The Q1 2019 Megaphone Report investigated paid Facebook & Instagram ads for 51 brands and retailers, which ran a total of 4,404 different ads between February 14-15, 2019.

This Megaphone Report is exclusively available to Plus, Team and Premier Members.

Our research calculates and classifies marketing via two different channels: email marketing and paid digital marketing, which includes Facebook and Instagram. Our analysis of these channels gives you an inside look at how consumer brands and retailers are navigating the marketing landscape, while allowing you to benchmark your own company’s marketing efficiency.

Surveyed companies are identified by Origin (Traditional, meaning it started either offline or both offline and online; or Digital, meaning it started online only) and Type (Brand or Retailer). When relevant, brands and retailers are analyzed separately.

Facebook and Instagram advertising

Loose Threads surveys all active paid Facebook & Instagram advertisements during the middle of each quarter. For special reports, data is captured during the pertinent week, such as during the Black Friday long weekend.

As Facebook and Instagram ads run on the same ad manager, they are surveyed together.

Email marketing

Loose Threads receives emails from each brand and retailer in the Megaphone roster. Our current approach is grounded in surveying how these brands market to a potential customer, versus an existing one.

Q1 2019 Superlatives

🏆 Social Butterfly Award: Nike

Nike ran 740 ads during the survey period—more than any other brand or retailer.

🏆 Most Promotional: The Honest Company

One hundred percent of The Honest Company’s Facebook & Instagram ads during the survey period included discounts.

🏆 Most Repetitive: The Honest Company

The Honest Company ran 137 ads during the survey period—three variations of one first-purchase discount for a monthly diapers and wipes bundle.

🏆 Most Old-School: (Four-way tie) Comme des Garçons, Pop & Suki, Supreme and Zara

Comme des Garçons, Pop & Suki, Supreme and Zara ran zero ads during the survey period.

Nike ran the highest number of paid Facebook & Instagram ad variants for the second quarter in a row, followed by Hims and Tommy John.

As in Q4 2018, Nike ran the highest number of paid ads (740 in Q1 2019 versus 778 in Q4 2018). This slight drop may be attributed to greater experimentation during the holiday quarter. The high number of Facebook & Instagram ads from younger, digitally-native points to a continued heavy focus on marketing, which is potentially the biggest line item in Hims, Dollar Shave Club and Tuft & Needle’s respective annual budgets. While it remains unknown how much each brand spends on advertising in total, ad variants that number in the hundreds imply a more sophisticated form of demographic targeting, higher creative investment and a much greater level of maintenance work, all of which necessitates a substantial management team that comes with a price tag.

As an established brand with a huge employee base (its marketing team includes nearly 2,000 employees, 181 of whom focus on digital), Nike’s large Facebook & Instagram presence is more justified than Hims’—particularly when looking at the purpose behind their respective ads. For Nike, the vast majority of its ads (61.5%) featured products, while 84.8% of ads from Hims featured first-purchase promotions or discounts (though this is a slight improvement from 97% in Q4 2018). First-purchase discounts are less of a problem for the brand than ongoing discounts and align with the company’s attempt to jumpstart rapid growth given its hefty $97 million in funding that’s made it impossible for the brand to only rely on organic growth. But as it funnels money to Facebook to acquire new customers, it’s potentially missing the opportunity to build loyalty among existing customers with ads that build the Hims brand beyond first-purchase discounts.

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Playbook

  • What percentage of your marketing team focuses on digital advertising versus non-digital channels? Does this align with the behaviors of your core or potential audience?
  • In Q1 2019, the majority of the paid digital ads that Hims ran featured first-purchase discounts.
    • What percentage of your digital ad strategy features discounts, and what percentage specifically features first-purchase discounts?
    • Could you rebalance this allocation to find more full-price customers?
  • How can you use paid digital ads to acquire new customers while still tending to your current ones?

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Rimowa ran only two paid ads during the survey period, despite the company’s rejuvenation efforts since 2016, which aim to digitize and pitch the brand to younger demographics.

Aside from the handful of brands that evaded running Facebook & Instagram ads altogether, Rimowa had the smallest presence with just two. At first glance, this is logical for a heritage brand with a steep price point. Like Louis Vuitton, which ran only 28 ads during the survey period, a light social media approach preserves premium brands from oversaturation and dilution. It also priorities communication channels where their typically older and inevitably higher-paying customers spend more time: email, retail, direct mail, etc.

Rimowa, however, is undergoing a serious (and costly) transformation that began in 2016 when LVMH purchased 80% of the company and named then 24-year-old Alexandre Arnaut co-CEO. The company debuted a new brand identity, ad campaigns, a retail concept and product collaborations, as well as retreated from wholesale, which was previously core to its distribution. Such restructuring would lead one to think that Rimowa is actively promoting its revamped brand via paid digital ads, particularly as many of its new activities are aimed at a younger crowd (as with the Rimowa x Supreme or Rimowa x Off-White collections). One of its ads during the survey period featured a two-day pop-up in LA in the honor of a collab with multimedia artist Alex Israel, which is very much in line with this strategy. With only two ads in total, Rimowa’s rejuvenation strategy is not concentrating on digital marketing, though it is posting frequently on its Instagram account—an organic social channel (images below). Perhaps this is meant to maintain a premium reputation for the brand, but the risk is that Rimowa will miss the opportunity to present its new look and ethos on a channel where the younger consumers it is after are spending time, ultimately hindering the heritage brand’s ability to chart a path for itself in the 21st century.

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Playbook

  • Rimowa maintained a minimal paid digital ad presence in Q1 2019, but reflected the ongoing rejuvenation of its brand and company through organic social posts.
    • How does your company view the role of paid digital ads versus organic social media?
    • Which should you prioritize for your specific audience and long-term goals?

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Kylie Cosmetics grew its paid digital ad footprint the most between Q4 2018 and Q1 2019, followed by the Honest Company and Hubble.

With 66.7% more paid Facebook & Instagram ads between Q4 2018 and Q1 2019, Kylie Cosmetics increased its digital marketing presence more than any other brand or retailer. However, the increase is negligible considering that the brand ran only three ads in total this quarter. Because of its foray into wholesale in November 2018 at Ulta Beauty’s more than 1,000 locations and ecommerce site, as well as the massive online following of its founder, Kylie Jenner, who can do most of the brand’s marketing for free, growing its Facebook & Instagram ad footprint isn’t something Kylie Cosmetics needs to prioritize. In fact, Ulta may have further relieved the brand from needing to do so. That said, it would make sense to market this new wholesale channel in its digital ads, which the brand failed to do (one of its 36 email campaigns during the survey period, however, did feature an exclusive product to Ulta Beauty). Instead, Kylie Cosmetics used Facebook & Instagram to advertise AfterPay (an installment payment service) in all of its active ads during the survey period, which is arguably less necessary for its accessibly-priced products.

More problematic is paid marketing growth stemming from the Honest Company and Hubble, which are deepening their dependence on social media sites that continue to raise the cost of advertising and can make sudden algorithmic changes that dramatically alter the effectiveness of their digital marketing.

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Playbook

  • What does your company prioritize in the first quarter vis-à-vis the holiday quarter? Does this make sense given the potential seasonality of your business or should it be adjusted?
  • How can you amplify new company developments through your paid digital advertising strategy in order to diversify the type of ads consumers are seeing and promote your brand in new ways?

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Dia & Co. lowered its paid digital ad footprint more than two-fold between Q4 2018 and Q1 2019.

Especially for a smaller and younger digitally-native brand like Tecovas, which can benefit from spending less on Facebook & Instagram advertising, reducing ad presence on the digital channel also provides an opportunity to focus more on organic growth at an early stage in its life cycle. For Glossier, a pivot away from other social media sites may signal that it is taking its first step in enacting what it is calling “Phase II” of its evolution, which will merge ecommerce with its version of a social network that will likely centralize distribution on an owned platform. Additionally, nearly 82% of Glossier’s Q1 2019 Facebook & Instagram marketing consisted of videos.

Dia & Co., Revolve, Tecovas and Glossier all drastically reduced the number of paid digital ads they ran between Q4 2018 and Q1 2019. Likely, this is a result of moving away from the holiday season, when they turbocharged their marketing strategy, and the decision to establish a simplified marketing strategy in Q1.

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Playbook

  • How can you increase your focus on organic social media in order to reduce reliance on paid digital marketing and external social media platforms?
  • In Q1 2019, Glossier began almost exclusively running video ads. How can you diversify your digital marketing strategy to promote your brand in new ways?

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The most common type of paid digital ads were ads that featured a single product, followed by ads featuring a promotion or a new product.

Promotional ads rose between Q4 2018 and Q1 2019 from 15.6% of all ads captured in the survey period to 20.8%. This is surprising given the importance of Q4 for holiday shopping when promotions and discounts tend to be on the rise. On the other hand, it may signal brands’ and retailers’ apprehension about slow first quarters, which they are attempting to offset by pushing out more discount offers.

Among the brands and retailers that relied heavily on promotions, a significant portion of these ads featured first-purchase discounts, which are less problematic than ongoing discounts that contribute to brand dilution and transform all marketing into transaction rather than working to deepen the relationship between brand and customer. One hundred percent of the Honest Company’s ads included these first-purchase discounts, all of which were one of three variations on an offer for $20 off a shopper’s first diaper and wipes monthly bundle. Though extremely repetitive, the actual effect of this ad strategy could still win the Honest Company new customers while simultaneously subscribing them to a product replenishment program. On the flip side, these ads only apply to new customers, meaning the brand is doing nothing with paid social to deepen its relationship with pre-existing or loyal shoppers.

In contrast, 56% of Outdoor Voices’ ads offered discounts, but only 33% of these were first-purchase discounts, which means that more than half of the brand’s ads on Facebook & Instagram were skewed to giving existing customers discounts. This strategy could actually prove more detrimental to the brand than that of the Honest Company, since it promotes Outdoor Voices through discounts for both new and existing customers, instead of using digital marketing to build the OV brand.

As discussed in the Q4 2018 Megaphone Report, discounts dilute brand equity, associating companies with promotions rather than their values, or even their products. With so many consumers scrolling through Facebook and Instagram, consumer brands and retailers have a real audience to tell their story, but the majority fail to do so—only 4.7% of paid digital ads, for instance, highlighted a brand or its values. Discounts are also addictive—once brands start using them, it’s hard to scale them back, especially because customers come to expect them in each brand interaction.

Ads featuring a single product or a new product remain popular as they can directly incite social media users to click and buy. Ads featuring new products are particularly useful, serving the dual purpose of launching a new SKU while making it immediately shoppable. But both fail to use social media channels in a way that strengthens the brand and values behind it, keeping the messaging transactional.

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Playbook

  • After consumers are bombarded by discounts and promotions in Q4, how can you attack digital marketing in a new way during the first quarter?
    • What other types of digital ads serve to build your brand rather than dilute it?
    • What kinds of ads do more than incentivize a transaction?

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Testimonials comprised more than 10% of all paid digital ads during the survey period, up from just 2.6% in Q4 2018. The majority featured text rather than video.

Testimonials are growing in importance as more brands compete in commodity markets and more companies launch wellness-oriented products whose effects are not backed scientifically and therefore inspire consumer skepticism. Harry’s and Dollar Shave Club, which both sell razors and other wellness products, ran the greatest proportion of testimonial ads (83% and 45% of their total digital ad footprint respectively)—a nod to the importance of highlighting customer preference in commodity markets. These ads featured quotes (“It’s like hearts come out of Harry’s blades. I can’t explain how good it feels”) or videos of customers shaving and speaking about their experience.  

Dirty Lemon followed behind the two razor brands with 34% of its paid digital ads during the survey period featuring testimonials. For a brand positioned in the wellness economy, customer quotes play a significant role in quelling skepticism about the alleged health benefits of its retinol- and charcoal-based beverages. “This Detox Doesn’t Require You To Give Up Anything” and “Daily detox for the win, guys. I’m serious” build curiosity for the brand, driving more consumers to try the drinks and see what happens.

Though in this case, testimonials are still being featured in paid advertisements, they are married with freely available, user-generated content about the brand (as long as the company isn’t paying for reviews about its own brand and products). Seeing other shoppers vouch for a brand one is unsure about helps companies grow trust with their audience, illustrating that their products “really work.” While inherently subjective, the rise in testimonial ads is a positive trend that consumer companies should continue to embrace.

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Playbook

  • As commodity brands, Harry’s and Dollar Shave Club both used testimonial ads to win over shoppers through their peers.
    • What kinds of quotes, videos or other media will speak best to your core audience?
    • How can you enhance the personality of your brand through the voices of customers?
  • Based on your product category, how important is it to allow customers to speak for your brand?

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Less than 2% of paid digital ads during the survey period featured retail or events—a missed opportunity, particularly for digitally-native brands moving offline.

Of the 36 brands with owned retail that were analyzed in the Q1 2019 report, only 14 (39%) used paid digital to advertise it. Legacy brands stepped up in this category—Rimowa featured retail in 100% of its ads and Vineyard Vines did so with 67% of its ads. As traditional brands with a much larger brick-and-mortar presence than digitally-native companies, this marketing approach helps differentiate them further. It also makes sense for Rimowa as the company strives to transform its physical presence for the modern era, even if its recently launched new retail concept has yet to arrive to most of its locations. In the case of Vineyard Vines, whose ads featured actual events for in-store sales in cities such as Tampa, FL and Paramus, NJ to which consumers could RSVP, its digital marketing pushed shoppers to visit the brand in person albeit for a discount. This not only made Vineyard Vines’ brick-and-mortar stores a destination, but also bridged the gap between online marketing and offline opportunities to strengthen the bond between the brand and its shoppers.

The bigger surprise is the lack of retail-focused paid digital ads by digitally-native brands and retailers, many of which are moving offline. Casper, for example, currently has 20 retail locations, but plans to add 200 by 2021. Still, the company featured retail in less than 5% of its paid ads. Additionally, both Dirty Lemon and Winky Lux, which opened their first physical locations in the second half of 2018, highlighted owned retail in 0% and 12% of their ads on Facebook & Instagram respectively. Because offline experiences can productively garner awareness for younger, less widely known brands, a lack of digital marketing about retail and pop-ups is a missed opportunity for these companies.

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Playbook

  • How can you tap into digital marketing in order to bridge the gap between your online and offline channels?
  • In Q1 2019, digitally-native brands such as Dirty Lemon and Winky Lux hardly advertised their new brick-and-mortar stores, while legacy brands like Rimowa and Vineyard Vines promoted offline retail more widely.
    • If your company is digitally-native but moving or interested in moving offline, how can you create a digital marketing strategy that incentivizes customers to visit you IRL for a new experience that rivals that of older, more established brands and retailers?

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Less than 2% of paid digital ads during the survey period served to notify customers of a restocked product—another big missed opportunity to connect with shoppers.

Today, many companies maintain lower inventories in order to reduce the cost of storing merchandise or to manufacture scarcity and spur demand. This strategy is particularly common among digitally-native brands such as Everlane, which used digital waitlists for six new products in Q1 2019. In addition, seven brands, including Goop, Revolve and Tommy John, ran Facebook & Instagram ads to notify customers about a restocked product. Whatever the reason for the restock—either inventory simply could not be filled earlier or the company superficially limited inventory in order to establish greater demand—such a move illustrates that the company’s products are in high demand and incentivizes consumers to buy the items before stock is depleted again. Even so, it means brands are leaving money on the table by under-buying inventory.

Further restock communications also provide a new way for companies to foster interactions with consumers, incentivizing shoppers to pay attention to developments within the company, jumpstarting purchasing behavior and raising the profile of a brand. However, only 1.6% of digital ads during the survey period pointed to product restocks. Though these ads are only relevant to brands and retailers that run out of products or manufacture scarcity, more that do could employ this marketing technique to enhance clout for their brand.

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Playbook

  • How can you use paid digital advertising to strike a long-term dialogue with shoppers whether with information about restocked products, loyalty and membership programs, educational content, or content about your brand and its values? How will this content look and perform differently on social media platforms versus in an email campaign or in an offline advertisement?
  • How can you use inventory management on the front-end (waitlists) or back-end (restocks) in order to incentivize customers to pay attention to your company and pounce on products as soon as they appear?
  • How can you use your audience in the Facebook & Instagram channels to your advantage, spreading the word about waitlists or restocks in order to enhance your brand profile and/or gauge demand for specific products in the future?

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