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In tandem with the dwindling dominance of the duopoly, direct-to-consumer brands are diversifying their playbook for 2023.
“You could run a successful DTC brand and really only do Facebook, Instagram and Google a couple of years ago,” said Adam Lovallo, founder of digital agency Thesis. “That’s no longer the case.”
In 2023, brands are diversifying their media spend to more channels like TikTok and Amazon, six agency and brand marketing sources told Adweek. And against a looming recession, brands are also trying to find cheaper alternatives to digital platforms altogether, including earned media, affiliates and more branding-based campaigns.
Four of the six sources interviewed do not plan to grow their budget allocated to Meta in 2023, with some decreasing spending by up to 30%, and one slightly increasing spend (after clients decreased spending in 2022).
Spurring this change is marketers’ declining ability to cost-effectively acquire audiences on Meta after Apple’s 2021 privacy changes sapped some of the platform’s targeting prowess. Moreover, as the DTC space matures, established platforms like Meta and Google are becoming more competitive to achieve successful outcomes.
“There are hundred times [more] ecommerce brands than there were 10 years ago,” said Calla Murphy, vp of digital strategy and integrated marketing at direct response agency Belardi Wong. The agency’s clients decreased spend by 13% in 2022 year over year on Meta, but impressions were down by 22%, almost double.
Reflecting this new reality, in 2022, Meta and Google made up less than 50% of digital ad spend for the first time since 2014, according to Insider Intelligence. The two companies’ share of advertising budgets is expected to shrink further to 44.9% in 2023.
Murphy said in 2023, her clients are expected to decline their spend on Meta by 10%-15% in favor of Google, the search giant’s Performance Max automated ad product, direct mail, and test channels like podcasts, TV and other social platforms. Another DTC brand, which requested anonymity so as not to flaunt its competitive strategy, said it was decreasing spend on Meta by 25%-30% in the coming months and will then further evaluate the return on investment.
To be sure, Meta continues to take a large chunk of DTC budgets. Some marketers have recently found increased efficiency in the platform, especially with a new AI-powered ad product, Advantage+. A recent test of 31 advertisers found Advantage+ shopping campaigns improved cost per acquisition by 17% and return on ad spend by 32%, a Meta spokesperson said, and the majority of the company’s investment has been directed toward improving the company’s apps and advertising services.
Nonetheless, relying on Meta and prioritizing diversification are not mutually exclusive.
“The ATT change was so impactful that a heightened awareness in the industry of diversification for the sake of diversification is valuable,” Lovallo said.
Performance prowess of TikTok and Amazon
Google and Meta used to be the only social platforms reliable for lower-funnel, direct-response marketing, Lovallo said. Now, TikTok has entered the fray. Still, the latter occupies a smaller slice of budgets.
For instance, portable blender company BlendJet is planning to increase its TikTok budget by around 35% in 2023, compared to 2022, inching TikTok’s share of total budget up from 12% to 13%, said CEO Ryan Pamplin.
CPMs on TikTok are still cheaper than other video channels like Meta or TV, however, making it a worthwhile investment during recessionary times, said Katya Constantine, CEO of DTC agency DigiShopGirl. Constantine estimates her clients are increasing their TikTok spend from 10%-20% of their total budgets.
“Every couple of years, you have a different platform that is able to bring that path to virality,” she said, noting this role used to be occupied by Meta. “Today, TikTok has become that.”
Amazon is also becoming an increased area of investment in 2023, said Duane Brown, founder of agency Take Some Risk, partly for being a less saturated space. Brown said Amazon’s spend could increase by as much as 30% among its DTC brands.
Balancing brand with performance
In preparation for a potential recession, several sources said they were prioritizing profitability over growth and finding cheaper ways to advertise, such as affiliate marketing. Murphy said clients were looking to invest more in earned media and direct mail to extract more value from each customer.
And while performance is increasingly important during recessionary times, and for DTC brands, the investment into brand-based marketing efforts are balancing out.
“The reason we’re investing in brand is I can see in the data we need to reach new pockets of customers,” said Brittanie Williams, CMO of personal finance mobile app Earnin. “How proud are people to use our brand, share our brand?” she said. “This guides my investment.”