Where is the Online Advertising Innovation?

Online advertising models are far from optimal.  Improvements would benefit everyone – from online media properties, to advertisers and even website visitors.  Improvements can only be achieved with the commitment of leading web properties and advertisers to work together to continuously test innovative new online advertising models.

Unfortunately the same standards groups that drove the initial success of online advertising may now be holding it back.  IAB standards transformed a highly fragmented online media landscape into something that large advertisers could purchase efficiently.  Rather than dealing with hundreds of ad specs, advertisers could limit their creatives to a handful of standard banner sizes. While this was critical for catalyzing initial online advertising growth, things were optimized on a less than perfect model.

For proof of potential advertising model improvements, just consider the leading search engines of 1999. Three of four are basically dead, while Google moved from obscurity to a $160 billion market cap.  This growth was largely on the back of an innovative advertising model.  Google didn’t follow the recommendations of the IAB, but the other search engines did.  Google’s new model delivered fantastic results to advertisers and provided a better experience for users.  At my current venture, we largely built our business through Google Adwords.

I believe there is similar potential for dramatic improvement in advertising on destination websites.  Again, pushing the envelop will require close cooperation between media properties and advertisers.

I first became fascinated with the potential of online advertising in 1995, when a friend showed me his business plan for an online advertising supported game site, Uproar.com.  His concept was that people would register to play free online games for a chance to win cash prizes.  Accurate registration information would let advertisers perfectly target their messages.  I had been selling print advertising so was eager to move beyond the static, untargeted world of print advertising.  In fact I took an interest bearing loan just to make an angel investment in the company.

When I later joined Uproar full time, we faced the daunting challenge of balancing advertisers’ needs for results with visitors’ desires for an entertaining experience. We launched with integrated animated advertisements targeted by demographics.  However, since our audience was so small, we couldn’t even give the ads away.  We were faced with the challenge of building a large audience and making it simple to buy advertising.  Eventually we settled on the standard IAB banners, but integrated them into the game flow to drive better results for advertisers.

There has been very little evolution in the 10 years since these standards were put in place. The primary difference today is that advertisers have become a lot more sophisticated at tracking results and media properties have added rich media.  Surely it is time for savvy publishers and advertisers to join forces to discover a much more effective way to leverage the potential of internet advertising.

What Makes an Effective Startup Marketer?

Should startups seek a seasoned large company marketing executive to give them credibility with VCs and drive their company to greatness?  Not necessarily.

Startup marketing leaders must be hands-on and dynamic.  A marketing executive from a large company is likely accustomed to relying on functional experts from across a big marketing department.  Their role is much more of a conductor than someone who actually executes marketing.

Additionally, the financial targets at a startup are initially much smaller than those at a large company.  Startups must manage many micro campaigns while they struggle for traction, but large companies must evaluate every marketing campaign for its potential impact against enormous marketing targets.  Small but profitable campaigns generally aren’t worth the time they take to manage.

Finally, startup marketers must approach their job with much more urgency than their counterparts at big companies. There is no momentum to carry them from quarter to quarter. While they are trying to discover marketing programs with a positive ROI, their company is burning precious cash on salaries and other fixed costs.

Finding a dynamic marketing leader for a startup is more difficult than it may seem.  Startup marketers must have strengths in both the creative and analytical sides of their brain.  They should possess the creative skills to know what to throw against the wall and the analytical skills to figure out what actually sticks.  And they can’t just be thinkers.  They must also be scrappy disciplined executers.

It is also important for startup marketers to be both conservative and aggressive.  Initially they trickle in customers to optimize their business model and hone their value proposition.  Once the business model has been refined and proven economically viable the marketer must switch into an aggressive mode to capture market share and quickly scale the business to cash-flow positive performance.  Despite the need for aggressive growth, effective startup marketers must retain the discipline to follow a systematic testing process of measurable programs.

With the right startup marketer, a new venture dramatically improves its chances of success.  Marketers coming from enterprises succeed despite their large company experience, not because of it.

Discovering Effective Marketing Tactics for Your Startup

Great startup marketers generally make excellent resource allocation decisions. We are all faced with the temptation to gravitate toward marketing tactics that have worked in previous companies. Unfortunately, an old marketing mix is almost never a perfect fit for a new marketing situation. For example, when I ran marketing at Uproar.com we relied heavily on banner advertising, even running the most viewed banner on the entire Internet for a period of time. We also had a large affiliate program with over 30,000 partners. Leveraging these key elements of the marketing mix we achieved the lowest registered user acquisition cost of any publicly traded company for a free online service.

Naturally I tried to replicate these marketing tactics at my next early stage company. Unfortunately they didn’t deliver the desired results. Though I still used a very online centric marketing approach, the marketing mix contained very different elements. For example, banners made up less than 10% of our marketing spend (compared to 90%+ at Uproar) and we didn’t even have an affiliate program.

So what is the key to discovering the right mix of marketing tactics for your particular situation? It helps to have a relentless drive to try lots of programs until you find some that are successful. But assembling an effective marketing mix goes beyond simply effort. Before even considering the marketing mix, you need to have a handle on some marketing basics like a proven value proposition. You also need the tools and processes in place to determine the effectiveness of each tested marketing program. The rest is really an art of knowing what to test and combining effective tactics in an optimal marketing mix. Like any other art form, creativity is a key advantage in building winning marketing programs.