The Rundown: It’s time to question the DTC model

“The big dirty secret of the business is that nobody really knows if the direct-to-consumer model really works,” a digital brand’s founder half-whispered to me (on background, of course) last week.

It’s become a more common refrain recently. Some of it stems from the normalization of born-online brands as they start looking a lot more like traditional companies. “Direct-to-consumer” mostly meant the strategy of operating without middlemen (stores, mostly) and instead building direct connections with customers online. Ecosystems like Shopify helped that along. Many brands get to the $100 million mark easily — buoyed by big VC interest and of course, the marketing power of Instagram.

But after that things get a bit fuzzy. DTC brands are opening up stores. They’re selling inside department stores. Some of them are making products to sell on Amazon. For some brand founders and people in the space, Tag Heuer Replica Watches this means the DTC model hasn’t yet been proven. If you want to make it big, you still have to play in more traditional spaces.

Of course, that’s also a somewhat shortsighted view. A growing school of thought posits that this generation of brands doesn’t need to follow the “big is best” model. Maybe it’s OK if they only get to $50 million, then diversify into new categories with a portfolio of small, sustainably growing brands. There are also a handful of supposed success stories of brands like Mizzen + Main which become profitable despite raising money very late. But I’d argue is in the minority.

The biggest “success” story is Dollar Shave Club, which Unilever bought for a whopping $1 billion in 2016 and was heralded as proof that a DTC model can work. But Unilever paid 5x the revenue that DSC was going to make that year, and DSC wasn’t profitable. What Unilever purchased was e-commerce chops, marketing brilliance and the guarantee that someone else wouldn’t buy DSC.

There are simply too many brands built entirely online that still rely on Instagram and Facebook. Something as simple as rising Instagram ad rates (already happening) is enough to sink them. Competition is fierce, especially in the wellness categories. And while many dream of a Unilever-Dollar Shave Club or Walmart-Bonobos exit, those are the exceptions, not the rule. More and more of those companies are building “DTC” brands of their own in-house, a la Gap with its men’s athletic brand Hill City.

What’s clear is that a large-scale DTC shakeout may be on the horizon: That may come with a natural “cream rises to the top” scenario. Or it’ll come because “online-only” may end up being a way you launch, not the way you grow. — Shareen Pathak

Netflix is “Encyclopedia Britannica” because it wants to be
First, Netflix was the Albanian Army. Then, Netflix was Walmart. Now, Netflix is Encyclopedia Britannica. You know what else Netflix is? A global subscription streaming video service with more than 139 million global subscribers. TV executives love taking shots at Netflix. And considering how dramatically Netflix has already reshaped the TV business, it’s not surprising that they would. But there is one shot made against Netflix that makes very little sense: The idea that Netflix doesn’t have a brand in the way that HBO does — and that somehow makes the streaming giant inferior.

The latest iteration of this shot comes from new HBO boss Bob Greenblatt.Tag Heuer Replica “Netflix doesn’t have a brand. It’s just a place you go to get anything — it’s like Encyclopedia Britannica,” Greenblatt said, in an interview with NBC News. “That’s a great business model when you’re trying to reach as many people on the planet as you can.”

And Greenblatt is correct. It’s a great business model if a company is trying to reach as many people on the planet as it can. And guess what? That’s exactly what Netflix is trying to do — and spending a ton of money to do it.

What Greenblatt’s criticism ultimately means is that many of the streaming video services created by big media giants won’t ever scale to the size of Netflix. These will be global services and, if done right, attract a decent amount of subscribers. Because the fact is that Disney and HBO are brands that some people are willing to pay for. But Disney wants to be Disney. And HBO wants to be HBO. Netflix wants to be all of them combined. — Sahil Patel

A rough start to 2019 for programmatic publishers?
Publishers who rely on programmatic advertising for their revenues are weathering a rough first quarter, a couple of media and ad tech execs told me this week, despite many seeing encouraging revenue growth in the last three months of 2018.

One theory to explain the dip in yield: Supply just keeps on growing. For years publishers worried that programmatic ads were a “race to the bottom” in a market where cheap inventory is a commodity. And as large, premium publishers push further into the space, and begin to make more of their premium and video inventory available through the channel, revenues for the programmatic stalwarts might be getting harder to come by.

Meanwhile, advertisers are getting more conservative. In an era when “brand safety” is a constant worry and marketers are steering clear of news, it’s just getting harder for publishers to convince buyers’ bidders and brand safety tools that there are impressions worth buying.

So what are the repercussions of this likely to be? Same as always — more ad units on web pages, more floating video ads blocking content, and more hunting for close buttons on irritating interstitials. Publishers say they’re getting smarter about extracting yield from their programmatic inventory,
TAG Heuer Carrera Replica but when revenues are down, expect them to fall back on the old stuffing pages full of more ads trick. More is more when there are targets to be reached and commissions to be made. — Jack Marshall дебетовые карты банки

More in Media

How Time’s collectible covers make the case for a print comeback

Time’s bookazine business and collectible covers are helping maintain profitability in print at a time of decline.

The Trade Desk’s ‘premium internet’ shift stirs concerns among publishers over ad dollar allocation

The Trade Desk reassures that minimal authentication can still attract ad dollars, but many publishers remain skeptical of relying on UID 2.0 and ceding control over their data.

AI Briefing: Why WPP is adding Anthropic’s Claude models to its AI platform

Choosing which AI models to use has been a key factor for companies as they develop AI strategies for marketing and other applications.