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The Startup Brand Fallacy: Why brand marketing is mostly useless for consumer startups

Brand marketing is mostly useless for consumer startups. Startups build a great brand by being successful, finding product market fit and scaling traction, etc. But it’s not a real lever. Let’s not mix up correlation with causation!

If this seems contrarian to you, it’s because there’s a vast ecosystem of consultants, agencies, and other middlemen who are highly incentivized to have you spend $ and effort on non-ROI/non-performant activities. Early startups should opt out of all of this

It’s easy to confuse correlation and causation: If you’re starting a consumer startup, you see successful late stage cos with fawning media coverage, amazing conference speaking slots, celebrities on the cap table, etc., and think that’s what caused their success: Great brand.

But great brand is the lagging indicator of success. The buzz is created by the hard work that the entrepreneurs put in: Finding product/market fit, hiring a great core team, finding acquisition channels that scale. Brand marketing is great, but it should be layered on later.

The greatest consumer products in recent years slogged through years of obscurity. The overnight success of Uber, Airbnb, Instagram, etc were actually multi-year successes driven by hard work and multiple pivots.

Working on press mentions, conferences, etc can be a good way to get an initial hit of traffic. It’s great! But it’s not enough. Here’s an article from a few years back: After the TechCrunch bump, there’s life in the trough of sorrow.

Anyone who’s been on the homepage of TechCrunch, AngelList, Hacker News, or even in the NYTimes knows that it’s a increase to your dopamine but not so much your customer acquisition :) It’s great for the early days, but you need a lot more to scale.

Furthermore, the metrics-driven argument is obvious. Ultimately, the engagement in every product can be deconstructed into a series of user cohorts that join and decay over time. How does brand help these cohorts? My observation: They don’t help much.

One argument is that brand marketing can create buzz and word of mouth. OK if that’s the case, why does every brand-driven commerce company have >60% of their customer acquisition happen through paid marketing? Why do they have to buy all their customers?

If brand marketing helps make acquisition ultimately cheaper, then why does every startup’s paid acquisition become less efficient over time, even as the company becomes more well known? The same arguments apply to startups’ re-engagement efforts.

It’s true that a strong brand can confer defensibility in a noisy space – but it’s brittle, hard to create, and hard to sustain. Hard to bet on that in the early days of a startup.

Where brand marketing does matter, especially outside of consumer: Recruiting a great team. Raising money. Partnerships. These are all small targeted audiences where you can reach them with more touchy feely efforts, and it can work! So put your emphasis there.

For early consumer startup efforts, it’s better to focus on the basics. Understand your users, deliver a great product to the market that grows by itself, built moats, monetize in a user-aligned way. Grow your team, work with the best advisors/investors/etc. The basics.

Do all that, and your product’s brand will take care of itself – and then you can layer on more brand marketing efforts to 10x the effect. Just don’t do the steps out of order!

[Originally tweetstormed at @andrewchen]

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The Scooter Platform Play: Why scooter startups are important and strategic to the future of transportation

(📷 lime)

The scooter startups are way more important than you think, or in emoji-speak: 🛴+📱=🤖🚗🚁. Let me explain.

Right now, scooters are a lot of things – fun, cute, adventurous – but here’s a couple words I rarely hear about them: Strategic. Important. Platform play. And yet they are.

Chris Dixon has written that the next big thing will start out by looking like a toy. Scooters are literally derived from kids’ toys. It’s the perfect example. (Btw, here’s the perfect moment to re-read his essay arguing that the next big thing will start out looking like a toy)

Like a toy, a scooter seems underpowered vs other transportation options. It only takes you on short trips – a few blocks at a time. It’s cheap and makes less money than a highly profitable Uber trip to the airport. They are placed all over the place in cities, annoying many

These all seem like weaknesses, but in fact they’re strengths. Because scooters are cheap, short-range, and ubiquitous, it means consumers are adopting them as an alternative to walking

SCOOTERS COMPETE WITH WALKING! What’s the market size on that?? :)

As a result, the scooter apps are being downloaded in the millions by consumers – the adoption has been incredible. But now we have another starting point to capture the intent to go from Point A to Point B. That intent is valuable

These scooter trips are short, frequent, and cheap, driving high engagement in the app. In fact, if you live in SF they become a home screen app. You might check it all the time, before you walk a couple blocks

Combine those factors – millions of consumers, high frequency, and strong intent – and all of a sudden it’s obvious why this is a big deal

When you’re the first look and the highest frequency place to start your trip, it’s the pole position in consumers’ minds. Everything else is downstream

Google has one of the best business models ever. It’s the starting point. It has a search box, maps user intent to URLs, and charges everyone downstream if they want to be promoted in any way

Scooter cos like Lime are also the starting point. High frequency and high intent. It has a search box for where you want to go, and maps user intent to a trip

Scooter apps could be the starting point for a lot of kinds of trips. Alongside Apple/Google Maps, rideshare, etc – the place where you’d go to book your autonomous vehicle rides. Or your VTOL / flying car trips. It could even upsell rideshare trips from Uber and others

Scooters look like a toy, but in fact they are something else: Strategic. Important. Platform play.

🛴+📱=🤖🚗🚁.

(Originally tweetstormed at @andrewchen)

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The IRL channel: Offline to online, Online to offline

(📷 dmagazine)

We’ve heard about Facebook ads, Google adwords – but today let’s talk about the “IRL Channel.”

The IRL channel is an underappreciated advantage of companies that exist in the real world – Amazon Echo, Envoy, Lime, Uber, etc – that use constant in-real-life reminders to try out and use the product

The viral acquisition benefits are pretty obvious. If you’ve never seen/tried a product, but you see them swarming around your city (or your workplace), then naturally you’ll want to try it out

More importantly, some product usage patterns are naturally viral. Couple examples:

  • Transportation fits into this bucket, which is why Uber’s rider acquisition mostly viral/WOM Traveling and going out are social activities. You bring your friends and loved ones in the car with you, to share the costs. Even the fully utilitarian version – going from point A to point B – can be social, since there’s often a person on the other side.
  • The new scooter/bike trend is another obvious example. Lots of brightly painted Lime scooters all over SF makes a splash. Put some pricing and instructions on the actual hardware, and riders who have big smiles on their faces, and you have a natural acquisition channel.
  • With Amazon Echo, the physical presence gets you an retention/engagement benefit. Sitting on your kitchen counter naturally encourages you to use it. The newest one, the Show, has a display which invites you to interact. Sometimes the Amazon Echo thinks you’re talking to it when you’re not. I’ve always thought that Amazon is unlikely to ever fix this since it probably increases engagement when it occasionally gets things wrong :)
  • Envoy is a B2B example. I’ve signed in with the system at the lobbies of dozens of companies, which means if I ever have to make a purchasing decision in the category, they’ll be the natural choice.

There’s not a ton of entrepreneurs who are brave enough to build new consumer hardware cos, but if you are, I think this has to be a key consideration!

The IRL channel is about a physical experience that drives you into a digital one. But the other way around is pretty profound as well.

When you see your social feeds populated with photos from highly instagrammable retail experiences like Boba Guys or the Museum of Ice Cream, like below…

(📷 Boba Guys fb page)

(📷 laweekly)

… you can’t help but pull up Yelp to figure out the closest place to go!

The other mega trend here is esports and the fandom community, of course. One day you’re playing League of Legends and reading Star Trek fan fiction, and the next day you’re going to esports arenas and checking out vidcon. It’s a thing.

The IRL channel is real. It helps you with acquisition, retention, and more. It’s starting to go both ways – from online to offline, which has been a force in retail for the past few years – but also offline to online, where IRL products remind you to interact with their digital sides.

Super fascinating, and I’m excited to see where this will all go!

[Published with some modifications, originally tweetstormed at @andrewchen]

PS. Get new updates/analysis on tech and startups

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