Photo via Ken Hawkins

“Seattle’s great at building technology, but we don’t understand marketing. San Francisco’s great at marketing. That’s why great B-to-C companies come out of San Francisco and not Seattle.”

A managing partner at a VC firm said this to me several months ago. It solidified, in my mind, something I’ve been wanting to scream at Seattle entrepreneurs for a while: Users aren’t free.

I want to scream it to investors, too. As we close out the angel round for Salad Labs, I notice a certain type of investor asks a question that makes me want to tear my hair out: Have you thought about making the product more viral? 

“Oh, viral? Why didn’t I think of that? If only we were doing a better job of spamming Facebook walls, we wouldn’t even need to be raising money! We’d be gazillionaires! Viral! What a totally innovative and unconditionally effective user acquisition strategy.”

But this is how Seattle’s investors think, and, in turn, it’s how Seattle’s entrepreneurs have learned to think, and it isn’t working.

“Be really viral” isn’t a marketing strategy. It isn’t a user acquisition strategy. It isn’t the best way to approach building a great consumer company, and I suspect that’s a core reason why Seattle can’t seem to create the next Pinterest, Zynga or Foursquare. If more viral hooks always equated to increased user acquisition and engagement, no online consumer company would ever have failed in the social era.

But fail they do. Because, as it turns out, users aren’t free.

Viral hooks are not the answer

Sasha Pasulka

Here’s a surprisingly little-known fact about viral: It has to be properly seeded. The people who don’t understand this are generally people who have never launched anything that went truly viral, a group that probably includes the investor lecturing you to “be more viral.”

Content and products go viral after they’re shared by at least two or three users with enormous social networks. Getting 500 people with a couple hundred Twitter followers to post a link to your product will almost never produce a truly viral response; it works only if one of those people is followed and retweeted by someone with 50,000 followers, one of whom retweets in turn to their 75,000 followers, and so on. This is how and when viral explodes. You have to get that initial seed out to a tremendous user base at the same time, otherwise the momentum dies quickly.

Forcing all the users of your product to spam their own Facebook walls and the Facebook walls of their friends only makes your users hate you. It does not make your product “go viral.”

Here’s another tidbit: Facebook has noticed that you plan to build your brand’s equity by destroying theirs. The combined forces of EdgeRank and Timeline will ensure that a user’s social network has near-zero visibility into the advertising you’re forcing onto their wall. The only person who will notice it is your user, who will be annoyed.

The case studies about viral product growth via Facebook – the ones from a year or so ago that your investor remembers – no longer apply. The rules have changed.

Your dev team’s PR skills are not the answer

This is one of my favorite “get-users-for-free” strategies employed by tech startups. PR isn’t an effective standalone user acquisition strategy. But an especially ineffective – and super popular – user acquisition strategy is PR, managed part-time by your startup’s CTO.

Here are just a handful of the reasons this typically doesn’t pan out:

  • TechCrunch is not your target market. It really doesn’t matter what you’re building – if you’re marketing a B-to-C product to anything other than investors, TechCrunch is not your target market. But it’s where your dev team really, really wants to see their names. Effective PR gets you out of the echo chamber and in front of an audience who might actually use your product, even if that means your college roommate won’t read it and be jealous.
  • It’s easy to make enemies in the media if you don’t know what you’re doing. Hand a story off to one outlet when another had expected an exclusive, and you’ve potentially made not one but two media enemies, because even the outlet who got the exclusive now knows you don’t play fair. What’s worse – you didn’t even know you weren’t playing fair! You didn’t know the rules. Because you have a software developer managing your PR.
  • Messaging is everything! Tech startup Geeklist destroyed any and all brand equity after a Twitter user discovered their video ad featuring a girl dancing in her underwear. Posting the video was terrible judgment to begin with, but the situation probably could have been diffused with a swift take-down and sincere mea culpa. Instead, Geeklist worsened the situation with an apology and Twitter interactions that the audience felt was half-hearted and insulting.

Buying users with money

Many, many years ago, in the dark ages before Twitter and Facebook and Pinterest, young companies and their investors understood that users cost money, and they were willing to pay for them. But in an age where startups no longer have to pay for servers, we somehow expect that we shouldn’t have to pay for users, either. User acquisition is not a cloud offering, but people don’t seem to be getting the memo.

“People count on getting users for free,” says Donald DeSantis, a partner at mobile strategy agency LIFFFT. “Startups think to themselves, ‘We’re going to build viral hooks into our product, and seed it through Mashable and LaunchRock pages, and it’s going to be a viral hit.’ And it doesn’t work. It’s bullshit.”

So if users aren’t free, how does one go about buying them?

Behold, some tried-and-true ways that companies can exchange money for users:

Advertising!

I know, I know. That’s so Web 1.0. But historians who study the distant past are now discovering that advertising was a user acquisition strategy employed with great success for many hundreds of years, even all the way back before social networks. You don’t have to buy a cheesy banner ad — although banner ads are getting cheaper and easier target. You can run targeted ads on Facebook or buy search terms. Depending on your product, it might make sense to buy ads on the radio, in a local magazine or on specific blogs.

Figure out your customers’ projected lifetime value, and then figure out how and if you can acquire them for less than that. It’s not rocket science. If you are unwilling to invest in advertising because you suspect that your customers’ lifetime value is zero, then you are not running a company – you just have a project you think is fun.

Here’s the other cool thing about advertising: You can use it to test. The people who sit next to you in your tech incubator are not providing statistically significant feedback on how to convert users.

But the 500 women between the ages of 18 and 35 who live on the West coast and are NASCAR fans who clicked on your Facebook ad are providing that feedback, and some of them might even become users. Optimize your product by driving meaningful data points, before you squander 56.2 percent of the potential conversions from the national news coverage you’re going to get in six months.

Sponsorship!

Find out where your target demographic will be and then spend money to have a strong presence there. Get a booth at a conference, sponsor a concert series, pay for a blogger to go to an event. Stop demanding every piece of coverage for free. If you want your audience to invest in you, you have to demonstrate that you’re willing to invest in them.

Acquisitions!

Want users? Buy something that has users. Zynga’s daily user traffic increased by 25 percent after the gaming giant purchased OMGPOP for $210 million. Unless your company is valued at $7 billion, you can probably achieve similar growth for a more reasonable price tag.

Hire people who are trained in marketing and PR!

Here’s an idea that too rarely seems to occur to tech startups: Hire a marketing professional.

The role of a marketer continues to be ill-defined for tech startups. I suspect companies are hesitant to invest because many fell victim to the “social media guru” craze, and they paid a lot of money for a “guru” who turned out to be little more than a junior PR flunky with a slightly above-average willingness to write things on Twitter.

But that’s a result of a company making a bad hire, not an inherent problem with marketing talent.

Seattle boasts a growing number of exceptional marketing candidates who can guide product, strategy, user acquisition and PR with measurable results. If you understand what you need from a marketing exec and hire accordingly, the right person is well worth the investment.

Depending on your situation, it might make sense to hire a proven PR or marketing agency to work alongside your team rather than bringing someone in-house right away.

Users aren’t free

If you’re a B-to-C company, you need a marketing budget. You need a marketing budget even if investor after investor implies that every other company with half a brain acquired all their users for free on Facebook. Because it’s just not true. It’s a myth.

Successful consumer companies invest in user acquisition, in the form of marketing talent, advertising, events, sponsorships, referral payouts, paid placement and a hundred other user-acquisition strategies that cost cash or equity.

They budget for it. They understand that users aren’t free, and that failing to invest financially and specifically in user acquisition is a surefire way to fail to acquire users. Investors and entrepreneurs in San Francisco, in New York, and certainly in Los Angeles already know this.

It’s time for Seattle to get in the game.

Sasha Pasulka is the VP of Marketing at Salad Labs and a digital strategist at Red Magnet Media. You can follow her on Twitter @sashrocks. Editor’s note: Salad Labs is a sponsor of the Seattle 2.0 Startup Awards, presented by GeekWire.

Comments

  • denise

    You missed one:  Provide something of value — where the value isn’t derived from the hype/viral factor itself.

  • http://www.facebook.com/people/Devin-Miller/100001051294818 Devin Miller

    Sasha, enjoyed the article.  Tough to condense all the nuances of startup marketing into one article though.  I would add that the reason why many investors encourage startups to try and “go viral” is because investors realize that most consumer internet products generate very little life time value per user, maybe only a dollar per year per active user. 

    The cost of acquisition compared to the revenue generated per active user is simply too out of whack.  Even Facebook ads cost $1 or so per click and then you still have to convert that click to a registered, active, revenue generating user. 

    Most direct to consumer companies cannot afford to market to, acquire, and generate revenue from consumers.  Shockingly, free products like Facebook, Foursquare & Pinterest do not generate much revenue per user.  

    If new direct to consumer (free) products cannot go viral with minimal PR / marketing (and I agree, they
    should spend more than $0) then they are just not going to work. Thus, you get investors trying to tell you to try the near impossible. 

    Ultimately, I think startups need to do the math on what they can reasonably expect to make per user over what period of time.  Are people willing to pay for your product?  If so then maybe trying to go viral is a waste of time and you need solid marketing experts.  However, if your product is only valuable when you surpass tens of millions of users then having your hipster friends spam their hipster friends and hope it takes off might be your only hope.

    Investors will push it because they can afford to be wrong, they made 5, 10, 15 bets on different companies and many are betting that at least 1 of them is the next Twitter, Fourquare, Pinterest or dare to dream, Facebook.  Further, the valley crowd will try anything.  There is not an app or game they will not try and talk about.  In the Valley, many “viral” launches happen purely because the king & queen makers will it so.  We just are not cool enough I guess in Seattle.

    But as a CEO, VP marketing or whatever who may be reading your article, the pragmatism you preach is spot on.  But ultimately, product / market a startup is going after is going to partially dictate whether you really have a choice. 

    Customers are not free, but sometimes you cannot afford to buy them either.

  • http://moniguzman.com Monica Guzman

    It had to be said and you said it. Thoughtful piece, Sasha. Hope it goes “viral” ;)

  • billy

    Great article, thanks for your candor and enthusiasm.

  • http://profiles.google.com/joeconnector Joe “The Connector” Kennedy

    Interesting viewpoints, but I think it is a big mistake to generalize like that – SF is so great and Seattle so terrible at marketing.  There are a lot of people who would totally disagree with you.

    • http://twitter.com/clintmania Clint Schmidt

      I am an online marketing guy who just left Seattle after 8 years to go *back* to the Bay Area. I’ve only done start-ups. She’s spot on. The risk profile is VERY different in Seattle.

    • http://www.facebook.com/ryanlburt Ryan Burt

       Good article, but yes, you just took the words out of my mouth.

  • Bill

    Best line: “If you are unwilling to invest in advertising because you suspect that
    your customers’ lifetime value is zero, then you are not running a
    company – you just have a project you think is fun.”  Amen.

  • http://twitter.com/cindybetty Cindy Engstrom

    Sasha where have you been all my life (can i buy you a few beers?)?! I agree with you from the moment i moved here in 1998.  I am so bored by the idiotic notion that companies should not spend funds on customer acquisition tactics.  Imagine if Apple took this approach?  Apple defines the essence of marketing:  create lust for your product.  The age old valley v Seattle is basically: decent marketers in the valley (often they can’t figure out a good biz model though) v amazing engineering in the NW (where they lack business acumen and this is the same elk that are in the VCs or the angel funds).  All told, I’ll take the IQ in Seattle! That is why I’m on my 3rd start up here and the savvy start ups find the great marketing people.   They are hard to find in the NW but the marketing people are here … one of the best is our Marketing Manager Nikki Nash for SircleSamples.com  

    • FAKE GRIMLOCK

      RECRUIT FROM OUTSIDE.

  • http://www.elieseidman.com Elie Seidman

    Great piece

  • http://twitter.com/fijiaaron Aaron Evans

    If your users aren’t less than free, you’ve got the wrong business strategy.

  • http://www.facebook.com/ryanlburt Ryan Burt

    I’m going to assume you wrote the beginning of the article like an editor would – just to attract eyeballs with a gross generalization and stereotype – well it worked.  Despite the BS about SF versus Seattle (whatever) you have good points here.  Just leave the Bay Area is better stuff out…

    • FAKE GRIMLOCK

      BEST WAY GET EYEBALLS IS PISS PEOPLE OFF.

      GREAT WAY PISS PEOPLE OFF IS SAY EVERYONE IN THEM CITY WRONG.

  • Clark

    Stop treating the content, you know the stuff that people actually see on your site, as a commodity to be obtained cheap or free, while only the coders and execs get decently paid.

  • FAKE GRIMLOCK

    ARTICLE GOOD!

  • FAKE GRIMLOCK

    STARTUP REQUIRE 2 THING:

    1. GROWTH ENGINE

    2. DISCOVERY ENGINE

    GO ONLY VIRAL FAIL BECAUSE NOT HAVE 2.

  • Ralph Barbagallo

    Seattle must be a weird place if this (spot on) article must be directed at Seattleites.

  • http://www.facebook.com/willgill83 William Gill

    What a perfectly pitched, beautiful description of the current state of many startups (and large businesses).

  • http://tyeshasnow.com/ Tyesha

    The Rant realized. Perfection.

Job Listings on GeekWork