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IAB’s Playbook for Thriving in a DTC World

At its annual leadership meeting earlier this month, the Interactive Advertising Bureau (IAB) showed that it knows how to walk the proverbial walk. The national trade association for the digital media and marketing industries not only released its comprehensive research report analyzing the market impacts of direct-to-consumer disruptors, but also announced significant changes to its own organizational structure to keep pace with attendant market shifts. Driven by the conviction that direct-to-consumer is a key progression in the evolution of digital marketing, IAB has opened up its membership, changed its board make-up and broadened its mission to include DTC brands.

Nowhere was this more apparent than in the choice of this year’s keynote speakers. Whereas Keith Weed, then of Unilever, headlined the event last year, and P&G’s Marc Pritchard did the honors the year before, 2019’s choice of Heidi Zak and Dave Spector of disruptor brand ThirdLove, quite literally set the stage for IAB’s focus on helping brands understand and prosper in the new brand economy. Let’s look at some of the implications for advertisers that were addressed at the meeting.

New Realities Call for New Strategies
IAB CEO Randall Rothenberg kicked off the meeting with a look at the findings of “How to Build a 21st Century Brand” which showcases the latest developments in the consumer marketing landscape and offers a deeper dive into the work first presented at last year’s meeting. The 2019 results examine how the growth of digital, the emergence direct brands and new consumer purchase patterns have wholly transformed the way consumer goods and services are created, marketed and sold. Case in point: in the CPG market e-commerce is driving 82% of all growth and causing the shift from an indirect brand economy to a direct economy. Brian Weiser, the popular industry analyst formerly of Pivotal research and now with WPP, said the watershed moment in this transition occurred when Amazon acquired Whole Foods, which signaled how fully DTC business models had co-opted traditional advertising and agency models and now mandates new marketing priorities.

Rules of the Road
In doing the research for the study, IAB analyzed the practices of more than 3,000 DTC brands in order to provide incumbent brands—as well as new DTCs and those in second or third phases of growth—a GPS for traversing the new landscape. In the process, IAB singled out the practices of 250 brands—which guides the complementary study “250 Direct Brands to Watch—and put together the DTC Playbook which identifies the “unwritten rules” of DTC success and commits them to paper (or PowerPoint) for brands to use to help frame their media and advertising strategies going forward.

The Revolution WILL Be Televised. And digitized. And mobilized.
DTCs are known for having built their businesses almost exclusively on social media and, in fact, the study shows 90% launched with a Facebook- or Instagram-dominant strategy. While DTCs still allocate 50% of their ad spend to social platforms, they are getting more media promiscuous, as described by the IAB, and are embracing multiple channels to reach new audiences and support the next phases of growth. For example, 50 of the brands to watch spent $1.3 billion on TV in 2018, a 98% year-over-year increase. IAB says for disruptors, addressable will become the favored ad buy, and CTV will be tapped primarily for targeting and reach purposes. On the incumbents’ part, they have begun aggressively building digital relationships and 48% say they are starting to bring programmatic buys in-house as they build up their strategies for targeting and reach via programmatic buys.

The way forward is not easy but it is required for success in the new direct economy. Check out the IAB’s site for more insights and information on how to prosper.