Kevin Krim is EDO's President &CEO. His 21-year career hasspanned search, social and TVadvertising across start-ups andmajor companies like Yahoo andNBCUniversal. Sebastian Chiu isEDO's Chief Data Scientist. Heearned his undergraduate and

What we can learn from DTC successwith TV ads12 mins ago

One of the most-discussed plot twists in recentadvertising has been the pivot of Direct-to-Consumer (DTC) brands to linear TV. Thesedata-driven, digital-first players are expandingwell beyond Facebook and Instagram—andbecoming serious players on the largest

post-graduate degrees fromHarvard, working previously as adata scientist at Dropbox.

traditional medium in advertising.

A January 2019 Video Advertising Bureau studyfound that in 2018, 120 DTC brands collectively spent over $2 billion in TVads—up from $1.1 B in 2016. 70 of those 2018 advertisers ran TV ads forthe first time.

But while we know that theyʼre advertising on TV, what may be lessdiscussed is whether theyʼre succeeding on television—and what strategiesthey use to achieve their success.

At EDO, we have a unique and differentiated ability to measure how DTCadvertisers perform on TV by tracking incremental online searches abovebaseline in the minutes immediately following individual TV ad airings asviewers translate their interest in advertised brands and products directlyinto online engagement with them.

By measuring incremental search activity across 60 million national TV adairings since 2015, we are able to effectively isolate the effects of TV adplacement and creative decisions that are most likely to cause onlineengagement.

We ran the numbers on DTCs as well as advertisers in various othercategories to better understand how DTCs specifically are succeeding in TVads—and what DTCs who are considering TV advertising can do to achievesuccess on TV.

Table of Contents

Does the David vs. Goliath story play out on TV?

The DTC revolution is a quintessential David and Goliath story. In verticalafter vertical, small, digital-native upstarts are changing the game andovertaking major brands. Does that story play out on TV as well—or is TVadvertising one area where DTC marketers have finally met their match?

To answer that question, EDO looked at how effectively TV ads elicitedviewer activity since September 2018 across eight major industrycategories including DTC. Guided by historical ad performance acrossbillions of ads, we rated ad performance based on how closely the DTC adscame to meeting the benchmark volume of brand-related online activity inthe minutes following each TV ad airing.

We index each industry accordingly—giving an index value of 100 to an adthat meets benchmark standards, and below-par ads getting a score under100 while higher-scoring ads receive a score over 100. We chose to set ourindex baseline of 100 to the average Consumer Packaged Good (CPG) adsince it is such a large and broad ad category. Our results are as follows:

What emerges is a picture of DTC brands giving traditional advertisers avery strong fight. In the minutes following ad airings:

The typical DTC brand garnered an average 6.7 times more searchengagement than the CPG category.DTC appears to be a serious competitor to traditional retail—the latterwith just 11% more search from the average TV ad than DTCadvertisers.DTC also outperformed the benchmark itself by 6.7 times.

Because DTCs are typically competing with entrenched players across thevarious categories above, it s̓ particularly illuminating to look at specificcomparisons. DTC s̓ lead was significant as we drilled into specificadvertisersʼ performance.

In the men s̓ grooming category, consumers who viewed a Dollar ShaveClub ad were 6.5 times as likely to engage online than were people whoviewed a typical ad for traditional brands Gillette and Schick. Withinbedding, TV viewers who saw mattress ads were 3.4 times as likely toengage online if that ad was for DTC brands Casper, Leesa, or PurpleMattress than for traditional mattress companies Mattress Firm, Sleepy s̓,and Tempur-Pedic.

To understand what an accomplishment DTC s̓ TV ad performance really is,keep in mind that even the “giant” DTC companies—valued between $1 and$2 billion at the most—are still tiny compared to the massive traditionalincumbents (P&G, for instance, has a market cap over $230 billion). Simplyput, when it comes to TV ad impact, DTCs are punching way above theirweight—and giving traditional brands a run for their money.

Is there a newcomer advantage on TV?

DTCs are overwhelmingly challenger brands—and thus “the new kids onthe block” within their respective categories. Does being a fresh face helpor hinder the way TV audiences receive them?

One hint may come from the way viewers respond to DTC advertisers overtime. Looking at the search engagements that brands garner as they firstarrive on air versus the months following, it s̓ clear that TV newcomersreceive a “pop” in the first three TV months. After that, ad-related onlinesearch levels out in the nine months that follow.

Below is a sample of that newcomer s̓ welcome amongst a select few DTCTV advertisers:

How much more engaged were audiences in the first three months of abrandʼs TV ads vs. the subsequent nine months?

Overall, amongst the brands we studied, audiences were 75% moreresponsive to DTC TV ads in those first three months. When it comes to TVads, being a newcomer can help. That s̓ good news for many DTCadvertisers looking to enter the TV game.

How does the DTC marketing playbook translate toTV? (A brief history and how-to, plus a Caspermini-case study)

DTC brands are built on driving efficiencies by rethinking the marketingstatus quo – simplistically, by cutting out the middleman. Can DTCstranslate that philosophy to TV?

First, it s̓ important to recognize the historical context here. It s̓ not actuallya new phenomenon to use TV to drive direct sales to consumers. For many

decades, TV has had a category of advertisers called “Direct Response”(DR) marketers – you probably know them as those memorable, ifsometimes annoying, spots loudly pitching you the latest kitchen or workoutgadgets with a toll-free phone number and/or, for the past couple decades,a URL.

We know the longer-duration versions of these ads fondly as “infomercials.”DR marketers are the predecessors of today s̓ generation of DTC marketers.TV networks generally relegate DR ads to non-guaranteed placements (i.e.,“we will run your ads in whatever programming we have open slots”),almost always outside of the higher-profile dayparts, in exchange for amuch lower price per ad than that paid by advertisers who commit toguaranteed placements in the Upfront.

How do the DR marketers know it s̓ a good trade? Quite simply, they watchthe data very carefully – they keep track at a very precise level the exacttime an airing runs on TV and then they look for the spike of people ofentering their sales funnel. The special thing about live, linear TV is thatthere s̓ almost always a spike.

There are hundreds of thousands or millions of people watching the ad liveand some portion of them react by looking for more information andperhaps buying. So the DR marketers count how many site visitors (or in thepast, how many phone calls) above the norm arrive in the minutes followingthe TV ad, tag them as a cohort with metadata about the specific airing thatgot them there and then see how many convert into buyers.

They do the ROI math on value relative to cost, and then they buy more ofwhat s̓ working for them and less of what s̓ not.

If they realize there s̓ a very specific chunk of TV programming that s̓ reallyperforming well for them, they might pay more to get guaranteedplacement, but more typically theyʼll identify a certain creative (the 15-second or 30-second piece of video that is the ad) is doing particularly well

in certain types of programming and they will ask the networks to rotatethat one in more often, or theyʼll shift money into better-performingdayparts or networks, staying in the DR-tier of inexpensive inventory.

Why doesnʼt every marketer do this? The short answer is it s̓ hard for mostbrands because they do not have the visibility that DR marketers have.

Whether it s̓ an old-school DR marketer selling a countertop rotisseriechicken roaster or a next-gen DTC marketer selling a networked stationarybike, there s̓ only one way the interested consumer can shop and buy. DTCbrands own their funnels.

Most other brand marketers, from automakers to CPG to movie studios,canʼt see the data about their customersʼ paths to purchase because it isscattered around a tangled web of online and offline sources and outlets.What we do at EDO gives these brands a sophisticated proxy of the real-time, granular visibility that previously only DTC (and DR) marketers had.

Casper Sleep, one of the best-known DTC players, seems to have leveragedthe DTC player s̓ data-driven approach with its innovative approach todayparting (apportioning ad buys across time of day).

Dayparts are a classic media balancing act, involving investing ad budgetsacross a spectrum of time slots that represent the biggest audiences for thehighest prices (prime time) to lower-cost, lower-viewership times likeovernight. Striking the right mix along that spectrum lies at the heart of anefficient TV plan.

We looked at the dayparting strategies of three of the leading mattressbrands—DTC leader Casper, alongside traditional brands Sleep Numberand Mattress firm—over a six-month period to get an up-close view of howthese traditional and DTC brands might approach dayparting differently.The differences were striking.

Mattress Firm and Sleep Number take a conservative portfolio approach todayparting, spreading their ad buys roughly evenly across time segments.

Casper takes a very different approach. It focuses the bulk of its advertisingfrom morning into mid-afternoon—particularly in the early afternoon(“afternoon daytime”)—and spends little in all other times, includingpremium-priced prime time TV.

This enabled Casper to spend an estimated $2.5 million versus SleepNumber s̓ of $22 million in the same time period. Focusing on the daytimedayparts was clearly driven by Casper s̓ data-driven view of what wasworking for them. EDO s̓ data validates that Casper s̓ TV ads were 4.7 timesand 6.6 times more effective in generating engagement than those ofMattress Firm and Sleep Number respectively.

The core of the DTC playbook is to take a critical eye—and a lot of data—toevery aspect of marketing. In the case of Casper s̓ TV buys, the brandshows that the approach works on TV as well.

Conclusion: 3 keys to DTC TV success

DTC brands are leveraging their test-and-learn, audience-driven and data-informed marketing approach—coupled with their sheen as exciting newplayers—to win in the old-is-new world of TV ads.

How can an aspiring DTC brand (or one who wants to perform like one)follow in their successful footsteps? Our conclusions above point to thethree keys to TV ad success:

Timing is critical. Given the initial excitement that TV ads drive,deciding when to enter the TV medium is nearly as crucial as isdeciding whether to advertise on TV. The strategic fundamentals ofyour strategy must align with what TV can do for you. It s̓ a massmedium and if your offering is super-niche, then TV may not be rightfor you. If you have a local or regional offering, then national TV isobviously overkill when local or regional TV buys would make moresense. Are you ready for scale? Enter too soon in your company s̓growth, and you may not have the capacity or capital to carry themomentum past that initial pop. Start advertising on TV early enoughto benefit from the growth that TV ads offer—but not so soon that youcanʼt sustain TV advertising as part of your ongoing marketingstrategy.Treat TV like direct response. To ROI-driven DTCs, every medium is aDR medium. DTC marketers regularly use their data to help themignore tradition and focus instead on getting maximum impact withmaximum efficiency. As Casper s̓ dayparting strategy indicates, that s̓an approach that works on TV as well. DTCs should use their innatedirect response tendencies to their advantage—and carry that

approach to TV too.Commit to an investment. This point follows from the two pointsabove. TV success takes a significant amount of advertising, and asignificant amount of data. Both of these require a critical mass of advolume. TV is a scale game: if youʼre looking to dabble, it s̓ not for you.With a serious approach and budget, the TV networks will open uptheir innovative, audience data platforms, like WarnerMedia s̓ Ignite andViacom s̓ Vantage, to you and help you build a sophisticated TVcampaign plan that can include benefits like performance guaranteesand automated optimization.

Ignore the headlines about the declines in TV ratings. Watch what the smartmoney is doing. The smart money knows that the days of spray-and-prayare in the past.

In this era, every brand marketer has the opportunity to act like a DTC andbuy the TV that works for them and run the creatives that are performingbest. Follow their lead and youʼll be able to reap the benefits of the mostunder-appreciated channel in the DTC marketer s̓ media plan.

Kevin Krim is EDOʼs President & CEO. His 21-year career has spannedsearch, social and TV advertising across start-ups and major companies likeYahoo and NBCUniversal.

Sebastian Chiu is EDOʼs Chief Data Scientist. He earned his undergraduateand post-graduate degrees from Harvard, working previously as a datascientist at Dropbox.