Month: December 2020

In 2020, this perennial tete-a-tete changed. 

Google and Apple announced policy changes that left the ad industry with a conundrum: just because there are workarounds to online ad restrictions doesn’t mean they should be taken. Not when both Google and Apple are hellbent on weeding them out in the name of privacy.

Few enjoy the feeling of being told what to do. Case in point the brouhaha around Google’s, then Apple’s, decision to blunt the ad industry’s ability to run targeted ads on their properties based on a user’s personal details. 

But the real trouble starts when the desire to avoid a reckoning leads to a refusal to grapple with the evidence. And the evidence so far points to a future where third-party cookies and mobile identifiers are blocked or limited by browsers and devices. It should be uncontroversial to say that Google and Apple have every right to protect the privacy of their consumers. After all, they’re the ones responsible for those people. Yet years of workarounds spotlight the way in which the ad industry has been in denial about this moment ever arriving. In the wake of their announcements, Google and Apple left the market with little doubt over their plans and the lack of workarounds to them. 

Neither businesses have a clear outline of those plans this year, but what little they did share made it clear that third-party cookies and mobile identifiers would eventually be either blocked or limited by browsers and devices. 

These changes effectively put the brakes on the identity free-for-all that led to an abundance of identity solutions with nothing blocking them. The alternatives don’t hold much promise either. Most post-cookie solutions are other forms of ID-based tracking like device fingerprinting, which combines certain attributes of a device — like what operating system it is on — to identify it.

“The workarounds most affected this year have been those which moved from matching third-party cookies to another cookie or mobile identifier,” said Raman Sidhu, vp of business development at analytics platform Beemray. “This year has marked the end of the ID free-for-all.”

The market may have accepted there are no more workarounds, but the market must still make money. Technical solutions that allow advertising in a privacy-centric way are already here and more will surely come. But the biggest risk in pursuing those alternatives is reputational risk. After all, no one wants to be called out by the press for pursuing surreptitious alternatives to either cookies or mobile identifiers.

“There will always be a subset of the industry that tries to create a workaround for anything the tech companies do, but I don’t think clients have the same appetite for those solutions anymore,” said Krystal Olivieri, GroupM’s svp of global data strategy and partnerships. “The reality is that clients understand the regulatory, reputational and ethical risks associated with shady tactics or those that are above the bar in the same way we’d like every tactic to be.”

Behind the scenes, there’s an arms race to replace the old identifiers with something new. Key players are working on approaches that fall into one of two approaches that, while not mutually exclusive, are pretty different. 

Some stakeholders are betting on a world where all content moves behind a registration or paywall, and therefore consumers are logged in. On this path, publishers effectively become walled gardens themselves where third-party identity providers can install technology in the publishers’ domain to capture those log-ins, translate them to “master identifiers” that are interoperable with the ad tech ecosystem, said Craig Dempster, CEO of Merkle. 

Others believe the days of the free and anonymous internet are over. Instead, they’re pursuing strategies that attempt to scale first-party identity solutions on both the publisher and advertiser sides using a combination of logged-in traffic, alongside other non-cookie based signals like IP and probabilistic matching. 

“In 2020, very little changed in the world of identity though it has become one of the main topics as marketers plan for 2021,” said Dempster. “The upcoming changes have gone from theoretical to very real and marketers are now starting to determine their plans to test various cookie-less identity technologies next year.”

These days it’s more acceptable, and most likely more beneficial, to stop attempting workarounds. For Google and Apple, following people around the internet is the opposite of their vision for a privacy-centric world, and they’re the gatekeepers to that inventory. As a result, the open web is becoming unknown, and the walled gardens anonymous. That’s where consumers are, at scale.

“For the most part I’ve seen the industry stop attempting workarounds and start working on real solutions that range from a publisher data co-op to cohorts to broad ID systems,” said Jay Friedman, CEO of programmatic agency Goodway Group.

The reality that things are going to change permanently has set in. The plan forward has not yet been determined and the likelihood is that we will see a scattered number of different outcomes co-exist in the market at a steady-state come 2022.”

Louis Vuitton was not an outlier. This year, many fashion events and runway shows that would typically be held in Europe or the U.S. have moved to China. Many luxury brands have shifted resources to opening stores and social media accounts focused on Chinese consumers, while retailers have pivoted existing platforms to focus exclusively on China — it’s what LVMH has done with its online retailer 24S.  They’ve also begun aligning products to Chinese cultural moments, such as an exclusive collection Dolce & Gabbana debuted around the Qixi Festival.

The past five years have seen countless luxury brands scrambling over each other to get into the lucrative fashion market of China, partnering with Chinese companies like Tmall.  But recently, those brands have realized they can’t just focus their commercial efforts in the U.S. and Europe and expect the Chinese audience to keep buying. Now brands are shifting their cultural focus — meaning marketing efforts, shows and other areas beyond just commerce — to China as well.

Prior to the pandemic, the majority of Chinese spending on luxury brands happened outside of China, while those consumers were traveling abroad in cities such as Paris or New York, according to data from brand performance agency ForwardPMX.

But with travel restrictions in place and many Western countries having a harder time than China controlling the virus, much of that spending has come home. “This year, we’ve seen a decline in import duties, coupled with travel restrictions which brought that spending back to the domestic market,” said Joyee Yu, market director for China at ForwardPMX.

“We’ve seen this first-hand with our luxury retailers, with year-over-year domestic sales growing. While buoyed by restrictions in international travel, the ongoing growth of China’s middle class will continue to fuel the appetite for luxury consumption. Coupled with digital natives coming of age, the growth in luxury is set to continue, and it’s set to be inherently digital.”

Now, instead of relying on doing the same events, shows and store openings in Western countries and expecting the Chinese consumer to come to them, brands are being forced to seek out customers and invest more heavily in ways to reach Chinese consumers culturally. Christina Fontana, Tmall’s fashion and luxury director for Europe, who has helped launch more than 50 non-Chinese luxury brands on Tmall this year, said that marketing and being able to intelligently reach Chinese consumers is one of the toughest challenges for brands to crack. This year, she’s seen much more demand from brands looking to engage with Chinese customers directly through digital and in-person events, rather than just looking to Tmall to facilitate a transaction.

“Since China reopened, a lot of brands have pivoted their focus there,” Fontana said. “And they come to us asking for help with digital events and understanding the Chinese consumer. Those things can be really tough for a brand from outside of China. So we’ve been working with brands like Cartier and Michael Kors on Chinese campaigns or digital pop-ups. It’s been inspiring to see how committed a lot of them are to China.”

In October, Shanghai Fashion Week was the only major fashion week to be held in person, with more than 90 brands including Galia Lahav and Uma Wang hosting physical shows in the city for the first time, and other fashion players like Browns and Harrods hosting events and pop-ups. And luxury brands like Dior have been partnering with Chinese Key Opinion Leaders <– why is this capitalized? [KOL is basically the Chinese term for influencer. I’m not sure why it’s capitalized but that’s how i always see it written] and companies like Paklu and Tmall for China-specific campaigns.

A common refrain across major luxury brands’ earnings calls this year was that sales were tanking everywhere except China. Burberry saw double-digit growth in mainland China in November, while the rest of its focus regions all saw declining sales, for example. It’s only natural that a cultural shift would follow that kind of financial shift. What’s less clear is whether China’s current dominance will remain and for how long.

“Things will inevitably come down at a certain point, like we see today in Japan,” said Yanyan Froud, regional vp of APAC and RU at ForwardPMX. “But due to [China’s] sheer size of the market and the very dynamic economy tiers in different regions, fashion and luxury enthusiasm is set to last much longer than in many other markets.”

And it’s not at the top level where China’s influence in fashion is growing. From the bottom up, fashion trends are starting in China and spreading to the west in a way they never did before. In July, a wave of Chinese street style videos swept through Anglophone TikTok — they were taken from the Chinese version of the app and posted by American users. It exposed many American users to China’s fashion world and popularized Chinese influencers outside of China overnight. One influencer, who goes by @ergoozhang, jumped from 140 followers on Instagram to more than 70,000 within a month. Non-Chinese brands and retailers may be desperate for a piece of the China pie, but from top to bottom it’s clear that the shift is larger than just business interests.

“In light of Covid, it made me not worry so much about leaving,” said Shawn, a copywriter who requested anonymity. “The agency I was at had an incredible office; it was gorgeous and inspiring to work in. They had a cool culture. But with everyone working remotely it made it a lot easier for me to think about other priorities.” 

Getting a promotion and having a better sense of a path forward in his career trajectory became a top priority over office views or craft beers on tap. Ultimately, he decided to leave his agency to go client side at a decidedly less cool financial services firm, as it offered the ability to work from home and a clearer path forward in his career.

Shawn isn’t alone in reevaluating his priorities this year. One agency exec told Digiday that he’d recently been getting calls from former employees who had jumped to hot startups looking to leave for a better work/life balance as the “cool” company culture wasn’t as attractive during a pandemic. 

As employees in industries like tech, advertising and publishing have worked from home for the majority of 2020, the perks of working for a “cool” company with an impeccable office space, amenities like a free lunch, beer and cold brew on tap and ping pong tables have dissipated. What’s left is the work and the company culture over Zoom. With that being the case, employees are now rethinking the value of working for a company that emphasized in-office perks over employees’ well-being.

“When the pandemic hit and everyone decentralized, what I heard from hundreds of my clients is that people don’t care about those perks,” said Josh Wand, founder and CEO of recruiting firm ForceBrands, adding that his New York City office had been among those to offer free lunches, beer and cold brew on tap and a ping pong table as he believed the physical space was a draw for talent. “People want to feel connected. They want to feel valued. The little things become the big things. It’s not about the free lunch or the extra perks — it’s about growth opportunities, visibility and transparency.” 

Some agency execs say they recognize that retaining top talent will take more attention from leadership as the allure of a fun office culture no longer holds the same weight as it once did. 

Andrea Diquez, CEO of Saatchi NY, has nearly 30 one-on-ones with her employees each week to “stay close to people.” Doing so allows her to continue to “feel the pulse of the agency” as well as understand the issues she needs to manage to keep her team happy and retain talent. 

Diquez believes that giving people her time as well as more time off — she closed the agency for the week of Thanksgiving as well as for two weeks over Christmas and New Years — is more important to keeping people happy than more superficial in-office perks. 

Without the facade of cool inside an office, it’s clearer than ever that what makes a company’s culture is its employees. Agency employees and industry observers believe that recognition has changed the way people evaluate potential employers and will likely continue going forward. 

“What makes an agency culture amazing is the talent the agency has,” said Manuel Borde, global chief creative officer at Geometry. “If you lose that talent, or fail to replace the outgoing talent with equally amazing ones, then the agency culture is gone. The ‘coolest’ agency brands in the world could be a nightmare to work [for] if they have the wrong crowd, and in counterpart the smallest or most unknown agency of the world could be the best place to work — with the right people.”

To do so, they turned to Twitter. 

Olowe and Teng knew they had to find a way to differentiate themselves from the hundreds of other skincare brands on Instagram, so they used Twitter to post about topics important to their prospective customers, such as how to deal with acne caused by wearing a face mask daily to slow the spread of the coronavirus.

“Instagram is a more visual platform…but it’s also a platform that’s extremely noisy,” Olowe said.

While Instagram might be a place for pristine selfies, Topicals wanted a place where they could honestly talk about the chronic skincare conditions their customers were facing. She felt Topicals could differentiate itself by focusing on a platform many other startups ignored (Twitter) and by talking to customers differently. 

The approach paid off, at least early on: Roughly 50% of Topicals’ revenue in its first month came from Twitter, where the startup has now amassed more than 17,000 followers.

Over the past several years, Instagram has become the advertising platform of choice for venture-backed direct-to-consumer brand, so much so that social media users now use the shorthand “the Instagram swimsuit” or “Instagram bedding” when referring to some of these companies.

But new-to-market startups are increasingly doing away with some of the branding tactics that have been historically popular on Instagram. The first crop of direct-to-consumer startups built their business models around selling products online that had previously only been sold in stores, or selling more fashionable versions of household staples (think Away with luggage). That helped fuel now familiar Sans Serif and pastel-heavy aesthetic.

Now, newer startups are zeroing in on different opportunities — and making loftier claims. Olowe, for example, said that Topicals wants to “destigmatize” chronic skin care conditions. That requires a branding playbook that’s less muted. 

Minimalistic aesthetics are rejected in favor of bright, clashing colors and oversized lettering. Edited photos that evoke a carefree way of life have been replaced by imperfect vignettes from home. And instead of positioning their products as ones that could swing open the gates to a breezy, minimalist lifestyle, brands are increasingly trying to stand for something bigger, centering their social media strategy around busting taboos or reaching customers that have historically been overlooked.

Competing aestheticsInstagram has been the de facto launch pad for consumer startups for nearly as long as the term “direct-to-consumer startup” has been en vogue. 

Melanie Travis, founder of Andie Swimwear, told Vox’s The Goods last year that she launched an Instagram account for Andie before she even had a prototype. “[Instagram] is where our demographic lives, basically,” she said, adding that at the time that Andie spent about 80% of its marketing budget on Facebook. 

With so many brands congregating there, a certain sameness began to seep into their branding identities: the same sans-serif font, the same pastel-adjacent colors like millennial pink and sage green.

Design experts say there’s a good reason why this type of branding took off. “People were still getting comfortable with shopping online, for a lot of these products,” brand strategist Aja Singer told Modern Retail. “So brands really wanted to make it into an easily digestible, very clean and easy-to-understand experience. It worked for a long time — which is why it became pervasive.” 

Sensing this, startups have been trying to take a different approach. 

Topicals’ packaging and website design is inspired by an early 2000s’ “coming of age” movie, featuring yearbook-inspired lettering. Its products come in pink and yellow packaging, not a clinical white as eczema treatment products historically have. Meanwhile, Topicals’ Instagram and Twitter feeds’ feature pictures of models and customers who don’t try to hide their eczema flare-ups.

Singer told Modern Retail that she’s increasingly seeing brands that target Gen Z take a different branding and community building approach, citing acne care brand Starface, which launched last September as one example. On its TikTok account, Starface typically features videos of users lip-syncing while wearing the company’s bright yellow acne care patches.  “[Gen Z] is looking for unfiltered reality and just having real conversations,” Singer said.

https://www.tiktok.com/@starface/video/6907551406727728389?source=h5_m

The rise of TikTok has also played a role in this new brand-building approach. Thingtesting, a site that reviews new consumer startups, dubbed this trend the rise of the “TikTok aesthetic. “Compared to Instagram’s curated world, TikTok is a place where bold, weird and silly ideas thrive,” Thingtesting editor Sarah Drumm wrote.

Even startups that still rely heavily on Instagram have changed their approach. “There’s so much conversation in the DTC circles around the rise of blands and now the opposite reaction of maximalist brands,” said Kim Pham, co-founder of Omsom, a new food brand that sells Asian meal starters which she launched with her sister Vanessa. 

Instead of the usual muted tones, Omsom chose bright, contrasting colors, and its virtual events strategy has centered around breaking taboos and confronting stereotypes. Over the summer, for example, Omsom hosted a virtual cooking class with chef Jen Phanomrat, which Pham described as the “anti-cooking class,” asking probing questions like “What do you think of the word authenticity, what do you think about appropriation in food?” said Pham. “It was less about ‘Hey, how do you cook something from ABC.’”

Still an essential platformAesthetics aside, Pham said that Instagram is “absolutely Omsom’s number one brand and community lever.” She thinks Instagram still works well for Omsom because the company is trying to reach Asian-Americans, a group that has historically been overlooked by consumer startups on that channel.

“When I spoke to other founders and other investors, they were like, ‘Be careful of approaching Instagram, it can become a money suck and it is really noisy,’” said Pham. Indeed, the cost of advertising on Instagram has gotten more expensive, as more brands flock to the platform. Some brands have reported customer acquisition costs on Facebook and Instagram doubling or tripling within a year, and as such can no longer bring in the same amount of revenue from the same type of ads.

“I think us being proud and loud and unapologetically Asian led to a shareability for us [on Facebook and Instagram].”

Despite their new look and feel, these new startups will face many of the same challenges as the first crop of direct-to-consumer startups. It’s only getting easier to launch an e-commerce website. That means that once a brand with a unique look finds traction, there’s sure to be ten other competitors trying to copy that brand’s playbook. The TikTok or Gen Z aesthetic may well become the new “blanding” in ten — or even two — years.

While branding might help determine which brands gain quick traction early on, the quality of the product is what will determine which ones have staying power against copycats. Thingtesting founder Jenny Gyllander told Modern Retail that a brands’ Instagram or social media feeds only serve as a “first impression” for a customer.

Founders acknowledge that unique branding is only the first step in building a DTC startup with staying power. “Branding and having something that is visually compelling is really important to the customer,” Olowe said. “But those are table stakes.”