patterns of millennials and Gen Zers, the majority (60%) bought their makeup in stores. 

Between store closures and the inability to try on makeup in-store, consumers aren’t buying products like they used to. Purchases shifted online. While overall makeup sales quickly dropped off in March, online sales increased 10% month-over-month.. 

Online sales weren’t enough to offset in-store purchases, but certain categories experienced significant spikes. Several cosmetic products are booming: at-home spa tools, purple hair products that help preserve hair color, serums, and blue-light blocking skincare products.

Blue-light blocking skincare products are one of the most pandemic-driven products to take off. People are paying attention to their skin when they see themselves on Zoom day after day and are aware of how much time they spend behind screens.

DTC Brands Doing Exceptionally Well

Because more people are shopping from home during the pandemic, DTC beauty brands are enjoying a healthy spike in sales. Even at the height of the pandemic in April, DTC wellness and skincare brand Tula experienced a 400% YoY increase in sales. 

“I think what we’re seeing is that consumers are staying at home and they’re investing in health and wellness even more,” said Tula CEO Savannah Sachs in a CNBC interview. “We’re seeing really, really great demand across the country.”

People couldn’t go shopping in stores or take care of themselves by going to the salon—so they bought products for self-care at home from digitally native brands.

“In [a matter of] a day, we had to hire an additional 20 people on the customer service team because our volume increased so dramatically,” said Public Goods founder and CEO Morgan Hirsh.  Now that we’re six months into the pandemic, brands are questioning whether this trend will continue as physical stores reopen.

Some, like Sachs, believe that the pandemic will continue to influence consumer behavior long after we return to normal. Others like Vegan skin-care brand BioClarity’s CEO Tracy Julien believes that the trend will slow and partnering with retailers will be an important way for DTC brands to grow. 

MediaRadar Insights

Methodology

We analyzed Direct to Consumer (DTC) Beauty ad spend during the month of August. We used data from TV, digital, and print ad spending (though ad spend is primarily in digital and TV).

Findings

DTC Beauty Brands

In August, DTC beauty brands were up 79% YoY—spending $16.8mm. This is significant considering the entire ad spend in the beauty category was down 24%.

When we analyzed how spending from DTC beauty brands was distributed throughout the different formats, we found:

• Television and digital: Spending was double that of August 2019
• Print: Spending was down 59% YoY
• Podcasting: Spend was just over $1 million in August

The top ten DTC Beauty advertisers were: 

• Manscaped
• ProActiv
• Hims
• Hair Club
• FabFitfun
• Billie
• Function of Beauty
• Curology
• Harry’s Shave
• Native Deodorants

These top ten spending DTC beauty advertisers came from three categories:

• Skincare
• Shaving supplies
• Haircare brands

It’s important to note that, of the top ten spending DTC beauty advertisers, only two were cosmetic subscription boxes. Overall, the cosmetic category is down YoY— but DTC cosmetic brands are up 33%. 

Without the restrictions of traditional marketing strategies within traditional brick and mortar stores, DTC beauty brands are targeting more specific audiences with more diverse messaging. 

These are the primary changes in the DTC beauty category we’ve noticed over the past months—primarily in August. We’ll continue sharing any major changes or new trends as they develop. 

For more updates like this, stay tuned. Subscribe to our blog for more updates on coronavirus and its mark on the economy.

Direct-to-consumer brands have shown they’re here to stay — and now they have the advertising budget and strategy to match. 

Last month, AdWeek reported on MediaRadar research showing that average ad spend by DTC brands is up 50 percent in 2019. Part of that growth means turning to more traditional advertising formats. “In the early days, DTC brands did purely transactional direct-response advertising,” MediaRadar CEO Todd Krizelman told AdWeek. “All mathematical—but today, as these companies mature, they’re looking more like standard companies.”

That’s not only true of established, quasi-household name DTC brands. These are five new DTC brands to keep your eye on. They all just started advertising in Q3, and they all have bought ads in a variety of formats. 

Gym King

After more than four years of building a foundational presence with retails, Gym King is now launching into its next phase, advertising DTC athleisure products online. “It is a pivotal time for Gym King, which has been investing in its infrastructure over the past six months to go from bedroom brand to retail heavyweight,” writes Emily Sutherland at Drapers. 

The luxury-oriented workout and lifestyle apparel brand was first seen advertising with Daily Mail back in August, with promotional offers. 

Nadine West

A women’s personal shopper service in the style of DTC subscription boxes, Nadine West promises affordable, high quality outfits delivered to customers doorsteps every month. 

The DTC brand first started advertising in August across a variety of women’s interest publications like USA Today, Healthline and AllRecipes. 

Pinna

Pinna is a new, kid’s focused audio company with podcasts, audiobooks, music and more. From CEO Maggie McGuire: “It is the first audio on-demand streaming service for kids that brings together all of the best audio into one place, including podcasts, audio shows, music, and audiobooks. There is no other one aggregated destination for all audio formats curated and created just for kids.” 

Pinna is a premium app, charging $7.99/month with a 30 day free trial. The company was first seen advertising in September on, of all places, The Weather Channel. 

Crane & Canopy

Crane & Canopy is a DTC home furnishing brand, pitching luxury bedding online. It’s not exactly new — the brand has made headlines since 2016 — but Crane & Canopy was first seen advertising in July of this year, on Cooks.com 

FaceTory

Another subscription box player, FaceTory takes it very niche with its focus on Korean face masks. With a focus on a free product trial, FaceTory was first seen advertising in September on Fashionista. 

Direct-to-consumer isn’t going anywhere. In fact, it has plenty of room to grow in both market share and advertising spend.  

Earlier this year, we highlighted just how much advertising investment across TV, digital, and print has grown for DTC brands. From 2014 to 2018, ad spend grew by 50 percent. 

That growth is still going strong. From unique household names like 23andMe to niche home goods brands like Touch of Modern, major DTC players are still spending big to expand their piece of the pie.  

MediaRadar found that 800 DTC brands have advertised across online, TV, and print media in 2019 so far. DTC ad spend is up 15 percent compared to the same time last year. 

But who are the top advertisers — and what does their advertising look like? 

SmileDirectClub 

By now, SmileDirectClub has made a name for itself as an industry leader in the relatively nascent teledentistry industry. The popularity didn’t come out of nowhere; the DTC teeth straightening brand has spent heavily on advertising since it launched in 2014. 

This year alone, SmileDirectClub has spent over $150 million across all media.

Working with everything from OOH creatives to programmatic display ads, SmileDirectClub even has a large in-house agency to support its efforts. 

SmileDirectClub has held the top spot in DTC advertising for quite awhile — but that status may change in the near future. Fortune reports that a disappointing IPO and restricting California bill may stymie growth moving forward. 

Wayfair 

Something between a marketplace and a dropshipping home goods brand, Wayfair has spent heavily on advertising as it looks to compete directly with Amazon. 

Wayfair has spent over $100 million on advertising in 2019, placing ads ubiquitously if not judiciously. “Wayfair and its colorful pinwheel logo are seemingly everywhere these days: on boxes being opened by Bobby Berk in the most recent season of Queer Eye, hovering next to photos of your middle school friends’ kids in Facebook sidebar ads,” writes Cheryl Wischhover at Vox. 

Outside of customer growth, and to support all this spending, Wayfair has also added a new revenue stream in sponsored products. 

Jet.com 

Walmart-owned Jet.com has spent over $100 million on advertising this year as it continues to focus on growth over profitability.

The high level of spending is slightly confounding given Walmart’s announcement that it will fold the startup eCommerce platform into its own eCommerce offerings in the near future. 

“Over time, Jet morphed into a brand with a reputation of reaching younger, more affluent urbanites – not an existing fit with Walmart, but a potentially complementary one that could help Walmart grow beyond its core,” writes Stepehn Kraus at Search Engine Watch. 

Time will tell how this fit affects ad spend. 

Ancestry 

Genealogy site Ancestry.com has spent over $50 million in 2019 as it seeks to hold its own against newcomers like 23andMe. 

Despite facing backlash for a controversial video ad earlier this year, the site has seen an elevated presence across TV, online video and display ads as it expands its marketing mix.

“I keep hearing this debate around ‘brand’ versus ‘performance’. In my opinion, there’s no debate. You need to be able to do both,” Ancestroy CMO Vineet Mehra told Beet.tv. “You’re going to see more and more of our spend in video going into addressable TV, mid funnel digital video, which can solve a lot of the same problems we’ve tried to solve on TV, but in much more attributable, addressable ways.”

UNTUCKit 

Trying to stand out in a crowded apparel DTC market, UNTUCKit has spent over $25 million on advertising in 2019. 

While their advertising has spanned everything from print media to national TV, the brand has also made good use of ad tech to maximize their ROI. “Untuckit partnered with measurement and optimization firm TVSquared to measure its TV spots daily and optimize its campaigns regularly,” reports Chris Kelly at MarketingDive. 

Direct-to-consumer continues to shake up the way we think of marketing, sales and more. 

For direct-to-consumer marketing, you generally think of organic efforts. Search and social ads, email campaigns, and social engagement like the goofy original Dollar Shave Club ad from way back when. CB Insights profiles some of these more organic (but still aggressive) strategies among DTC brands; Casper going all out on SEO and The Honest Company investing in educational content, for example. 

But the landscape has changed since those early days. Dollar Shave Club was bought up by P&G and Chewy.com is a PetSmart property. As DTC has grown, these efforts may have lost some of their efficacy for those fresh to the scene. Newer brands will have a harder time getting noticed using these time consuming, content-heavy and long-term strategies. 

On the other side of the same coin, these new DTC brands may also have a hard time keeping up as established DTC brands start spending their ad dollars more traditionally. “DTC brands have reached an inflection point that requires them to make a substantial shift to maintain growth,” writes Casey Wuestefeld at MarketingLand. “Likely pivots will include expansion into out-of-home advertising, physical retail and — most notably — television. In other words, these traditional brand disruptors are about to start looking a lot more like traditional brands.”

Many are instead investing in programmatic advertising. It’s targeted, it’s relatively inexpensive and it’s easily measured. At the same time, it is inherently more visual and can reach further than paid search and social advertising. 

“Direct-to-consumer (DTC) brands are now starting to embrace programmatic advertising by taking control of it from an early stage, as paid search and paid social programmes are starting to reach saturation point and the cost of acquisition is only rising,” writes Lloyd Greenfield of The Programmatic Advisory. “Whether is it the empowerment of third-party service providers, or by managing execution themselves, DTC brands are leveraging … strengths in digital and data to gain further market share through effective programmatic advertising.”

In other words, many smaller DTC players are finding programmatic has a higher ROI for their digital ad dollars. They get the benefit of both using ad creatives and placing them cost-effectively. 

Some new Programmatic DTC buyers in Q3 2019 were:

Lancel 

This is not exactly a digital native. Lancel is a 145 year old company, but now it positions itself with a new look and a heavy DTC presence. 

Nadine West 

The DTC brand can be summarized as a subscription box for the fashion market. The ad creative focuses on a free trial and special offer. A quick search reveals that the brand relied heavily on influencer marketing in its early stages, making programmatic display ads something new. 

Crane & Canopy

This luxury online bedding company almost certainly faces stiff competition from other DTC players (like Brooklinen) and from the eCommerce presence of major retailers like Bed, Bath & Beyond. Crane & Company bills itself as a luxury bedding brand, with the ad creatives to match. 

FaceTory 

You can’t get much more niche than affordable monthly Korean sheet masks. FaceTory operates with the popular DTC model, offering subscription boxes for the sheet masks and some bonus skincare products.