Tim Armstrong: Rely Too Much On Third-Party Platforms And ‘You’re Really Putting Yourself At Risk’

Ever fall down the YouTube rabbit hole or mindlessly scroll through the news feed and then suddenly wake up 30 minutes later with no idea where the time went?

Of course you have – and so has Tim Armstrong, former CEO of Oath (now Verizon Media) and AOL. The current business model of the internet is designed to suck people into an online session and spit them out only after monetizing as much of their time as possible.

“It’s one human versus a bunch of super computers taking digital exhaust off of a phone and using it to essentially find ways to manipulate your attention,” Armstrong said at the IAB Direct Brand Summit in New York City on Thursday.

Brands, direct-to-consumer brands in particular, have an opportunity to flip that model on its head by being more cognizant of how they interact with their customers, said Armstrong, who founded and now serves as CEO of the dtx company, a VC firm that invests in and builds infrastructure for DTC startups.

“The average Gen Zer will be on their phone for seven years of their life,” he said. “How much of that is intentional time, and how much of that is attention time that someone just tricked you into?”

The problem from an advertiser perspective is that because people spend so much time engaging with the large tech platforms, that’s exactly where DTC brands usually spend an inordinate amount of their ad budgets in the quest for scale.

“One thing I think is a danger in the DTC landscape right now is that if you give yourself totally over to the third-party platforms to manage all of your consumer interactions, you’re really putting yourself at risk,” Armstrong said.

Another danger: The rising cost of customer acquisition, which is directly tied to the oversaturation of digital channels, and shows no sign of slowing down, he said.

It’s a compounding process. Brands spend and consumers generate data, which brands have difficulty accessing and using to develop a more omnichannel, direct approach to customer interactions.

As a result, DTC brands often don’t have a good, data-driven way to decide how to optimize their channel mix or their costs in the long term. And make no mistake, these businesses do “want to build over a long period of time,” Armstrong said.

According to research released by the IAB on Wednesday, 90% of surveyed DTC brands say they’re profitable, while more than a quarter (27%) have already brought their ad-buying in house, which points to an appetite for data-driven tactics. Only 15% cited getting acquired by an incumbent brand as a long-term goal for their business.

 

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