Upstart direct-to-consumer brands, largely built via digital and social media, increased their spending on television advertising by 60% to $3.8 billion in 2018, according to a report from the Video Ad Bureau.
As a category, the 125 companies tracked by the VAB, added $1.4 billion to the TV marketplace last year.
The companies use data and analytics to determine which marketing investments result in actions ranging from website visits to sales. The growth in TV spending by these companies indicates that TV’s ability to grow sales has been demonstrated to those companies. And the VAB report shows how DTC companies that have either started advertising on TV, or increased their TV spending, have seen increases in revenue and market value.
Many networks have made a concerted effort to attract business from these companies at a time when more traditional advertisers are reducing their TV spending. The demand from the new companies is a factor in the strong upfront market, according to some network sales executives.
The VAB, a trade group representing big TV networks and distributors, has been running a TV ad campaign of its own, highlighting DTC companies that have boosted their business by advertising on TV. New spots begin airing this week featuring Peloton founder and CEO John Foley and Touch of Modern co-founder and CEO Jerry Hum.
“The common misconception is TV can’t be tracked the same way as digital advertising,” said Hum. “Very quickly we found that we were able to track it and measure it just as precisely as we could on the digital side. All the KPIs also improved. The cost per customer went down. The cost per sign up went down. TV ended up being the biggest portion of our marketing spend.”
The campaign was produced by Viacom Velocity and will be seen on more than 50 TV networks in nearly every local TV market for at least 15 weeks. The ads appear on linear TV, video on demand, online, mobile and TV everywhere apps. A two-minute version of the spot is available on the VAB’s website.
In its study, the VAB identified 125 of these DTC companies.
In one case, the online men’s lifestyle retailer Touch of Modern, increased its TV campaign spending and saw sales revenue grow 33% from 2017 to 2018, the VAB said.
According to the VAB, Touch of Modern boosted its TV ad spending to $33.9 million in 2018 from $852,000 in 2017. The increase of $33 million in TV ad spending helped power a $50 million increase in revenue.
A sample of five emerging DTC companies purchasing TV advertising for the first time saw revenue gains ranging from 25% to 800%.
“DTC brand leaders will tell you their data is essential to their company and it drives all decisions,” said Sean Cunningham, president and CEO, VAB. “The data collected and measured against customer activations and business outcomes from TV advertising campaigns has proven these DTC marketers not only made smart investments, but it also prompted them to reinvest in TV to continue driving growth. The 125 DTC advertisers featured in Direct Outcomes succeeded in producing mass consumer market disruption using premium video advertising and generated billions of dollars in sales for brands that didn’t even exist several years ago.”
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Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.