Sunday, March 6, 2011

Prediction: Facebook won't be a viable marketing strategy for startups

Chris Dixon is causing (surprise surprise :) a bit of an uproar with his blog post "SEO is no longer a viable marketing strategy for startups."  Chris's post is overstated but what I agree with is that SEO is no longer viable as the primary marketing strategy for a startup.  To help explain this, it's worth putting SEO in context of other [former star] free acquisition channels.

Email, not Google, was the first great source of free user traffic on the internet.  Hotmail, Kazaa, Skype... the list goes on.  Email was novel and inboxes were essentially greenfield.  But as more and more startups started using email as their main customer acquisition channel, the efficacy of email declined.  The channel was congested, and people had email invite fatigue.  Today, startups still try to get users to email their friends and get them to join a new service, but it's no where near as effective as email invites once were.  Email invites have gone from being an effective primary marketing strategy for startups, to being a small piece and better leveraged for nurturing existing customers rather than acquiring new ones.

Then Google entered the scene as the dominant search engine with a brand new free marketing channel.  Suddenly, organic results was the new greenfield.  Many companies (like TripAdvisor and Yelp) exploited this opportunity by creating content that catered to certain search behaviors (e.g., best hotels in [Aruba], [sushi] [94114]).  In SEO there is stickiness and accrued advantage to companies that list high in Google's organic results thanks to the content asset and value of links. (To be fair, email invites, you could say, also had an accrued advantage because if you received 10 invites from different people for the same site, you'll pay attention whereas you won't for the company you just got one invite.)  But unlike email, Google results are segmented.  While you just have one "inbox"/behavior in email, in Google there are numerous "search behaviors".  So the possibility of building a startup on the shoulders of free traffic from Google has lasted longer than it did for email.  As new search behaviors emerge (e.g., online coupon searches was only recently exploited by companies like RetailMeNot), new companies will be able to take advantage of the new greenfield.  But for the categories that are already dominated by an incumbent player, while there is the constant chance that Google will make an algorithm change that switches things up, it's exceedingly difficult to build a new company primarily on SEO.

This brings me to our current day and age, with what I'll call heavily amplified word of mouth in the form of Facebook and Twitter.  When Facebook first launched its app platform, it was undoubtedly the most effective free online acquisition channel yet.  Remember iLike's astounding growth?

In a crazily short period of time, some amazing companies have been built on Facebook (and Twitter as I blogged about here).  But like all the former free acquisition channels, as more companies flocked to Facebook to capitalize on the new greenfield, diminishing returns kicked in (and Facebook took more control).  Don't get me wrong - Facebook is still a fantastic channel and still strong enough to be a startup's primary marketing channel, but for a newcomer, especially for a newcomer trying to make a mark in a category already dominated by an incumbent (e.g., social gaming) it will never have the same efficacy it had back in 2007.  Consequently, it will become increasingly difficult for a new startup to leverage Facebook as its primary marketing strategy.  

SEO, like email, is no longer a viable primary free marketing channel for startups to build their companies.  But eventually, Facebook won't be either.  It's interesting to note, by the way, that each channel has favored a different kind of company (e.g., SEO=content rich, Facebook=social).  What's will be the next great channel, and what type of companies will it favor?

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