DTC Briefing: How the election could upend e-commerce advertising ahead of the holidays

But, brands can’t just stop advertising with the all-important holiday season around the corner. Now, they are in search of ways to make sure they stay top of mind for picky shoppers as they weigh what to put on their holiday wishlist this season. Many brands and agencies say they are responding to the deluge of political advertising by focusing more on organic tactics like influencer partnerships this month. Or, by putting more dollars into channels like Pinterest and TikTok that aren’t as over-run with political ads. 

“The paid platforms are going to be dominated by the elections,” Ashvin Melwani, co-founder and chief marketing officer of collagen brand Obvi said. 

The challenges brands are thinking through right now are ones they grapple with every presidential election cycle. However, there are a few wrinkles that make this election cycle different than 2020. In 2020, consumers were still flush with money from stimulus checks; this year, they report being much more price-conscious amid years of sustained inflation. 

Additionally, over the past four years, October sales events have become much more ingrained within retail culture. Amazon held its first-ever “Second Prime Day” in October of 2022, though in 2020, Amazon also held Prime Day in the fall due to supply chain disruptions caused by the pandemic. But now, nearly every major mass retailer, including Walmart and Target, kicks off holiday deals in October. 

In turn, DTC startups will have to suss out multiple challenges throughout the month of October. One big question will be figuring out whether rises in CPMs are attributable to political advertisers, and/or to major brands pouring in dollars to support early holiday sales events. Another will be whether shoppers are more hesitant to shop due to political uncertainty or the broader economic climate.

In a recent report, e-commerce growth agency Common Thread Collective looked at just how much Meta CPMs changed during the last presidential election cycle. Common Thread Collective found that CPMs increased roughly two weeks before the election and actually dropped the week of the election. 

However, Common Thread Collective found that the Acquisition Marketing Efficiency Ratio (which is calculated by dividing new customer revenue by total spend) declined the week before and the week of the election. What that means is that — even as CPMs drop — those two weeks haven’t historically been efficient for brands to advertise because they did not bring in as much new customer revenue. 

And there are signs that CPMs are already increasing. Katya Constantine, founder of the agency Digishopgirl Media, said that Meta CPMs among her clients are up nearly 20% month over month between August and September; last year, they were nearly flat. 

This CPM increase is likely to hit direct-to-consumer brands hard in particular because of how much of their advertising is skewed toward Facebook and Instagram. Melwani of Obvi said that, right now, his brand spends about 70% of its marketing mix on Meta, 20% on influencers and affiliates and about 5% each on TikTok and Google. 

Obvi uses manual bidding to run its Facebook ads. With manual bidding, advertisers can set certain parameters, like a maximum customer acquisition cost. That means Facebook will spend more of a brand’s budget if it believes it can get below that maximum CAC.

Melwani said that Obvi’s run rate on Meta started to come down in August, indicating that CPMs were increasing — and inhibiting Obvi’s abilities to hit its target CAC. In turn, Melwani said that Obvi has been more focused on growing its international sales on Meta over the past month, a trend that will continue in the lead-up to the election. Toward the end of August, Obvi launched into Australia, New Zealand, UK and Canada — and is currently exploring a few other countries. 

Obvi is also “doubling down on other things that we can control, like influencer and affiliate, and kind of just pushing TikTok Shop a little bit more,” Melwani said. “I’d rather stay efficient than try to force spend [on paid platforms like Meta].”

Constantine said that CPMs are the main metric brands should keep an eye on throughout October to dictate spending. If past election cycles are any indication, they can fluctuate wildly from week to week. But she also advised brands to keep a closer eye on metrics like click-through rate that indicate just how much people are engaging with ads. She said that her firm has “prioritized other channels that don’t have as much of an election noise,” citing Pinterest and TikTok as two examples. 

Polly Wong, president of the agency Belardi Wong, advised brands “to be fluid with marketing budgets, letting the consumer drive marketing spend.”  

In an email, Wong said it may be hard for brands to capture attention from new customers in particular during this time. “In that case, pulling back on top-of-funnel spending for that two-week period may make sense,” she said. 

The challenge for brands, however, is that they will have to adjust their marketing budgets quickly. After all, there’s not much time between Election Day and the beginning of Black Friday. 

“If CPMs rise due to the competition for impressions for political ads… weather the storm with top performers and modest spend cuts, and then be ready to push spend into strength when [the consumer] re-engages, likely right after the election,” Wong said. 

What I’m reading

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• Why Fanatics is losing investor fans, according to The Information. 
• MeUndies recently added a senior vice president of sales who will be tasked with growing the brand’s wholesale presence. 

What we’ve covered

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• Béis is launching a resale program, a rarity for the luggage category.