While most of us will be happy to say goodbye to 2020, it undoubtedly provided a major boost for direct-to-consumer (DTC) brands. Altered consumption and purchasing habits brought on by COVID-19 forced them to focus on the effectiveness of their marketing to an unprecedented degree. Riding the wave of consumer viewing habits, these brands significantly increased their overall ad spend dollars allocated to Connected TV (CTV) in an effort to improve performance; however, CTV spending still represented a minor portion of overall spending. And now, as we head into 2021, the smart DTCs are beginning to see CTV for what else it can offer them—a vital branding tool.
CTV audiences eclipsed those of cable TV for the first time in 2020, and DTC companies took notice, turning to the medium to drive successful and measurable outcomes. In fact, CTV and over-the-top (OTT) ad spend rose an astounding 70% between Q1 and Q3 in 2020 according to a recent report from Pixalate. eMarketer is predicting a whopping $11 billion in CTV ad spend in 2021, up from $7 billion in 2019. This exponential growth is in large part due to CTV’s suite of analytics, which allows marketers to drive measurable performance through TV—a perfect marriage of sight, sound and results. But while CTV’s data-driven appeal is clear, it’s less obvious asset may be its effectiveness in providing upper-funnel awareness.
Despite common misconceptions, awareness and branding are crucial for DTCs. Initial punditry around the DTC revolution emphasized how companies like Dollar Shave Club represented the death of brands, because they were all about user acquisition marketing and pinpointing marketing down funnel. Over time, the opposite has proven itself to be true: the direct-to-consumer revolution represents the democratization of three of the traditional advantages of legacy brands: distribution, scaled production, and advertising support. Consider the following:
Distribution: Brands can now quickly build a website or app and distribute their product directly.
Production: While scale used to be a key factor in producing consumer goods, it’s now easy to design and manufacture a consumer product on demand, typically overseas, and quickly have it shipped to the U.S.
Advertising: While historically only big brands could afford major advertising campaigns, brands can now build an ad campaign tailored to their needs with just a few clicks.
With these competitive advantages gone, all market players, including DTCs, are left competing primarily on either price or brand. And let’s face it, not too many marketers want to always compete on price.
Because of this newly-leveled playing field, brand awareness is now a critical piece of the customer acquisition puzzle for DTC brands to stand out and assert themselves. Take a look at the mattress industry. In an incredibly crowded space of over 150 brands, and despite the influx of well-funded challengers, legacy brands like Sealy and Serta are still top-of-mind for mattress shoppers. Challenger DTC mattress brands such as Casper, despite allocating significant marketing budgets to compete, still rank relatively low on unaided brand awareness. They must default to a greater focus on brand to survive, let alone thrive. This is where CTV offers a unique opportunity for brands to differentiate themselves, helping them to hone top-of-mind awareness so consumers think to type their name into browser bars to drive direct results.
CTV’s targeting capabilities, coupled with demographic breakdown, make the platform the perfect wingman to be the driving force behind these new DTC brand-building stories. CTV provides an ideal audience, with 85% of DTC consumers reportedly watching streaming content each week, and an astounding 82% of DTC shoppers taking action after seeing an ad on CTV according to a recent report from Telaria. The same report shows DTC shoppers’ streaming TV consumption totals nearly 13 hours each week, nearly 20% more than time spent watching cable TV. CTV also reaches coveted demographics outside of noisy social platforms and in the homes of a captive audience. A recent report by Telaria and Hulu found that DTC shoppers spend 70% more time streaming TV each week than using social media—welcome news for marketers who have found the cost-per-click increasing on social platforms.
CTV is well-positioned to take on the increased advertising burden. Recent research conducted by Fox found that CTV generates return on ad spend (ROAS) between four and ten times higher than linear TV, and even more so when compared with digital behemoths YouTube and Facebook. Yet fewer than 40% of advertisers have spent on CTV/OTT channels in the past year, significantly lagging behind social media, display, and non-CTV video. As CTV continues to develop and mature, so too will the platform’s use and flexibility evolve as an advertising channel. As one of our clients recently told me, “Like most other brands, 2020 pushed us to look for more efficient marketing channels and we turned to CTV. While we expected to enjoy the benefits of its performance, we were pleasantly surprised by what CTV offered for brand lift. Going forward we’ll be focusing even more on how we can maximize ROI across the board from our CTV spending.” Smart DTCs who flex CTV’s muscles for branding AND performance will be the real winners in 2021.
Upwave (formerly Survata) is a fast-growing marketing analytics company providing machine learning-driven brand marketing measurement technology and intelligence to the world’s leading brands, agencies, and publishers.