In one of the most popular ’80s movies, “Can’t Buy Me Love,” a stereotypical nerd bribes the most popular girl in school to go out with him. In digital media, the popular kids these days are the nerds, of course. And today the most popular of all are the “unicorns,” digital startups with at least a $1 billion valuation. They include companies like Pinterest, Kik, Houzz, and Snapchat. And many brands are hoping to gain popularity by teaming up with them.
There are some good reasons to work with unicorns. They attract big (often young,) engaged audiences; they are building important new forms of communication and commerce; their growth rates are high; and, let’s face it, they do offer a few decent PR opportunities.
But there are also some good reasons why brands should be very careful when evaluating which unicorns to partner with.
Beware the Trojan unicorn
A few years ago, Twitter founder Ev Williams explained in a speech to Silicon Valley entrepreneurs how to get rich online. He cautioned that it’s not enough to invent a new business. Instead, he said, you have to take an existing business and reinvent it.
Many unicorns are so powerful that simply by tweaking their own strategy, they can upend entire markets and even strategic partners. Snapchat has started its own content platform called Discover that could compete with publishers that it partners with. Uber has several important strategic partnerships like CapitalOne, PayPal, and Starwood Hotels that fit well in their current ride-share model. With a huge valuation based on its logistics capabilities, however, it’s possible that one day Uber will introduce its own payment service or hotel app, hurting these partnerships. The company recently launched UberEATS to deliver food, so it’s not that far of a stretch.
Companies looking to work with unicorns should evaluate the overlaps between their business models and work out the possible effects of a unicorn’s competitive moves. Imagine if Pinterest started making and selling its own products. How would this affect a fashion brand partner? How will Kik’s new bot shop evolve? What if it starts making its own games? The best protection against this risk is to work on reinventing your own business as you try to work with the unicorns, which is crucial as consumers embrace such game-changers as smartphones, connected products, and advanced TV.
Working with unicorns is a lot of, well, work
Partnering with unicorns on early-stage projects is risky even when they aren’t upending your business model. It requires a lot of work and investment to test new features. Projects that started out hot can stretch out for months or even implode. Remember Facebook Beacons?
Even a standard feature on a unicorn platform requires that its partners learn new functionality, create new content, designate new people to engage and manage it, and analyze new metrics. Pinterest requires that a brand set up, update, and manage its own board. Houzz favors retailers that refresh images of client work regularly. Kik’s bot shop requires companies to create a functioning, interactive bit of software. At the same time, audiences have high expectations. If a marketer or publisher doesn’t put in the work to create quality engagements, it can be a waste.
Once you have determined you have the budget and the stomach to test a new feature, a good rule of thumb is to only forge a partnership with a unicorn if your target audience has reached critical mass there, your message is relevant, and you have the bandwidth to engage with audiences in a way that meets their expectations. Then focus on measuring the value as quickly as possible. In this way, you can ensure some decent audience engagement as you test the channel for revenue or branding potential.
Take note, though: Even after you’ve determined that it’s worth the work, the game can quickly change, requiring you to retool your plan. Pinterest stopped allowing affiliate links on its site last year, causing many “Power Pinners” a loss in revenue. Many bloggers and small business owners had to adjust their model to drive more traffic to their own site to make up for the lost earnings.
You’re not automatically cooler just by association
It might not be immediately clear if a brand can come across as authentic on a hot new platform. Pinterest is more than 80% female and has an artistic vibe. You might be surprised to see that Harley Davidson and Stone Brewing company have fantastic presences on Pinterest. These two brands are authentic for a few specific reasons. Harley actually has a large female following, and its iconic look takes well to the visual focus of Pinterest. Stone Brewing company has a high-minded brand approach that works well with Pinterest’s storytelling capabilities.
The best way to be as successful as Harley or Stone Brewing is to create a list of attributes of your own brand and the unicorn’s brand and lean into the common elements. Geico Insurance focuses on its gekko, not images of totaled cars, for example. NARS, a cosmetics company, previewed its fall makeup collection on Snapchat with a short video to create buzz, as the images expire quickly after they are seen; meanwhile, it showed a more in-depth version of the collection on its site.
Not every brand has to work with a unicorn from the start or be a launch partner for each new feature that a unicorn service launches. Some brands benefit from being mavericks, testing new platforms quickly and getting in front of “early adopter audiences”; others don’t. A stodgy furniture brand might benefit as a test partner with Houzz if it’s trying to reinvent itself. Consumer packaged goods companies, on the other hand, often get slammed for being over-eager to engage with audiences on every new platform that emerges before taking the time to understand how to approach the platform and its audience authentically. Many companies just might not be big or fast enough to be an early adopter but can allocate resources and build a program more slowly as the value of doing so becomes better established.
Just like in the high school cafeteria, navigating your relationship with the popular kids is full of twists and turns. In the end, only you can decide if the risks are worth the rewards of playing their game.
Christian Baesler is President of Bauer Xcel Media.