The Necessity of Naivety
The other day, a founder of a new start-up in the performance marketing space quipped, "I can’t believe how easy I thought this would be when we started." In some ways, he is the classic performance marketing story – young guy wants to start a company picks the performance marketing sector because of its relatively low start-up costs and rather immediate results. The part of his story that differs from some others that have entered the performance marketing space are the jobs he has held prior to starting up his marketing services firm – McKinsey and Goldman. The Ivy League education also separates him on paper from many in this space, one of its most redeeming qualities being the openness with which this industry will accept anyone who wants to try and reward success regardless of pedigree. After six months, this startup, who came in with some high powered corporate relationships but no industry contacts per se has started to find some footing, i.e. making some money, but it’s been interesting tracking the progress.
We came across another new entrant to the space the other day. At first blush, their story sounds like so many others, and on the surface, theirs has little reason for anyone to take notice. They talk about top offers and quick payments. They use an off the shelf tracking technology and their team consists of perhaps no one over 26 years-old. They have some industry experience but no direct experience in the performance marketing industry. Their prior jobs did not include consulting or banking, and while college graduates, were any of their schools to have ranked in the top 100 academically, it would come as a shock. Having also just crossed the six-month mark themselves, they have some definite wind at their backs, and from a revenue perspective are on par if not exceeding the other start-up and on a profit basis, they are most certainly ahead.
Presentations vs. People
Every time we connect with the Ivy guys, we are blown away by their marketing material. These are guys who either themselves or through clever leverage of interns have materials that would make any client think about working with them. Good materials alone won’t seal the deal, so it’s not just about that. Yet, they’ve taken a skill that they needed at their previous jobs and have leveraged it for all that it’s worth. It’s also worth pointing out that they have leveraged their banking contacts for some great top-down introductions.
The other company on the other hand couldn’t find PowerPoint on the computer. I would worry about them giving a presentation. Just seeing the press-release made me worry for them. And cliche as it sounds, especially for a network, they do have some impressive offers, two of them are actual exclusives not even white labels. A handful of their other offers come direct from advertisers who almost always will tell newer entrants and veteran companies to go through someone else. It makes no sense really. Their secret? Relationships. They didn’t work directly in the space at or with a network but their jobs previously had them interacting with people across all levels at practically hundreds of companies from direct advertisers, lead buyers, aggregators, networks, and almost anyone else involved in the performance-marketing sector. So, when they decided to ditch that work and start a network, they could say, "Hey. We’re going into this business. We know everyone. Let us run x." And, the company having seen them do well elsewhere in the space would let them. It has been remarkable watching them put together offers that seemed impossible to land with little to no effort with an unknown brand, no real traffic and practically no real idea what it means to be a network.
Making Traffic vs. Hiring Traffic
Getting offers is only one part of the equation. The other is getting traffic for them. Those in the space spend as much, if not more, time trying to nail down traffic. If you are a network, what publishers do you accept, what rules do you let them skirt, on which are you strict, what other networks do you let run the offer, etc. If you are trying to own your inventory, the issues revolve around where to arbitrage successfully, how much to spend on testing, when to change offers, where to bend the rules, how to maintain quality and volume, etc., with account managers sitting in between and playing the crucial role between them. So what do you do if you are these companies?
For traffic, the brain trust group has taken a combination network and affiliate approach – looking for traffic partners and doing quite a bit of buying on search and other pay per click interfaces. It’s been a struggle – low quality scores despite some hard work on content, battling lower payouts being new, allocations, and all the typical start-up challenges. The quest for traffic for them has been about sheer grinding, laborious testing, and some non-shady craftiness. For the brawn trust, it was a different form of hustle and involved mainly picking up the phone to find existing account managers who wanted a greater return on their book of business and the promise of some differentiation. It wasn’t easy finding the right people, but once they did find a good account manager to take a chance with them, it meant instant traffic.
Necessity for Naivety
This is not meant to be a story about the brawns versus brains or the minor leaguers taking on the Ivy Leaguers. Neither of them have made it yet, and it must be remembered that even their best months so far wouldn’t match the daily revenue of the largest networks. What makes this story interesting to us is not that one went to this school and another had this job. For us, these are two great stories about finding success. Hearing how both have hustled and what each goes through, it reminds us of how a three year-old goes about getting what they want. They just do. They don’t know what is and isn’t possible. Whether through testing or another form of tenacity, both of these companies were lucky that they haven’t seen the space for a long-time, that they didn’t know the real horror stories. They had an idea and decided to take the risk to see if they could execute on it. Had they known then what they know now, they might not have started or hung in there as long as they have.
