Podcast Summary: Marketing Operators E042: Our 2025 DTC Predictions Review

Release Date: January 15, 2025
Hosts: Connor Rolain, Connor MacDonald, Cody Plofker

In Episode 42 of Marketing Operators, hosts Connor Rolain and Cody Plofker delve into their predictions for Direct-to-Consumer (DTC) marketing in 2025. The discussion covers a range of topics, including advertising platforms, artificial intelligence (AI) in e-commerce, SaaS consolidation, media buying strategies, and shifts in the e-commerce labor market. This comprehensive review offers valuable insights for marketers seeking to navigate the evolving landscape of DTC strategies.

1. Applovin's Diminishing Role in Media Budgets

Prediction Overview:
Applovin, once a popular advertising platform, is predicted to see its hype fade, with its share of overall advertising spend dropping significantly.

Key Points:

• Skepticism and Incrementality Issues:
  Many brands are testing Applovin but find limited incremental benefits. The initial surge in spending may not be sustainable due to decreased effectiveness as competition increases.

• Incrementality Decline:
  As more brands invest in Applovin, the platform’s performance metrics, such as click-through rates, are likely to suffer, leading to reduced returns on ad spend.

Notable Quotes:

• Connor (05:11): "There’s just so much spend that’s gone into it that I don’t think that can be sustainable."
• Cody (05:20): "Applovin hype will fade. It’s really easy when you have the very first e-comm brands advertising to all these mobile game users who have only seen other mobile games for the first time."

Host Predictions:

• Connor leans towards Applovin capturing about 5% of overall ad spend.
• Cody estimates a slightly higher range of 5-8%, considering larger brands may continue utilizing the platform for retargeting and mid-funnel strategies.

2. AI's Transformative Impact on E-commerce

Prediction Overview:
2025 marks the year AI significantly enhances consumer brands by automating customer experience (CX) tasks and introducing innovative ad creative options.

Key Points:

• Automation in Customer Experience:
  AI tools are revolutionizing CX by handling vast amounts of customer interactions efficiently, reducing the need for large support teams.

• Advancements in Ad Creative:
  AI-driven tools are improving ad creation processes, enabling brands to generate high-quality, diverse ad creatives with minimal manual effort.

Notable Quotes:

• Cody (19:16): "2025 is the first year AI makes a decent-sized difference for consumer brands. It will come from automating CX and there will be some legit ad creative options for the first time."
• Connor (20:18): "AI is just evolving so rapidly."

Implementation Examples:

• Rich Panel Integration:
  Both hosts discuss leveraging Rich Panel’s AI capabilities to automate comment moderation and enhance customer support.

• AI in Ad Production:
  Connor highlights experimenting with AI tools like Recharm and FLARE to streamline ad creative workflows, enabling rapid production of ad variations.

3. Consolidation Within the SaaS Industry

Prediction Overview:
The SaaS landscape will witness increased consolidation as companies build or acquire horizontal solutions to offer all-in-one bundled services, enhancing competitiveness and reducing operational costs.

Key Points:

• Shift from Variable to Flat Pricing:
  SaaS providers are moving away from variable pricing models (e.g., based on usage or revenue) to more predictable flat-fee structures.

• Acquisitions and Integration:
  Companies like Loop acquiring Wonderment exemplify the trend towards bundling complementary services to provide unified solutions.

Notable Quotes:

• Connor (50:02): "It's a lot easier to do acquisitions because it’s easier to have less vendors and pay them a bit more than having multiple specialized vendors."
• Cody (52:16): "We're seeing consolidation there. Just like you have post-purchase experiences merging with other tools."

Future Outlook:

• Predicted mergers will focus on creating cohesive ecosystems where multiple functionalities are integrated, simplifying vendor management and enhancing data interoperability.

4. The Hedge Fundification of Media Buying

Prediction Overview:
Media buying will undergo significant transformation as allocators become trendy, software-driven processes that automate daily spend across various advertising channels.

Key Points:

• Automated Budget Allocation:
  Software tools will increasingly take over the allocation of advertising budgets, optimizing spend based on real-time performance data and predictive analytics.

• Challenges in Full Automation:
  Despite the theoretical benefits, fully automating media buying remains complex due to the dynamic nature of performance metrics and the unpredictability of future results.

Notable Quotes:

• Cody (58:17): "It has all these different cost curves and it's giving you optimal budgets."
• Connor (59:38): "It will happen, but not yet. It’s still very much theoretical."

Practical Insights:

• While automation tools are advancing, the hosts emphasize the importance of human oversight to account for nuances and unpredictable shifts in channel performance.

5. E-commerce Labor Market Evolution

Prediction Overview:
The e-commerce labor market is expected to undergo significant changes, with brands increasingly outsourcing operations to achieve higher leverage and reduce operational expenses (OPEX).

Key Points:

• Rise of the Agent Brand:
  Brands will increasingly adopt the "agent brand" model, outsourcing various functions to specialized agencies or global talent pools to enhance efficiency.

• Operational Leverage through Outsourcing:
  By leveraging global talent and AI-driven tools, brands can maintain high growth rates with smaller, more efficient teams.

Notable Quotes:

• Connor (40:59): "We've got to optimize our workforce to build operational leverage."
• Cody (42:06): "More than half of our performance creative team is overseas, reducing costs significantly."

Examples of Operational Efficiency:

• Global Workforce Utilization:
  Outsourcing roles such as creative strategists and editors to international teams reduces costs while maintaining high productivity.

• AI Augmentation:
  AI tools further enhance the efficiency of outsourced teams, allowing for scalable and cost-effective operations.

6. Meta's Struggle with Reaching New Audiences and Upper Funnel Strategies

Prediction Overview:
Meta (formerly Facebook) will acknowledge its challenges in reaching new audiences and subsequently focus more on upper and mid-funnel strategies to optimize advertising effectiveness.

Key Points:

• Diminished Audience Reach:
  Meta’s ability to connect brands with new, untapped audiences is declining, prompting the platform to seek improvements.

• Shift to Upper Funnel Objectives:
  Brands will increasingly adopt strategies that focus on awareness and engagement (e.g., view content, add to cart) rather than direct purchase objectives to counteract Meta’s reduced effectiveness in driving new customer acquisition.

Notable Quotes:

• Connor (32:11): "Meta is just not great at reaching new audiences... Brands will do more upper funnel stuff."
• Cody (39:20): "View content campaigns were some of our best during BFCM."

Strategic Adjustments:

• Optimizing for Engagement:
  Instead of solely driving purchases, brands will prioritize engaging potential customers earlier in the conversion funnel.

• Diversifying Ad Spend:
  Brands will allocate budgets to multiple channels like YouTube, Snapchat, and YouTube Shorts to mitigate Meta’s limitations.

7. Emergence of an Omnichannel Digital Brand Product Layer

Prediction Overview:
An omnichannel digital brand product layer will emerge, integrating various shopping platforms (e.g., Shopify, Amazon, TikTok Shops) to streamline product distribution and management across multiple points of purchase.

Key Points:

• Centralized Product Management:
  Brands will adopt unified systems to manage sales across diverse platforms, enhancing efficiency and consistency in operations.

• Threat to Established Platforms:
  This integrated layer poses a competitive threat to dominant platforms like Shopify by offering more versatile and interconnected solutions.

Notable Quotes:

• Connor (62:42): "Commerce is changing, and brands need a central place to distribute across all shopping platforms."
• Cody (65:21): "There’s an opportunity for someone to compete with Shopify by offering a digital brand product layer."

Potential Market Dynamics:

• Consolidation of Sales Channels:
  By centralizing operations, brands can more effectively manage inventory, orders, and customer data across multiple sales channels.

• Enhanced Customer Experience:
  A unified product layer ensures a seamless shopping experience for customers, regardless of the platform they choose to purchase from.

8. Consolidation and Standardization in Analytics Tools

Prediction Overview:
Analytics tools will evolve to offer standardized reporting frameworks, such as consistent week-over-week (Sunday to Saturday) reporting, enhancing comparability and reducing the need for custom data adjustments.

Key Points:

• Standard Reporting Cycles:
  Tools will adopt uniform reporting periods to align with common business cycles, simplifying performance tracking and analysis.

• Incorporating Behavioral Shifts:
  Analytics platforms will account for changes in consumer shopping behaviors, such as increased weekend purchasing, to provide more accurate insights.

Notable Quotes:

• Cody (55:14): "I want to see Sunday to Saturday reporting natively by analytics tools."
• Connor (56:37): "I hope it happens for you. Yeah, really do."

Implications for Marketers:

• Improved Data Accuracy:
  Standardized reporting reduces discrepancies and ensures that performance metrics are directly comparable over time.

• Enhanced Decision-Making:
  More accurate and consistent data facilitates better strategic planning and budget allocation.

9. Potential Acquisitions in the Social Media Space

Prediction Overview:
Social media platforms like TikTok and Snap are potential acquisition targets, driven by strategic interests from major commerce and technology companies seeking to enhance their digital ecosystems.

Key Points:

• TikTok's Acquisition Prospects:
  TikTok may be sold amidst geopolitical tensions, with potential buyers including Amazon, Walmart, or Apple aiming to integrate it into their commerce strategies.

• Snap’s Vulnerability:
  Snap’s declining stock performance makes it a more likely candidate for acquisition compared to TikTok.

Notable Quotes:

• Connor (66:51): "I think it'll go to somebody and... maybe Amazon, Walmart, or Apple."
• Cody (70:10): "The likelihood that Snap gets bought feels more likely than TikTok being sold."

Market Impact:

• Consolidation of Commerce and Social:
  Acquisitions could lead to tighter integration between social media and e-commerce, enhancing seamless shopping experiences within platforms.

• Competitive Dynamics:
  Major acquisitions may reshape the competitive landscape, potentially diminishing the influence of standalone social media platforms.

10. Additional Predictions and Final Remarks

Fun and Miscellaneous Predictions:

• Mainstream TV Figures:
  Stephen A. Smith is predicted to become a more mainstream media figure, expanding his presence beyond sports broadcasting.

• TikTok’s Future Stability:
  Concerns about TikTok's stability and ownership suggest a fluctuating investment landscape for advertisers on the platform.

Conclusion: Connor and Cody wrap up the episode by emphasizing the importance of adaptability and strategic foresight in navigating the rapidly changing DTC marketing environment. They encourage listeners to stay informed, experiment with emerging tools, and remain agile in their marketing approaches to thrive in 2025 and beyond.

Hosts' Final Thoughts:

• Connor (66:32): "Marketing operators becomes a de facto number one DTC podcast closely followed by nine operators."
• Cody (57:55): "We'll see how much traction [TikTok acquisition] gets in this coming year."

Key Takeaways:

• Diversification of Advertising Channels:
  Relying solely on platforms like Meta/Facebook may become less effective, prompting brands to explore and invest in alternative channels.

• Embracing AI and Automation:
  Leveraging AI for customer experience and ad creative can significantly enhance efficiency and scalability.

• Operational Efficiency through Outsourcing and SaaS Consolidation:
  Reducing OPEX by outsourcing and adopting consolidated SaaS solutions will be crucial for maintaining profitability amidst margin pressures.

• Strategic Budget Allocation:
  Automated media buying tools and standardized analytics reporting can optimize ad spend and improve strategic decision-making.

By addressing these multifaceted predictions, marketers can better prepare for the challenges and opportunities that lie ahead in the dynamic realm of DTC marketing.