Faced with rising customer acquisition costs on Facebook, beauty brands are rethinking their marketing strategies. Connected TV and over-the-top ads through streaming platforms like Hulu and Vudu are becoming new levers to pull.

In August, lip-care brand Eos and skin-care brand Bio-Oil began placing ads on Hulu. Men’s brand Oars and Alps will begin its first series of ads on Hulu and Vudu in November before Black Friday.

Why brands are mixing up their marketing funnels
Early in the direct-to-consumer era, companies like Bonobos were able to grow quickly by advertising on Facebook, Instagram and Google. These ads were focused on customer conversion and acquisition, known as lower-funnel marketing tactics, as opposed to brand awareness. As more e-commerce and DTC brands have flocked to these platforms, the cost-per-click or cost-per-acquisition of a customer has risen. An analysis of its Facebook impressions data by marketing software company Adstage saw the median cost-per-click for Facebook News Feed ads rise from $0.43 during the second quarter of 2018 to $0.64 during the second quarter of 2019.

As DTC brands have expanded to national retailers or grown in size, they have turned to brand awareness campaigns to remain top-of-mind for customers. For Oars and Alps, which is sold through its e-commerce site and expanded into Target and Amazon Luxury Beauty in 2019, this tactic was a driving force for its upcoming streaming ads. Laura Cox, Oars and Alps co-founder and CMO, said that 70% of the brand’s marketing ad budget is currently on Facebook and Instagram, but this will be reduced to 40% in 2020. Instead, connected TV ads and direct mail will make up 60%. In tandem with the budget changes, Oars and Alps is also rethinking what part of the marketing funnel it looks at: Until now, almost its entire budget had been allocated to conversion, but in 2020, and with a budget of less than $2 million (not including its sampling program), it is shifting to focus 30% on brand awareness to respond to its growing retail distribution.

“That number will continue to go up. We have to have more awareness, and we also want to make sure we can tell our story, because a lot gets lost on the shelf,” said Cox.

Telling a brand story
Beauty brands are focused on creative content such as tutorials and visual packaging, and that segues easily to video ads. While they can be placed on social media platforms, the way they are delivered in that environment doesn’t prompt engagement, said Raphael Rivilla, partner for media and connections planning at Marcus Thomas.

“Facebook and Instagram are very strong channels for using video as a lower-funnel tactic, but the view time is low, at about three seconds,” he said. “Connected TV and OTT is prime for distributing [longer ads] because people actually watch them.”

Telling the brand story is important for those in mass distribution, but also for companies trying to introduce themselves to more customers. When the Eos marketing team was brainstorming its brand relaunch strategy for 2019, it concluded that OTT ads through Hulu were the right platform to relay the brand’s story of being fun and creative, but also using natural ingredients, said Eos CMO Soyoung Kang. Eos has allocated 13% of its 2019 marketing budgets to Hulu and Roku, according to Digiday. Hourglass is also running Hulu ads at the moment, but declined to comment for this story.

“It’s the optimal platform for us to tell a richer brand story to an engaged audience,” said Kang. “[We] honed in on programming within the wellness and lifestyle verticals on Hulu, which are a great fit for our consumer.”

And compared to video platforms like YouTube, television-streaming platforms offer two benefits. The first is that YouTube ads are constrained to YouTube.com, whereas OTT ads can exist across multiple platforms, and there are more of these platforms launching regularly. Secondly, television streaming offers premium content, which provides a level of insurance for brands that are wary of what content their ads may run adjacent to. YouTube has repeatedly been scrutinized for its inability to regulate videos uploaded to its website and offer transparency for who is producing said videos.

“Hulu and Vivo have a premium, compared to YouTube. As a brand, I want to be in premium environments where it’s safer,” said Cox. “I don’t want to be next to something that might look [bad]. It’s harder to [end up with that] on Hulu.”

Why brands are preferring OTT over linear TV 
Several factors make OTT ads more attractive than linear TV. Linear TV ads begin at $250,000 and are an upfront cost, whereas OTT ads require a smaller budget and the cost is broken down monthly, said Ali Haeri, vp of marketing at advertising firm Steelhouse.

“As a smaller brand, we don’t have the same capabilities [as a large CPG company],” said Cox. “By going to connected TV, we can have the impact of a television ad, but on a smaller budget and with the benefit of behavioral targeting.”

OTT ads are also easier to digest for performance marketers, since linear TV metrics deviate from performance marketing data, said Haeri. With linear TV, brands and ad buyers focus on gross ratings or Nielsen reports, whereas OTT ads are similar to social data and have a retained focus on cost-per-visit, conversion rates and the lifetime value of a customer.

“Linear TV is used for scale but not precision; [it is] high-impact but low-efficiency,” he said.

The precision and efficiency of connected TV and OTT lay in the data capabilities of this type of advertising, which allow brands to effectively target and retarget their ad audience. Much in the way that Eos wanted to target wellness and lifestyle verticals, Oars and Alps highlighted lifestyle activities like mountain climbing in its video campaign, rather than only products. The brand worked with DataXu and Amazon’s OTT platform Amazon DSP to use its ads for retargeting purposes. This granular data has been helpful for Oars and Alps. It was able to identify prospective customers who have gone to its website but have not made a purchase. It also found out which of those potential consumers went to competitors’ websites in the past year but not the past two months. The latter indicates that those shoppers are susceptible to switching to a new brand, representing a ripe ad opportunity.

OTT ads can not only be used to target specific demographics and psychographics but also to leverage the household to target and retarget customers through all of their internet-connected devices. A person could first view a brand’s ad on a streaming platform through their smart TV and then later be retargeted on their cellphone or laptop, said Rivilla.

As OTT ads become more popular and mature as a marketing channel, there are opportunities for them to become more sophisticated and engaging. Companies are popping up to help add plugins to ads that make them interactive. These features could become more important for brands over time, because even though 70 million households now have some kind of streaming service, this is minuscule compared to the number of users on Facebook or Instagram. This means beauty brands will have to eventually spend more to reach their desired audience as others gravitate to this marketing channel.