The future of marketing is IRL

As we come out of the pandemic, digitally native brands should recognize that the next front in the battle for customer acquisition is in real life.

With Americans returning to bars and restaurants, vacationing like never before, and even (perhaps grudgingly) returning to the office, digital brands need to be out in front of their audiences—and those audiences are out and about.

Digitally native brands are finding that having a presence in physical space is increasingly crucial to their long-term strategy for three reasons:

1. Consumers are ready to engage with the real world. After two years on Zoom, doom scrolling, and streaming, consumers are ready to get outside. And when they are outside, they increasingly notice advertising and brand messaging. Moreover, they often will share those out-of-home ads on social media.
2. Most commerce still happens in stores. Even during the 2021 pandemic, more than 85% of retail sales happened offline. Marketers want to be close to decision points for commerce, and the vast majority of those decisions still happen outside the home.
3. Physical presence is part of the marketing mix. One of the smartest thinkers in media today, Benedict Evans, wrote an insightful piece this past March where he argued that marketers should consider their rent spending as part of customer acquisition. He points out that the best marketers are trading off rent and marketing spending to see which has a better ROI. Some brands might need more stores—others fewer—and some can stay purely virtual. The bigger point is that brands need to recognize that customer acquisition includes retail, marketing, distribution, and advertising—a more than $750 billion annual investment pool in the U.S.

The biggest tech brands like Apple and Amazon saw the importance of physical distribution and invested in retail store networks to secure additional consumer touchpoints. In addition, smart multi-channel retailers, like Warby Parker, also extended their digital brands into physical space.

But building a physical store network is expensive and a big bet for most digitally native businesses. It requires extensive amounts of capital, long lease commitments, and a fundamentally different skill set. Apple needed to bring on Target veteran Ron Johnson to get the Apple Store right, while Amazon spent $13 billion to buy Whole Foods.

In addition, brands that are purely content- or service-based really don’t have enough transactions or volume to support the rent required to have a store network.

The fastest way for a digitally native brand to get into physical space is by using out-of-home advertising. With Americans returning to the streets, it is no surprise that out-of-home advertising surged 37% in Q4 2021. Increasingly, it is digitally native brands driving much of that growth, with Apple, Amazon, and Google all in the top 10. Direct to consumer and tech brands now constitute 28 of the top 100 OOH advertisers, according to the OAAA.

Out-of-home ads are an easy entry point into the real world and are increasingly measurable on an apples-to-apples basis with other media. Smaller formats like street furniture, in particular, allow for more granular targeting close to retail locations and real-world competitive conquesting.

Public space advertising in places like transit hubs and multi-use real estate developments have the added benefit of providing opportunities for product sampling and pop-up shops, props and stunts that drive social media sharing, and content distribution on digital screens. These allow brands to take advantage of an existing large audience without having to make the long-term commitment of a retail lease.

The most innovative digital brands are setting up long-term physical presence to promote their content and advertising. Examples include Netflix on L.A.’s Sunset Strip and DraftKings in Chicago’s Addison Station (outside Wrigley Field). These investments are a cost-effective alternative to building retail locations.

Whether it be through retail stores or out-of-home advertising, brands that can effectively compete in real life will have a massive advantage over those that remain exclusively on online platforms.

Chris Grosso is the CEO of Intersection, a leading out-of-home media and technology company focused on America’s largest cities.