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IAB Research Busts Myth That Direct-To-Consumer Brands Are Looking to ‘Sell-Out’ to Incumbents, Finding Overwhelming Majority Are Already Profitable

November 20, 2019 GMT

NEW YORK--(BUSINESS WIRE)--Nov 20, 2019--

Overturning conventional wisdom that direct-to-consumer brands are riding a valuation bubble and social media presence in pursuit of quick flips to larger incumbents, new research by the Interactive Advertising Bureau ( IAB ) says that an overwhelming majority of DTC disruptors report they are: profitable; looking to expand globally; and using diversified media channels—including online and print display ads, direct mail, and television—in pursuit of their next waves of growth.

The findings were contained in two studies released today by the IAB, the national trade association for the digital media and marketing industries, at its annual Direct Brand Summit in New York. The first study, “Disruptor Brands: Founders Benchmark Study,” is the largest study ever conducted of disruptor brand founders and leadership teams on their strategies, capabilities, and goals. The second study, “Direct Brands: Media & Customer Acquisition,” is the largest research ever undertaken on DTC brands’ media and customer acquisition strategies.

Results from “Disruptor Brands: Founders Benchmark Study” show that in contrast to the most recent set of high-valuation startups, direct brands are focusing on profitability and customer satisfaction ahead of market share. In fact, 90 percent of surveyed DTC brands state that they are already profitable, taking an average of about three years to achieve profitability. The findings suggest that the vast majority of disruptor brands are building institutions to last, with only 15 percent citing that being acquired is a long-term goal. Additionally, there is a significant opportunity for them to go global. While 78 percent of their sales currently reside in the U.S., more than one-third (34%) say that global expansion is a top priority.

Other key takeaways from the “Disruptor Brands: Founders Benchmark Study” include:

In sharp contrast to the popular belief that DTC brands center their marketing around social media, “Direct Brands: Media & Customer Acquisition” respondents report that they are actually building diversified, multichannel media strategies online and off. In terms of digital advertising channels, search was cited as the most popular (67%), followed by display (65%) and then social (64%). Direct mail (63%) and print (62%) were top choices for offline media, with television a bit further behind (58%).

Further findings from “Direct Brands: Media & Customer Acquisition” include:

“IAB’s point of view is that all consumer brands have no choice but to become direct brands, and build two-way, data-enriched relationships with their end consumers,” said Randall Rothenberg, CEO, IAB. “Because brands can no longer lock out competitors by owning their own supply chains, dominating high-priced media, and ruling brick-and-mortar retail shelves, they need to embrace the fact that they are in the relationship business—which means that they must be in the content business, the experience business, the service business, the data business, and the retail business, as well.”

“As DTC brands continue to mature, they’re becoming increasingly sophisticated in how they approach media buying across a diversity of online and offline channels,” said Sue Hogan, Senior Vice President, Research and Analytics, IAB. “Incumbent brands are already taking a page from their playbook. And for publishers and the ecosystem delivering their brand messages, understanding their media perceptions is key to partnering with this rapidly growing and profitable segment.”

“Disruptor Brands: Founders Benchmark Study” and “Direct Brands: Media & Customer Acquisition” are sponsored by IAB Direct Brands Initiative Strategic Partners Google, Hulu, and Pinterest, and Supporting Sponsor PebblePost. To review the complete findings from the former, go to https://www.iab.com/insights/founders-benchmark-2019/, and the latter study is available at https://www.iab.com/insights/media-customer-acquisition/.

About IAB

The Interactive Advertising Bureau (IAB) empowers the media and marketing industries to thrive in the digital economy. Its membership is comprised of more than 650 leading media companies, brands, and the technology firms responsible for selling, delivering, and optimizing digital ad marketing campaigns. The trade group fields critical research on interactive advertising, while also educating brands, agencies, and the wider business community on the importance of digital marketing. In affiliation with the IAB Tech Lab, IAB develops technical standards and solutions. IAB is committed to professional development and elevating the knowledge, skills, expertise, and diversity of the workforce across the industry. Through the work of its public policy office in Washington, D.C., the trade association advocates for its members and promotes the value of the interactive advertising industry to legislators and policymakers. Founded in 1996, IAB is headquartered in New York City.

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Laura Goldberg






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