Is This the Beginning of a DTC Comeback?: State of the Industry

[00:00:00] Taylor Holiday: Welcome to another episode of The Ecommerce Playbook Podcast, Special Industry Report featuring the fine gentlemen of the DTC Index. We are back to discuss October. We're teasing something really cool that we've got coming out next week. Lots of stuff happening. Let's jump right in below me. Steve, has it started snowing yet?

I'm glad you're still here. I feel like we lose you in a couple of weeks as soon as the slopes open. How are you doing?

[00:00:24] Steve Rekuc: right. I am doing great. Seeing plenty of snow here in Colorado and looking forward to a good ski season. I'm Director of Data at Common Thread Collective and stare at a lot of the data that we have for our models, our AMER spend models, as well as a lot of the data from Direct to Consumer Confidence Index, the DTCCI, that we get a lot of the data from New Commerce for.

[00:00:46] Taylor Holiday: Nice. And now we also have the Nuggets Beat Reporter here with us today, giving you the latest on uh, Nicola Jokic's magical season Mr. Jeremiah Primer. How are you, sir?

[00:00:56] Jeremiah Prummer: Yeah, that's right. So, two days ago, Yogesh had a great game as per usual. So, but we will avoid those subjects today and just stick to D2C. I'm doing well founder, CEO of NoCommerce, and we're going to be diving in a little bit on everybody's Performance in terms of the DC and uh, rather and how that's going.

And then also kind of covering a hot new topic in the space. It's popped up in the last few weeks that I think everybody's looking at and trying to see where they should be investing their dollars right now. Yeah.

[00:01:30] Taylor Holiday: least the low key, mellow, even tempered member of the group. Also a green thumb and an artist apparently behind him, like the the scene that we have today. Yarden, who are you and what are you providing for us today?

[00:01:43] Yarden Shaked: I'm a co founder CEO of Verus. Uh, What we do is a real time benchmarking and market trends for digital marketers. So, we have about 7, 000 brands on Barrows. They share data with us. We anonymize aggregate that. And so we have a very large database of first party data from Shopify, Meta, Google, TikTok and so forth that people view through a dashboard for their own business.

But you know, we're looking at aggregate views here for, for these conversations.

[00:02:13] Taylor Holiday: Well, today we're here to discuss October as well as reflect a little bit on some of the things that happened pre and post election and tease something that we have really cool coming out before black Friday, our first ever DTC index special report. But we'll get to that in just a moment to start.

Let's reflect back on October. We came out of a September where we had seen some initial concerns. About trends related to growth rates, declining amongst some of the seven figure brands in particular yard. And did October show any signs of recovery for our industry?

[00:02:45] Yarden Shaked: Unfortunately not. It basically just flattened. I mean, I guess, you know, the optimist will say, well, the bleeding stopped. So, so there was no bounce back. Basically, seven figure brands were flat in terms of year over year growth. Which is of course not a good thing. I mean, you know, the companies that we track are theoretically high growth. And, you know, they live off of you know, new customer revenue coming in. New customer revenue is actually down year over year. Which means that, you know, at some point that'll catch up with them if it's not already catching up with them now. And, you know, the eight figure plus brands are at about 10% year over year revenue growth which was the same as last year, which is pretty good, but we would hope we would hope to see better of it. Yeah, and I'd say like a big trend here is, you know, really looking into the data is that there's a lot. Like the, the, there, there is a majority of, of businesses that are growing. But, but there's a lot that are declining and are in steep decline. And so, so there, there is this dichotomy of like, the median is zero percent year over year growth. But there, there, there's a lot of negative impact going on and a lot of brands that are absolutely

crushing 

[00:04:04] Taylor Holiday: of that tale of two cities that we have discussed previously. What about on the ad side yard? And what are we seeing in terms of spend across the platforms and ecosystems in 

[00:04:13] Yarden Shaked: So I'll just go quickly through that. I mean, you know, as we're used to seeing, so, so meta year over year CPMs are up but and spend is, is way up raw is actually down but only 4%. So spends up nearly 25%. Raw is only down 4%. So, you know, meta continues to keep efficiency even with increased spend Google a different story.

Both spend is down and ROAS is down even more. TikTok continues to be the rollercoaster that it is, it's really only three 4% of a share of wallet. You know, they haven't been able to break that barrier. And, you know, ROAS is increasing year over year, but off a, you know, very weak. 2023 yeah, I think it's, it's interesting also to like, as we look at October to look at what happened with elections, you know, it's half of October, half November.

So, so if you look at it, you know, there was a lot of hype before elections on what is going to happen. Should we spend should we not? Surprisingly what we found at Vero's which I'd say is you know, like actually what happened. I mean, it, it, it tracks enough that the election didn't have very specific impact on row as that can be pointed to.

So like the way that we, the way that we ran these numbers is we said, like, we, we basically bucketed the change the year over year row as change. In terms of significantly deteriorated, slightly deteriorated and slightly improved and significantly improved significant is over 10 percent on both sides, slightly is under 10%. So before the election in, in the two weeks leading up to the election year over year on meta 40 percent had significant deterioration. So. A ton really struggled in terms of ROAS performance. But 35 percent had significant improvement. So actually there was a lot of there was a lot of improvement. And, you know, in the middle is the rest, but actually minority. So these swings are very aggressive to both sides. Now, the thing that really surprised me is, you know, we're only a week after the election that when we're recording this, but I reran the numbers, you know, that same analysis, just what happened from you know, from November 6th up until November 13th. And for meta, we see basically the same numbers. So, so really interestingly, like the election didn't necessarily affect. The row as performance on, on meta which like on the one hand surprises me on the other hand, we've seen this so many times with meta that the scale that it has and the diversification of formats and you know, the, the, the skills and the algorithms, like it has been able to handle these waves, remember the team, a huge wave coming in, it didn't really affect advertising there either. Google actually deteriorated more. After the election. So, Google is strong and now this is you know, starting to get into, like, comparing a Black Friday, Cyber Monday holiday ads last year and so forth. But Google 60 percent of advertisers in the past week. The week after the election had significant deterioration on row as compared to the year before where only 25 percent of them.

So, had had significant improvement and that's opposed to it's, it's up from 50 percent at significant deterioration in the weeks pre election. So it even got worse after the election,

[00:07:55] Taylor Holiday: if I could just recap that. So it sounds like we've got flat growth on the seven figures, eight figures up a little bit which could be interpreted a couple ways. It could be bottoming out with hopeful upward movement because we stopped the bleeding or it could be continuing to lag.

But as we move out of October into the beginnings of the election, we start to see maybe some positive signs that the election wasn't quite as negative as we thought and Meta handled it better. And Steve, I actually think you have some interesting data to support some optimism as well, coming out towards the end of October around what customers are just declaring about the economy and what their plans are for spending.

So will you share a little bit of that with us as well?

[00:08:34] Steve Rekuc: Yeah, absolutely. So it's really interesting. We kind of normally would expect the last 2 weeks prior to the election to kind of be a significant drop off in in performance during that time. And it did drop in the data set that we were looking at specifically acquisition marketing efficiency went down to, like, from an average or the month. Of around 3. 06 to down to 2. 6, so it did drop off in performance, but really didn't get as deep as we thought it would be. And that's kind of because we were seeing a significant bump in the anticipation of the future of the economy. That started around the week of October 21st, we saw our 1st, positive signal for. I expect the economy to be better in the future than worse.

[00:09:22] Taylor Holiday: So I want to I want to I want to linger here for a second, because I think this is a big milestone for us. So tell us a little bit about what is this question that you're specifically referring to? How long have we been asking it? And what do you mean? It's the first positive. Can you can you go a little deeper on that for us?

[00:09:35] Steve Rekuc: yeah, the question is, do you think the economy will be better or worse in the future? Yes. No, not the same. Or better worse, you know, about the same. And we've seen a net negative signal, meaning that the majority of people saying that the economy will be worse in the future. They anticipated being worse in the future to being pessimistic and we started this in March of 2023. So just as Silicon Valley Bank was going belly up so it certainly had, like, especially as we began, we were looking at some potential other banks going having issues at that time. So, I certainly understand where that was coming from, but really in the last 3 weeks, we've seen a significant uptake in people believing that the economy will be better in the future.

[00:10:25] Taylor Holiday: And Jeremiah, will you give us some explanation of how we deliver those questions and who they're delivered to?

[00:10:30] Jeremiah Prummer: Yeah, definitely. It was, I did want to add some more context there. So we are the, the way that those questions are delivered is that there is an experience with a no commerce. So again, we work with 4, 500 brands, close to 5, 000 now who are running surveys. And so you can opt into what is called automated insights with a no commerce.

And we have a bunch of different questions that are run as part of that. And so that specific question where we're looking at the future of the economy. is run on an order confirmation screen after somebody completes a purchase. So there is a bias to it, but the bias makes sense in the context in which we all operate, right?

We're, we're surveying people who are buying products online and ultimately that's who we're selling to anyway. So I think that that bias is actually a helpful thing. What's really interesting is this question has been answered over half a million times in the last 18, 19 months since we started running the survey. We're talking about like, Hundreds of thousands of people that have answered this, and this is the first time in that time frame where we're actually seeing net positive future sentiment, which is kind of wild, actually and it makes sense. Like, this, this tracks with with any other macroeconomic indicator that you're going to look at. But I do think it's a really interesting thing. And when we talk about timing, it is really awesome. And this is happening a few weeks ahead of Black Friday.

[00:11:46] Taylor Holiday: Yeah, I mean, I think there's a chance that we could pay that. It's like a very bullish signal that in the over the course of over now, what is it? That's like 22 months now or so of tracking data. 20 months of tracking data. The general population has never had a positive sentiment about the future of the economy.

And that has changed that you combine with obviously stock market Bitcoin, whatever macro, like you're saying, reference to other macro indicators. And one of the things we had talked about is that the best possible election result was probably consensus was probably not conflict, right? So setting aside any feelings about who, who won and just saying that there was a clear path to victory.

Not a lot of contention about that. In a way that the, the economy has responded positively to, I think we could all say, and maybe does anybody want to steal me on the other side? I don't know if you do, but I think that that's a really positive signal heading into black Friday, cyber Monday for us as a community.

[00:12:37] Yarden Shaked: And, and, you know, I think we're probably all on our dashboards. I mean, I'm checking every few hours to see, like, how you know, how these initial Black Friday, Cyber Monday, you know, revenues are going and stuff. We are actually seeing healthy you know, healthy holidays right now. So like, from November 7th, we're seeing a big spike in revenue across the board and that spikes holding you know, daily revenues seem higher than the year before. And it's interesting because like that spike on from our data set, like 607 is actually earlier than what we saw previously, which was more around November 10th, November 11th. So there was something about, like, the elections that everyone is holding out, holding out, holding out and it ends and let's go.

Even though Black Friday, Cyber Monday is later. Than usual, but, but yeah, the early signs, the first week actually look 

[00:13:40] Taylor Holiday: I agree. I think I think there's some definite positive stuff. See, what are you seeing on the discount rate front? This is a story we've been tracking for a while now in terms of our industry leaning in. There's some inflationary elements to this conversation. There's other pieces. What are you?

Are we seeing that to continue to trend up year over year?

[00:13:57] Steve Rekuc: We are yeah, we, we saw that higher 14 percent higher year over year for the last 28 days and basically beating it almost every day, except there's a little bit of offset with the days because we have a veterans day kind of landing on, I think, Saturday last year compared to Monday this year. So a little bit earlier on that.

Otherwise, every day was significantly higher discount. What's interesting is we've seen stronger discounts given to returning customers

or returning customers purchasing on higher discounts, even though their

revenue is only

up, like, 4. 5 percent

from returning customers. Whereas new customer revenue, we saw significantly higher revenue in our data set of like, close to 15%. 

[00:14:40] Taylor Holiday: to then. 

[00:14:40] Yarden Shaked: Yeah. So it's so interesting. Cause when I was looking at, when I was looking at various discount rate, like we were seeing I think it's like yeah, this is 15 percent where you guys are seeing much, much higher discount rates, which is really interesting. I mean, Because I was actually surprised that, you know, discovery rates are elevated, but not elevated to a crazy amount over the holidays, which, you know, naturally you know, naturally, you think about Black Friday as a big discount event. We actually didn't see that. We don't see them go crazy just yet. But in your data, in your

data set, they are 

[00:15:16] Taylor Holiday: well, when you say, yeah, 15% is actually pretty close to where we are too, so we're just, we're just tracking year over year. But the actual percentage amount is actually very similar. So, we have right around 15% is, is the, is the discount rate. Generally, it spikes obviously ahead of BFCM.

So I think the actual amounts are similar, but we're just seeing that year over year, it's up 14% against a baseline. It's around 15%. So somewhere, somewhere in that still nominally, you're talking about like 1. 8 percent increase in discount rate totally, but not So, so to be clear, we're not saying it's going from 15 to 30, we're saying plus 15 percent on a baseline of about 14 percent is about 15.

8, like something you get what I'm saying? So

[00:15:58] Yarden Shaked: Oh, okay. 

[00:15:59] Taylor Holiday: not that it's going from 15 to 30, not that way, 15 percent on the baseline.

[00:16:04] Yarden Shaked: But why, why, why do you think it's not?

So, okay, so, so, yeah, that makes sense. But, but, it's, it's, it's not time

yet, but it will, you 

[00:16:12] Taylor Holiday: Friday, Cyber Monday. I think it'll jump all the way up to like 25, 26 percent on average is Steve.

[00:16:17] Steve Rekuc: Yeah, yeah, and I think it

normally tops out there at that point in time. I think brands start stop being profitable. So it's tough to go above that too much high, at least collectively. There might be individual brands that are working on higher margins that can go higher. But I mean, running back to the thing we covered last issue, and I don't know, certainly know that discounts are always conducive to driving more revenue. Like, the higher discount doesn't always mean more higher revenue.

[00:16:46] Taylor Holiday: Yeah, totally. And I think there's like an upper bound here. That's like sort of a law of physics of e com that there's some point in which like the money doesn't make sense anymore. And so 25, 26 percent is hard to push the average above that in terms of discount rate. Yeah. Jeremiah I know going into these key moments, it's always an important topic for us to look at how purchase behavior changes how gifting becomes a part of the conversation.

What are you guys seeing heading into Black Friday, Cyber Monday on the survey side? What insights do we have from your data set?

[00:17:20] Jeremiah Prummer: Yeah, there's not been a big shift yet in gifting. I think that's that's going to be playing out. So we'll definitely include some information on that front and the report. The big shift usually starts to happen right around now. So, I think if we look at historical years. That's when it starts. And then it really accelerates after Black Friday.

That's when, when you will see the peak of gifting. I mean, I know we've covered that a little bit in the past, but we'll definitely make sure that in this issue, there's, there's a little bit of information there. So nothing major on that front. I think just in general, I will say to you, like, we're looking at we're tracking just the we, we kind of track revenue and that we pull order data with surveys.

So when we're showing a survey, we're pulling the order information as well. So we are seeing just in general. Just a slight tick up on almost like a daily basis right now in terms of like the volume of surveys that we're showing. So I believe you know, at this point, yeah, we're, we're getting close to, we're like 400, 000 plus surveys a day.

So, that's, it's, it's growing. It's a lot higher than it was in October. And I think we're just going to see that continue to ramp up slowly for the next

week and a half or so. So Yeah. nothing major in terms of like shift right now in buying behavior, but that is coming and obviously like when we, when we recap

November and Black Friday, Cyber Monday, there's going to be some really interesting information there.

[00:18:43] Taylor Holiday: One thing I wanted to close the loop on Steve was that you were you had published a lot of data about the potential dip following prime day in October and just the sequence of revenue there. Can you close the loop for us? And what did we see for prime day this year? And how did that affect performance in October?

[00:19:01] Steve Rekuc: Yeah, I mean, it did drop off. It just didn't drop as significantly as we thought we're booking out that specifically. That's the 1 and keep a little bit closer attention on the acquisition of new customers can become a little bit challenging after you. Kind of cleared out the funnel and we did see, like, as, as we were talking about, kind of between the election and. Prime days, we saw it kind of bottom out on October 26 and kind of a low point on October 19th as well. Around like, that 2. 6 number and then 2. 7 on October 19th, but we didn't see it kind of maintain as low as it even was like, last year after prime, we saw a deeper dip from prime last year and kind of a quicker recovery. You know, I think it was the positive economic sentiment combined with more discounts year over year that kind of drove things to kind of be a more productive October from our perspective.

[00:19:59] Taylor Holiday: Yeah. One of the things that I noticed is that as usual, there was the PR sort of cycle. Okay. About prime day being the biggest day of sales ever for Amazon, which is usual. So some, some key takers I've seen is consumers spent 7 billion online. Outside Amazon on second day of prime day, independent sellers on Amazon sold more than 200 million items.

More mobile commerce accounted for half the purchases by now pay later was a huge piece, but one of the things that was interesting is that they didn't actually publish the numbers. And usually they like to, They, there's some sort of correlation between how detailed the report is and just how bullish they are on the scenario.

And this was a little bit more of an ambiguous, we broke the record. So I thought that was interesting that they were kind of muted in sharing the data about how prime day performed for Amazon.

[00:20:50] Steve Rekuc: Yeah, that that's really interesting. And it makes me believe that they beat it, but not as significantly as they had hoped.

[00:20:58] Jeremiah Prummer: One thing to this is very anecdotal. This is like my personal experience here, but I'm curious what you guys experience as well. The summer. Prime sale. I forget exactly when that was. Felt bigger to me and felt more in my face than this one did. Like, I just didn't, I didn't even notice it. Honestly, I completely missed it.

I actually had some stuff I wanted to buy for prime day and I just didn't even know it was happening. So, I knew it was happening, but it was like off by a couple of days. So it just didn't feel like it was marketed as well, potentially. Like, I don't, I don't know if you guys experienced that as well.

[00:21:31] Taylor Holiday: You know, what's funny is that like the the, The more obscure the stat, like, so you ever watch a sports game and they're like, that was the most hits on a Thursday during a night game against teams in the national league. Like you start seeing these really obscure stats. And so some of the headlines are like that, where I saw like, people bought items across 35 million different categories or like the, you started to see the presentation of the data be like, we're reaching for a way to say that this was better than ever across these more and more obscure measures versus like.

This was the revenue. We smashed it by this much, you know? And so that to me is always a little bit of a red flag. All right, before we wrap up, cause that we knew October was going to be a briefer one as we get ready for what is going to be a much meatier report about the November black Friday recap, but also.

Part of the reason we're going lighter on this one is because we have made a decision that we are going to put out our first ever special report coming two weeks from today. So today's November 20th or November 14th. We're going to try and get this out before black Friday and cyber Monday to help you all make some decisions is we are going to publish the first ever DTC index special report.

Yes. We're putting ourselves on the hook right now, gentlemen, for getting this Publish. And it is all about app loving. So if you've been in the e commerce space, you know, that there is this wild new ad network called app loving that has just exploded onto the scene. In my 12 years of doing this, it is the most energy and movement of money I've ever seen towards an ad platform.

So This fast. And so we are going to deep dive into the data across our network here to publish for you the deepest insights we can on how app loving is actually performing on behalf of e commerce businesses. But Jeremiah, you put together some good info that I'd love for you to tease out to just illustrate how big this movement is on this ad network and how important it's going to be for people to understand what's happening.

[00:23:21] Jeremiah Prummer: Yeah, sounds good. So we have obviously we, we track a lot of data in aggregate. And so one of the questions we have two questions in our platform that we recommend that brands ask one of them is how did you first hear about us? And then the other one sorry, there's, there's other questions too, but of the questions that we're, we're looking at these two specifically are very interesting.

So how did you first hear about us? And then. If somebody says that they bought today from an ad asking them where they saw the ad. So we've got those two questions that we're asking. And so I think we'll, I won't dive too much into the details right now, but I, I can just say like, if you look back at the last six months, like the growth in people discovering brands and buying brands because they saw apps sorry, ads in the context of a game or mobile app is massive.

Like it's what massive massive growth. So anyway, we'll be sharing a little bit about that. And then the other thing that's really interesting is we're just seeing like we do see click data on order so we can look at first click last click as this day is coming through. And so, I mean, we, we've seen over 100, 000 orders already attributed to app 11 on a click basis.

So there's some really interesting stuff that's happening and all of that's in the last 5 months. Very, very fast growth. So, yeah, we'll break down a little bit more of that kind of the trend that we're seeing. But It's very interesting. I think there's a lot of nuance to, to the data always.

And then I think we're, we're gonna kind of try to tackle this report from a few different angles, looking at survey data, looking at click data, looking at demographics data if possible. And then I think Taylor, you've got a few other things that you're thinking about as well in that context.

[00:24:55] Taylor Holiday: Yeah, I, we have, so across our portfolio, we have seen some customers that are like awesome legacy. Do you see players actually exceed their meta budget without 11, which is just, it's hard to fathom that as being possible for some of these brands to get to that kind of scale that quickly. Now some, some things that I find interesting is.

They reporting is default seven day click optimization. They are, most of the brands that I'm seeing are comping this on both a first click basis, using a North beam, triple whale, or a last click basis on GA to meta they're seeing comparable results on those measures. We have some holdout studies live right now that we're going to share the results from to make sure that we're actually seeing an incremental impact, that's sort of the gold standard of media these days, but the pace of scale Is enabled by the ability to just sort of transfer your existing ad assets.

So you can use your vertical video formats off of meta, get them immediately uploaded into a very similar ads manager UI with a managed service. There's 10, 000 in ad credits being given out. So the adoption rate is really fast. The volume is there. And brands are taking advantage of it. So We want to give you a view of how impactful this could be for your business with some really high quality data, both on the survey side Yarden's going to go gather about, he told me he was going to get 2 billion in app love and spend data here for us over the next few days.

And we'll pile that into the report, but, but here's the thing. You got to sign up, right? So if you sign up to subscribe to the DTC index, and we have a code for you to do that right now, you're going to get the October report, everything that we just discussed, but you're also going to get access to this special edition for free, otherwise it's going to be expensive.

This is going to be a high in demand report and you're going to be able to buy it as a one off. But if you're a subscriber right now, and you use. No 50 NOV 50 right now, you will get 50 off your subscription to the DTC index that will come with the app love and report for free. Otherwise you don't have to pay for it.

So go ahead and take advantage of that right now. And we will load you up in two weeks with an awesome detailed in depth report of what we're seeing across this channel. Anything else to add to tease there? Gentleman on the Applovin front.

[00:27:01] Yarden Shaked: No, I think just, you know, from both perspectives of a brand, you know, that's considering this new ad platform that I think we've seen over the years that sometimes, you know, there's these new formats that come out and there's really a lot of arbitrage opportunities, especially right at the start, which is where we are, you know, you need to know this before you get into it. And then, you know, on the strategic investor side of things to really understand, you know, what's real and what's not, what the data is being seen on the ground and you know, the, the mix of data that's coming from this. I mean, I know all, all of us here are getting a lot of emails from a lot of people to try to understand what's going on.

And we said, you know, Well, maybe we'll put together our, our perspective here because we are the holders of the data. And so. I think it's, you know, going to be,

[00:27:56] Taylor Holiday: Awesome. And if you join, you're also going to get a Jeremiah's 10 tips to get reached level a thousand on candy crush. So that will also be in the Applovin report if you sign up today. So go and check it out. DTC index. com. We appreciate all of you. Thanks for tuning in.