CAC: Customer Acquisition Chaos - by Rex Woodbury

We recently invested in a company that enables creators to be the next-generation sales channels for brands, in a transparent and privacy-forward way. Brands care about a few things: 1) They only want to pay when they’ve acquired a new customer and done so profitably; 2) They want to control who can sell / promote their brand and where; and 3) They... See more

But now, P&G needs to get that consumer to type the word “Tide” itself—otherwise, top hits for detergent might be for competitors or for Amazon private-label products. Brand recall, as opposed to brand awareness, is a much more difficult and expensive proposition.

Meta and Google are becoming more expensive and less measurable for brands, leading brands to start exploring new customer acquisition channels. Influencer marketing is one option, and the industry has swelled from $1.7 billion in 2016 to $16.4 billion in 2022 (a 46% CAGR). Influencer underpins discovery-driven commerce.

But influencer marketing is also broken. As I wrote in May’s Influencer Marketing 2.0, most influencer campaigns rely on hefty upfront lump-sum payments and use hacks like discount codes to track attribution. ROI is often poor, and measurement is even worse. The channel is difficult to scale efficiently.

There are two primary types of shopping: search-driven shopping and discovery-driven shopping. Today, Amazon dominates search-driven shopping: 74% of online shopping searches in the U.S. now originate on Amazon.com (much to Google’s chagrin). You go to Amazon and you search “paper towels” or “hand soap” or “laundry detergent.” Search-driven commerc... See more

Alongside rising CACs, Apple’s App Tracking Transparency (ATT) changes have dealt a blow to digital advertising. ATT is Apple’s opt-in privacy framework that requires all iOS apps to ask users for permission to share their data. Spoiler alert: many people do not opt in. Meta estimates that it will lose $10 billion in ad sales revenue (about 8% of i... See more

The classic example of brand advertising, meanwhile, is Coca-Cola. Coke doesn’t care that you buy that Coke right now, but rather that next time you’re thirsty at a movie theater, you reach for a Coke and not a Pepsi. Companies like Nike and Disney also rely heavily on brand advertising, building long-term brand equity.

Discovery-driven shopping is the mall. It’s wandering around, browsing, deciding what you might want to buy. Discovery-driven shopping is about serendipity.

Direct response is where most of the money is in digital advertising, which makes sense—direct response drives real outcomes for brands, and it’s highly measurable. Direct response lends itself naturally to the internet, where attribution is easier than with TV or physical advertising like billboards.