The rule breakers

1 November 2007

Everyone knows rules are made to be broken, but when it comes to marketing in the Web 2.0 world, some companies are ripping up the entire manual. So what can other entrepreneurs learn from them?

'It's kind of supposed to suck the first time you get [the product] out - you just keep changing it.' So says Ben Smith, chairman and co-founder of MerchantCircle, with tongue only partly in cheek. His Silicon Valley-based company provides an online local business directory that helps small businesses promote their products and services, climb search engine rankings, create online ads and track what's being said about them online. It's all done with the help of MerchantCircle tools, and the company releases a new product once a week. In the Web 2.0 world, he says, 'one of the skills is to quickly innovate products, so you don't always have to be right'.

Smith was speaking at the 'Early Stage Venture Investing' conference in San Francisco, where a panel explored a broad range of marketing issues, from understanding customers' needs in emerging markets to product launch strategies. Whether it's about listening to customers or analysing marketing data, the message was that the traditional rules of marketing are being interpreted very differently from sector to sector.

Product readiness is a good example. The software industry has a well-deserved reputation for delivering unfinished products - in fact, the whole idea of a beta programme, where customers put new software into use and unearth all the bugs and glitches for you, is the ultimate in free outsourced quality assurance testing. There have, however, been constraints on how far vendors can push the beta concept. In the traditional enterprise software space, where applications help organisations run critical business functions such as manufacturing, finance and sales, suppliers' credibility rests on getting a reasonably solid product out even in its earliest forms, although there's generally an acceptance that depth and breadth of functionality may follow in later releases.

In the consumer-driven Web 2.0 world, however, the rules are very different. Smaller tools and products can be pulled as soon as you get feedback from just a handful of online customers - so you can adapt them well before the vast majority of customers even have a sniff of what the original looked like. As a result, there's much more tolerance for experimentation. 'On the web,' said Smith, 'the sooner [you can get it out] the better. Put it out as quickly as you possibly can - it may even only be a piece of what you intend to release.'

Not every software company is prepared to release products so early, of course, particularly in the business software space or for business-critical applications. But even the most conservative companies need to set themselves challenging targets. 'Get your product out uncomfortably early,' recommended John Zicker, president of Sana Security. 'You may not be charging for the product [to begin with], but you'll get a sense of people using it.' He acknowledged that many entrepreneurs are wary about publicising their product too early for fear that others will copy it - 'but if you've got a good idea,' he added, 'four other people are probably doing it already. So get out there early with it.'

Approaches to public relations have also evolved in the Web 2.0 environment. Traditionally, newspapers such as the New York Times have represented the nirvana of coverage for entrepreneurs - along with The Wall Street Journal, it's the closest you'll find to a broadsheet-style 'national' newspaper across the US. But for Smith, 'the New York Times writing about [your product] doesn't matter [so much] now. If you want to be seen by millions, it's about getting found on Google - it's a different way of launching.' For consumer-oriented web developers, getting covered by TechCrunch, one of the best-known technology blogs in the US, is a much more significant step towards getting your first 50,000 users.

Smith also challenges conventional thinking about market research and analysis. One of the biggest problems start-ups face is lack of data - there's just not enough historical sales and marketing statistics available for them to work out customer purchasing patterns and analyse buying trends. But while he studies data every day, Smith argues that ultimately, entrepreneurs just need get on with it. 'I see so many guys get wrapped up in the data. But really as an early stage company, you can't do too much analysis - you can't roll around in too many questions. Early stage is all about making decisions without data.'

Finally, panellists at the event warned entrepreneurs to be cautious when they sound out prospects and customers, and bear in mind that the feedback they give you will rarely be unbiased. Steve Tran, founder and chief marketing officer of BeVocal, recalled speaking to in-house IT professionals about software as a service, an increasingly popular outsourcing model where vendors run and manage software applications for customers, rather than customers having to install them on their own in-house servers. Many IT managers, he pointed out, are more focused on the traditional in-house model where they have total control over the technology - and that colours their feedback.

Likewise, not every customer's opinion counts. Smith - who recalls one customer saying 'I don't want to be on your internet, please get me off' - warns that sometimes, you simply have to ignore individual voices. 'I have to focus on not listening to any one user,' he said. 'You're dealing with lots of whackos.'

By Keith Rodgers, Webster Buchanan Research