The efficiency of advertising has been the key performance indicator for digital marketers for over a decade. Longterm effectiveness of the marketing has taken a back seat to this efficiency, a topic that was recently raised by Adidas Global Media Director Simon Peel:
We had an understanding it was digital advertising driving eCommerce sales and as a consequence we were over-investing. The reason for that is short-termism because we are trying to grow sales very quickly. We had a problem that we were focusing on the wrong metrics, the short-term, because we have fiduciary responsibility to shareholders.
This led Adidas to invest heavily in paid search. Peel found answers when the company suffered an error in its Latin American market. A break in their Google AdWords program resulted in an inability to spend on paid search. This lack of investment didn’t lead to any dip in traffic, revenue, or SEO performance.
Econometrics is the quantitative application of statistical and mathematical models using data to develop theories or test existing hypotheses in economics and to forecast future trends from historical data.
The econometrics informed a new direction at Adidas. Peel determined that they should invest in video, a decision that had – thus far – been ignored at Adidas HQ because the medium didn’t do well with last click attribution.
It’s starting to become pretty clear how performance marketing can come at the expense of brand and experience,” wrote Reza Khadjavi, co-founder and CEO at Shoelace in Polymathic’s Advertising and Data section. “But the latter is still very hard to measure and quantify.” Shoelace is an early pioneer in the platform-driven advertising model that focuses on brand as much as reach. The SaaS startup works with the likes of Tracksmith, Rhone, and Soludos on a principle called “journey marketing.”
Khadjavi is speaking of a principle that was initially discussed in the book High Output Management. In the book, the author discusses the process of properly pairing indicators as a forcing function to avoid optimizing for a single goal.
For every metric, there should another “paired” metric that addresses adverse consequences of the first metric. Many companies and especially governments violate this principle continuously, and are startled by the result – every time. [2]
This was Adidas’ recent issue. The company stated that its focus on efficiency rather than effectiveness led it to over-index on ROI and over-invest in performance and digital at the expense of brand building. They aren’t alone.
The last decade has seen the still unstoppable rise of Facebook and Google PPC as the leading sources of traffic to direct to consumer brands. These platforms created scalable, quick to test, advertising channels –– and in their early days, these channels were incredibly cost effective.
These days, consumers feeds are overrun by these Facebook and Instagram ads. Those of us who are in the know scroll past search ads on Google looking for the organic articles and even then, we question the mechanisms by which this article appeared first. The brands behind these ads are paying more than ever to have them shown, seeing less effective ROAS for those ads. Still, they invest anyway based on the belief that Facebook ads and Google PPC are table stakes in the DTC industry.
On the consumer side, suspicions toward sponsored content reflects the poor experiences with purchasing products lack quality or trying to figure out how we ever got targeted for the advertisement at all. That suspicion, among other things, gave rise to social media influencer marketing –– real people who we can choose to follow (or unfollow).
Celebrities like Robin “Rihanna” Fenty, Kylie Jenner, and Lady Gaga have been the most adept at navigating these waters, trading fame for commerce. By doing so, they’ve been able to build brands that made them the wealthiest in their industries. We discuss this in Member Brief No. 3:
The digital economy rewards the companies that operate along the line that separates traditional digital media and traditional eCommerce. [3]
It’s a level of brand equity that’s difficult to come by. But, it’s desired by all. If a brand lands an organic feature (if those still exist) on an influencer’s Instagram, it’s likely that they’ll see sales skyrocket. That is, if they haven’t bought their audience.
But forging relationships with influencers is challenging and expensive. Their endorsement can develop sales and brand equity by mere association but at what cost? How can you determine that their audience is also your target audience? And, how can you work with influencers to make the partnership a genuine collaboration?
In other words, how can you apply pairing indicators to the influencer market in order to make the spend profitable (at least a 2:1 ROAS). Here, agencies and tools have stepped in to fill the gap –– both to help build the relationships and measure the return. One in particular has been working with scaling DTC brands like Indochino, Frank and Oak, and Ettitude, and setting up what they call “creator” programs.
#paid, the Toronto-based SaaS company, draws a line in the sand when it comes to using terms like “social media influencers” and “creators.” According to #paid, social media influencers typically follow a pattern.
- They publish posts solely as a means to earn revenue
- They delete collaborations from their feed
- They don’t partner with brands long term
- They buy fake followers
- They lack trust with their audience
- They’re only measured by awareness and likes
In contrast, creators have a longer-term perspective on brand partnerships.
- Treat their work as a craft
- They are proud of their collaborations
- They’ve built trust with their followers
- They can deliver on CPA, CPC, ROAS demands
- And they open their handle for paid social whitelisting
With creators, #paid argues, brands can avoid the Adidas trap by emphasizing econometrics and pairing indicators. They focus on, both, efficiency and effectiveness in performance marketing as well as balance brand building and brand equity. Nik Sharma, the former head of DTC at Hint and Vaynermedia recently helped club with a whitelisting campaign between TikTok power user Cosette and Pill Club.
Whitelisting—or the practice of “pre-approved lists of influencers that brands can work with, and in some cases, get unfettered, open access to their handles. Whitelists have become of interest for brands looking to make sure their ads only appear in pre-approved places. [4]
Brands have done this in the past by partnering with content creators. To simplify the onboard process, #paid built an automated platform that provides value to performance marketers and media creators by establishing clear guidelines and expectations.
On Hacking Linear Commerce
Brands can buy creator campaigns on #paid’s platform the same way media buyers spend on Facebook. The platform’s insights include: audience demographics, reach, and overall campaign projections based on spend.
In the #paid model, two things happen before a brand matches with a suitable creator. First, creators are algorithmically selected by #paid based on their audience demographics, geographics, and gender. This helps to identify creators who over-index in reaching the right audience.
Then, creators on #paid are alerted to new campaigns and advertisers. They can then can “hand raise” to let a brand know that they are genuine fans of the brand – an important factor in the mutual decision to partner. From there, the next steps are up to the brand in question:
- Does this creator’s concept speak to what we are trying to do with the brand?
- Does their audience overlap with the audience that the brand is looking to reach?
- Do the projections make sense for the spend? Is there a worthwhile ROAS?
Next, brands are presented with another set of choices:
- the creator posts organically
- brand can pay to boost with a sponsored post agreement.
This is what #paid refers to as “paid social whitelisting.”
Companies like Common Thread Collective also use whitelisting as a sales method. For CTC, their processes are run manually through account executives. #paid‘s process works similarly to Frame.io, which several performance marketing agencies use to collaborate with their brand customers on creative for Facebook and Instagram posts. This means that brands now have the opportunity to approve all creative action –– organic or whitelisted –– before it goes live. Retailers can also share feedback directly with creators within the platform.
Case Study: Ettitude’s Creator Campaigns
Founded in 2018 by Katerina Dey, DTC bedding brand, Ettitude recently partnered with #paid on a content creator campaign. We chose Ettitude for multiple reasons to include: size, traction, and capital efficiency. 2PM requested access to Ettitude data on their first campaign with #paid.
We’ve always wanted to find a way to scale our influencer marketing as a channel, and while we love the content that influencers create, we always saw a fairly small organic reach. “With #paid, we thought we’d be able to get produced content and scale it with media dollars behind these campaigns.
Kat Dey, Cofounder of Ettitude
As of November 8, Ettitude used #paid for both organic and whitelisted content from four different creators. This campaign began on October 28 and concluded on November 4. It included:
- Instagram Photo Posts: 8
- Instagram Stories Posts: 4
Those twelve posts generated 13,921 engagements at a 2.75% average engagement rate and $0.28 CPE. Overall, audience sentiment was positive. The campaigns earned a 84.21%, whereas a neutral sentiment is closer to 16%. Ettitude’s overall spend for the above metrics in a two week span was around $4,000.
ROAS: (Revenue – Cost) / Cost
Ettitude had the posts by the creators whitelisted. During the first week, these whitelisted sponsored posts had a reach of 56,976 with 84,235 impressions at a CPA of $214.48. The ROAS landed at 0.92 for the week. The following week, the week of November 4, the whitelisted sponsored posts had a reach of 110,163 with 216,375 impressions at a CPA of $160.97. The ROAS landed at $1.32 for the week.
ROAS was moving in the right direction. For Ettitude, they were looking to get 2:1 for this to be a long term and sustainable channel.
Michael Gagliano, Head of Sales for #paid
There is a ramp typically involved with brands on #paid, and it can take a couple iterations to achieve the desired ROAS. Depending on pricing and margin, some brands seek 2:1 ROAS. Some seek as much as 4:1 or 5:1. Ettitude products range in price from $250-$300, 2:1 achieves the brand’s objectives.
That isn’t so different from how traditional performance marketing works. Brands need a baseline. And once the appropriate tweaks are made, they usually double down on advertising efforts. On Ettitude’s side, they are willing to invest four to six months on the #paid channel to hit 2:1 ROAS.
Consumers are more and more interested in products recommended by their friends or by content creators they trust (micro-influencers). We love to work with content creators because our product is so different most people are really happy to work with us and they rave about it once they get to feel it.
Kat Dey, CoFounder of Ettitude
She added:
It’s very time consuming to manage these creator relationships manually, so a platform to manage everything in one place is useful. On top of that, we’d love to get more reach for these content pieces and the whitelisting aspect was very appealing.
Black Friday and Cyber Monday
This year’s Black Friday is sure to break American records. Shopify alone processed more than$1.5 billion USD in sales during 2018’s BF/CM event. At its peak, Shopify merchants generated over 37 million USD in sales per hour or 870,000 USD per minute. By comparison, Shopify processed more than 1 billion USD in sales in 2017.
This year, brands are launching their campaigns earlier and earlier. In some cases, weeks before BF/CM. Not only does this capture early interest and sales, it’s a tactic used to bolster email lists. That channel remains one of the most successful. During BF/CM 2017, email had a 4.29% conversion rate for Shopify merchants. In 2018, email had a 4.38% conversion rate. It’s no surprise that Shopify recently announced their email client.
There are only two things on the internet that you can own: your website and your email list. Everything else is just temporarily rented. We’ve done the website part from the beginning. Now please welcome to Shopify email.
— Tobias “Tobi” Lütke, CEO of Shopify
During BF/CM 2018, direct traffic was a close second in value to retailers with a 4.35% conversion rate. The frustration with direct traffic, if any, is the lack of attribution. It can be difficult to identify where the conversion path began.
- Was it with a PR article?
- Was it a social media post?
- Was it through word of mouth?
- Was it a creator’s post?
In talking with Dey, she plans to use #paid produced content across the Ettitude site and throughout other channels in an effort to improve the bedding brand’s equity. While direct traffic can be difficult to decipher, performance and growth marketers have identified that direct traffic and conversion rates increase in direct correlation with improved brand equity. This could be why direct traffic conversion rates leapfrogged search conversion rates (growing 48% YoY according to Shopify).
Given this historical data, it makes the most sense for brands to (1) grow their email lists and (2) improve direct traffic long before BF/CM to drive the most conversions during the holiday season. Beyond immediate ROAS, creative partnerships may with this. Brands like Ettitude have grown in the email and the direct categories as a direct result of these campaigns.
Tapping into the influence that creators hold may allow brand equity to developer faster than otherwise. People follow creators across all social platforms because of a concept we call ‘attainable aspiration.’ Because of this phenomenon, people take action when creators recommend products they use to live their life. This is true influence. Brands who authentically tap into this influence are able to not only build deep desire for their products, but drive action and ultimately sell products to the right consumers.
Bryan Gold, CEO of #paid
Ettitude’s launch of two additional campaigns in the weeks leading up to BF/CM is consistent with the patterns that we’ve found in brands preparing for the holiday sprint. With an 84% positive audience sentiment on their creator collaborations, they are likely now exceeding their ROAS expectations while also improving two key channels: email and direct. Ettitude is addressing multiple brand needs at once, something that even Adidas failed to do for quite some time. While a large company can afford this type of mishap, upstart DTC brands have a smaller margin for error.
Adidas over-indexed on performance while losing sight of brand. This hindered growth and needlessly wasted marketing dollars. Without properly pairing indicators, the brand’s key performance indicators were lost in the weeds – Adidas suffered by measuring the wrong metrics.
It’s #paid’s hope that their platform becomes the go-to for creative-driven performance marketing. It’s the best of both worlds: the metrics are there for the performance marketers, the creative is there for the brand managers. And for the brands savvy enough to identify this arbitrage opportunity, #paid’s method is an option for digitally natives looking for the same arbitrage opportunity that Facebook afforded DTC brands between 2010 and 2014. Or the same arbitrage opportunity that creative-driven commerce allows for today. Just this month, Jeffree Star Cosmetics generated $54 million in gross revenue in one hour by using linear commerce principles to market a new product.
PPC accountability + brand marketing can equate to higher returns for early adopters of these methods. Eventually, there may be a saturation but for now, creator-driven commerce and whitelisting are alternatives to the rocketing customer acquisition costs of traditional PPC marketing by way of Facebook and Google.
Case Study by Tracey Wallace | Editor: Web Smith
Editor’s Note: In response to a few requests from longtime readers, 2PM agreed to partner with industry operators to build a library of practical methods to solve problems. Our partnership with #paid is the first of these. I’ve been outspoken on the perils of PPC-first customer acquisition for direct to consumer brands. 2PM partnered with #paid to study its platform’s efficacy on an early stage brand. To do so, we directly discussed the process and the outcome with Ettitude, a DTC that was founded in 2018. The results were positive for Katerina Dey and team. The concept of whitelisting is a growing tactic in the DTC industry. As a marketing and branding tactic, the method is worth your consideration.
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