It is not the money spent on marketing that makes a startup successful

Posted on January 26, 2008
Filed Under Internet tutorials, Online business

After weeks without writing any posts I have decided to share with you some ideas about startups that might be insightful especially to those of you who are planning to launch the fifth youtube-like site.

1. there is no clear correlation between investments in marketing and long term website profitability

The idea behind it, is that in the long run marketing is almost reluctant. 99% of profits are due to word of mouth and recommendations from people you trust. What may investors forget is that to most of us it is important to have someone who tells us what is important or good. It’s not a matter of immature behavior. We simply want to get confirmation that a startup or website in general is worth spending time on.

2. marketing is a short-run medicine, you need a really competitive product to become profitable

Well, if “content is the king”, it basically means that quality is the most important thing. Frankly speaking there are some exceptions like MySpace, which is an extremely (an too) simple tool, to many observers (including me), but usually no one would visit a site that is worthless more than once.

3. scale effect is vital. Critical mass must be reached to have occupy a relatively safe position on the net

An experience I had advising an investment company is that you need to reach a significant amount of users to remain competitive on the market. Basically, you need to be number one, two or three in your category and have scale effect not to be cut out of your niche. This is vital for social networking sites in particular.

In a nutshell: good reputation –> good service, product –> scale effect