This is the latest installment of the DTC Briefing, a weekly Modern Retail+ column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. More from the series →
As part of the never-ending quest among DTC brands to diversify the marketing mix, TV ads are once again back in the limelight.
Throughout December and January, a number of DTC brands including Jones Road Beauty, Bobbie and Care/Of launched their first-ever TV ads. If these campaigns perform well, they are likely to increase their TV spend. Meanwhile, data from multi-touch attribution provider Rockerbox shows that across all of its clients, it has seen a 15% increase in linear TV spend over the past year.
Interest in TV ads has been growing among DTC brands over the past few years, largely due to the increased pressure to diversify ad spend away from Facebook and Google. Dedicated agencies like Tatari and MNTN also make it easier for brands to test out TV ads. But, some marketers think that TV spend could accelerate this year in particular as the economy improves — and as streaming services like Netflix and Amazon are under pressure to grow their ad-supported tiers.
Baby formula startup Bobbie started running its first TV ad campaigns in conjunction of its endorsement with tennis superstar Naomi Osaka. Entitled “Parents Push Harder,” the ad started running on ESPN during this year’s Australian Open. The “Parents Push Harder” campaign will also run across streaming TV, and also involves some out of home and paid social elements.
Although the ad has only been running for a few weeks, Kim Gebbia Chappell, Bobbie’s chief brand officer, said that the brand has already seen an immediate lift in traffic to the site during times when the ad is running on ESPN — even if that is during odd hours of the day, given the time difference with Australia.
“For us, as a brand awareness campaign, it seems to be resonating,” Kim Gebbia Chappell said.
What’s particularly interesting about this latest TV boom is that it is being driven by smaller brands, at least compared to the types of brands that have typically advertised on TV in the past. Data from Rockerbox shows that among its clients that allocated less than $5 million on advertising spend on linear TV has increased roughly 74% over the past year — a greater increase than the increase in linear TV spend reported by Rockerbox clients as a whole.
Ron Jacobson, co-founder and CEO of Rockerbox, said that TV advertising started to get more interest from DTC brands especially around 2021, when “times were good” following the huge uptick in e-commerce sales during the pandemic. Then, “there was a pullback when things got tighter the last few months — but it is starting to come back.”
Jacobson said that, generally speaking, there are a couple of factors that lead most DTC brands to make the leap into TV. Either they are starting to see diminishing returns on Facebook and Google, or “there’s a fear of being overly reliant on Facebook and Google.”
There are still DTC brands that can build $20 million to $40 million businesses through Facebook and Google advertising alone, but it is becoming rarer and rarer due to platform changes like the iOS 14 update or Google’s depreciation of third-party cookies wreaking havoc on brands’ advertising businesses. Even if these changes aren’t wrecking havoc on brands’ business, he said, it leaves them wondering if they should continue to diversify even further away from Google and Facebook.
But it’s not only linear TV seeing a boost. Juhi Pikale, an independent consultant and the former vice president of performance marketing at Fabletics, expects that in the next 12-18 months, streaming TV spend in particular will go up. That’s because more streaming services like Netflix and Amazon are introducing ad-supported tiers. Meanwhile, services that already have ad-supported tiers like Hulu and Disney+ are under greater pressure to turn a profit and thus want to ramp up their ad businesses accordingly.
“As they continue to grow their ad supported tiers… the ad impressions are going to [ramp] up pretty drastically,” she said. “It is a good time to get in now because you should be learning the building blocks of the channel before it blows up.”
Pikale said a common misconception among brands is that “TV creative should cost $100,000 to produce.” That might be the case if a brand is looking to put together a highly-produced TV ad that requires multiple shoot locations. But, she said thanks to the rise of TikTok and other social media platforms, she’s seen more brands succeed with almost UGC-style ads that repurposes content from paid social campaigns. She cited Nutrafol as an example of one brand that has done this.
“You can put on much more simpler ad creative that costs a lot less to produce,” Pikale said. Meanwhile, some platforms like Amazon are also helping with TV asset creation if the brands agree to spend a minimum amount on advertising.
For some DTC brands, figuring out when to invest in TV also comes down to a matter of figuring out when they have a campaign that would be well-suited for TV.
Telehealth platform Ro has run TV ads in the past, but kicked off a new campaign in the New Year to promote its Body Program, which includes access to medical practitioners able to prescribe Wegovy, a weight-loss medication that’s part of the same class of prescription drugs as Ozempic.
“You will continue to see additional TV ads from Ro,” Will Flaherty, SVP of growth at Ro said in an email. ”In the present day of media fragmentation, TV advertising remains an incredible vehicle to reach a very broad scale audience with compelling, immersive creative that can both facilitate storytelling and brand building, but also drive response and member sign ups.”
Meanwhile, Gebbia Chappell from Bobbie said that the brand wanted to start running TV campaigns that would correspond with major events featuring Osaka. While it’s too early to tell what Bobbie’s TV budget will look like for the entire year, Gebbia Chappell said that the brand will likely continue spend that corresponds with “inflection points along Naomi’s career.”
“What I feel like we will do is continue to spend on TV and start to see what kind of longterm growth that can bring us, and does that increase our word-of-mouth flywheel,” Gebbia Chapell said. “Are we seeing more organic search? With traffic that comes to the website — how does that perform for the next 60-90 days?”
Ultimately, Gebbia Chappell said that what she likes about TV is that it allows brands to “build trust with a viewer in a way that you cannot do digitally.”
“I think in this day and age, it is really easy for any brand big or small to run a TikTok ad, an Instagram ad,” Gebbia Chappell said. “It takes another level to run a TV campaign.”
Pairing retail with DTC
Direct-to-consumer eyewear brand Pair is launching its first retail partnership with National Vision, the optical retailer that houses multiple brands including America’s Best and Vision Centers at WalMart. It’s a much anticipated move for a brand that has swelled in popularity in recent years — and represents another viral TikTok brand getting a toehold in brick- and mortar-markets.
The National Vision launch will begin with 110 of America’s Best stores across the country.
Nathan Kondamuri, co-CEO and co-founder at Pair, told Modern Retail that National Vision was the right partner because it shares Pair’s values, like affordability and accessibility. “Additionally, as the second largest optical retailer in America, it was very intuitive to partner with them,” Kondamuri said. The partnership also features exclusive pricing, with a bundle of a frame, two top frames and eye exam for under $150.
Pair was founded in 2017 and got a boost after appearing on Shark Tank in 2020. Since then, its magnetized customizable glasses have taken off with a range of customer demographics, with its revenues quadrupled from 2020 to 2023. As of October 2023, the brand attributed about 25% of its total sales from TikTok after customers started sharing videos of them swapping out their top frames to create different looksThe brand has raised $145 million to date, and recently began doing all its manufacturing from its own California facility.
National Vision is the second-largest vision retailer by sales, according to a Vision Monday survey of 2022 sales. It topped $2 billion in sales in 2022, after Vision Source L.P. and Luxottica Retail, which are both part of EssilorLuxotica. — Melissa Daniels
What I’m reading
- Neighborhood Goods is closing its stores permanently, Beauty Independent reports.
- From one mattress brand to another: Casper has named Joe Megibow, formerly the CEO of Purple as its new top executive, effective immediately.
- Beyond Yoga, the athleisure brand acquired by Levi’s two years ago, has named a new CEO. Nancy Green, formerly the CEO of Gap-owned Athleta, is taking over the top job from founder Michelle Wahler.
What we’ve covered
- Styling service Stitch Fix is building out a transformation office under its new CEO, Matt Baer, as it hopes to reverse roughly eight consecutive quarters of revenue decline.
- DTC brands have a new scapegoat to blame for advertising costs going up: Temu. According to a new study from MediaRadar, Temu’s advertising spend jumped 1,000% for the period from January to November 2023.
- What led up to Uber’s decision to sunset Drizly, the alcohol delivery service it acquired roughly three years ago for $1.1 billion.