Written by:

Erik Rannala

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I don’t mean to imply that we are in the business of investing in the next generation of . . . quick service restaurants. We are not . . . at least not yet 🙂 But almost 20 years since the Internet changed everything, in every industry we are seeing, the conversation has changed from a discussion about the “internet” to just a discussion about the industry itself (and the brick and mortar companies within them). In the mid 90’s, the Internet was seen as a platform to build new businesses to disrupt existing markets. What the internet enabled really was, simplistically, a comparatively frictionless method to market, acquire, and service customer and partners. There certainly was an argument to be made (and many have made them) that the “Internet” was not a strategic disruption but an operational innovation which will eventually become a “cost to compete”. Putting that argument aside, what has been increasingly true is that being an online business in of itself no longer translate to an inherent competitive advantage it once did.

The “internet” business is not what it was fifteen years ago. It is now next to impossible to build a brand strictly using online marketing channels. Furthermore, so many middle men and gate keepers have sprout up to charge tolls for directing traffic on the internet that the online cost of customer acquisition has skyrocketed. That almost every business has figured out a way to leverage the internet to optimize their operations also means that the line has continued to blur between online and offline companies. . . . For us. . . it means being an “internet entrepreneur” has increasingly less about “internet” but more about just being an “entrepreneur.”

The ironic part is that there are a whole generation executives and entrepreneurs that are badly equipped for the challenges of taking on incumbents when the internet no longer automatically tilts the playing field in their favor. In the first group are guys and gals who spent the majority of their careers at internet companies – especially at the behemoths like Google, Facebook, Yahoo, eBay – that have so much internal scale that they never learned to compete in the “open” internet for traffic and attention . . . much less offline for branding and sales. In the second group are “internet native” entrepreneurs who are continuously plugged in and never knew a world without iphones, always on internet connections, and facebook pokes . . . the complete unawareness consumer behavioral norms can be really disconcerting. Of course, by no means does it imply we do not want these entrepreneurs to start companies (in or outside of MuckerLab) – we do, because we DO believe that the passion and love of technology is not only important but a prerequisite. It is just that we wish these teams are augmented with more diverse traditional business talents OR that these entrepreneurs would deviate from their strict career paths a bit and acquire some traditional marketing or operational skill sets. Out of the many entrepreneurs we met it appears that some very basic business skills are lacking . . .

Merchandizing – As little as 5 years ago, in the age of Google, recall and precision ruled the Internet. It was all about comprehensiveness, aggregation, and ranking. We didn’t try to tell people what they should like/want – instead of we simply tried to find it for them. Today, words like curation, taste making, maven, fashionista, and social discovery dominates the internet lexicon instead. Offline merchandizing skills honed by offline retailers are increasing important for the web as it was decades ago for businesses from Barneys to Walgreens. Entrepreneurs need to not only be trend setters but also know how to influence tastes and taste makers themselves.

Branding – The fact remains that most of the major internet “brands” were built using PR via some variation of the founding myth playbook. These brands are not nurtured through the highly choreographed product-marketing-advertising-communication tactics employed by offline companies. The life stories of the founders and the origination of their ideas became the basis for building their personalities and brands. This works when the press continues to be fascinated with technology companies but given the noise and the inevitable backlash – technology entrepreneurs needs to stop dismissing some basic (and sometime seemingly hokey) branding strategies and exercises especially in consumer categories. (BTW, there got to be a reason that Apple spends hundreds of millions a year in offline advertising a year – I’m super surprised that not more technology companies has followed suit.)

Retailing – Online customer acquisition tactics has become a never ending search for “cheap” traffic that quickly become tapped out when everyone else piles in . . . rinse repeat. Not enough entrepreneurs understand how to acquire customers profitably through retail channels (end caps, facings, circulars etc). Whether that is because of lack of knowledge, or the inability to think beyond the virtual click stream, I’m not sure. But I do know that for the handful of technology companies that have tried, offline channels constitute the majority of their sales and acquisition volume – and magnitudes cheaper than online.

Direct Response Marketing – It is probably not an exaggeration to say that offline DR marketing is the forefather to adwords. Yet today, I only see so called ‘spammy’ (I call them brilliant instead) internet companies using DR channels such as TV, direct mail, radio, telemarketing, even catalogs/print to acquire customers for their warez and products. This is probably one of the easiest offline marketing techniques to learn for internet entrepreneurs – its just a/b testing and some math. Get on it.

Event/Guerrilla Marketing – For any type of social applications, online communities, and marketplaces – event and guerrilla marketing are crucial for customer retention and virality. The key to success for these companies depend on their ability to attract like-minded users, foster user to user interaction, and generate content. Offline community based marketing tactics does not seem sexy nor scalable but it does do a wonderful job of creating real and tangible connection between the company, its users, and its brand within the target community.

Sales – Many internet entrepreneurs seem to lack old fashion sale management and sales operations experience (“but Will, instagram only has 12 employees!” . . . aargh). Not making money or outsourcing sales to an ad network is never a long term strategy. Furthermore, multi-level marketing direct selling strategies has become a great channel to build a low cost, self propagating, self sustaining sales force to sell products and build a fervent community of evangelists.

 

 

 

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