I’ve seen the future and it’s a flywheel. Not a physical flywheel, but a system that – for all intents and purposes – is actually its more expansive and digital equivalent. A system that replaces the momentum which a flywheel creates and gathers as it spins and accelerates with the expansive digital power which we have come to call the “network effect”. Actually, my favorite flywheel these days isn’t a physical or digital object at all – it’s a relatively new, second-generation (or maybe a third generation) ad tech startup business based in New York which is called SimpleReach ( www.simplereach.com ) and which has built tools and a measurement/content distribution platform that permits publishers and brands to make much more effective and intelligent use of all of the branded and sponsored content they are creating to help them burnish their brands and better connect at a higher level with their customers.
The network effect (which was first formulated by George Gilder and is now generally known as Metcalfe’s Law) is basically a description of the expanding value of a communications network as it adds additional nodes or links. The rate of growth in the intrinsic value of the network is not linear, but exponential and multiplies ever faster as the network expands. What SimpleReach has done is create an enterprise model where its customers themselves (as well as interested third parties who may be prospective customers) increasingly help build SR’s business and grow its user and customer base (without any direct compensation) mainly because it serves their own selfish and competitive interests to do so. There’s no more authentic and convincing promoter and marketer for your business than a satisfied customer who makes it his or her business to invite more people to the party. That’s the flywheel in action.
Why do they do this?
First because it dramatically increases the value of the SR tools and services for each of them in their own businesses. You can never go wrong counting on smart business people to act in their own self-interest. From the brand’s standpoint, each new publisher added to the SR reporting network increases the brand’s ability to more fully measure – in a unified and standardized manner – the value and impact of its spending on a given campaign. From the publisher’s standpoint, each new brand added to the program (by the publisher or independently by SR) which then has the ability to extend its ongoing and new campaigns and its marketing spend to that publisher’s channels creates more revenue opportunities and more of a one-stop solution set for the publisher.
And second, because the publishers (and frankly the agencies as well) really have no choice but to adopt such a system because their own customers are starting to demand that they use the SR methodology and provide them with the results which they can then readily fold into their own analysis. Sometimes a given brand will have learned about the SimpleReach service from a different use case with a different publisher (or obviously from SR itself – although they do very little sales or marketing right now – relying mainly on word-of-mouth and cross-referrals) and then – in discussions with other publishers, the brand will expect and often specify this type of data and reporting and make it clear that – if such support is not available – it will be pleased to take its business elsewhere. Frankly, no publisher today can afford to be without these kinds of offerings which are really the newest and most powerful windows to the digital world.
And finally, because, if the middle men (publishers or agencies) don’t provide these services to their customers (the brands), the customers will go right around them directly to SimpleReach and sign up for the services. And, as it happens, that’s already beginning to happen as the ultimate brand customers start to understand that they need these tools for all their marketing channels and not simply for the initial channel (or agency or publisher) which may have brought the SR service to their attention. Frankly, the brands already see themselves more and more as content publishers anyway and so it’s a simple step (no pun intended) to contract directly for these kinds of resources – especially when – as noted above - they provide constantly more efficient one-stop shopping and integrated surveillance and tracking dashboards.
This is the kind of growth engine that you want to hang your hat on and then hold on tight for the rapid ride. And it’s the kind that’s very hard to come by and, as often as not, may end up flying off the track and throwing everyone for a loss. But if you find the right engine in the right marketplace and environment and your guy is the first player there, then the extent of the potential upside is hard to imagine.
It’s not simply that (a) pervasive and truly additive platforms – once in place – are almost impossible to dislodge and (b) that increasingly technology spaces are becoming more and more “winner take all” plays; it’s that the momentum and the earning potential accelerates at such an overwhelmingly rapid pace that even the biggest players can’t respond quickly enough to the new competitive threat or use their size and resources effectively to offset the early advantages of the growing cash cushion of the first mover.
Especially in the case of a new business, that cash cushion provides several layers of comfort and security. First, management can focus on the business, not on what often – in new growing businesses - feels like perpetual fundraising. Second, early mistakes are less likely to threaten the business’s existence since the business can pivot if necessary without payroll becoming a problem. Third, the customers are comforted by the bankroll and much less concerned about betting their business on the newest kid in town. Fourth, the company can afford to support simultaneous pilots and trials for far more customers than most startups. And finally, there’s very little pressure on the pricing of the business’s services since the company doesn’t have to engage in price cutting in order to win new accounts.
But there’s an even more powerful factor at work in cases like this and it’s the “lock-in” investment (not in terms of dollars, but in terms of tangible business benefits) which creates powerful barriers and overwhelming switching costs even for those clients and customers which are willing to consider any kind of shift or movement. Both of these considerations are not matters of dollars and sense; they are concerns that anyone attempting to switch and losing even a moment’s time or presence in these fiercely competitive marketplaces would be irreparably damaged and disadvantaged to such an extent that any such considerations would never be worth the risk.
As a result, flywheel businesses enjoy another interesting benefit – the customers seek out and readily agree to multi-year contracts - which is somewhat counter-intuitive when you are dealing with new, young companies until you realize just how quickly these kinds of new data services become mission-critical to the customers and just how addictive and additive they can be. The customers (who ordinarily would be reluctant to make longer-term commitments to a startup) quickly start to attempt to sign multi-year agreements for two reasons: (1) they become concerned about the startup’s overall capacity to meet the growing demand for its offerings and they want to be sure that their own needs will continue to be met; and (b) as they incorporate the new company’s products and services into their own businesses, they want to be sure that the company sticks around and stays in business.
As long as the startup retains the ability over time to continue to raise its prices and otherwise adapt and improve its products and services, this is nothing but great news for the new business because it creates unexpected levels of stability, predictable future revenue streams, and assurances that the company’s future is sufficiently secure that it can make appropriate growth plans and also attract first-class talent to what would otherwise appear to be a far riskier opportunity.
So what does all this say about the future of content marketing (which continues to grow like crazy as the big brand advertisers try to create viable and continuing substantive/emotional connections with their customers) and what do you need to be thinking about for your business as you try to determine how to most profitably spend your digital marketing resources?
First, it’s important to understand that we are moving into the second generation of the digital marketing revolution. If the first generation was the brute force ability to get your material (content) and your associated messages out and in front of the digital consumer (on every device), the second generation is all about tracking and measuring the efficacy and amplification of those efforts and getting better at getting it out there all the time. It’s no longer about tonnage – it’s all about transparency and touching the right targets at the right time in order to deliver the appropriate information and incentives to them.
Second, especially in the media/publishing marketplace, accountability is now the be-all and the end-all. No one takes your word for anything these days – no matter how much wine you pour down them - it’s a “show me or see ya” world and the winners are the ones with the documentation and the ammunition to make their cases. If you can’t convincingly connect spend to traffic to engagement (and organic sharing) and ultimately to conversions and concrete results, you really can’t compete for much longer in this space.
We know most of these initiatives won’t work, but we need to know which are working and which aren’t as soon as possible so we can tactically adjust the aggregate dollar spend in order to optimize our dollars and our results. The old idea that you would simply “set it and forget it”; spend ratably the same amounts across various campaign channels; and sit back and wait for the results might have been the only way to go in the old days before we had real time responses and metrics, but it’s a lazy and stupid strategy today.
And even discussing the best post-campaign documentation feels a lot like too little and too late because it’s fundamentally about after-the-fact analysis and not utilizing ongoing actionable insights. The best players are focused on prognosis (prediction and real-time adjustment) rather than diagnosis which is basically all about looking backwards to see what worked. You want to be able to shift the sands under the consumers’ feet and up the ante when you see where it makes sense to increase the spending behind already successful sharing in order to press your bet, amplify the impact, and increase the return on your initial investment in the development, creation and delivery of that content.
And so, in this newest media world, the real winners will be the ones who can not only help their clients track and measure effectiveness in real-time, but whose tools permit them to immediately take the next and most critical actions to accelerate and double down on what is working before these fleeting opportunities pass them by. It’s an old venture capital rule of thumb – you feed your winners and you starve your losers. And that’s where the guys at SimpleReach really come into their own as their rapid growth and multi-line expansion are showing. As I always say, you want to be there when the customer wants to buy and SimpleReach helps its clients track and get the right messages in front of the right customers in order to reach them at the right moment – when they are receptive and ready to buy.
It’s that simple (no pun intended), but it’s not easy and these guys are simply crushing it.
PS: “You Get What You Work for, Not What You Wish for”
