- On Tuesday, the fitness company Peloton released the documents it had previously filed confidentially for an initial public offering.
- It’s not just the buzzy bike maker’s losses that have been on the rise — its advertising expenses have been on the upward trajectory as well, up by 114.1% year over year between 2018 and 2019.
- Peloton is arguably the first direct-to-consumer brand that has filed to go public — and has gone down this path by prioritizing not only performance but also brand marketing.
- Peloton’s rise has been aided by a specific demographic of customers, namely people 44 and under that the trade group IAB has identified as the target audience for DTC brands like Peloton.
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On Tuesday, the fitness company Peloton released the documents it had previously filed confidentially for an initial public offering, revealing spiraling losses of $245.7 million on sales of $915 million in its most recent fiscal year.
But it’s not just the buzzy internet-connected stationary bike maker’s losses that have been on the rise — its advertising expenses have been on the upward trajectory as well.
Peloton’s sales and marketing expenses increased 114.1% in 2019
Peloton shelled out $324 million on sales and marketing in fiscal 2019, the company reported in its filing, up by 114.1% year over year from $151.4 in 2018. This increase in sales and marketing expenses is in line with other companies that have recently gone public, such as the office-coworking company WeWork, which has spent $378.7 million in the run-up to its IPO in 2019, and Uber, which spent $3.2 billion in 2018.
Read more: WeWork boosted its advertising spend by a whopping 164% on its way to one of the most anticipated IPOs of 2019
Sales and marketing spending has also increased as a share of Peloton’s revenue, the company’s filing revealed. In 2019, sales and marketing accounted for 35.4% of revenue, up from 34.8% the year before.
Peloton has invested in both performance and brand marketing
While brands like Dollar Shave Club have been acquired, and the mattress direct-to-consumer brand Casper recently attained unicorn status, Peloton is arguably the first DTC brand that has filed to go public.
Peloton’s aided brand awareness in the US was 67% as of April, according to its filing, something it attributed to “a broad mix of marketing and other brand-building measures.” The brand has invested in not just performance marketing on platforms like Facebook, Twitter, Instagram, and over-the-top channels to generate sales, but it also branched out to traditional channels like TV more recently, like other DTC upstarts.
Read more: Direct-to-consumer brands that built their businesses without traditional advertising are now embracing it in key ways to fuel growth
“As television advertising, online, and social media platforms continue to rapidly evolve or grow more competitive, we must continue to maintain a presence on these platforms and establish a presence on new or emerging popular social media and advertising and marketing platforms,” the company wrote in its S-1.
Carolyn Tisch-Blodgett, Peloton’s senior vice president of brand, has helped the brand stand out in a crowded fitness landscape by using a mix of TV, digital, radio, and even billboards. She recently oversaw the launch of the connected treadmill Peloton Tread, Peloton Yoga, and even led its UK expansion with an ad blitz worth £7 million.
Peloton’s rise has been aided by a specific demographic of customers
According to a recent report by the advertising trade group Interactive Advertising Bureau and Cassandra, part of the holding company Engine Group, DTC brands have exploded on the back of a specific audience — who are younger and richer than those that buy only from traditional consumer packaged goods companies.
The report found that 68% of people who buy DTC products along with traditional ones are age 44 and under. That seems to be squarely in Peloton’s sweet-spot. According to the company’s filing, its fastest growing demographic segments included members under the age of 35.
Peloton positioning itself as a media company, among other things, is also likely to have been a draw for this audience. Almost a third of this segment actively creates, shares, or reposts content about these brands, about twice as many as those who buy only traditional brands.
Peloton, like other DTC brands, also said that it conducts frequent tests in its sales channels, which have allowed it to further optimize marketing spend. One such test is incrementality testing, Business Insider previously reported.
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