Direct to consumer brands are facing competition from the hand that raised them…
Publishers are rapidly realising that they’re best placed to compete with direct to consumer brands as they begin to use rich reader data to inform their own product developments.
This is leading to sandbox or product innovation environments popping up inside large publishers. Here, small teams of writers-turned-researchers can use their category and market expertise to develop competing products, in-house.
After all, e-commerce focused publishers like GQ, Cosmopolitan, What-Hi-fi and more curate thousands of product reviews and product guidelines on a yearly basis. This category knowledge combined with huge data sets of what readers are buying; makes for an incredibly fertile model to begin thinking about product creation.
Publishing giant, Hearst, have recently launched a range of Yoga mat’s into their Yoga and fitness based editorial, in order to compete with other Yoga brands and drive sale at a higher yield. It also enables Hearst to begin building brands of their own that can be exported elsewhere, a valuable IP proposition.
Why are publishers creating their own products?
The commodification of digital ad impressions has meant that publishers have continued to look away from purely traditional display advertising revenue. The value of each impression is plummeting thanks to the sheer volume of advertisers out there, add in the rise of ad-blocking and the implementation of GDPR, and the value of ad revenue rapidly declines; forcing many publishers to look at alternative revenue streams.. Many publishers now rely heavily on donations or subscriptions, alongside depleted digital advertising, to keep afloat.
The Guardian has stripped back on digital advertising all-together:
“After two battle-weary years in which The Guardian cut costs and halved losses, the publisher is starting to turn a corner. Today, it has a new reader-revenue driven business model and is on the brink of breaking even.
Getting to this point hasn’t been easy. The Guardian has been forced to downsize and rein in its global ambitions. But a shift to a unique reader revenue model that relies on voluntary contributions as opposed to restricting access has, in many ways, proved naysayers wrong.”
So, those publishers that are in a position to offer buying guides, product reviews and curated look books; are also poised to start bolting product development onto their revenue model and investing heavily in product innovation.
And just like that, a new revenue model is born
Publishers have been building profile data for years and know more than the brands themselves about what their customers like and dislike, which products perform best and what the outstanding features are. Add this to cookie data that pulls information from a prospects social media feed and you’re starting to build a pretty sophisticated buying profile, perfect for informing the next innovation in yoga, headphones consumer electronics etc, etc…. the list goes on.
Wareable, a popular smart wearable’s publisher, collates all the popular brands and products from the sector; curating detailed and well researched buying guides that tech fans love to browse and purchase from. They’re perfectly placed to start investing in their own ‘Wareables’ range and begin competing with the very products they review.
The DTC market boom
The DTC (direct to consumer) boom has been growing for the last five years, thanks to behemoth marketplaces like Amazon and Ali-Baba giving rise to independent products and e-commerce platforms.
For those unaware, a DTC is essentially a product that goes straight from a brand to a customer without the use of a typical retailer or brick and mortar middleman. Amazon and Ali-Baba are an exception to this rule because they’ve encouraged the marketplace to prosper by enabling brands to manage their own stock inventories and exposed them to large volumes of bottom of the funnel prospects. i.e. customers arrive at the site, ready to purchase.
Publishers have been capitalising on the demand for direct to consumer brands for the last ten years through the millions of impressions that product pages generate (this was previously a healthy income of advertising revenue via the pay per click model). Publishers will also typically take an affiliate kick-back from any direct or re-targeted sales, but if a reader was to purchase a publisher own product; the income would be significantly higher and the long-term impact, significantly more valuable.
On the horizon we could potentially see established publisher brands in a range of sectors, competing with, and even superseding established brands in popular markets. Picture GQ branded aftershave or Cosmopolitan cosmetics.
The move from publishers into product and DTC offerings is another example of the constantly shifting advertising world and the relationship that triangulates between customer, advertiser and publisher. Increasingly, advertisers are looking at opportunities away from typical digital advertising and this in turn has caused publishers to start addressing their readers needs more directly and at much higher margins.