Marketing Spend - Direct-To-Consumers Companies

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Average Marketing Spend - Direct-To-Consumers Companies

After an exhaustive search through credible sources, we were unable to determine the total global marketing spend by direct to consumer companies.

Global Advertising Spend

  • As per data from Statista, the total global advertising spend is expected to reach $563.02 billion in 2019, up from $543.71 billion in 2018. The global advertising spend has been burgeoning consistently over the past three years rising from around $503.67 billion in 2016 to $521.38 billion in the year 2017 to the current levels of $543.71 billion in 2018.
  • The top five DTC brands in terms of marketing spend since January 2018 include SmileDirectClub, Peloton, Leesa Sleep, 23andMe, and Stitch Fix. These label have collectively spent about $650 million (January 2018 - March 2019).
  • From 2016-2017, DTC marketing investment fell 4.7%, which represented the first drop since the year 2011. However, TV’s share of this spending has been climbing, making up over 70% of DTC investment during 2017.
  • According to the statistics from the 'Video Advertising Bureau,' since 2016, the estimated TV advertising spend by D2C companies has nearly doubled, with D2Cs spending $2 billion on TV advertising in 2018.
  • Some DTC brands are moving up to 30% of their ad total spend away from Facebook's advertising platform. Curology, a business that markets acne solutions, is one such DTC brand that has truncated its Facebook ad spend by almost 30%. Also, MVMT has decreased its Facebook ad allocation to about 30% of its total advertising spend, including TV, radio, podcasts, and direct mail.
  • One of the paramount reasons for this shift to TV advertising by DTC brands has been the rising cost per mile (CPMs) on Facebook and other social media platforms, which makes it extremely expensive for developing DTC brands to only depend on the social channels' advertising.

DTC Advertising Spend Future Trends

  • As per data from IAB, 78% of all DTC companies intend to expand their advertising spend on digital video within the next 12 months and are more inclined to raise their spending on advanced TV and OTT. Furthermore, DTC companies are projected to depict a 50% YoY spending increase for digital video advertising.
  • DTC companies are more inclined to spend with publisher applications and sites (e.g., Oath, The Dodo, CNS/Conde, etc.) and they are projected to keep pace with Facebook regarding their 2019 budget for digital video with publishers, with a 17% budget allocation to each. Additionally, slightly more than half (51%) of DTC companies intend to spend more of their funds with influencers.
  • Between the years 2016 and 2017, the DTC advertising spend space witnessed the exodus of some of the biggest DTC spender brands such as Crestor, Viagra, Tamiflu, Cialis, Axiron, and Nasonex because of the lack of exclusivity. Over the last five years, all the listed trademarks have remained in the top 20 of overall DTC investors. Combined, they contributed nearly $500 million to DTC investments.
  • Numerous prominent labels like Lyrica, Chantix, Eliquis, and Humira, which spent an aggregated amount of around $1.2 billion in DTC advertising in 2017 and comprised about half of the total investment for the 10 leading DTC spenders, are anticipated to be deprived of exclusivity by the year 2022. This is likely to have a considerable negative impact on all DTC marketing spending in the coming years.

Research Strategy:

Our research began by scouring through various industry reports and research articles from Deloitte, McKinsey, Market Radar, Forrester Research, Business Wire, etc., on the global DTC advertising spend. These are potential sources presenting industry data and tracking growth over some time. Therefore, we decided to leverage this research path. However, no pertinent information on the DTC marketing spend for the 2016-2018 period was available in any of the reports. All the information we came across catered to the overall global advertising spend, the expected rise in ad spend globally in the coming years, and the variation in the marketing spend by brands in different industries. Hence, the data concerned all brands globally rather than any specific data point for DTC companies.
Next, we searched through credible database that track ad spend such as WARC Adspend Database, Ipsos AdWatch, Standard Media Index, etc.; media articles from Forbes, WSJ, Bloomberg, Reuters, Business Insider, etc.; surveys from Pew Research, Nielsen, Deloitte, among others around the advertising spend of different DTC brands; and various advertising information blogs such as Media Radar, Adweek, Info. Zs, Marketing Land, E-Marketer, etc. Again, these are potential sources where experts present and analyze data, especially from paid research and primary research from companies. However, we could not find relevant information related to the total global marketing spend by DTC companies for 2016-2018. The information we found centered around the future trends in DTC marketing, and the current trend of shifting to TV advertising from social media/Facebook advertising.
Afterward, we attempted to triangulate the information. Since we were able to track down the overall global advertising spend for 2016-2018, using the information around the share of DTC brands in the overall global advertising, we believed we could triangulate the information on their marketing spend. For example, if in 2018 the global advertising spend was $X million and DTC brands represented Y% of the overall advertising spend that year, then we could have triangulated their global advertising spend in 2018 as (X*Y/100) million. While we were able to locate the information on the overall share of DTC brands in TV advertising, no data specific to their share in overall advertising across various other platforms was available.
Finally, we searched for alternative data points to help us triangulate the information. Since we were able to garner information on the global marketing spend of the top five DTC brands, we wanted to check for any data on their market share or the percentage share constituted by them. For example, if the total spend of the top five DTC players is $X million and they composed Y% of the industry spend, then we could have triangulated the overall industry spend as (X/Y*100). Though we located the advertising spend of some individual brands and the overall decline in the advertising spend during 2016-2017 by DTC brands, no data on the market share or the percentage share constituted by top five DTC brands in the overall DTC marketing spend was available.

The primary reason for the unavailability of information is the niche market, which resulted in no market report or credible databases reporting relevant data. Also, as the DTC market is fragmented with several new entrants, information on the marketing expenditures for industry players is not readily available as they are private. They also tend to refrain from disclosing their budgets for competitive reasons, which makes data aggregation at a global level arduous.
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Direct to Consumer Marketing Breakdown

Direct to consumer (DTC) companies generally allocate the majority of their marketing budget to TV advertising. Notably, however, the breakdown of advertising spend by channel can vary significantly based on the company's industry and other factors.

DTC MARKETING SPEND

RESEARCH STRATEGY

An extensive review of trusted media sources, industry reports and articles published by authorities and key players in the marketing and research sectors was conducted to ascertain the breakdown of marketing spend by DTC companies across digital, TV and print advertising. As part of this research, direct, pre-compiled information was identified to address DTC company spending on TV advertising, both as a gross value as well as a percentage of DTC advertising overall.

However, no pre-compiled information was available which directly explained marketing spend by DTC companies across digital and print advertising. The reason this data was absent is likely due to the highly specific nature of the requested information, as well as the fact that the majority of DTC advertising spending does not occur through these channels.

In order to identify DTC marketing spending across digital and print advertising, several attempts were made to triangulate the data. First, we looked for total DTC marketing spending across all categories, and then attempted to isolate the spending across digital and print media by process of elimination. Unfortunately, this attempt was unsuccessful due to the lack of such granular information. Next, we looked to identify total print and total digital marketing spending by industry or company type, however this information did not specifically isolate print or digital spending for DTC companies. Lastly, we attempted to identify the marketing spend by channel for the five to ten DTC companies who spent the most on advertising in 2019, with the goal of using this estimate as a proxy for marketing spend by channel for all DTC companies. Unfortunately, the more granular marketing spending by channel for these companies was also not available. As a further step, we would recommend contacting the research organizations Nielsen or Kantar to request a custom study or analysis of previously collected data, given that both companies are highly cited across news and analysis related to DTC marketing.


Sources
Sources