Last month at the Interactive Advertising Bureau’s Leadership Conference, IAB head Randall Rothenberg gave what may prove to be one of the most significant industry speeches in years, even more important than Proctor & Gamble CMO Marc Pritchard’s keynotes on viewability and cleaning up fraud.
Randy heralded the emergence of the direct-brand economy, explaining why the Dollar Shave Clubs, Caspers and Warby Parkers might take over the world, or at least put up a good fight against Amazon as it continues its relentless march to massive commerce power.
He posited that the technology-driven transformations of commerce, communications and manufacturing over the past several decades have created an environment where a new breed of brands can be digitally born to attack legacy brands and retailers in ways never before thought possible. These brands would have significant competitive advantages and enjoy the benefits of network effects once they start to gain scale.
While I didn’t see Randy’s speech in person (for which I’m kicking myself), I have spent quite a bit of time with the text and the presentation, and I’m convinced that he’s captured the single most important shift coming to the world of advertising, much more important for people to understand than blockchain or AI, our industry’s most recent fascinations.
I am also convinced that the emergence of direct-brand companies will have an enormous and positive impact on TV advertising.
Why? Because when these companies needed to scale, TV had already become their media platform of choice — despite the fact that they were born and weaned on search and social advertising.
The same thing happened with e-commerce companies. Just look at what TV did for brands like Expedia, Zillow and E*Trade. Hard to miss those Trivago spots.
Unfortunately, I’m not sure TV companies are quite ready for what direct-brand companies will expect of them. Here are a few examples of ways they’ve missed the boat so far:
Direct brand is not synonymous with direct response and per-inquiry. Many TV companies see direct-brand advertisers as DR or PI, just because they care a lot about the performance of their ads. But they also care about audiences, outcomes, data and real-time campaign reporting and optimization.
Those are not arrows typically found in TV companies’ quivers, though there is much progress being made here.
Dropping direct-brand advertisers into the DR bucket, which gives them cheap rates and performance but satisfies none of their other needs, will not help TV companies build long-term relationships with these future giants.
Sales-channel management will be hard. Most direct brands don’t use traditional TV media agencies. Further, most are accustomed to measuring and managing media with a lot of in-house control, tightly integrated with their enterprise analytic, e-commerce and customer relationship management systems. TV networks will need direct-sales channels to these clients if they have any hope to win and maintain their business.
This won’t be easy. Media agencies today are their bread and butter. Just wait and see what happens when brands start splitting their business between media agency-handled buying (for content, integrations, upfronts, etc.) and then deal directly with TV networks for their audience and outcome buying. You can just imagine some of those phone calls as they each compete to grow their businesses against each other.
These two examples only scratch the surface. I plan to write more about the implications of a direct-brand future.
What do you think? Will direct brands change our business forever?