Should an internet startup outsource its marketing activities?

I was speaking last week at a Panel on Internet startups and Branding. One of the underlying assumptions to this panel was the fact that in Israel we are strong in making great technos but not so great at marketing them. I would say this is strongly changing mainly because a new wave of entrepreneurs is getting more and more exposed to consumer ventures and face the challenge to build brands and service that address directly the end user specially in the internet space.

Historically most high tech ventures in Israel have been non end-consumers oriented and more enterprise focused. I remember when i first arrive in Israel four years ago i could count on two hands the number of companies with an international internet consumer brand.

This has now changed a lot. You can find here dozens of new projects addressing directly end users. But those project have to face the difficult phase of attracting users and keeping them. Which requires a strong marketing culture within the company.

One of the attendees defended the idea that the same way you can outsource finance, legal and other stuff you can outsource marketing in order to solve that issue. I answered this was wrong to believe that someone else can do better something that you should do with excellence from day 1.

Finance and Legal are very rarely key competences in the young life of an internet startup. they are important but not key. Therefore it makes sense to outsource them. But if your service is all about seducing, attracting and understanding the user, the marketing is a key competence of the company. Even more: the whole DNA of the company should be imprinted with marketing. From the CEO to the product team. Marketing is not a function or a title: it is the company. Marketing is about having a great product, a great user experience, a good logo and brand identity, a good customer service, a good distribution road map, a good customer acquisition program and even more important a good customer retention program. Marketing is not about sales (which is always mistaken in israel where there is only one word for both). Marketing is not Business Development. Marketing is about how your company interact with your users at all level.

I do not know any successful web service that did not have a great understanding from within when they started. And one of the key symptoms of that is the quality of the execution. If you do not know how to execute well and assimilate fast the feedback around your execution there is low chance you'll make a difference and there is low chance your users will feel it too. This is why it is recommended to get out there with your product early and start to learn on to improve things with your users.

Let's take PR for example: do you need a PR firm from day 1? There are great PR firms out there, but you can start to do the job without at least at the beginning. StyleShake is a company we have invested in: they do not have a PR firm, not even a PR person inside. but the product and the concept is so good that they are naturally covered by the best papers and blogs (BBC, Wired, Financial Times, SpringWise...)..If this goes one they will have to scale it probably with a PR firm. But for now they do very well. You can the attention of bloggers by simply talking to them directly (of course not by sending a Press Release) or by being smart (Twitter for example just put wide screens at SXSW conference last year to get attention of bloggers)

If you think you don't have the necessary skills inside the company for that, then here is my advice: spend all your energy in finding the right key persons and bring them within the company.

Later, with scale, once you have proven you start to find the right pattern for success you will need to outsource some part of it (PR, media buying, SEO, strategy maybe,..). If you have some budget you can afford a consultant that will assist you. But outsourcing rightly is not replacing what you should already know and it requires time and skill.

There are at least 3 good reasons you'll never get a great outcome from a marketing provider if you don't know how do it yourself

• You won't know how to best select your provider
• you won't know how to best brief and pilot your provider
• You won't know how to best evaluate him

Like a great yogurt brand says in its base line: all the goods things start from within

Comments

[Miriam Schwab]

Hi Ouriel! Your points about marketing are very good. Companies need to see marketing as an integral part of their business activities. I still work with many companies who view marketing as on par with secreterial services, and they treat their marketing department as such.

In terms of the success of outsourcing marketing services: it depends on the company's approach to marketing, as you said. Companies that take marketing seriously and still manage the strategy, but need to outsource certain parts of it due to manpower limitations, seem to do well in this department. Those that view marketing as unimportant cannot successfully outsource this part of their business because they just don't take it seriously enough to work closely with an outsider.

In short - in my opinion outsourcing marketing can work, and work well, if the company in question understands the importance of marketing.

[Ouriel Ohayon]

Miriam i agree with you. The first is realizing how crucial this part is. But the second is realizing how important you need to internally control and understand what marketing is all about. Outsourcing is a consequence not a reason for success

[Omer Perchik]

Hi Ouriel,
Great post!
I believe that the Israeli online gambling industry had thought the Israeli web entrepreneur the great value of marketing.
The highly skilled marketing experts of 888.com and empire online are more than marketing evangelists, they are marketing GURUs!

[Uriah Av-Ron]

Hi Ouriel,

As the guy who made the comments about finance and legal last Thursday, my point referred to monies spent on hiring lawyers and accountants VS. monies spent on hiring marketing people, as well as the revolving door of hiring and firing marketing people (at Israeli start-ups).

I do agree with you 100% that marketing should start and be internal.

As a marketing consultant, one added-value of an external consultant is objectivity. When start-ups spend hours breathing, eating and sleeping their business, they sometimes miss some the market's perspective which an external person can help add. Of course, marketing (not sales) people must be speaking with customers and prospects daily, which all too often does not happen.

[Mr Boin]

Good point, but is 'Marketing' the right term for all that? I keep having cultural gap problem when talking marketing the way you do with other person and I ended up adopting alternative name (social-marketing, community building, experience design, and so on).

[Or-Tal Kiriati]

While I do agree that marketing should be a part of any company, there are various stages for various capacities of marketing. You do not need a full time marketing all the time when establishing the company. And saying the CEO should be both CTO and the Marketing Manager - is dangerous.

Here is the problem: Most entrepreneurs are tech oriented. They are not marketing people. The best thing for them to do will be to create a partnership with a marketing oriented person that will become a co-founder.
But some are reluctant to do it. Certainly at the earliest stages. Also, not so many marketing people will leave a good job for an early-stage startup.
However, there is the middle road. One that can allow entrepreneurs to develop marketing thinking for themselves and for the company they are establishing, even if they are not originally marketing people: That is to hire a consultant. A helping hand, to ask the right questions and to assume the job of the marketing thinking.
One of the diseases of the startup market is tech-people who believe they "know it all", technology, marketing, industry... The failure to recognize where they need assistance creates the average arrogant entrepreneur that can fool the environment only up to a certain point.

[Ouriel Ohayon]

one of the vertues of a good entrepreneur is realizing its limits. A good team will be a team where key skills are represented. If the team if only or too tech oriented, no matter how good the external assistance can be, the project is likely to fail.

[Ran Rubinstein]

My impression is that VCs/Angels expect you to have the market all figured out in your business plan. How can I allocate money for marketing (not ads/publicity/sales) in a seed-stage startup when everything is supposed to be figured out before I get the money?

Marketing is an activity for bodies with resources, who need to decide what to do with those resources. Enterpreneurs are to VC's what Marketing officers are to growing companies - we do the marketing work - the VC funds the execution (which usually includes PR, sales efforts, etc).

Ran.

[Ouriel Ohayon]

i can't speak for other VCs. but what i can tell you for a fact is that i do not expect the market to be all figuret out. for a simple reason. this is not possible. what i expect is to feel that the team will be ON THE GO able to figure it out and have the industry understanding and experience that will enable them to do that. It is clear that things change very fast on the web. It is liley that new competitors will come out. some will die. New services will challenge pricing....therefore figuring ot the market from day 1 does not make sense to me and is a wrong expectation.

[Eyal Beit-On]

Good to see this discussion Ouriel and a great post.

As a consultant I agree with letting the client develop the marketing strategy from within and based on the business model they created. I also think once the client reaches "marketing maturity" they can decide the extent of outsourcing that suits their needs/budget.

[Jenia]

" Marketing is not about sales (which is always mistaken in israel where there is only one word for both). "

Are you sure about that ?

there's "mehirot" - sales
and "Shivuk" - marketing

[Ouriel Ohayon]

Well Jenia, this is the problem, there is another word for Sales but people do not use it and believe marketing is sales. Maybe this has been influenced by the retail industry or the fact that in hight tech b2b both are very close....

[outsource It provider]

Hello Ouriel your article is so helpful, i never imagined that a PR firm is possible, and its amazing that behind the success of bbc and wired is this firm. I agree that a thorough understanding about marketing will really boost up an outsource provider's ability to give quality service to the customers they have.

[ComputerScreensavers]

Men, U cool!!!

[Screensavers]

U cool, man!!!