Commentary

What Will a Direct-Brand Future Mean For TV Advertising?

  • by , Featured Contributor, March 15, 2018

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.

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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?

7 comments about "What Will a Direct-Brand Future Mean For TV Advertising?".
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  1. Dale Knoop from TRE, March 15, 2018 at 3:10 p.m.

    I do think there's an opportunity for change.

    Reason 1 - with a phone in hand or at arm's length while TV is watched there is the desire of consumers to get exactly what they want, exactly when they want it. It could be a sale, a sample, a sign up, watch a video....anything. Direct brands seek this more than "traditional" brands who value views, engagements, likes,etc.

    Reason 2 - if folks like FOX want to lighten the commercial load new ad formats with direct brands showing the way to non-interuptive selling with revenue share based on agreed upon KPIs could be a path forward in this effort.

     

  2. Dave Morgan from Simulmedia replied, March 15, 2018 at 3:14 p.m.

    Dale, I totally agree. Direct Brands are actually a better fit long-term for TV than traditional brands. They will be much lower maintenance around content integration work and all of the "soft" part of account management - tickets, dinners, etc. Plus, they will pay up to their ROI and long-term user value, meaning that they have a lower resistance to premium pricing as long as it works.

  3. Ed Papazian from Media Dynamics Inc, March 15, 2018 at 3:24 p.m.

    An interesting article, Dave. I, too, am seeing a movement towards selling direct by advertisers normally associated with TV branding campaigns. They are, in effect, exploring the extent to which they cat cut out the middlemen---the wholesalers and stores, thereby saving a substantial amount of money, and reinvest some of that saving by going direct, instead. So far, this is in its early stages but it is evolving. It may work a lot better for some types of products and services than others.

    With regard to the advertising side, we must remember that the main function of TV branding campaigns has ben to launch new products and, for existing products, to motivate people to use the categoriey and  to chose specific brands over others. I doubt that this type of advertising will diminish or change significantly in its basic thrust. The direct sell part is, most likely, going to be funded from the sales promotion budget, not the branding budget and you are right, TV will get some of the action. I don't believe, however, that the TV ad sellers will allow the DR folks to use extended direct response commercials---say a minute or longer---in their premium program content as this will turn off many viewers and distress their regular branding time buyers. So we can probably forget about much of what the broadcast networks offer---except in the late night hours and on weekends and this is probably so for the larger cable channels---at least in primetime.

     More refined targeting techniques makes sense for any type of TV advertising, so long as it is brand-specific and the sellers will cooperate with reasonable pricing and flexibility, which means that most of the "new"  DR action will probably be on cable and it will have to be strongly supported by digital activities such as search, email "blasts", etc. Ultimately, no matter what the targeting mechanism in the time buying phase indicates, the typical DR advertiser will judge every channel and/or program placement on what sells relative to its cost---aka ROI. And there will probably be no such thing as an "upfront" buy since extreme flexibility and fast reactions are the rule, not the exception. I know as I've been involved in a number of TV DR campaigns.

  4. Henry Blaufox from Dragon360, March 15, 2018 at 4:09 p.m.

    "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."

    Any thoughts on which firms have the expertise and software to help?

  5. Dave Morgan from Simulmedia, March 15, 2018 at 4:38 p.m.

    Henry, I think that when it comes to data-driven targeting and measurement tools, the best efforts are being drive by Nielsen (NCS & NBI), Neustar (MSP suite of products are super strong) Oracle (BlueKai & DataLogix being integrated into TV systems) and TV Squred (digital conversions). As far as sell-side software systems for analyticsm and inventory, most network' efforts today are being built with a heavy degree of outsourcing to firms like Accenture, Deloitte, McKinsey. There are not yet comprehensive "built for TV" systems out there beyond some work we are doing across both teh buying and selling process and folks like Clypd, 605 and Data + Match addressing key pain points like data integreation, analytics and attribution.

  6. Tom Cunniff from Tom Cunniff, March 19, 2018 at 9:14 a.m.

    Smart, and I agree. But IMO the core of the challenge is more fundamental. It's obvious why marketers and publishers and networks and ad agency holding companies -- and yes, direct brands -- need advertising. But it's less and less clear why consumers need it. Most of the TV ecosystem needs fundamental reinvention. Media companies need fewer, shorter ads. Advertising needs to shift its focus from being clever to being useful. Digital needs to find a way to port the best parts of what digital does (data and relevance) to TV while preventing the diseased aspects of digital (fraud, clutter, unviewable, non-brand-safe etc etc) from moving over to TV. None of this is easy, particularly when publicly-held companies who can't afford to take a 5-year earnings hit are involved. It's a fascinating time to be in the business.

  7. Dave Morgan from Simulmedia replied, March 19, 2018 at 11:22 a.m.

    Tom, I completely agree. Advertising needs to put the viewer in the center, and truly delight them. I have a lot of confidence that the prudent delivery of delightful advertising with information about products, services and commerical information that viewers might not be aware of and is relevant to them can be very helpful. However, that is not how TV advertising is practiced today. I'm hopeful that some of what we hear from FOX makes it into practice. Incredibly, in the digital ad world where it's quite possible to surpress over-freqeuncy and delivery truly relevant ads, the user experience is absoluytely awful. At some point, advertisers, agencies and media owners have to hit the reset button.

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