Direct-to-consumer (DTC) advertising allows the manufacturers of products to connect with the people that purchase their products.
DTC brands have been advertising for years in various media, though some of these advertising efforts were met with limited success. The problem lies in how traditional advertising works and how difficult it can sometimes be for DTC brands to reach their intended audience this way.
Most DTC products only appeal to a certain portion of the population, and their manufacturers ideally want to target these consumers with their ads. More traditional advertising models give few if any guarantees that the ads will reach the target audience, however; you pay for the reach and have to attempt to target an audience by choosing the right advertising slots.
Fortunately, DTV brands now have new advertising options available.
Enter Connected TV
The increasing popularity of connected TV (CTV) devices among consumers has created a significant opportunity for DTC marketers.
Unlike traditional TV ad slots, CTV advertising allows marketers to target specific demographics instead of just placing ads within a specific program or time slot. This allows connected TV advertisers to have a significant amount of control over who sees their ads and who doesn’t. This is exactly what DTC brands need to maximize the effectiveness of their marketing efforts.
This has significant implications for the companies that sell direct-to-consumer products. A study released earlier this year by Telaria and Hulu found that ad relevancy was twice as high among DTC buyers when viewing ad-supported streaming channels as compared to traditional TV. Additionally, 82 percent of DTC buyers take some action after viewing DTC advertising in connected TV content.
The Benefit of CTV Advertising
Linear television has always presented some challenges for DTC brands.
In addition to the fact that ad slot buys are based on the TV platform’s reach instead of targeting a specific demographic, there are only a limited number of slots during any specific program or event. Many slots are prebooked by established TV advertisers who have upfront deals with the channels hosting the programming. This can make it difficult to reach a desired audience, especially when upfronts and large purchases are used to lock up the most prized advertising slots.
With connected TV advertising, the demographic-based targeting prevents this. Because there are not a limited number of ad slots per show, multiple advertisers can buy coverage for the same content and the platform will programmatically place the ads in front of the audiences that most closely match the advertiser’s target. This relatively open playing field allows smaller advertisers and DTC marketers to more easily compete with larger agencies and eliminates a major barrier to reaching the audience most likely to respond to the DTC brand.
A Solid Value in CTV
Looking at the cost of CTV advertising compared to the costs incurred by linear TV advertisers, it may seem at first that connected TV is a much more expensive venue for DTC brands to focus on.
Many cable networks feature ad costs of around $10 to $12 CPM, while CTV channels may have costs of between $20 and $40 CPM depending on the channel and the content it hosts. Instead of looking solely at the cost, however, it is important to look at the value that is purchased for that cost.
Traditional TV advertisers enjoy lower costs, true, but they also experience a significant number of wasted impressions within that cost. As CTV advertising is based on demographic instead of reach, the percentage of impressions that are wasted drops significantly. DTC brands that realize this are focusing much more on the value of CTV advertising than the low cost (and low value) of linear advertising. Given the more direct line that CTV gives brands to their target audience, the rise of CTV is also setting up a success story for those DTC brands that embrace connected TV advertising.