The twentieth century saw very little disruption for category-leading brands.
Del Monte fruit, Nabisco biscuits, Gold Medal flour, Sherwin-Williams paint, Gillette razors, Lipton tea, Ivory soap – across practically every consumer business, America’s top brands in 1923 were the same category leaders 60 years later.
But nearly one century on, those rankings are starting to crumble, according to the IAB’s fifth annual Brand Disruption report, based on surveys with 300 brands, half of which were large incumbents and half of which were digital native startups.
Historically, top brands were shielded from challengers because only the largest advertisers could run national TV campaigns and only those that ran national TV ads were stocked by the major retail and grocery chains, said IAB Executive Chairman Randall Rothenberg.
“Now [those brands] are losing share to an ever-replenishing army of small disruptors that keep coming up behind them,” he said. “The media retail cartel protected incumbents from disruption – and now the protection is gone.”
The rise of streaming video and CTV in combination with a revolution in ecommerce and media platforms are the main catalysts that helped digital native and ecommerce startups catch up with TV-reliant legacy brands are new alternatives TV branding, according to the report.
CTV catches up
CTV and other data-driven video options have given new brands the tools to reach scaled national audiences without linear television, formerly the primary vehicle to move product off shelves across the country.
First, the consumer adoption finally exists for CTV and linear alternatives to be standalone scaled branding channels. In 2019, roughly one in three US households didn’t have a single streaming subscription. Less than half had more than one subscription. Fast forward two years, and 46% of US homes have four or more streaming subscriptions, while fewer than one in five go without a streaming service.
The pandemic accelerated the CTV trend by sequestering people in their homes during much of 2020 and forcing many to rethink their cable-internet packages.
But the more important long-term driver of CTV brand advertising adoption is what Rothenberg called the recent “privacy gyration” by government agencies and tech platforms (namely, Apple and Google).
The top two reasons cited by brands in the IAB survey for increased CTV spend were addressability (27%) and measurability of performance (16%). Reaching first-time customers and gaining incremental reach were the priority for only 8% and 6% of brand marketers, respectively.
Apple’s App Tracking Transparency framework, plus the promise of (eventual) third-party cookie deprecation by Google’s Chrome, have brands scouring other media channels for addressable inventory, Rothenberg said.
“That’s been a big net benefit to the streaming video industry,” he said, since those channels target identified user accounts – a YouTube, Roku or Fire TV user, say – or addressable households.
The commerce media revolution
The convergence of online shopping and programmatic advertising is also a powerful tool for gaining on incumbent brands.
“By far, the most powerful medium for [DTC brands] has been what we broadly call ‘social commerce,’” Rothenberg said.
Even if there’s relatively little shopping happening on Facebook Shops, the branded storefronts the company now known as Meta introduced last year in partnership with Shopify, the Facebook ad platform is still a huge commerce driver. Eighty percent of brands now work directly with social media influencers, with most of that growth going to smaller social media accounts, as opposed to major celebrity endorsements or sponsored content, Rothenberg said.
In these online environments where hundreds or even thousands of rival products can compete for impressions – as opposed to a handful of brands on a physical shelf – a brand’s data assets and finely targeted campaigns can overcome traditional advantages in scaled manufacturing and retailer relationships.
Rothenberg said that legacy brands are still the predominant spenders on retailer-owned ad platforms, including Walmart Connect, Target Roundel and Kroger Precision Marketing, to name a few. But that’s largely because those commerce media businesses are fairly nascent and are still primarily used as extensions of existing shopper marketing arrangements, i.e., how brands work with retailers on in-store signage or coupon promos.
The retailers themselves are courting digital-native brands.
“Our hypothesis is simply that the large brick-and-mortar retailers need the smaller brands more than the smaller brands need the large retailers,” Rothenberg said.
Research conducted by McKinsey and the IAB shows that 70% of Americans tried new shopping channels during the pandemic, and that 44% of younger consumers (millennials and Gen Z) experimented with new brands. Of those that tried new brands in the past year and a half, 84% said they plan to stick with the new brand.
“Retailers are focused on building relationships with younger customers in part by stocking new brands and rethinking traditional shopper marketing,” Rothenberg said. “They’re furthering the competitiveness of disruptor brands and the challenges to incumbent brands who have been their partners for 100 years.”
