More startups are advertising on TV, but why?

By Erin Griffith , written on June 7, 2013

From The News Desk

The last time I watched anything on MTV, it was still showing music videos. When over the weekend I caught the channel on a restaurant TV, I didn't expect to recognize anything.

And I didn't, until the commercial break, where three startups I've written about -- Jewelmint, ShoeDazzle, and Dollar Shave Club -- advertised their subscription services to MTV's audience of youths.

It felt like a dense concentration of startups advertising on television. These are unprofitable companies and TV advertising is expensive. Beyond that, they are supposed to be "digital natives," adept in the ways of targeting and retargeting and programmatic buying and social media. Why are they spending cash on expensive advertising that their class of company believes is wasteful and ineffective?

I ask this because the digital advertising world has been trying to lure advertising spend from TV to the web for over a decade now. Advertisers have slowly adopted the web, but the amount of money spent hasn't come close to matching the amount of time spent. It's the old adage that "analog dollars are digital dimes," crossed with the other old adage of not knowing which half of your ads actually work, with a touch of the one about measurability being both a blessing and a curse for online advertising.

The narrative coming from the digital side is that online ads are more effective because they are targeted. TV ads are wasteful and expensive; their effectiveness can't be measured and you wind up reaching a lot of people outside of your target audience. Not to mention, spending gets lumped into a fluffy "branding" bucket which takes zero accountability. That same narrative says that TV ads continue to dominate ad budgets because TV people just don't "get it" and media buyers are slow to adapt. That's why adtech companies and sites constantly compare their offering to TV as a way to get a piece of that no-accountability branding spend -- Facebook's "TV-like" native ad units are only the latest in a long string of companies trying for the same.

And yet, increasingly, digital companies seem to be all about the television. Especially commerce companies: One Kings Lane, JustFab, Zulilly, ShoeDazzle, Seamless, and Warby Parker have all advertised on TV.'s cute "Touched" spot ran through March.

The big platform companies have tried their hand, too. Facebook had its chair ad, which was so bad that I thought it was a parody. Twitter's hashtag ad got boring reviews. In March Spotify unveiled "For Music," a TV spot featuring a nonsensical voiceover informing us that music lives inside us. "Because we were all conceived to a 4/4 beat. … Why? Because it's music." (Huh?) Of the big software platforms, Google's TV ads have probably been the least bizarre.

Clearly none of these companies were scarred enough by the infamous superbowl ad, which became a symbol of dotcom bubble-excess. (This list of eight startups which advertised in the Superbowl but no longer exist today is a nice reminder.)

So why TV? Is digital advertising simply not enough?

The answer I got from industry observers was "Why not?" The companies are well-funded, making some money, and they have marketing budgets.

Darren Herman of kbs+ Ventures and The Media Kitchen notes that consumer-facing startups have used sophisticated digital advertising strategies to get to real revenue and raise major VC funds, but they later realize that TV, out of home and print advertisements actually can boost sales revenue. Beyond that, it's about the optics. "Television is interesting for a (large) or hot midsize startup bc it's almost like a 'we have arrived' moment for them," he says. "'We are here and we are on TV,' is a scary moment for competitors and its super sexy for investors and morale for co staffers."

The problem is that many startups don't know much about buying TV and experimentation can be expensive. When it's done purely as a buy for reach, the results are a bunch of low quality leads that provide an artificial boost," says Ian Schafer, CEO and founder of the agency Deep Focus.

However, in researching this story, I discovered it doesn't have to be. I spoke with Caroline Lacsamana Cook and Ben Zimmerman, whose LA-based direct response marketing agency, Media Design Group, has seen a significant uptick in work from startups (including Dollar Shave Club) in the last year. They buy remnant inventory on the cheap, rather than pay premiums at the TV upfronts for, say, the first commercial break in each episode of The Bachelor. By doing that, they can spread their message effectively without spending millions of dollars. "Because we're flexible, they are flexible with us on the rates," Zimmerman says. This means remnant spots cost 50 percent to 70 percent less than what, say, Procter & Gamble pays at the upfronts.

Direct response marketing on TV was once the purview of phone call-driven offers from the likes of Snuggie or Shamwow. Thanks to second screen browsing, which is becoming the norm for TV viewing, Media Design Group and other agencies like it are better able to track conversions from TV commercials without begging viewers to call a tacky 1-800 number.

The results are highly trackable. Aside from raw data that shows a spike in website activity whenever a commercial runs, Media Design Group will also track whether those visits are first-time visitors and whether they ultimately convert into buyers. "Now we can use algorithms and we drop pixels," Lacsamana Cook says. "We can tell you when they purchased what their first interaction with the site was. It is more aggressive and more accountable."

The cost of production is also getting cheaper -- Zimmerman says in some instances his firm has used a chopped-up version of a startup's demo video to make a simple compelling TV ad. This has led to a more startups at earlier stages jumping onto the TV bandwagon, be damned.

Says Schafer: "If you want to cross over into the mainstream, nothing does that quite like TV."

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