Pattern Recognition, by Ian Sigalow

Selling Courage

Introduction

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Ian Sigalow

Ian is a co-founder and partner at Greycroft Partners in New York City. He has been a venture capitalist since 2001.


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Selling Courage

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How to Succeed In the musical “How to Succeed In Business Without Really Trying”, JP Finch finds himself in a predicament.  In a span of just a few days he ascends from the mail room to the corner office, but in the process he accidentally becomes the Vice President of Advertising (against the advice of his trusty manual).  The advertising role forces him to come up with “good ideas” and his easy career advancement comes to a screeching halt.

The original book for “How to Succeed” was written in 1952, and senior marketing jobs have only gotten harder in the past 60 years.  Public companies change their CMOs every 18-24 months on average, making it the shortest job tenure of any C-level position.  Over the next decade the CMO will become responsible for more technology decisions than almost any other group in the enterprise, from marketing software platforms, to housing customer data, consumer privacy, and the endless breadth of digital point solutions.

When faced with uncertainty, the most common human reaction is to slow down and take fewer risks.  There is a saying that “no one ever got fired for buying IBM”.  In the online marketing world the equivalent would be buying Google search.  Most companies spend 50%-60% of their total digital budget on Google search.  This share continues to grow in spite of the fact that traffic to Google.com is flat.  To Google’s credit they have successfully morphed the design of their search landing page to deliver more advertising over time without losing customers.  What surprises me most is that companies are now spending half of their search budget (or more) buying their own brand as a keyword.

You would assume that someone who goes to Google.com and looks for “Nike Shoes” or “Northface jacket” is already a Nike or Northface consumer.  Yet Google will make billions in revenue this year by putting brand keywords like these up for auction.  And brands are afraid that if they don’t spend against their own trademark that the traffic will be re-routed to competitors.  This is magnified by Google’s web browser, Chrome, which takes shortened addresses (ie. try typing Nike instead of Nike.com) and sends them to search.

This is one of many clever ways that google has out-marketed marketers.  You can imagine that the search experience on Google.com would be awful if you looked for Nike Shoes and had to scroll through a page of Reebok links, so it is clearly in Google’s best interest to show relevant advertising.  In fact Google’s growth strategy for the past five years has been predicated on convincing marketers to spend money against traffic that would convert anyway – effectively turning “natural” search into paid search.

The way that Google has done this is with something called “last click attribution”.  The general premise is that marketers are weighing the activity on google.com higher than the brand building and awareness activity that got users to search for their products in the first place.  One of the tricks is that Google provides marketers with free tools to reinforce this world view.  Have you ever heard the expression “lies, damn lies, and statistics”?  It is more like “lies, damn lies, and Google Analytics”.

For the past two years I have been an investor in a company called Tagman that has solved this attribution problem.  We had a board meeting yesterday, and the conversation revolved around how to define the core of our value proposition for the hundreds of marketers who have chosen us as their partner.  We went around the table – are we selling software?  Multi-party attribution?  My response is that we are selling courage.  At the end of the day marketers need to be armed with better tools so they can take the leap of faith that buying their own brand is not a good use of money.

profile

Ian Sigalow

http://sigalow.com

Ian is a co-founder and partner at Greycroft Partners in New York City. He has been a venture capitalist since 2001.

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