There's a reason why you couldn't keep the stock of Alphabet (GOOGL) down yesterday. This quarter will be known as the quarter where you had to pay the piper to get sales and the piper happens most often to be Google hence its 21% revenue growth.
When you lay out some of the winners so far of this quarter what do you hear? Direct to Consumer. Direct to Consumer and Direct to Consumer. When you hear that on these calls you should consider you should note Facebook (FB) , you should consider Amazon (AMZN) , but you can bet that the centerpiece is Google, both as an offensive and a defensive strategy.
Benno Dorer, the CEO of Clorox, specifically called out how his venerable company has now crossed the big barrier, 50% of his advertising is now digital because that's where the buyers are. Sure, Clorox has an amazing brand. We think of their trash bags, their kitty litter, their salad dressings and of course their bleach products by name.
But digital spend is all about buying when you need, buying at the point of most engagement and when you think of that you should be thinking Amazon when it comes to the brand but Google when it comes to engagement. If you want to call up what the strongest disinfectant is you are going to end up with bleach and the bleach that's noted is Clorox. Right at the top. How important is this spend? Huge, because right next to the text are ads for Simple Green cleaning products. You aren't going to see Simple Green in the supermarkets so there is an amazing equivalence of some unknown brand, right there, point of purchase. It's a tough world; you go to bleach itself and you get some animated show. That's not helping Clorox. I bet the company will have to do something about it.
Ralph Lauren isn't hiding the secret sauce of this quarter: "As you know direct to consumer remains our number one priority," says Patrice Louvet, the relatively new CEO: In the third quarter the company increased marketing investments by 18%. "We continue to shift our spend to channels that matter most to consumers today, namely digital and social."
Digital? Again, think Google, although for the core brand you might think Amazon. It's that well-known. You want to know what the First Lady wore last night? It's Lauren. I found that out through hitting up First Lady, State of the Union, on Google.
For social, that means the still ascendant Facebook because it's all about influencers and all influencers are about social. Some execs check their influencers hourly for how their likes are doing. Yes, it's that compulsive; why not, some of these people have millions and millions of followers.
Think about how bold these execs statements are about digital. Digital spend is an "investment," says Louvet. Do you know that Fabrizio Freda, CEO of Estee Lauder, used the exact same word about his on-line spend? It's now an investment, not an expense. For Lauren it is used to capture the under 35-world that had left the brand. It's working. For Freda it's all about young people worldwide but particularly the 400 million millennials who are best reached through T-Mall. They are reaching them through Alibaba (BABA) , another household on-line name.
These sentiments echo those of the best on-line retailer in the world, Lululemon (LULU) which has invested heavily in on-line, and digital now represents a quarter of the firm's business as traffic increased 35% and conversion equals high single digits, which is astonishing. Again, that one's got a brand. You might go directly to their site. But you also may want to hit up sports apparel on Google.
Why not pay for it, that's the new register?
Of course it is not just Lauren, Estee Lauder and Clorox. This morning Capri (CPRI) , the old Michael Kors, reported a better than expected quarter? I think Google and Facebook may be the reasons for the breakout..
Don't believe me about this transition. Do this. Walk down the major expensive shopping district in Manhattan, Fifth Avenue. You know what you will see?
Almost no shopping bags. Conclusion: buy Google, that's where the shoppers are, not on Fifth Avenue, the once legendary buying district. If you don't buy Google, you are dying on the vine.