Is a Startup Bust Just Around the Corner?
That simple, straightforward lesson from the last tech bust ought to be guiding the new generation of startups. But as technology companies rush to fill every niche in the marketing industry, the lack of go-to-market savvy is stunning. In fact, four trends suggest that a bust is just around the corner. (Warning: This list will sound vaguely familiar to anyone who lived through the bust circa 2000.)
1. Startups are launching at an accelerating rate, selling tech marketers can't use. A quick look at attendees of the SXSW Interactive Festival in Austin, Texas, this month leaves one overwhelmed by the sheer diversity of such companies . But then, a peek at the Deadpool list compiled by TechCrunch is sobering, since the majority of startups that have recently gone under are marketing-focused.
In so many cases, tech startups develop solutions in a vacuum, expecting the sheer "coolness" to inspire marketers to deploy the technologies. Too often, though, marketers are left unsatisfied because results can't be widely applied or sustained at an efficient cost. That spells trouble any way you look at it.
2. Tech companies are adding features, for no good reason. The more startups I see, the more features I see piled on, to make each one stand out. The list of finalists in this year's SXSW Accelerator competition for web-based products is chock full of ventures claiming a niche in the marketing ecosystem. The problem is that the added features don't really serve a marketing role. Not only that, feature creep creates a big risk during the delicate customer-incubation process, which can be upset with just one bad tech glitch.
3. Startups fail to develop a business model that serves everyone. Way too often the technology is awesome but ill-designed for brands or their agencies to adopt. In many cases, new technology is a high-labor, low-billings proposition, making it really hard for agencies to profitably sell to clients. To compensate, many technology companies have adopted a white-labeling channel strategy, where technology companies let agencies label their technology as having been developed by the agency itself. Agencies then can charge clients as much as they can get away with.
The problem with this game of hide and seek is that it's not connected to a business model that serves anybody well. To justify the premium pricing for the tech, agencies are faking a core competency that they don't really have, instead of strengthening and charging for the marketing savvy they do have. Clients have to pay more for simple platforms that they might want to run themselves. Tech companies can't get credit for their brilliance.
To right the business model, transparency is the only way forward, so everyone knows who is getting what share of the revenue pie. Say what you like about "old" media, but at least everyone knew what tasks everyone else was getting paid for.
4. Marketing ventures are being built by technologists with no domain expertise. A friend, let's call him Thomas (a banker, by the way), wants my marketing advice about an investment he has just made in a mobile startup that captures personal information through a small consumer device with the capability to push content and ads to users. As I listen, I realize he doesn't understand how mobile media are bought and sold, or how clients use data in a marketing process. He is so naive, he's convinced that many large packaged-goods companies will "happily redo all their packaging so they could give this little device away." He has no clue how hard it is to sell new tech to advertisers and their agencies.
All of this leaves us with the uncomfortable reality that much of today's marketing tech is not marketable to the marketing industry. The technology landscape is full of pretty, shiny bits of platforms and apps that are disconnected from how marketers really work and create. This echo from the last bust is reverberating in my ears too loudly for my taste.