- This week, leading e-cigarette maker Juul Labs announced that its CEO would step down amid investigations by federal agencies and said it would suspend all advertising.
- Several of those investigations focus on the brand's marketing practices, and longtime ad exec and anti-smoking activist Alex Bogusky blamed the company's Silicon Valley-style approach for its problems.
- Bogusky said Juul, like other startups, pushed for growth at any cost by positioning itself as a tech company to avoid federal regulations on tobacco-derived products.
- Two sources said DDB struggled to staff up on the Juul account because some creatives and strategists don't want to be associated with the brand.
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Just two months ago, Juul Labs was still on a venture capital-fueled high. Now, with the company facing an uncertain future, 30-year ad veteran Alex Bogusky attributed its apparent fall to a marketing strategy ripped straight from the Silicon Valley playbook.
With a $12.8 billion investment from tobacco giant Altria and a $38 billion valuation, Juul's US ad budget exploded to $104 million in the first half of 2019 from $1.4 million in the year-ago period, according to Kantar Media.
To solidify its position as market leader, Juul hired Omnicom-owned agency DDB to produce its "Make the Switch" ads and built up an internal team led by CMO Craig Brommers, formerly of Gap Inc., and creative director Perry Fair, who'd been with Red Bull and Beats by Dre.
Earlier this week, the company agreed to suspend all advertising amid a crackdown on vaping by the Federal Trade Commission and the US Food and Drug Administration.
Juul bypassed federal regulators by calling itself a tech company, said the executive behind anti-smoking campaign Truth Initiative
Alex Bogusky, who is co-founder and chief creative engineer at ad agency Crispin Porter Bogusky and who launched the anti-tobacco Truth Initiative campaign in 1998, said Juul rapidly rose by exploiting a regulatory loophole and positioning itself as a tech company to avoid rules applied to other tobacco-derived products and prescription-only anti-smoking aids like gums and patches.
"[Juul] wound up in this happy place where they could advertise, and they did so aggressively," he told Business Insider. "They're not a cessation product, they never filed to be a cessation product, so the FDA doesn't regulate them the way they would a cessation product."
Bogusky said Juul adapted the same philosophy as pseudo-medical startups like Theranos, which initially succeeded in bypassing federal regulators because "they'll just take your word for it unless it's proven otherwise."
As the company expanded and reports of vaping-related illness increased, the FDA and Congress took notice. In a series of letters sent to four top e-cigarette producers this week, Rep. Raja Krishnamoorthi of Illinois called Juul's marketing tactics illegal specifically because the company did not receive federal approval to claim that its products help smokers quit.
According to a study published by Stanford in January, the brand also actively targeted teenagers with ads like the ones below.
Bogusky said private equity- and venture capital-backed startup models encourage this sort of behavior because Juul had to grow sales even though its self-defined consumer base of adult smokers is shrinking.
The company's decision to target teens created an ethical issue for the ad industry
The brand recruited young influencers, advertised on Instagram, sponsored summer camps, and held presentations in high-schools where representatives described its products as "totally safe" in a strategy reminiscent of past tobacco campaigns that featured doctors smoking cigarettes.
Juul later said it had abandoned those tactics, but its fastest-growing market continued to be young people even as its ads shifted to focus on older smokers.
"The message to a teen is, you can't be hurt by this, but for some reason it's something held out for adults only," Bogusky said. "And that message is really provocative."
Bogusky wrote a May New York Times op-ed that called Juul's marketing an ethical issue for the ad industry.
Two sources familiar with the business told Business Insider on condition of anonymity that DDB has struggled to staff up on the Juul account despite actively recruiting for that team in its San Francisco office because some creatives and strategists do not want to be associated with the brand. DDB and Omnicom declined to comment.
Bogusky said he understood why agencies would work with such companies, especially when the client positions its products as a safe alternative to cigarettes. "We're a desperate industry," he said.
He said the FDA should treat e-cigarette marketing the same way it treats ads for tobacco or prescription cessation products. Regulators seem to be moving in that direction, though unintended consequences could follow. BuzzFeed reported that some smoking experts fear an all-out vaping ban could end up boosting cigarette sales.
Juul did not respond to a request for comment.