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How Brands Should Evaluate Startups

Surprise: Cost is the Last Thing You Should Be Thinking About

By Published on . 2

Among the thousands of startups launching this year, and the thousands more that have launched in recent years, how can marketers keep track of which ones matter? Before long, marketers will need to hire a new CSO – a Chief Startup Officer – just to manage the incoming.

For marketers feeling overwhelmed, it's possible to focus efforts by using four criteria to evaluate startups and new technologies. These criteria will help brands focus on what matters and prioritize which ones are worth a closer look, and possibly a trial program or partnership.

1. Value: What's the value proposition for consumers or end users, and what's the value that brands will provide by participating? If either form of value isn't compelling, then that 's the first sign that the brand can look elsewhere.

2. Applicability: Which brands and verticals make the most sense to participate? If it's a social TV app, then entertainment marketers are probably the first target , but heavy TV advertisers will often be a good fit. One way to get startups away from pitch mode and into a more candid conversation is to ask them which brands would be their ideal fit. Sometimes, their answers will reveal a rift between the goals of the startup and the brand, while other times it opens up new ideas for how to work together.

3. Prominence: How much will any given brand stand out? Is it just a rotating banner ad buried at the bottom of the screen, or is it a highly visible sponsorship or integration? Is there any degree of exclusivity that comes with it? Is it a customized experience that a brand can share through its owned or even paid media? With younger startups, brands have more leverage here, and they can use it. If the startup is phenomenally successful, such as Pinterest, then brands will need to reach that audience far more than the startup needs to feature brands.

4. Ingenuity: What is the startup doing that hasn't been done before? How does it differentiate? What does it do the best? Exploring this often reveals competitors that are better suited for working with brands, but it can also make the real innovators stand out.

These four criteria are the ones that matter most, but there are dozens of other factors that tend to come up when evaluating startups. Two in particular were intentionally excluded from the list of core criteria:

1. Scale: Applicability is so much more important than actual user numbers, especially for pilots with startups. Also more important than scale is momentum. An app that has 100,000 users and had 90,000 the month before will be more appealing than an app that has 1 million users and had 1.5 million earlier in the year. Just look at what happened to MySpace. When its user numbers started dropping, advertisers jumped ship, even though it still had tens of millions of users.

2. Cost: Costs can vary widely, especially when tying in multiple brands or expanding the program in any way. Even pricing models tend to be fluid with new and emerging companies. If a startup says it's charging on a CPM basis and the marketer says it only pays for clicks, the startup will almost always come around.

Startups will come and go, but having a method for evaluating them will give marketers at least one source of consistency in this fluid media landscape.

ABOUT THE AUTHOR
David Berkowitz is vice president of emerging media and innovation, 360i.
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