Tech Startups Play Growing Role with Marketers

When it comes to technology needs, marketers are seeking startups for a wide range of activities relating to marketing and advertising. Marketers find technology startups small and nimble, and, perhaps most importantly, passionate and driven to solve clients’ needs with fresh ideas, according to a new study.

Interestingly, the most notable activities sought from startups were for social media (53%) and content development and management (49%). Other projects included research and analytics (45%), mobile advertising (43%), marketing automation (39%) and promotions (37%), according to the study, “Brands Working with Startups,” conducted by the Association of National Advertisers in conjunction with the Consumer Technology Association.

technology startupsThe study looked to develop a clear picture of marketers’ perceptions, attitudes and behaviors toward hiring startup companies. Specifically, it examined how marketers work with startups, their approach to using them, the activities associated with startups, and the pros and cons of hiring such companies.

Marketers reported engaging with startups to leverage up-and-coming technology, stay ahead of and understand technology trends, drive innovation and gain competitive advantage at a reasonable cost. They are looking for out-of-the-box, cost-effective solutions. Another interesting finding is that marketers tap these startups almost exclusively for technology solutions. They don’t purchase the technology, but rather buy solutions to solve business problems. Over one-third of marketers worked with startups in the past year, the study found.

Some 88% of respondents said that funds for the technologies come directly from existing marketing budgets and 53% rely on their agencies to help them partner with a startup.

“Marketers clearly take a serious approach to engaging with startups, and this survey takes a deep dive into exploring the nuances of those relationships,” said ANA President and CEO Bob Liodice. “It examines and reveals not only how but why advertisers turn to startups, and what they expect of them.”

Marketers evaluate technology startups by a number of performance indicators, including the degree to which the business problem is solved, reliability of the technology and the effectiveness of reaching customers.

There are, of course risks associated with partnering with startups. The study found that startups can pose security risks, particularly with sensitive data and their enthusiasm may overrun their ability to deliver on the work they promise. Legal and compliance issue can arise and sometimes the startup may go out of business before the projects are completed. On the flip side, large marketing companies have established selection processes that can take a long time with multiple levels of approval. Add in the lengthy procurement process and a deal to form a partnership can get bogged down.

The study, which included both business-to-business and business-to-consumer marketers, also revealed the following:

  • Marketers who hire startups measure the success of engagement in relation to business outcomes.
  • The biggest barrier to engagement is the startup’s inability to articulately describe its offering in a meaningful and relevant manner.

“Technology is influencing all aspects of our lives—and that’s no different for startups and marketing in the digital age,” said Steve Koenig, senior director of market research at the Consumer Technology Association. “We saw the world of startups, marketing, and technology converge at CES 2016, where we hosted C Space, the home for advertising, marketing, and digital content communities, as well as the Eureka Park marketplace, which featured more than 500 exhibiting startups. Based on the traffic we saw at these key marketplaces at this year’s CES and the findings of this study, it’s clear the novel solutions that technology allows are of utmost importance to marketers.”

When it comes to who within an organization manages startup relationship, it’s a mixed bag: 34% director, 17% manager/assistant manager, 17% brand or product manager, 14% other, 12% vice president and 6% CMO.