Influence or data? How to spend a marketing budget
(Editor’s note: David Goldenberg is co-founder of PigSpigot.com, a user-generated greeting card site. He submitted this column to VentureBeat.)
My company recently faced a tough decision. Like most Internet startups, we wanted to get the word out about our product, but our marketing budget was tiny. We debated whether we should we hire a PR professional/social media guru to help us or if we should spend our money on an online ad campaign. Ultimately, it came down to this: Influence or data?
That’s not to say, of course, that it’s a clear-cut delineation. A lot of press releases, for example, have measurable SEO components, and even the most SEM-dependent company has a Twitter account these days.
But to slightly torture the already beleaguered baseball/business analogy, here’s the deal: very few startups can rely on the “Field of Dreams” method of marketing, and many of us can only afford to pursue one of these strategies effectively. So do we swing for the fences with PR or play small ball with SEM and affiliate marketing?
In the course of making the decision, we talked to a bunch of other folks who have faced a similar fork in the road, and we were surprised to find that even among companies that are in similar stages and have similar products and markets to one another, there’s not much of a consensus about what to do.
So let’s back up and break it down.
What’s the point of hiring a PR firm? To get noticed and burnish your reputation, preferably by getting favorable coverage.
But if a big blog (like, say, VentureBeat) writes about you, what does it get you? A bunch of traffic, probably – with the potential for viral growth. You also get a nice link you can brag about and promote. Plus, you’ll probably attract the notice of a bunch of folks (including potential investors and partners) who wouldn’t have known about you otherwise.
But your traffic boon will probably tail off soon enough, which looks bad after a down month or so. Plus, your conversion rate will probably decrease, as most of the folks coming through are there to check you out rather than buy anything. In essence, you’ve enhanced your reputation but the effect on your business model is usually neutral at best.
Let’s say you decide to spend your money on a customer-acquisition program via SEM or affiliate marketing instead. You’ll definitely get some traffic, which may not happen with the PR approach. You’ll also get detailed analytics you can sift through to tweak your revenue model.
The downside? You haven’t helped your reputation, so the traffic faucet will turn off as soon as you stop pouring money into the other end. Plus, your viral upside is much more limited because ads are really just you talking about your company. So you’ve helped your business model but you haven’t done squat for your influence.
So which is more important to you, influence or data? Certainly, it depends on a lot of factors, but a lot of it comes down to two things: where you are with investors and what your corporate philosophy is.
Manish Vora, founder of Artlog.com, which provides web marketing services for art institutions to distribute their content, opted for influence.
“I would love to tell investors that we get 500,000 uniques a month,” he says. “It certainly would have helped us in our fundraising. But for us to execute on our current business strategy, it is very useful that we are being used by important taste makers and industry insiders.”
While PigSpigot was searching for our first round of angel funding, we decided to stick to influence as well. We figured that we were new enough that potential investors would be more interested in the business idea in general than the details of our model. (Plus, if our customer-acquisition projects hadn’t met their goals, then our business model itself could be called into question. That seems to be why Twitter has opted to avoid the whole business model thing in general.)
We ultimately hired MediaAwaken, a great firm out of Boston, to help us plan and execute a robust social media and PR strategy, which resulted in lots of great press, a ton of traffic and interest from investors.
Now that we’ve gotten our first investment, though, we’ve changed our approach. Though we’re still operating on a small budget, we’ve decided that it’s more important to start testing out replicable customer-acquisition strategies than it is to continue many of our PR plans, even though that comes at the cost of relationship-building, which as Sarah Evans (the PR pro behind Sevans Strategy) points out, needs time and energy to be ultimately successful.
Despite the obvious downsides, focusing on data has had a few nice effects. It’s refreshing to be able to go through the day without feeling like I’m selling something with every email I send. And it’s nice to know what sort of return we’ll get for our money, even if our ceiling is (much) lower.
Mainly, though, it has made us much more astute about tracking our bottom line, which is what every cash-strapped startup should be doing in the first place.
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