Marketing BS: Everything becomes the Same Thing
Good morning everyone,
I hope you enjoyed the long weekend break.
Today’s essay connects some recent news about Clubhouse rivals to some evergreen thoughts about marketing agencies and customer acquisition.
Entering the Locker Room
Last week, Spotify acquired Locker Room, a sports-focused audio chat platform. According to an article in The Wall Street Journal, the deal values Locker Room at around $50 million.
As I described in my recent essay about Clubhouse, community conversations for live events could be a popular use case for audio chat platforms.
Imagine turning on your TV to watch a football game, muting the (tiresome) EPSN announcers, and then listening to live commentary from passionate football fans?
In terms of functionality, Locker Room bears a lot of similarity to Clubhouse: hosts create “rooms” where people listen to guests speaking on “stage.” Plus, there are options for listeners to “raise their hand” and join the discussion.
Locker Room was specifically built with features and functionality that enhance the fan experience. In addition to connecting with friends, users can find other people who follow certain sports and cheer for their favorite teams. For hosts, Locker Room simplifies the process of creating content. After each live recording, the app sends the host an audio file — which they could easily convert into a podcast or social media clip. (Locker Room gained credibility within sports fandom thanks to seed funding from some NBA stars, including Kevin Durant, Andre Iguodala, and Baron Davis.)
The acquisition makes perfect sense for Spotify. The company wants to “own” audio in all forms and channels. As such, they are moving quickly to bolster their competitiveness in the world of live audio chats — where Clubhouse is currently dominating.
Spotify isn’t the only tech company that views live audio chats as a “feature” rather than as a “standalone platform.” In April, Twitter plans to launch “Twitter Space audio rooms.” Both Facebook and LinkedIn are not far behind.
Two weeks ago, Slack CEO Stewart Butterfield revealed — during a conversation on Clubhouse — that his company was in the process of building a number of copycat products. Note: Butterfield didn’t actually use the word “copycat,” but...check out the list of planned features:
videos that disappear in 24 hours (like Snapchat Stories)
direct messaging across companies (like Facebook Messenger and even email)
audio rooms (like — of course — Clubhouse)
Here is a telling section of that conversation between Butterfield, Clubhouse CEO Paul Davison, and Josh Constine (former editor-in-chief of TechCrunch):
I don’t think I can express my reaction better than my fellow Canadian, media strategist Matthew Ball:
In the face of copycat tech culture, it’s easy to be cynical. An upstart company like Snapchat can originate the idea of “stories,” which is then copied by Instagram (“Instagram Stories”), Twitter (“Fleets”), LinkedIn (“Stories”), Skype (“Stories”), and now Slack. At least Twitter was creative enough to come up with a new name!
When TikTok burst onto the social media scene, it didn’t take long before Facebook and YouTube began developing clones (“Instagram Reels” and “YouTube Shorts,” respectively).
Now that Clubhouse has become the rage, the other platforms are rushing to duplicate their model. And if all the other social networks can copy the latest product trends, then why not Slack, too?
Marketing Agencies and Customer Acquisition
Building a successful marketing agency is hard. There are LOTS of agencies out there — what makes your one unique? How are you going to acquire customers?
Here is one way to stand out: become really, really good at some element of marketing.
Suppose you were the CMO of a company that led the industry in customer acquisition. You could use your cachet (and expertise) to launch your own agency — executing the exact same strategies that you were performing in-house. David Atchison followed this path. As the CMO of Zulily, David helped grow the online shopping company from fledgling startup to billion-dollar platform. After David left Zulily, he created an agency that focused on the same ideas and tactics he was previously implementing at Zulily. (I recommend checking out my interview with David; he shared many sharp insights).
Like Zulily, David’s agency — New Engen — excelled at paid customer acquisition. And yet, that was not how New Engen built their customer base. For starters, they were supported by some very influential financial backers. Those investors connected David and his team with other companies in their network (some of which they also funded).
Being “good” at marketing was essential for David to secure financial backing and connections. After that, though, David’s exceptional marketing skill was no longer the lever used to expand the business.
What mattered more for New Engen than marketing skills? The ability to build a strong sales team that could convert their friendly connections into paying customers. Even after acquiring a new client, New Engen’s marketing competence did not matter that much. Clients obviously cared about the quality of their marketing campaigns, but most clients could not differentiate between GOOD marketing and GREAT marketing. Clients did care, however, about New Engen’s responsiveness to their needs. Ultimately, New Engen’s success hinged on the efforts of their customer service department, rather than their marketing team — the ostensible raison d'être of the company.
The hardest part of building an agency is NOT developing more effective marketing tactics; the hardest part is finding a channel to acquire new customers. And it turns out that the easiest way to acquire new customers is by cross-selling products to your existing customers.
Most agencies charge a percentage of their clients’ spend. This standard practice is not perfect at aligning interests, but it’s pretty close. If an agency can improve your paid search ROI by 30%, it should be an easy decision to pay them 10% of your spend to implement those strategies. But once an agency has optimized your paid search, how does the agency get bigger? They could convince you to spend more on paid search — and you may want to do that! As your ROI improves, you will naturally want to shift more resources into that channel.
But sooner or later, you will hit diminishing returns. The agency can always improve your paid search, but once an account is highly optimized that often results in REDUCED spend — which generates less money for the agency. If an agency wants to grow their relationship with an existing client, the solution often involves taking on additional channels.
So, a marketing agency that built a loyal client based on their best-in-class skills for (say) paid search might begin offering services in paid social acquisition, then display marketing, then SEO optimization, then affiliate management, then television ad buying, then re-branding creative design… and so on.
Eventually every successful specialized agency becomes the same agency.
Every Job Becomes the Same Job
At any workplace — like a software company, car dealership, or construction site — the entry level roles require very, very different sets of skills. At the entry level, the most important skills are based on the core tasks performed by the employees (e.g., programming software, selling cars, or using tools).
Managers for all three of those jobs also require significantly different skills from each other; after all, they need to fully understand the details of the core tasks so they can coach their team. But the managers’ jobs also share some common responsibilities (e.g., scheduling employees, ordering supplies, etc.). As for the managers of those managers, they are even further removed from the specific skills and tasks of the entry level roles.
With each step up the corporate ladder, jobs become more and more similar.
Senior leadership positions demand competencies in areas like strategic direction, developing talent, and communication. Those skills are slightly different for various industries, but there is clear transferability from one sector to another. CEOs switch industries all the time.
When starting our careers, we focus on different tasks and skills. But the further we progress in our careers, the more we all start doing the same thing.
Just like marketing agencies. And just like social media networks.
In 2013, Paul Graham — the co-founder of Y Combinator — wrote a famous essay titled “Do Things That Don’t Scale.” Graham argued that when you are small, you need to find a way to get big. The best tactic: do things differently. Be unique. Hope that your distinctiveness generates some success that you can leverage to ladder up and grow into something large.
For example, suppose you wanted to build a new social network that directly competed with Facebook. If you tried to launch a product that matched all of Facebook’s (expansive) features and monetization options, you wouldn’t stand a chance.
But, history has shown that you CAN find success by focusing on a unique social element:
short snippets of text (Twitter)
photos with cool filters (Instagram)
professional network connections (LinkedIn)
messages that automatically delete (Snapchat)
short-form video (TikTok)
live audio chats (Clubhouse)
...and so on.
Each network needs a unique element to capture an audience. After securing a core group of users, though, the company’s best plan for growth relies on the development of features that will meet ALL of their users’ needs.
Instagram expanded from a photo-sharing network into a product that also offers video AND auto-deleting stories AND audio rooms. Just like Twitter and Snapchat and LinkedIn and Slack and Spotify.
“Come for the feature, stay for the network (and all the features).”
The sameness of all platforms boils down to one thing: customer acquisition is the hardest part of the business.
Keep it simple,
Edward Nevraumont is a Senior Advisor with Warburg Pincus. The former CMO of General Assembly and A Place for Mom, Edward previously worked at Expedia and McKinsey & Company. For more information, including details about his latest book, check out Marketing BS.