Programmatic Is One Way DTC Brands Make Move to TV

Simulmedia offers automated approach with D2Cx.com
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Why This Matters: TV companies are building more automated, programmatic systems to serve a growing roster of direct-to-consumer clients.

They’ve got data. They’ve built their business on technology. They’re buying more and more television. And some in the advertising business are building more automated and programmatic systems to serve the fast-growing group of direct-to-consumer retailers that have been springing up.

Peloton

Peloton

Brands like Peloton, Home Advisor and Chewy.com built their businesses via digital and social media but are increasingly becoming big TV spenders. Spending on TV ads by DTC companies climbed 60% to $3.77 billion in 2018, according to the Video Advertising Bureau.

Those marketers look at TV in a different way than the traditional clients who buy in the upfront and deal with a sales rep, though.

Simulmedia, one of the pioneers in using big data to find overlooked inventory that precisely targets an advertiser’s potential customers, has built a special system for those direct-to-consumer brands.

Data-Driven, Automated Approach

Dave Morgan, founder and CEO of Simulmedia

Dave Morgan, founder and CEO of Simulmedia

“To the extent that programmatic means that you use data science and software and there is an automated bid approach, that is what we’re doing here with D2Cx.com,” said Dave Morgan, founder and CEO of Simulmedia. “We launched in beta in the late fall and basically built an automated marketplace purpose-built for the earliest direct-to-consumer brands to use to access inventory across most of TV.”

Morgan said there have been barriers to DTC companies looking to advertise on TV.

“If you’re not ready to go $5 million or $10 million nationally, you can’t get an agency’s attention and you can’t get the network’s attention,” he said.

DTC companies are also used to having a lot of control over how and when they spend their advertising budget and expect instant data on how their ads performed.

“They wanted to test, learn and optimize, and we were like, ‘that’s not TV,’ ” Morgan said. “It became clear to us that we needed to build a specific offering just for them, where you could leverage all of the scale of our transparent TV platform and create a mechanism for these brands to get a lot of analytics, so it’s sort of digital-like.”

With D2Cx.com, DTC brands can start with a relatively small investment and still get targeted ads and feedback on performance to determine if the ads are driving visitors to e-commerce sites.

“In some ways, I would say they’re modern direct marketers,” he said. “They want to see the results coming in hourly, so our platform lets them see which ads they’re running and which ones can be attributed to visits on their site. We always prided ourselves on the fact that we were giving delivery data the next day at the impression level and that wasn’t good enough here.”

Wide Range of Clients

Language-learning app Babbel

Language-learning app Babbel

Since starting D2Cx, Simulmedia has been working with about 90 DTC companies. Their spending ranges from a few hundred thousand to $20 million.

One client is Babbel, the language-learning app.

“We’ve run TV advertising in the past and know that it works,” Achim Spelten, VP of marketing for offline channels at Babbel, said. “We chose D2Cx.com because its marketplace provides inventory with a granularity that I have never seen before. In addition, their analytics and data are incredible because they help us understand TV’s long term impact on the business.”

Haven Life and Monster Worldwide are among the other clients Morgan was free to name.

“A lot of them are small and in their testing phase,” he said. “At any one time, we’ve got 10 or a dozen running campaigns.

“These brands that start as performance-focused now realize that one of the real powers of TV is the content,” he added. “So many of them tend to transition a significant portion of their buys directly to the networks because they want to pick spots in specific shows,” something that’s difficult to accomplish on automated systems that focus on audience delivery.

As these companies add the value of brand-building to their calculations of how much they’re willing to pay for advertisers, they’re shouldering higher CPM costs to get the right content, Morgan said.

To some degree, these innovative DTC companies are finding that some of TV’s time-honored principles still apply — that reach, relevance and recency tend to work.

Many broadcast and cable networks have targeted these DTC companies as a new, growing source of revenue, and are willing to do business with them in whatever way makes them most comfortable with television advertising.

Jon Steinlauf, chief U.S. advertising sales officer, Discovery Inc.

Jon Steinlauf, chief U.S. advertising sales officer, Discovery Inc.

“I consider these DTC companies to be the underpinning strength of the entire television advertising marketplace right now,” Discovery Inc. chief U.S. advertising sales officer Jon Steinlauf said. “These kind of companies we’re talking about, they test everything, so they’re willing to try everything.”

A lot of DTC clients are buying digital inventory on Discovery’s Go apps via programmatic, but some are buying directly through the company’s sales staff.

When it comes to linear TV, Steinlauf said DTC clients like direct-response television the most. When they can’t get direct response, they step into the national marketplace. There’s little difference in pricing from channel to channel, he added, and the networks make about the same amount of money no matter how DTC clients prefer to buy.

“They hire a lot of really smart data scientists and they turn them into great media buyers by looking at all the results,” Steinlauf said. “It always comes back to ROI.”

NBCU last year launched its Direct-to-Scale Program, aimed at helping companies selling products via the internet increase sales by creating TV campaigns and providing measurement and optimization.

“We’re partnering with these DTC companies in multiple ways,” Mike Reidy, NBCUniversal’s senior VP, digital ad sales, said. “We’re starting to see that business scale.”

Reidy said NBCU has made all of its ad inventory available for programmatic activation.

“These folks grew up first in activating against media in a digital fashion,” he said. “They’ve got a natural comfort level there and I think that’s where digital programmatic can really benefit them. It allows them, in a self-service buying model, to dip their toes in the water.”

Some DTC companies could benefit from having a more direct sales relationship with NBCU, though.

“NBCU is a very large company with a lot of different capabilities,” he said. “It can be a bit overwhelming. We’re flexible.

“Whether it starts off as a small test, but whether that be linear TV or digital programmatic, we want to continue the conversation and see how we can start growing their brand and scaling it on a truly national level and maybe finding areas where they can align more closely with our IP,” he added.

Guarantees Ease Planning

A+E Networks began offering to guarantee the outcomes of some of its targeted ad campaigns last year. Earlier this year, it introduced its P1 initiative, aimed at small and midsized clients.

“We are a catalyst for delivering the marketing messages on behalf of our partners to quality audiences,” Ethan Heftman, senior VP, ad sales, Precision and Performance, said. “Strong relationships enable us to be first to market with new offerings. Clients trust we’re working in their interest and want to try new things with us.

“Our DTC guarantees, combined with the inclusion of data and programmatic capabilities, has made the planning and measurement more streamlined and efficient, however the relationships continue to be the backbone of the industry as is evidenced by our upfront and all the touch points we have with clients throughout the year,” he added. “It is a cluttered marketplace, and our voice and message, and those of our clients, cannot be carried simply through pipes and data reports. Relationships are still our best leading foot.”

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