In 2022, direct-to-consumer (D2C or DTC) sales by established brands—think Nike—and digitally native ones—think Allbirds—were expected to surpass $117b and $38b, respectively.
By 2024, Insider Intelligence predicts those dollar amounts will rise to nearly $161b and $52b, which isn’t a surprise considering almost 64% of consumers made regular purchases directly from brands last year.
DTC brands are responding by investing heavily in traditional and digital ad formats, although the uncertain economy is putting pressure on many of them, including those at SmileDirectClub, who decreased spending by 7% YoY through May.
Overall, DTC brands spent nearly $4.3b on ads through May 2023, representing a 13% decrease from the same time last year. Meanwhile, the number of DTC brands buying ads fell by 5% to 760.
Despite decreases in spending every month of 2023, some DTC brands are still opening their wallets.
It’s a 50-50 Split for DTC’s Top Advertisers
Technology is the lifeblood of the DTC industry, with a click on a phone or computer often the only thing separating consumers and their intended goods or service. Despite that, DTC advertisers are still embracing the non-digital side of the advertising world.
Through May, DTC advertisers spent 53% of their dollars on digital formats (down by 14% YoY to $2.2b) and 45% on TV (down by 11% YoY to $1.9b). They also spent on print ads, which dropped by 38% YoY to $70mm.
Five DTC advertisers stood out—Casetify, DraftKings, The Farmer’s Dog, MapleBear (Instacart), and Wix.com—who combined to spend more than $443mm through May or 10% of the investment from DTC companies.
Advertisers for Casetify (owned by Casetagram), for example, increased spending by 168% YoY on the heels of the launch of Flexi Band for Apple and Samsung watches, its first “Style Lab” Pop-Up Experience, and becoming the official tech accessory partner of Coachella.
The big spending from advertisers at Casetify comes in the wake of rapid growth—since launching 12 years ago, Casetify has sold more than 15mm phone cases. We can attribute a good chunk of that growth to its investment in advertising, much of which lives inside social media channels. Through May, 99% of Casetify’s ad dollars went to social media channels, with a big focus on video formats.
Meanwhile, advertisers for DraftKings increased spending by 23% YoY, with the bulk of spending (79%) going to TV ads across cable (up by 393%) and broadcast networks (up by 69%).
While the traditional-heavy strategy isn’t new—440 gambling advertisers allocated 69% of their ad dollars to TV and print ads through October 2022—it flies in the face of the industry’s quest for profitability.
David VanEgmond, a former FanDuel and Barstool Sportsbook executive, said, “You’ve seen the industry pull back and say, ‘Wow, fighting for market share got pretty ugly in terms of losses.”
The ongoing investment in traditional ads instead of their more measurable digital counterparts could indicate that companies aren’t marching toward performance and efficiency at quite the expected pace.
Advertisers for MapleBear (brand name: Instacart) also spent big, increasing their investment by 127% YoY. Similar to their contemporaries in the gambling realm, advertisers for MapleBear spent 80% of their dollars on TV, many of which went to a Super Bowl ad.
For MapleBear, spending comes not only as Instacart fights for more of the eCommerce grocery pie, but they bolster their digital ads business and capitalize on the rise of retail media. At the heart of this initiative is Instacart Marketing Solutions, which aims to help retailers create marketing campaigns that “attract, engage, and drive affordability for customers on Instacart-powered eCommerce websites and apps.”
“We know affordability is top of mind for consumers across the country right now. It’s also top of mind for our retail partners, who are looking for more ways to help their customers save when accessing the groceries and goods they need,” said Chris Rogers, Chief Business Officer at Instacart.
He went on to say, “With the launch of Instacart Marketing Solutions and our expanded loyalty programs, we’re developing new technology tools that empower retailers of all sizes to create strategic digital campaigns and unique loyalty programs that engage their customers, grow their business and, ultimately, help customers find more savings at checkout.”
Instacart also recently partnered with Roku to help advertisers measure the impact of TV ads on eCommerce purchases via first-party data.
The big moves from MapleBear and Instacart aren’t surprising, considering nearly 30% of Instacart’s revenue comes from advertising. In fact, eMarketer predicted that Instacart’s digital ad revenues would grow faster than TikTok, Amazon, and Apple in 2023.
This intense competition from the likes of Walmart, Kroger, and Amazon (Amazon Fresh, Amazon Pantry, and Whole Foods delivery and pickup), as well as the push for more ad revenue, will continue to influence how MapleBear promotes Instacart.
That strategy will continue to evolve, but it’ll likely include podcast ads, which increased by more than 1,000% YoY to more than $2mm as MapleBear invested in primary pre-roll ads on popular podcasts such as Fantasy Football Today Podcast, Make Me Smart with Kal and Molly, and Happier with Gretchen Rubin.
Finally, advertisers for Wix.com and The Farmer’s Dog increased spending by 174% YoY and 109% YoY, respectively. For The Farmer’s Dog, much of that spending went to a Super Bowl spot, Forever, telling the story of Ava and her Labrador retriever, Bear, as they grow up.
Jonathan Regev, co-founder and CEO of The Farmer’s Dog, told PEOPLE that he hopes the ad encourages people to make healthy changes in their pet’s life to increase their happiness and longevity. Advertisers for The Farmer’s Dog also invested in TV ads across reality, sitcoms, movies, and action/drama shows.
An Industry Primed for Ad Spending
Brands like Allbirds, Casper, and Warby Parker ushered in the DTC revolution years ago and revolutionized the consumer world in the blink of an eye.
But established brands are catching up. Since 2011, Nike has grown DTC sales from 16% of revenue to 35%, while Adidas outlined plans for DTC sales to make up 50% of its revenue by 2025. Under Armour has also expressed a desire to grow its DTC model.
The continued emergence of established brands will push an already rapidly growing industry even further—and as they do, ad dollars will follow to keep companies one step ahead of the competition.
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