The TV commercials are ubiquitous—startups disrupting the sock industry, reinventing the bra industry, revolutionizing the exercise-bicycle business, transforming the shirt industry. These businesses and many others like them, direct-to-consumer sellers, forego retail and instead use television and other media to drive their messaging.
Many are virtually household names: Ancestry.com, Lendingtree, Booking.com, Harry’s razors, ZipRecruiter, Ebates and more.
Now, research from the Video Advertising Bureau suggests that these companies’ television spending is the key to their success—driving massive growth in engagement and in many cases, revenue.
The study, of 50 what the VAB calls “direct-disruptor” brands, found that they spent more than $1.3 billion combined on TV advertising in 2017, a 98% increase from the prior year. The study, released late last month, is the latest iteration of research the VAB has conducted annually since 2014, tracking the dynamics of growth for direct-to-consumer brands. Data for the current report was compiled and analyzed between January 2018 and April 2018.
The spending increase breaks down almost equally between “emerging” direct-to-consumer companies (VAB describes them as averaging eight years old and spending on TV advertising only since 2015) and “expanding” companies (which VAB defines as averaging 15 years old and investing in TV at least four years).
The emerging companies—34 of the 50—spent $542.7 million on TV in 2017, up from $228.1 million in 2016. They also saw an 83% lift in online traffic after they started TV advertising. Examples of the emerging companies include some high-profile advertisers, such as UntuckIt, Bombas, and Harry’s razors.
As TV spend increased for these companies, according to the report, so did revenue. For example, Leesa, the mattress company, founded in 2014, increased its ad spend from $13.5 million in 2016 to $63.4 million in 2017, and saw year-over-year revenue increase by 88%, from $80 million to $150 million, according to the report.
Among the 16 expanding companies, TV spend increased by 78%, from $434.3 million in 2016 to $770.9 million last year. The set of expanding companies includes such well-known brands as Peloton, Booking.com, Houzz, Ancestry.com and Lendingtree.
These companies also saw a direct correlation between ad spend and web activity, and in revenue growth. For example, the meal-delivery service HelloFresh increased its TV spend from $26.1 million in 2016 to $35.9 million last year, and saw revenue increase by 52%, from $663.3 million in 2016 to $1.0 billion in 2017.
“It’s instructive to watch new, data-driven brands doubling down on TV ad spending as the main means of compressing their aggressive timelines for new customer acquisitions,” says Sean Cunningham, CEO of the Video Advertising Bureau. “We’ve watched 80 new advertisers balloon their TV ad spend from a few million apiece to $2.5 billion collectively in just a couple of years. All recognize the power of TV advertising to fuel surges in revenue growth.”
