After 15 years of working for someone else Mikaal Abdulla finally got smart and started his own company. He is the co-founder and CEO of 8 Securities. This is part of an occasional series on marketing tips and strategies for startups.
If you are building a consumer internet business, you have probably spent 90 percent of your time on product development, building a team, chasing funding, and defending your decision not to get a “real job” to your mother. If you are lucky, then you spent the other 10 percent getting some sleep. The one area of execution that I typically see Asian startups least equipped to tackle is advertising.
Probably best to ignore Bad Advice Kitty.
As I have written before, there is a dangerous and false notion that products sell themselves. They don’t. Your product will not go viral and anyone that bets the success of their startup on tweets is a fool (and will eventually have to admit to their mother that she was correct). Advertising is to be taken seriously and you need to provision for both investment and time to learn how to acquire and retain customers online. There is no question that startups in Asia have an engineering bias – and that’s a good thing. But we are far behind our counterparts in Berlin, London, New York, and Silicon Valley when it comes to the quality of our UX (user experience) and marketing execution. Today I will focus on paid banner advertising, which is also known as display advertising. (I will cover search engine marketing, retargeting, email marketing, mobile advertising, social, public relations and UX in future posts on TechInAsia).
Online eyeballs
I spent over a decade spending an average of US$20 million a year in advertising for my previous employer (now current competitor). That marketing investment was almost entirely online and distributed into 15 different geographies across Canada, Europe, the Middle East, and Asia. Having benefited from that responsibility at a young age I learned a thing or two about online consumer behavior, building a brand online, and of course the ins and outs of digital advertising on a global scale. I also learned that fucking up once in a while was normal, and success in achieving marketing ROI (return on investment) is done through the systematic process of spend, track, learn, adjust, and then scaling the investment when you see returns. Even today, I accept that 70 percent of my teams individual advertising campaigns will either fail or break-even, but it is our job to ensure that the 30 percent that work get the majority of the investment and can scale up fast. It’s not dissimilar to the portfolio theory of a venture capitalist. They know most of their investments will fail but their ability to rapidly identify and ramp up investment in the winners is the name of the game. Treat your marketing tactics and campaigns the same way. Without some level of risk there will be no reward.
When I launched my startup into the very traditional bricks and mortar consumer financial services industry in Hong Kong, I had a theory that it could be built and operate entirely online. I had faith that consumers had evolved faster than the businesses serving them. I saw a disconnect between consumers demands and the stale business models that faced them. This was simply the opportunity. 8 Securities is new company going head to head with huge competitors such as HSBC and Bank of China. If we want to win in the long-term, we have to acquire new customers at scale, add value to their lives and strive every day to make them happy. In 2012 we will have spent approximately US$500,000 in advertising and 100 percent of that is online. Here are some lessons learned and recommendations that that I hope are useful for you.
Tip #1: It all starts with your value proposition
As a consumer internet startup, your paramount objective is to solve a problem for your customers. In doing so, you need to crystallize what differentiates you and precisely how that benefits your customer. Only once you have done this can you begin to think about your message to the market.
Defining your value proposition is no easy task. After nine months in the market we are still refining ours as we are constantly learning from our customers and striving to meet their needs. What we thought might be a benefit often has no resonance with customers, and only by listening do you really understand their pain point and the solution. Your value proposition and your brand have a symbiotic relationship in that one can not live without the other. Your brand is your promise to the customer. Your brand equity is what is left after you subtract your brand’s value proposition with that of your competitors. Marketing can not be effective until you are very clear on how you will position your value proposition in the market and and ultimately in the mind of your customers.
Many of the “marketing professionals” across Asia maintain a false belief that brands can not be built exclusively online. Furthermore, many media planners are still very traditional in their thinking and will advise you that “offline” marketing is a necessity to build brand strength and trust (they also earn more from traditional media). Leave the “offline” advertising to your competitors that are dinosaurs and focus your marketing efforts online where your customers eat, sleep, and breath. With the exception of any public relations you are able to generate in the press or TV, I would ignore the offline channel all together. Marketing in print advertising, outdoor, and on TV is a luxury and certainly not a necessity for a company born on the internet.
Tip #2: Banner advertising and the economics of lead acquisition
The first online banner in history belonged to US telecoms company AT&T. It was hosted on a website called Hotwired and got an astounding 78 percent click-thru rate. The average click-thru rate today is 0.07 percent – and falling fast. Online banner advertising is tough but if you crack the code it will give you a tremendous competitive advantage and a much lower acquisition cost per account than more traditional competitors.
The main advantage of banner advertising is that you can scale it at a rate not always available through paid search. There are three main variables you must optimize when running online banner advertising. First, you need to negotiate a viable CPM (cost per 1,000 impressions) if you are not running a pay per click campaign. Theoretically, an “impression” is defined as each page load where your ad is displayed in front of a real set of human eyeballs. That said, a vast majority of your purchased impressions will not be seen as we have trained ourselves to ignore advertising as we browse content. This is among one of the biggest factors why we have seen click-thru rates plummet.
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