- The old world was you got, you started
a brand and you fucking paid
to get even a prayer of getting in.
Now you build a $100 million dollar business,
direct to consumer, and you're going in with leverage.
This is one big game of leverage.
(upbeat music)
(cheering)
You got your perspective.
I just want to be happy, don't you want to be happy?
(upbeat music)
Super excited that you're here.
Excited for this fireside chat.
We have plenty of seats so everybody standing
in the back feel free to fill out.
I apologize if I rush out on a whim.
I gotta get to the airport
and I've learned my lesson on missing flights
in this town in the past, so I'll be
following D-Rock's call and so let's get into it.
- Yeah nice, so my name's Rebecca, I'm a senior reporter
at The Drum and I cover brand, digitals,
and I'm excited to be here today
to chat about pure digital brands,
and I guess we can kick off by talking about
Empathy Wines, which honestly I want to try.
Can you give me a bit of insight into into why you wanted
to chat, seeing big trends and brands moving
into the DtC space.
We were watching your clip.
You got that?
- For context you know, I wrote one of the first checks
into Birchbox and a lot of early kind of 2011,
12 DTC movement and obviously in the last 24 months,
because of the sheer scale of the underpriced attention
of Facebook and Instagram and the amount of capital that
is available and the growth of Shopify and Amazon.
All these macrotrends have led to an enormous growth
of direct consumer brands.
So I'm watching that and obviously my great thesis
of creating VaynerMedia was to buy nostalgic brands,
so I haven't been highly motivated to do Gym Shark,
or Fashion Nova, or you know, Hims.
Like that, that's not where my passion lies,
though I've been seeing all the growth.
In parallel, I had two specific executives at Vaynermedia
that were part of a team called the Office of the CEO
so in theory, a couple years ago, I realized how
stretched I was so I created a team to act like
a chief of staff and there was four of them
and after a year of it, it just wasn't as efficient.
You know, I moved to on chief of staff which
has been working much better, but I had these
you know, multiple executives that were super talented.
Two of them, John Trowman and Nate Troder,
who are my partners in Empathy Wine, have been with
me since they were interns in my wine business before
VaynerMedia and then came to Vayner.
John had left and worked for a distributor even,
for a year and 1/2 and came back.
So, as an entrepreneur, we're making this macrodecision
on the Vayner side, I'm sitting
with these incredible human assets which is really,
kind of the KPI of the whole Vayner thing to begin with.
There's this incredible push of DTC and, as a third layer,
I'm weirdly missing wine for the first time, right?
When you do something for 20 years, and its like
the only thing you're passionate about,
you get burnt out, and so when I left Wine Library
to do Vayner, it was so refreshing
and I was excited to not even think about wine,
and then a couple years later it was fun
because I started looking at wine like a consumer,
you know my whole life, I'd go out
to a restaurant like they're making a fork-ton
of money off this and this wine sucks
and all that kind of stuff and so,
that got fun and it started becoming fun again.
Nobody was doing anything super crazy.
There were some wine clubs that were
doing incredibly well but there's no purebred,
direct to consumer brand at the kind of scale,
so that's why it happened.
We're off to an incredible start.
We've sold almost $2,000,000 worth of inventory
in the first six months without spending
any media dollars, all off organic, against my brand.
We did that as a strategy to see if
we could gleam insights at scale
for my audience to make us deploy the media even
in a better way, the AB testing against
Gary fans versus wine drinkers as a whole.
And so, the next year for Empathy is gonna be
really exciting because I think we're really
now gonna act like a brand more so than
the leverage off a personal brand.
- Well yeah, you mentioned that actually.
I'm interested to find out more about the media plan
and what that looks like for Empathy Wine
'cause you launched it on Instagram.
Is that the most important platform in your business?
- You know, the funny part is I'm not sure
and we launched it everywhere, right?
You might have saw it on Instagram,
but we put out YouTube and podcast and Twitter
and Linkedin and email and you know, we're pretty excited
to go as many platforms as possible.
To bring this much value here,
I think one thing for everybody to think about
with direct to consumer brands is to understand,
I set up earlier, the phenomenon on the consumer's side
of why it's happening.
There's a very important thing that
I said very quickly and I'll say it again.
There's so much capital in the world today,
that VCs have to deploy it.
That's how they live and one thing that
everybody really needs to realize about some
of these incredible brands that we all love,
on Instagram, or pre-roll YouTube, or wherever you see them
is most of them are actually underwater.
They're raising so much capital is so they can
play a game where their customer acquisition is $31
but their margin on that is 19
so they're 12 bucks underwater.
Our clients at VaynerMedia, for example,
or established businesses that are
held accountable to Wall Street can't do that
and so, there is some incredible things that
are going on with these brands but if tomorrow,
the global economy starts to start the process
in the other direction, 98% of that brands that
we think are crushing it will be out of business
'cause they won't be able to raise the next round,
they're too underwater, the math doesn't work
on customer acquisition and profitability
and it's game fucking over.
And so we need to have a little bit better
of a conversation, we need to have more
of a practical conversation around
DTC brands to realize many of the ones that
we put on a pedestal, I would say my friends,
it doesn't take a hero to lose money every month.
And I think we need to be thoughtful that
a lot of these brands are not building actual brand,
they're really CAC and LTB conversion sales machines that
are arbitraging against influencers or Instagram
and they need to be very thoughtful about
building brand right now because when
shit hits the fan, it will be brand that
will get them through the dark time.
- What is a nice way for DTC brands to build brand then?
We're seeing a lot like our old, instructional TV ads
from these companies.
(sighing)
- I think it's a huge mistake and I think
you're seeing it because they're wasting money
and they don't care and I think that the biggest delta
is we literally, what's amazing to watch these brands go
so heavy on traditional, above the line creative,
is that the great case study of modern creative comes
in the form of Dollar Shave Club.
The Dollar Shave Club video is this generation's
Just Do It or Where's the Beef.
It really is an iconic piece of creative that
birthed the billion dollar brand.
The number one mistake that direct to consumer brands
at scale are making right now is not creating
long form video on Facebook and YouTube
to build brand equity.
And that's how I see it and I think there are
a couple brands that are actually, for that matter,
Purple Mattress.
If you nerd on this stuff,
you should go look at what Purple Mattress is doing
as a company versus what Casper is doing
as a company, right?
One is very hardcore DTC and is growing as a leader,
Casper, the Purple is creating a lot of creative.
The $180,000 production and creative execution risk
of making a funny video, a video that makes you cry,
a video that makes you think, if you hit that,
your CAC and LTB numbers get really good real fast,
'cause now you're trading on brand
and that's the ultimate goal.
- And then in terms of platforms--
- Yes
- Does that mean for social media platforms,
retailers, what does the shift mean?
- Well, it means that the Facebooks of the world,
the Googles of the world are getting more of their,
I mean it's crazy, ou have two gals in the middle
of nowhere, starting a direct to consumer
peanut butter brand and two years later, spending more money
on Facebook and Instagram than does.
- Mhm
- Like if you go talk to Facebook executives that
run their business, they're getting way bigger budgets
from companies you've never heard of
and that is probably my favorite thing
that's kind of going on.
Literally, literally, when you look at the top spenders
on these platforms, it will blow your mind.
Literally a brand you've never heard of
and that's because one trades on sales data
and another one trades on internal MMMs or reporting.
- Coming back to your earlier point, is there danger
in building your whole brand on one platform?
- Yes.
- What's the danger of that?
- You become one dimensional and a one dimensional
fighter is vulnerable.
(chuckling)
- Well what I resear--
- And again, instead of just making a fun statement,
let me add a little bit to that.
Look, every time you're looking for growth, you know,
this is actually a fun way to create some clarity
about how I think about the world.
I don't hate traditional media.
I think over a long period of time, it became overpriced.
I actually love outdoor, for example.
Outdoor gets seen, you know?
Not everybody's looking at their
phone every second and if you really like,
I love UIing apps in real life
so I like outdoor quite a bit.
I just like to buy it when it's remnant
and I can buy it for one month for 2000 bucks instead
of the 24 thousand they want when
you buy it for six month contract.
So to me, the danger of being one dimensional is,
why would you wanna be one dimensional, right?
You're gonna squeeze the crap out of one fruit
and you've squeezed all the orange juice out
of the orange but there's a grapefruit right here
and you should start, and even if the grapefruit's small,
there's still juice in there and so to me,
I think about overpriced and underpriced attention
and as real estate prices come down in a soft economy
and more internet business, inevitably its gonna turn
and storefronts are gonna be a good buy.
So, there's a bunch of companies that are about to go out
of business because they signed big leases seven years ago,
didn't factor in e-com, and they're underwater,
they'll go, demand for retail,
everyone's a headline reader like
don't buy retail, it's the internet.
So, what will happen is demand will go down so
retail, in two to three years, especially if
the economy gets soft, is gonna be
a fucking deal for these brands that
get walk in traffic.
Still, I mean everybody here bought something
in the store recently, so yeah, there's just no reason
to be one dimensional.
- Mhm, What do you think about these brands moving
into physical retail spaces?
Hardee's in the U.K. has just done a big deal
with Boots pharmacy.
- I saw.
I'm into it.
I think you expand your business,
you've got the leverage as a DTC brand.
You know, the old world was, you started a brand
and you fucking paid to get even a prayer of getting in.
Now, you build a $100 million business direct to consumer
and you're going in with leverage.
This is one big game of leverage.
- Well, I want to take some questions from our audience
if there are any, before Gary has to catch his flight
We'll just do it now.
- [Man] I'll ask a question.
Your recent campaign with K Swiss, you were out, I saw them.
- Thank you.
- [Man] it's incredible by the way.
- Thank you.
- [Man] That's very much a branded piece
by yourself I imagine.
Where do you see that going, you know,
and where does this kind of fit into
your vision of doing brands?
- So, just to catch up everybody,
this week we launched the fourth collaboration with K Swiss
and what we decided to do this time was do an above,
you know I love eating my own dog food,
so I'm yelling at everybody for not doing longer form
brand videos to drive their business,
and so I said then I'll do it for this.
And then I said what's underpriced attention?
Influencers are underpriced so I reach out to a huge slew
of influencers who follow me and offered to pay them
and we made a very long form video at Vayner productions.
I was very uninvolved obviously,
besides sitting and answering questions,
which they used some of it in the video,
but very little me in comparison to everything else.
We made a long form video that a bunch of influencers posted
for awareness and it was just a brand piece.
It was just kind of more similar to the stuff
I normally put out but more production value.
No different than the Dwyane Wade Budweiser piece we did
or the Maxwell piece we did and the impact
on sales was extraordinary.
It drastically outperformed clouds and dirt,
which was more sales, more of that approach
and so you can imagine, and here's the best part,
back to not caring about about outdoor
or radio or television.
I didn't care if it was gonna fail because I know creative
is the variable of success, but it worked extremely well.
- [Man] There's a lot of emotion as well
that you put into it. That was--
- Yeah I mean look--
I apologize for cutting you off,
if you're gonna make content,
you need people to feel something when it's done.
Whether they laugh, they cry, they think,
like, yo I mean that was, that was the most important.
If the video sucked shit, we wouldn't have
sold sneakers, you know?
And so, we went with the brand approach on digital
because, like I said in some meetings today
with some of the leaders, I believe that digital,
Facebook, Instagram, YouTube LinkedIn,
is the place to build brand,
not do lower funnel sales.
I think that's the place to do two, three, four,
five, six minute videos 'cause I think that's
the place where people are consuming information.
It's not super complicated.
And once everybody wraps their head around it,
it's so funny to see the creative landscape push
against this 'cause they put the emotion
and the ideology of TVC on a pedestal, meanwhile,
every creative on Earth would much rather have
two minutes and 13 seconds to tell a story than 30
or at least the appropriate amount of time
to tell the story versus being confined
to a 30, a 15, or a six.
- You mentioned influencers there,
what influence do they have in this DTC world?
- A huge role.
Influencers by nature are a creative
and distribution media all in the price of one
with the word of mouth affirmation and cosigning.
They're the great deal of our industry, yet there's enormous
scrutiny around it because people like
headline reading instead of being practitioners.
- Does anyone have any more questions that they want to ask?
- [Sam] What's the best--
- What's your name?
.[Sam] I'm Sam.
- Sam.
- [Sam] And that's some smart work you guys.
- Thank you.
- [Sam] How do we keep track of which channels
are undervalued?
Say at the moment Apple might not be valued--
- It's a great question, we were just having this debate
upstairs like look, what you measure against
is so imperative, right?
You know, to me, if I'm a business,
I'm trying to suffocate the shit out of everything I do
to prove to me that it's driving.
So for example, if I'm a retailer,
which I grew up one so this one comes natural to me,
I wanna do branded outdoor with actually a product
in offering and not offer that product
in offering anywhere else in the world so
that I've suffocated the variables to understand
that that was the channel that drove the behavior
in my 713 stores against a $49,000 production cost
and a $637,000 outdoor media spend.
And the fact that we don't do that,
over time made me realize how much
the industry doesn't want to figure out
the actual answers, you know?
Suffocating, having the actual intent.
We do a lot of digital buying where we're doing one mile,
two mile radius media spend against specific offer
and we can show that, you know,
there's a uptake in foot traffic versus your baseline
and your average sale is higher than
it was before because we clustered out other stores
where they didn't do that.
I mean, if you have true intent to prove the ROI
and you're lucky enough to have some sort of transaction
of some sorts, or something to anchor to, even
if it's a Nielsen rating on TV, which is their currency,
or votes or whatever it may be, you will get the answer.
If it's simply brand health, then somebody's making
a subjective call, no matter what report they use as gospel.
- Any other questions, anyone else?
- [Audience Member] Empathy Wine, is it coming to the UK?
- Yes
- When?
- We just had this discussion with them,
we're working on it.
We, one thing that was very important to me is
if this wine went into new markets,
that that market didn't pay a extra vig,
where it was just paying more than the American consumer
or to the best of my ability 'cause sometimes you g--
Like we're going to Canada, Canada is a Mafia.
The whole country owns the whole ecosystem,
you can only do so much, so we're looking
at several options.
I think I'd be surprised if we weren't here
within the next six months.
Yeah, I'm really excited about it.
- [Sam] It's Sam.
- Sam.
- [Sam] I have another question.
- By the way, did you guys see Gary will be extinct
in the U.K. by 2050, you see that article?
(laughing)
- [Audience Member] Not since 1992.
- There's not been a single kid named Gary
in the U.K. since 1992.
(laughing)
- I'm gonna super focus on my brand in this region
to inspire at least one transaction.
Exactly.
Real quick, and I apologize because this is gonna be
of value, I failed almost every class I took except history
and I never ever, and I mean this, knew why until recently.
Basically, the reason I end up being right about
a lot of things is the conversation you
and I just had, everything repeats itself.
It's pattern recognition, that's right.
That's why these brands are in deep fucking shit
if they don't start building a real brand.
What they're doing that scare the fuck out of me,
is I think they're wasting 85 to 90 cents
on every dollar they spend on marketing doing old things
with old reports, which is the only thing they can do,
which is contemporary branding
to build relevance to offset the
deep technology disadvantages they're sitting with.
- [Audience Member] So what would you do if
you were the retailers?
- Build a brand, because when this goes to voice,
and I say, Alexa, book me a hotel,
I'd better say Alexa, book me a Marriott
or Marriott's gonna be upset.
Alexa, book me a Four Seasons or they're gonna be upset,
because when voice becomes the toll booth,
not search, everyone's in deep shit because with search,
at least you have a prayer of seeing another result.
With voice, Amazon and Google pick and then
when Amazon and Google actually buy Starwood,
people are very confused what's about
to happen in the world.
I think I'm less confused.
(laughing)
- And that's what, I do things that people make fun of
and later revere.
So, I highly recommend if you're capable of dealing
with judgment and you have conviction, to do it.
It always works out in the end.
- Nice, okay I think that's a real nice place to end on.
Please stay in touch with us.
- I agree, see ya!
Have fun, I gotta run.
I'm sure some people wanna talk,
but I'm legitimately gonna miss this so have fun,
thank you so much. Thanks for coming.
(applauding)