Marketers: Think Like a VC

The following is also my column in this week's Advertising Age. I have added links to provide additional context.

Marketers: Think Like a VC

You'll Look Like a Genius for Spotting the Next YouTube and Build Audience Trust

When it comes to social media, there's one -- and only one -- thing you can bank on: No one puts down roots. This is only exacerbated in a flat world, where anyone can create tomorrow's hot site in a basement for pennies on what it used to cost.

To test this theory, I went back and looked at ComScore's list of top 50 digital-media properties for 2001. It is littered with community sites that are nowhere to be found on the most recent edition of the list: FortuneCity.com, Homestead.com, MadBlast.com and more. To be fair, there are also a few that have had staying power, such as iVillage and eBay. Still others have become part of larger portals.

For another view, I polled data from audience-trend tracker Alexa.com on the social-media class of 2004. The data, although not as statistically accurate as ComScore's, also point to the transient nature of online audiences. Friendster, once the "it" online community, saw its page views fall sharply in 2005, only to rebound dramatically this year. Meetup.com, another community, peaked in the first quarter of 2005 and has been largely flat since. Both are overshadowed by today's giants -- although judging by the hype a couple of years ago, the then-prevailing thought was that they might be giants.

Today a class of sites such as Facebook and YouTube are the ruling parties. Once they achieve a critical mass, they command a premium for advertising. Many of these started as home-grown projects but became huge businesses virtually overnight. The collaborative Digg news site, for example, is now the web's 24th-largest, according to BusinessWeek. It cost $1,000 to launch in December 2004.

Will these sites continue to ascend? History says some will, others won't and the rest will be acquired by larger players. With new communities popping up every day, my advice to advertisers is to get in early to build trust with the audience. You want your brand to be seen as an enabler of the community's hopes and dreams, not someone who's just betting on the fastest horse.

In other words, think like a venture capitalist even as you keep your marketer hat on. Sometimes you'll look like a genius for getting in early on the next YouTube; other times you'll miss. But the key is to remember that audiences are always on the move. Invest in building the conversation where they're going, not to where they've been.

Comments

[Max Kalehoff]

Steve,
I wrote that "comScore" analysis back in December 2001. Actually, that was back before comScore acquired the Media Metrix ratings business. It was still Jupiter Media Metrix, a company many VCs and marketers initilaly thought was hot.

[Max Kalehoff]

Steve,
I wrote that "comScore" analysis back in December 2001. Actually, that was back before comScore acquired the Media Metrix ratings business. It was still Jupiter Media Metrix, a company many VCs and marketers initilaly thought was hot.

[Brian Glover]

Another advantage to what you've laid out Steve is that you'll be reaching the early adopters and "connectors," plus spending less on advertising, which equals more bang for your buck. But, as you mention, building trust in your brand is important for effectively reaching this audience.

[Phil Gomes]

One thing to point out is that there is a widespread misconception that VCs are risk-takers.

Actually, nothing can be further from the truth. The best VCs are risk-mitigators.

The magic, it would seem, lies in one's ability to see the potential hiding in plain sight before anyone else can.

[kenji mori]

I think the old organizational structure usually comprised of R&D, Sales, Marketing, HR, and Finance is simply transforming itself. The boundaries are blurring, not only that of VC and Marketer.