What’s the difference between “direct” brands and “indirect” brands? The distinction is the subject of the largest research project the Internet Advertising Bureau has ever done and it will be the centerpiece of the organization’s upcoming Annual Leadership Meeting.
In this interview with Beet.TV, IAB President & CEO Randall Rothenberg explains why incumbent brands that have been dominant for more than a century need to be more directly connected with their customers and the role publishers play in that interaction. The Annual Leadership Meeting takes place Feb. 11-13 at the JW Marriott Desert Springs Resort & Spa, Palm Desert, CA.
“The center of gravity is changing,” says Rothenberg.
Brands have traditionally created value by erecting high barriers to entry for competitors and by relying on capital-intensive, owned-and-operated supply chains. Today’s direct brands create value with low barriers, are capital flexible and avail themselves of leased or rented supply chains.
Moreover, indirect brands extract value “not through this very cumbersome, indirect process of working through multiple third parties. Advertising agencies, publishers and retailers. But they extract value increasingly through the direct relationship between the company and the consumer,” says Rothenberg.
Direct-connections with consumers go far beyond being able to interact with them on, say, Twitter, according to Rothenberg. Direct connections generate reams of first-party data.
“And at a modest degree of scale, that first-party data fuels every other function of the enterprise. Product development, service development, customer value analysis, pricing, pricing mechanics. These are the things that modern companies need to compete.”
Not all legacy marketers are lagging on this competition curve. Rothenberg cites Nike as “a perfect example” with its projected 2X increase in direct-to-consumer revenue “in just the next three years.” Procter & Gamble is behind in this regard but is actively “orienting some of their strategy in this direction,” he adds.
Asked about the role of publishers in the modern marketing mix, Rothenberg points to the necessity to “step outside the impressions-based economy” and work to create direct relationships.
“Clearly, publishers always have and will continue to play a role in helping all brands acquire new customers. It’s just happening in many different ways than it used to happen before.”
One reason why popular brands like Madison Reed in hair coloring and Warby Parker in eyeglasses need content marketing to differentiate themselves is that they cannot simply blast out billions of ad impressions.
“Because these companies are drawing promiscuously from the same set of available supply chain resources, they are as subject to and potentially more subject to commoditization perceptions as offline companies,” Rothenberg says. “That makes it very difficult for them to differentiate on the basis of price or function. It needs to be on lifestyle, psychographics and demographics.”
This video is part of a series covering the IAB Annual Leadership Meeting. The series is sponsored by AppNexus. Please visit this page for more coverage.