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2013 Opinion Issue

Why Brands Will Focus Less on Startups in 2014

With Hype Harder to Come By, All Eyes Will Be on Results

By Published on . 5

Hey, marketers, are you excited to finally kick off some amazing startup partnerships in 2014? Want to get some hackathons going? Maybe you can crowdsource ideas and incubate them? Sorry, but that thinking is so 2013. Come 2014, brands are going to get more serious, and startups are going to have to work harder to get their attention.

People are debating whether startup funding from venture capitalists is in a bubble, but there's another kind of bubble that doesn't have much time left: the past few years of brands' interest in startups.

Advertising Age itself reflects this, with more mentions of the word "startup" in 2012 than in 2005 through 2009 combined. Expect those mentions to ebb in the years ahead.

Here are three reasons why a lot of the brand and agency love for startups is going to fizzle:

Clutter:
There's so much clutter in the startup marketplace right now that the most-frequent kind of startup pitch I'm getting these days is from those that help marketers keep track of startups.

Two of them were started by colleagues from my previous agency, and two of the most-developed -- Kite and DMR's Industry Index -- have executive teams with substantial agency résumés. I can only imagine how many current and former agency folks have such business plans in their desk drawers, just waiting for one of those "make the logo bigger" moments that convinces them to quit and try tackling this.

That said, marketers do need help managing the startup deluge. The number of startups out there with words like "crowd" or "social" or "app" in their names makes it practically impossible to remember the difference among them, and it's no easier for the startups with unusual names (Flayvr, for example, is for photo-sharing, rather than for recording your favorite kind of ice cream). The biggest problem with the clutter is that there are too few that matter for any particular brand at any particular time.

PR:
One of the biggest motivators for marketers looking to work with a startup is the public-relations value that they can get out of it. Typically the coverage has nothing to go on beyond the limited history of the startup and what the brand hopes to do. Rarely is there any follow up about what this achieved.

Journalists are going to start craving more meat. After the fifth brand-sponsored startup hackathon at South by Southwest or the 15th "we're the first brand to use this app" story, serious journalists will focus on what such partnerships accomplish. This is all the more true for stories about specific technologies. A brand using Vine, Snapchat or Google Glass is no longer newsworthy. Once in a while, a decent outlet will look at the five or 10 best examples of brands working with such technologies, but by the time that happens, a sizable number of brands will be competing for that attention.

Results:
If the announcement of some so-called partnership isn't newsworthy enough to generate a little PR, then what matters will be the actual results. Yet a lot of these programs are experimental, with a high risk of failure.

The programs are often designed to teach marketers how to be more agile and to teach startups what matters for brands. Both parties are expending resources with the overarching goal of evolving faster than their competitors, betting that focusing a little less on hitting quarterly targets will help them outlast everyone else in the long run.

It sounds rather poetic, but the harsh reality of the natural order is that most species go extinct. Most of the efforts don't make enough of a difference. Even good bets often don't pay off. A marketer working with a startup successful enough that it soon gets acquired can soon find a lot of their effort wasted when the acquirer buys the startup, strips it for parts and destroys its original purpose. It's relatively rare that a partnership between a marketer and a startup delivers results that the chief marketing officer cares about.

Startups still matter, of course. They contribute new ideas. They make great use of the talent contributing to them. They challenge their dominant competitors to keep earning their status. Marketers can learn plenty from them, and can learn even more from working with them, but they need to prioritize their resources and ensure any attempt at a partnership is designed to deliver value to the brand.

A handful of startups are designed to do that; the vast majority are not. Marketers have no choice but to minimize their startup involvement if other strategies are more promising. The upside of all the recent press attention is that enough marketers now know that working with startups is an option to pursue. Whether they should do it and under which circumstances will be up to them.

ABOUT THE AUTHOR
David Berkowitz is CMO at MRY.

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