And whilst this provides a very reactive and immediate setup, these brands are quickly reaching a ceiling in their growth. They have scaled as far as they can within the walled gardens of social media and lack the internal knowledge, technology and people to take their digital marketing to the next level.
Advertising within the walled gardens is simple and effective, with a single technology platform, providing large-scale and easy-to-use tools. But as brands scale, they invariably hit a limit to performance.
These closed ecosystems are problematic, as all advertisers have access to the same targeting, data and audiences – meaning that scale doesn’t really have any advantage for an advertiser. Whilst this is great when a brand is starting up, as it can deliver sales, these are hyper-competitive environments and the marginal cost of sales increases, meaning it can be difficult to scale beyond a certain point.
In contrast, the open ecosystem gives an opportunity to leverage scale through the ability to use custom targeting criteria based on first party data scale, which allows differentiation.
Unlocking social value
Most DTC brands will typically work on getting paid search right in-house and then move on to paid social. The typical profile of these digital marketing teams is one or two people who have developed within the company. They are platform experts but have never worked anywhere else, and so lack experience of working across multiple brands and verticals.
However, programmatic advertising on the open ecosystem is complex and requires talent who have experience in managing it. DTC brands wanting to manage this in-house will need to understand and navigate the complexities of the adtech landscape. If they continue down this route, they may find themselves drifting behind their competitors and creating a ‘Frankenstack’ of incompatible technologies.
Measuring into a box
The final key to unlocking digital performance marketing across channels is data and measurement.
When running in isolation across search and social, either of these channels can look effective, as you are using the walled gardens’ own measurement systems, allowing them to ‘mark their own homework’. On top of this, there are additional issues: firstly, you can’t see if this activity is incremental, i.e. how many of the sales would have happened anyway. Secondly, the activity will not be deduped against any other channels, i.e. you have 100 sales, search claims 80 and social claims 80 – which channel delivered the ads that caused the sale?
But DTC brands will also encounter the paradox of having too much real-time data, which makes long term brand-building and decision making difficult. Mediums such as display advertising and video can appear inefficient on a last click model, but time and time again are proven very effective when using more sophisticated tools, like multi-touch attribution. So, moving away from metrics such as last click is vital to scaling.
The complexity of measurement and attribution is almost impossible to manage without a large and experienced resource dedicated to this area – that’s why most brands choose to work with agencies here.
Getting ahead of the competition
Even with the dawning realisation that DTC brands need help to shortcut the learning cycle of moving from a wholly walled garden setup to an open ecosystem strategy, the current agency model doesn’t fit. These brands require a leaner, more flexible go-to-market approach that ultimately demands a different agency model.
DTC brands need to look for a partner that has a wealth of knowledge, which can provide scale and understanding of data-driven advertising tactics and technology. DTC brands will then get access to the wider digital ecosystem and the new tools and programs they need.
With the internal pressures of acquiring customers at speed and ambitious financial growth targets, DTC have no time to lose in leveraging their first party data assets and working outside of the walled gardens. So, while traditional brands are finding they need more control over their media, DTC brands are learning how to let go of control to get to an effective model quicker.