Users First, Brands Second
I like simple ways to think about things. Like mobile first, web second. These kinds of constructs work for me. One that I've been using a lot lately to describe what we like and don't like as much is User First, Brands Second.
When you are building your product and thinking about your go to market strategy, you need to decide who your first users will be and how they will take your product into the market. You can focus on getting everyday internet users first. Or you can focus on getting brands first and working with them to get users. This decision is critical and will impact almost everything about your business going forward. So don't make this decision lightly.
There are some great businesses that have gone with the Brands First, Users Second approach. Two that come to mind are Groupon and Buddy Media. They are very different businesses but both go first to brands, work with them to craft offerings for users, and then work to get those offerings in the hands of users.
Contrast that with Foursquare. The Foursquare app launched without any brands on it and went after user adoption directly. Today they have over 10mm registered users. Millions of users engaged on the Foursquare service attracts brands. And the brands come to Foursquare without much effort on Foursquare's part. This is the User First, Brand Second approach.
Facebook, Twitter, and Tumblr are all User First, Brands Second services. The brands are all over these services now. But for the most part, these services didn't do much to bring them. The engaged users did.
Our firm vastly prefers the Users First, Brands Second approach. I don't want to say definitively that we would not invest in a Brands First, Users Second business, but it would have to be something very interesting to get us to do it.
We do have several portfolio companies that took some version of a Brands First, Users Second approach to market. WorkMarket brings large employers and staffing firms onto their platform who put work orders into their system. That brings workers who pick up the work and get paid via the Workmarket platform. SoundCloud initially targeted audio content creators who put their work on the SoundCloud platform and according to Quantcast, that audio content brings over 14mm people a month to the service. But in both cases, these services launched day one with a valuable offering to both brands and users and they were not crafted specifically for the brand's benefit. That is a key point to be focused on.
The biggest problem with a Brands First, Users Second approach is you can get caught up in product development efforts to satisfy the brands and as a result you can't put enough energy into satisfying the users. And if that happens too much, you end up servicing the needs of the brands over the needs of the users and then you are a service business not a platform.
So when thinking about whether or not your company is a good fit for investment by our firm, think about whether your business is User First, Brand Second, or the other way around. That will be one of the first things we focus on when we evaluate it.
Comments (Archived):
Thanks, I needed that.
that’s a great first comment to get!
WOW. I might have jumped the gun and started out with number 3 and now working on number 1 but what a great read from Fred’s post and all through the comments. Great way to make a mid course correction.I have it written down, pinned and constantly in view.
Awesome post, Fred.When my new company got started on March 1, I told my team that we started out with two things: a talented team and amazing technology, and we needed three more to build a sustainable foundation for our business: an insanely great product, an engaged community of users and ecstatic partners.The sequencing of those five things could not be any other way.
ooh i like thatteamtechproductuserspartnersnice coreography of a startup
aaron/fred – i agree wholeheartedly. that’s a great “generic script” for a startup. just mix in the usual twists and turns and iterations (and highs and lows and nights and weekends), along with the right product at the right time, sprinkle it with a bit of luck, and it all magically comes together…
There have definitely been a TON of twists, turns and iterations. Many of our original assumptions didn’t survive Beta 1. :)But I will say that I’ve talked about those five things we need on a regular basis since Day 1 and it has kept our team focused on what we need to deliver to build a great business.
Dunno. we took the approach of:teamproduct solutiontech(users)(partners)Maybe I’m defining “product”differently than you all, but a great team can build great tech for a market need/product. If there’s no product need, doesn’t matter how great your tech is. Bitten me about 1000x over the past 10 years..
I read @aaronklein:disqus ‘s meaning to be “solution” where he says tech. I think you’re both saying the same thing.
Yes, you’re right Cam…I just posted a longer reply above but you hit the nail on the head.
You both – Aaron and Cam – be right if it comes down to semantics.My expectation would be that the question revolving around what “Tech” to use would be answered in terms of the choice to be made as to “How” the product is to be delivered to “Whomever” is targeted as the “User”.For example: Is the product something to satisfy exclusively the mobile user market as may be the case in a game or is it to satisfy both the mobile and the conventional browser based market as may be the case between a shopper and the retail store they are visiting or is the product exclusively a B2B service providing smoothed integration of inter-related Supply-Chain process and work-flow/order data in a manufacturing and/or distribution network? The most efficient and effective Tech will likely be quite different in just these few examplesThus consideration of both Product (tech consideration start point) and Target User (tech consideration end-point) will most likely determine the nature of Tech that is adopted for the most effective delivery of service or product ~ particularly so if the process is designed to also enable cash transactions and money transfer.Nonetheless, all three are intimately related and the heirarchy suggested here is excellent as a basic startup components reference list.
Great stuff.In our case, the tech I’m referring to are the core algorithms that allow us to pinpoint a user’s risk tolerance.We had that from day one – but it wasn’t usable as a product, so that’s been our core focus since getting started.But in our case, it was enough for investors to fund a nice pre-product seed round at a conservative valuation.
Terrific Aaron. I’m glad you have explicitly mentioned this aspect of using tech though I would refer to this as using business data – simply semantics in this case. Thank you. In all the years I’ve worked with clients it is no longer a surprise to come across yet another business that is not aware of the benefits of business intelligence or even basic CRM. Clearly you know about that value and are already on the right track in your approach to building your business. Sent from my Verizon BlackBerry via BES on XO hosted Outlook.
You’re very right…market need is always a precursor to building a product. Frankly, that’s almost an element of each piece.You go out and try and assess the need and build a team to fit that. You shape your technology and product to fit that. Your user acquisition plan is focused on your learning from that. Your partner strategy is centered on it too.My use of “tech” and “product” comes from having two layers to deal with in our startup: the algorithms at the core of our solution, and the product to deliver the benefit of that core technology to users.
Got me thinking about where investment fits into the team>tech>product>users>partners model. Maybe something like this chart… (of course each startup has a different curve and different markets have different thresholds). Interesting to note that investment isn’t part of core value creation… but rather something that’s triggered once enough value has been created. And thanks to disqus for allowing image uploads.
Ooo, I like that a lot. Thanks for sharing.
heh, thanks!
Love this visual – it was really easy for me to pin point where we were on this.
Thanks. Really though, just another example of great community and the role the service plays. It’s the product of a great comment by @aaronklein:disqus and subsequent distillation by @fredwilson:disqus. As I was typing a reply I the image popped into my head… and seeing that I could add an image got me to take a few moments to actually create and share it.
thank you!
great chartlove it
That’s a great chart. I don’t know if my company is going to fit that exactly, but it’s relatively close.We raised a decent seed round at a conservative valuation on the strength of a great team and great technology.We’re tantalizingly close to that insanely great product, even though we’ve shipped less than 10% of our vision.We’ve got a lot of hard work to do to build an engaged community of users, and I feel like we could finance a successful “A” round off of that accomplishment alone.I’d love to have some partners and revenue in place, though.We’ll see!
This is really well put!
cool
agree with comments below that there’s no point in building out serious tech if you haven’t validated the product need in the market. So for the kinds of investments fred makes, I think product and users typically come first, and then tech becomes increasingly important. Nor do I think, in most cases, people are raising seed without users, exceptions with well-known founders notwithstanding.
visionscience (that is stupidly struck)tech (fallowing the stupid science)product patners and supliers. hmmm…. the humble user.
These are the exact categories that I had in our Profile sheet, except that Tech & Product are merged together. The technology is inside the product. And customers will group users and partners. So, a simplified list would be:TeamProduct/TechCustomers (users, partners)and the fourth key variable is the MARKET. Is there a big market for these 3 to flourish.
You have just structured my thoughts. Thanks
Glad to help! I definitely didn’t try to patent it, so use freely. 🙂
Fred, my shorthand for this is:B2C2B –users firstB2B2C–brands firstI would quibble with you that GroupOn is a ‘great business’ based on their customer acquisition costs and that they simply gave lip service to the initial threshold viral loop component. That to me is their design lapse.B2B2C is a flawed model at its core. You don’t own the customer. You hand your brand to a partner to manage. You are not master of your fate.B2B generally works certainly. I spent a large chunk of my career in tiered distribution scenarios, but today, tiered or not, you need to own the touch point to the customer.There are many corner cases to this of course, but this has worked for me.
shorter and possibly better articulation of what i wanted to say arnold
I don’t know about that Fred.This is an important topic because we all follow the money and brands have it and must spend it.I’m seeing more and more B2B start-ups trying to figure out the community piece. And lots of B2B lead gen models. Tricky but they are simply networks or communities pushing the transaction forward to the brand.
Yes follow the money – but of course the brands, they follow the users 🙂
Absolutely.C= Customer and the world revolves around them (as it should).
Andrew, I think your first post here is way over thought. All the capital letters and 2’s are silly – not a personal shot, I went to a 12 step program to get rid of them!This post is the right answer – focus on your customer.My rule is to count the pieces required to satisfy the user (and, more importantly, how many entities need to be knotted together to provide value consistently).Too many pieces or partners, you just can’t do it.
you should get in to VRM arnold. Its going to flip the entire marketing value chain on its head.
Thnx MarkCan you send me a couple of links or thoughts to get me going on [email protected] is good.
just did
if you are the bartender – i am a chronic alkie 😉
OpenTable is a B2B2C business model. They first started by signing up restaurants (B2B) with a table management and reservation system. The initial value was very B2N focused and even without users making online reservations they solved a problem for restaurants managing their inventory of tables. Over time the consumer side grew as more people became comfortable making table reservations online. The model works well and they have a nice business with high barriers to entry.
Great example.
looks like disqus is having some difficulties today, wrote a comment and it disappeared…Anyway, great post again as always Fred =)One thing that can get tricky tho is to become blinded by the first type of customers you have and completely forget about the other one.Google with plus is doing something rather strange in this regard.Much like mobile first, desktop second, at one point, you need to have the two and be working actively for both of them.In terms of users and in terms of “mobile first” it’s something I think Foursquare did pretty darn well. In contrast, Instagram for instance is creating a huge gap in this area (as of now, I’ve yet to see something decent for their web app and I haven’t heard of anything coming for brands, but they might be working on it as we speak…).
i saw your first comment Laurent. strange indeed
Ha!We’ll be the only ones who will ever know what was in the ghost comment =)Pretty sure I missed a few things I wrote before when I wrote it again but the general idea is there…
I had the same problem to, tried 3 times to comment each time it disappeared, I hope you don’t get three copies!
No apparently not. I’ve refreshed the page several times and tried on different browser (ones where I’m logged in on disqus and others logged off), and even on the Disqus dashboard but the post didn’t show up.I’m guessing there was either a glitch in the matrix or maybe one of their servers had a failure at that very same time hence the comment disappearing.I’ll just have to remember to write my comments on my desktop first or at least copy them before hitting the post button if I make a lengthy one next time =)
Seems like some of this is driven by the business being created. The initial value prop with Foursquare is user to user. The initial value prop at Groupon is user to partner.
Thanks Fred. Where does a Twilio investment type of investment fit ?… “would have to be something very interesting to get us to do it.”
we are still trying to build an investment thesis around twilio and mongo. they are doing great as investments. we think large networks of developers around a platform has strong network effects, drives growth, adoption, and builds defensibility. but we need to nail this thesis down as we do more of this kind of investing
Well you’ve got your “user first, brands second” part of your portfolio, and with twilio and mongo you’ve got the “hard as rock foundations” to support consumer centric apps/services.Both Twilio and Mongo are what makes “user first, brands second” type of companies work and scale. By going directly to developers regardless of type (users or brands).
It’s interesting that you invested in these startups and years later you’re like “Yeah, we gotta figure out why we did that.” ;)But it’s an even broader question: how does your investment thesis translate to enterprise startups? Most of the elements of your thesis seems to apply mostly to consumer startups.
Just like going after brands can hijack product development, so does going after underserved users.If you want to be disruptive, overserved users and non-consumers is where the game’s at.
Build for the 80%!
Great advice. Glad to hear an investor saying this! I just wrote something similar for music industry startups (http://j.mp/q1lYDf ). MySpace is the poster child for putting brands before artists and end-users…and look what happened to them.
Reay Great HelloWow Best Article ! My Name Fahid Pervaiz From Pakistan.i am Seo expert,web designer, web developer .http://bestseoservicespk.com/
I think many people are nieve when it comes to how big brand marketing and advertising works. It’s not a short process – many brands like to be fast followers vs. leaders and the issues around their budgets are complicated with multi-layered decision proceses.Better to get user traction first (i’d say even in the case of BuddyMedia that’s true where their users are in fact big brands) so that you have a pull vs. push strategy – meaning Brands want YOU – Case and point Facebook – Many marketers and agencies hate dealing with Facebook – but in the words of one Media planner “they are dick heads we aren’t allowed to ignore”
Identification of the primary customer is of utmost importance. Once identified it dictates the flow of resources and structure of the firm.The adjective “primary” is crucial. Resource have limitations and if you don’t focus 100% on your primary customer someone else will.And as with users or brands the primary customer isn’t always the group who pays the bills. An example of this is Harvard, the students pay the bills, however Harvard have identified their primary customer as the research branch of the university. With the research and findings creating the conversation that make Harvard what it is.
Gr8 post. Spiceworks comes to mind – they have over million users. They started with a great product first – free network management for IT professionals. But, their customers were affiliates who wanted to get their products in front of the IT pros.I feel they did most of the things right in nourishing the ecosystem by developing their user base first and then bringing brands to the existing user base.
In my view, user engagement first, user growth second, and then brands third. There’s a reason FB (for example) touts active users and 4sq / twitter just overall registrations with no mention of active-rates over-time.
i wrote about that a few weeks agohttp://www.avc.com/a_vc/201…
Define active users.. once per year? 😉 Once per month? Are they active on Facebook because they loaded a website with a widget, and they happen to still be logged into Facebook?108% of stats in press releases or media consumption are made up.
You’re absolutely right Matthew – Facebook’s “actives” are gross over-estimates of actual use on Facebook proper. E.G. “liking” anything on a 3rd party website once a month is an active user??Their internal mandate is to make their user base appear as large and engaged as possible in order to attract and sell as much advertising as possible. While it might work in the short term, over the longer term any metrics related to engagement per “active users” will reveal the hollowness of the claimed “actives”. They better hurry up and IPO before that happens.
Facebook’s going to fail / become much less relevant in the end anyhow; Mark didn’t have the base insight of exclusivity to cause Facebook to grow – he stole it. If they did have someone capable at the helm Facebook would be quite different IMHO.I’ve said it before on here, and I’ll say it again – they don’t understand social. And what they’ve clearly shown is exactly what you’re saying, which is to bump the appearance of a very high valuation, but they don’t have that spectacular of technology – and they haven’t had that much time to fail, except repeatedly with privacy; Google has had lots of time with raw search data and time to analyze it – they know what they’re doing; I’ve pretty much figured out what they’re doing too and I’m building my puzzle pieces + I’ll one-up them if I find supportive and intelligent investors once I’m ready. I have a short series of posts I actually want to do pointing out what Google’s doing – which is they’re aiming for $300 – $500 billion a year in revenue / profit.Although I see they’re smart to copy what Google’s doing with G+, and actually they’re copying Twitter now too to make non-friend news more common, because we all know people are actually boring and we don’t *really* care about what more than maybe 3 of our casual friends have to say, maybe 5 on a good day.P.S. I’m an unreasonable man. 😉
I think there’s a bit of a false assumption at place here (or false something, I’m not sure if it’s an assumption, anyway…)Buddy Media is a B2B business. It provides businesses (brands) with a way to manage their relationships with consumers (on Facebook). It doesn’t need to market to your definition of consumers – its consumers are brands. From your description, WorkMarket is similar – it wouldn’t work without the brands (there would be no jobs for the consumers to apply for). Ditto Groupon – no brands, no deals, nothing for the consumers to take advantage of.A better matra would be more like Fight Club: the first rule is build your product for your users, the second rule is build your product for your users. The key is understanding who your users are, and whether this will change as a product develops (so Foursquare needed consumers as users before it could attract advertisers, who are a different type of users, to pay for the services it offers to its original users).But you’re right that if you end up chasing the advertisers at the cost of sacrificing your original product, then a future as the next myspace beckons.
The natural way of interaction between users (consumers) and brands, I believe is users first and then brands follow. The whole commerce is working opposite, since forever, just because before Internet consumers (users) where not able to integrate meaningfully and take the driving seat. I believe that will change and create great opportunities for consumers/users as well as for entrepreneurs and investors.This post could’t be more on the same page with what we are doing right now.
I see the Brands First model as being particularly relevant for middlemen. You need to bring in suppliers before customers will buy from you. Akin to a retail store – without inventory, you won’t make any sales.
Great post for “Steve Jobs Day”. WWSD? First and foremost, build a great product that Users will love. Everything else is secondary…the rest needs to be done and won’t always do itself….but without a great product, who cares?
Steve Jobs create a “Real Product” = hardware. Than he create the “Services/feature” = software. Many of you talking about products as software. All software runs on real products = PC’s and cellphones/smartphones. The approach of the business model methode you choose depents on “Real Products” or “Services/feature”.
I think of Product as everything that the User interacts with or relies on.
exactly. If users like to be there (i.e. facebook) brands will want their faces there as well!
The way I think about this issues is: “What needs to be done to provide immediate value to the end user?”. If the answer to that question is “More users” then you focus on Users first, If the answer is “More Brands”, then you focus on Brands first.The value to the end user on Foursquare, Facebook, Twitter, Tumblr increased tremendously if there were other users on the network, so they needed to be Users First, Brands Second. Groupon would have no value to the end customer without Brands, so they needed to be Brands First.
Being a young entrepreneur, it’s taken a while for me to understand that you should think about the early adopting customer (whether user or brand) at the outset and not just the product offering.
Great post. Fred, do you still believe in mobile first, web second as strongly as you did in the current tech landscape as you did when you first posted about it?
yes i do
IN FEW YEARS, WILL BE MOBILE FIRST… AND THAT IT.
Well, really – everything is mobile, even the browser.. I hope people don’t take this too literally. There are some things a browser offers that smartphones can’t. I would include browsers in with tablet-size mobile devices as well..
DEVELOP FOR TABLET, PHONE, DIFFERENT. DIFFERENT UX, DIFFERENT METAPHOR, DIFFERENT DNA.HAVE TO BUILD DIFFERENT FROM GROUND UP, EVEN IF IN MOBILE BROWSER.YOUNG HUMANS NOT USE COMPUTER EXCEPT WHEN TYPE PAPER FOR SCHOOL. FOR THEM INTERNET = PHONE. SOON THEM BE MAJORITY OF USERS, NOT YOUNG.IT IMPORTANT BE READY FOR THAT.
Listen to FAKE GRIMLOCK… he see far.
This was my initial idea also when starting my business. But never really thought of it when giving it a title. I love it!I also like @aaronklein:disqus ‘s way of explaining it. – Team- Tech- Product- Users- Brands/PartnersAnother great post! I love waiting for these the entire day and then have something to read and reply to that challenges me.
That’s a great frame. I’ve heard zillions of startup pitches by now, and when I ask people how they’ll get traction and they say something like “partnerships” I have to cringe. They’re great if you can get ’em but it’s out of your control whether you get them or not. It’s one of those things that should be a nice to have, not a must-have. And also, relevant today, a great “users first, brands second” company is Apple. Look at iTunes: they had the vision of the store all along but they first got iPods in users’ hands to get traction with the labels.
Fred … you know I’m a big fan. This post wasn’t your strongest. Just saying.There are three different business models at play in the companies you mention — specifically advertising (aggregation of an audience and delivering that audience to advertisers), ecommerce (selling products, services, offers, etc. to consumers) and SaaS (multi-tenant platform that is licensed for a monthly fee to businesses, consumers or prosumers). I can list a few others but won’t focus there (virtual currency, research, etc.)You need to apply your thinking to all three and you’ll see they are different and your generalization doesn’t work across all three. I think the point you were trying to make is that you like to invest in highly scalable businesses that put consumers at the center rather than businesses.If you are an advertising-supported company (Foursquare), you want to focus exclusively on the user. The user is critical to everything. Do right by the user and you have a chance of creating a business. If you don’t have the user engaged, your business is toast. This is a tough model to pull off at scale these days. Only a few have done it online at scale (Yahoo, Facebook, Google, etc.). Twitter is getting there. Foursquare is more of a work in progress. The other million web services depending on the almighty ad dollar are screwed as they can’t build their audience.If you’re an commerce company, you have to focus on the user. But part of that user experience is the product mix you offer. Nordstroms sells shoes and other stuff you wear (breaking news!). Remove the brands from the commerce site and you wreck the user experience. Think about Gilt Groupe as a great example — they have created an amazing shopping experience by working with brands. Without the brands, there is no user experience, right. So saying users first and brands second doesn’t make sense. You need the brands to get the users and then the users to keep scaling to get more brands. Groupon is a hybrid of both advertising and commerce — they sell digital coupons, which is really a form of advertising that people pay for. Groupon’s shoes are local deals and businesses. So they need to focus on both the user and businesses that want to sell to those users. Without the brands/businesses, there is no Groupon.Now let’s get to SaaS (think Buddy Media). We have built a software product that helps companies market on Facebook and other social destinations. Our “user” IS the business. We sell TO the business. So there’s no difference for many SaaS companies between “user” and “brand” — they are one in the same. People buy our product to accomplish a BUSINESS goal. One of those goals is to engage users through Facebook. But another is to be able to roll out the effort using a secure platform that has granular rights provisioning, auditing and content optimization. Consumers on Facebook don’t care about granular rights provisioning that the brands need. But if you are rolling out a global program on Facebook as a business, you care very deeply about this. So this feature is putting our users first, even though most reading your blog wouldn’t think of it as a very user-first engaging service.Fred, I’d be more than happy to write a regular SaaS column for the blog that has to do with building products that you sell into the enterprise. I imagine many businesses will give up the dream of finding the almighty ad dollar and try to actually build something that businesses (or people) pay for.Love,Mike
“I imagine many businesses will give up the dream of finding the almighty ad dollar and try to actually build something that businesses (or people) pay for.”This has been our mantra. Fred, would love to read more about building an enterprise focused business/product and Michael seems like a good candidate 🙂
i don’t think AVC is the best place to learn about that
I’m glad someone said this. I’m really glad someone said it well.
“If you are an advertising-supported company (Foursquare), you want to focus exclusively on the user. The user is critical to everything. Do right by the user and you have a chance of creating a business. If you don’t have the user engaged, your business is toast. This is a tough model to pull off at scale these days. Only a few have done it online at scale (Yahoo, Facebook, Google, etc.). Twitter is getting there. Foursquare is more of a work in progress. The other million web services depending on the almighty ad dollar are screwed as they can’t build their audience.””If you are an advertising-supported company (Foursquare), you want to focus exclusively on the user”I wouldn’t say that’s always true. What about if you have a community that creates the value. For example The Huffington Post, do you focus on your users then, or is it better to focus on the contributors who then create great content for the users?”If you’re an commerce company, you have to focus on the user. But part of that user experience is the product mix you offer. Nordstroms sells shoes and other stuff you wear (breaking news!). Remove the brands from the commerce site and you wreck the user experience. Think about Gilt Groupe as a great example — they have created an amazing shopping experience by working with brands. Without the brands, there is no user experience, right. So saying users first and brands second doesn’t make sense. You need the brands to get the users and then the users to keep scaling to get more brands. Groupon is a hybrid of both advertising and commerce — they sell digital coupons, which is really a form of advertising that people pay for. Groupon’s shoes are local deals and businesses. So they need to focus on both the user and businesses that want to sell to those users. Without the brands/businesses, there is no Groupon.””So saying users first and brands second doesn’t make sense”It makes perfect sense. There has to be priority of strategic focus, or there is no strategy. Amazon have chosen (Amazon’s Mission Statement):”Our vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”They’ve chosen the user.”Now let’s get to SaaS (think Buddy Media). We have built a software product that helps companies market on Facebook and other social destinations. Our “user” IS the business. We sell TO the business. So there’s no difference for many SaaS companies between “user” and “brand” — they are one in the same. People buy our product to accomplish a BUSINESS goal. One of those goals is to engage users through Facebook. But another is to be able to roll out the effort using a secure platform that has granular rights provisioning, auditing and content optimization. Consumers on Facebook don’t care about granular rights provisioning that the brands need. But if you are rolling out a global program on Facebook as a business, you care very deeply about this. So this feature is putting our users first, even though most reading your blog wouldn’t think of it as a very user-first engaging service.”Buddy Media could make a distinction of where they wanted to focus their resources. For example they could say, we want to make our product as great as possible for the Facebook users who are on the end of the software, or they could choose to make it as useful as possible for the brands that pay the bills. There is a choice. There are distinct customers. Only one can be put first.
I especially like the point you make about Amazon. They chose early on that the customer would be their #1 priority, and they focused on making their product the greatest place in the world for customers, drawing in hundreds of brands. If you have to make a choice between customer and brand, ensure that your product is optimized to make it the perfect environment or value add for your target audience.
Honestly, I think one of the big reasons advertising as a model is failing is we’re still shifting how we buy audiences. The technology is almost there for the holy grail of ads (right message, right audience, right time). In theory, the site shouldn’t matter. I’m not totally sure. I keep thinking the growth of performance buys for branding will make the idea of site quality kind of interesting in the future…where the nytimes will be “as good” as a very small niche site….
“The technology is almost there for the holy grail of ads (right message, right audience, right time)”Isn’t this what Search does? – The right message: intent is derived from the search. Thus a message can be crafted that matches the search intent- At the right audience: the audience selects themselves- At the right time: ads can be shown at the point of intentOr are you talking about interruption marketing?At the moment content is mostly static. And ubiquitous. The scarcity is with attention. This can be garnered via engagement, and as such content will need to become more engaging to maintain attention.Once there’s engagement with content, and user input this will give context at the moment of consumption. Allowing for the right message, to the right audience, at the right time. IMHO.
I’m talking about the Display market. It looks like this:http://www.slideshare.net/t…SO banner ads are moving towards a preemptive and post-emptive (retargeting) type of ad market. Aka buy the audience and show up where they are in all sorts of content that works for your message….
The targeting approach to advertising, of which you speak and which I am largely a fan, overlooks two ways in which content affects advertising value. The first is the halo effect, where the quality and brand of a publication impact the evaluation of the ads it runs; and the other is the impact of the emotional valence of the content on ad evaluation. Along these dimensions the site and the content that host the advertising definitely matter, and the NYTimes will continue to have an advantage over lower-quality sites. Thes dimensions certainly could in theory be addressed by technology, but I am not aware of anyone who is doing it today.
True. You can restrict your buys to tier 1 (peer39 has written about when targeting goes badly) However, the restrictions works only to a point – if you were to buy a fashion ad tomorrow, which site do you think would have more of a halo effect – the Satorialist or the NYtimes fashion page?
Mike, I would make two changes to this formulation: Commerce for business versus commerce for us as consumers, and Saas for consumers (prominent example is dropbox) versus Saas for businesses.
i guess sobut this was about what we want to invest in so entrepreneurs know when to approach us and when not toi thought that was cleari started with that and ended with that
Good point. After re-reading through that paradigm, it makes a lot more sense.
No worries, Fred. You do more for entrepreneurs in most weeks through this blog than most VCs do in their lifetime. You rock and I’m excited to read you daily and know you.I understand that the post was focused on USV and your investment focus. However, you are a “public figure” when it comes to starting companies and venture investing. So your thoughts drive markets and drive entrepreneurs to make decisions and much of the post had to do with building your product and generalizing about how to think about it.My comments were more to address sentences like this one, which is broader than your investment thesis.”The biggest problem with a Brands First, Users Second approach is you can get caught up in product development efforts to satisfy the brands and as a result you can’t put enough energy into satisfying the users. And if that happens too much, you end up servicing the needs of the brands over the needs of the users and then you are a service business not a platform.”Nonetheless, I appreciate being called a “great business” on A VC! Means a lot coming from you! And I don’t take that lightly. (Even if we’re one of “those” companies that need to actually sell something into enterprise versus scale, scale, scale and figure out our business model later.)Have a great weekend and stay out of the hurricane’s path. The latest map has it going right over my apt on the UWS!
i’ve been turning down a lot of entrepreneurs lately with the “brand first, user second” reasoning and i wanted to get my thoughts out there more broadly so they are better understood
There’s a big shift to SaaS underway and companies are unlocking larger and larger budgets. Businesses are demanding “consumer” software — software that helps their employees do more with less AND is as easy to use as Facebook and Twitter. Business software and usability are not mutually exclusive (despite what Oracle, SAP and others ingrained into us.) This next phase of the internet will be post PC for sure. But it will also be the merging of all the great aspects of consumer software and the benefits of robust enterprise software. It’s the rise of a new “user” — the business software user who isn’t in IT but is being asked to use web-based software products to get their job done. No one is writing about this but it’s an important shift and companies that know how to build, sell and support cost effect usable business software will create nice businesses. And I’d argue it will be easier to build a $1B business selling easy-to-use but powerful business software than trying to please the fickle internet user and deliver him or her to brands and retailers (also known as advertisers!).
I like to see writing about the other viewpoint.I think this is a great post by Fred. He is a VC that invests in large engaged networks of consumers. I totally love the post, even though I am just an entrepreneur that sells SaaS to huge enterprises, and I don’t want any VC.What’s best is that I get to see your point in these comments as well.I think the comments are where we get to see the opposing point of view,
ME FIND IT CLEAR.IF SERVICE SUPPLY BRANDS TO USERS, GET BRANDS FIRST.IF SERVICE SUPPLY OTHER USERS TO USERS, GET USERS FIRST.
HiI’m surprised no one has mentioned risk in any of the responses to yourpost Fred.There is a natural tendency for VCs to go for high risk highreturn. B2C is more risky. You can end up with a business trundlingalong with a few thousand users, no growth, no revenue (in fact justcosts). In B2B the costs are less. If you can get some interest you can atleast get an income. So B2B is less risky.Engineer’s tend to be risk averse. If they have a passion for an ideaand a technology they want more chance for it to succeed v lesspotential gain. This is because they invest their expertise which isless transferable than your cash and typically can only focus on onebusiness at a time whereas a VC will focus on several. CertainlyCereProc’s approach was B2B first B2C second. But then we greworganically and through some tough economic times. Our new services,based on our component business, will go B2C first. Also for us B2Cis a great means of testing ideas and remember VP X at company X isalso a C so its a good means of getting visibility in B.Of course a good VC also invests expertise. So maybe you’ve become abit like an engineer. We are always accused of having hammers and tryingto find nails. Maybe because you have expertise in B2C growth that’swhat you look for 🙂
“I’d be more than happy to write a regular SaaS column for the blog that has to do with building products that you sell into the enterprise.”I guess you could simply start your own blog, no?
I think the biggest challenge with the Brands First approach is authenticity. Users will detect a lack of authenticity at a thousand paces.
I think thats its worth acknowledging that neither Foursquare or Tumblr has yet to find a way to successfully integrate brands into the experience. Sure, they exist on their platforms, but they interact the way that users interact… they’re effectively brands as people and not brands as brands. Neither company (however successful) has monetized these brand interactions in a meaningful way because they’ve been trying to fit a square peg into a round hole. Until they do, they’re companies but not businesses.
Foursquare’s issue is less about how can brands act as brands as much as how can brands influence users on the local level. Having users Interact with brands as people through broadcast sharing is exactly how Facebook and Twitter operate. While Facebook has created unique functions specific to brands their basic interaction is synonyms with how people interact. The line between brand and person is even blurrier for Twitter. Foursquare’s product is driven by location and local space not generic broadcasting. Having national brands interact on a local level is inherently difficult as they lack local insight or influence. In general Foursquare is less interesting for brands as much as it is for the local merchant which is where they can thrive in a post Daily Deals ecosystem.
I only half agree with you here. I think one of foursquare’s critical assets is that they provide really targeted local data to vendors and brands about everyday user interactions. This data as biz dev is going to be crucial for growing and scaling the foursquare product. Vendors learn a lot about their customers from their foursquare data, an asset they rarely have access to due to their size. On the opposite end, large brands spend millions on trying to access their users across the globe. What better way to understand how and where your users are interacting than foursquare–people are literally telling you every thing they’re doing everywhere they go. So how would this work for MTV–who I follow on Foursquare–MTV can understand where their fans are shopping, what they are eating and when they are doing it, putting them in the perfect position for negotiating media buying. Who needs Nielsen when you have foursquare (okay that’s an exaggeration, but you see what I mean?)You can establish a taste graph like never before. If brands are ignoring this aspect of foursquares value add, then I would be disappointed. Yourbuzz is the Clickable and AmEx product that launched for small businesses to manage their listings, kind of like a free version of Yext, which demonstrates that there is a need for sourcing localized data. Larger brands can take heed from how AmEx is optimizing their small biz customers for data. Does that make any sense? Let me know what you think.
Definitely makes sense and I completely agree that the data Foursquare creates is much more valuable than providing another platform for brands to interact with users. However, Foursquare helping Brands unlock the value of that data is much more of a SaaS driven business whereas this article and my comment were focused on consumer facing apps. That was the point Mike Lazerow was trying to make in his comment on why Buddy Media doesn’t fit in this discussion.
Kind of gets to a question of are we flattening culture if we create tools like this…
While this may be a rephrasing I would say ‘reputation first, brand a distant second’.
agree agree agree.
Well, character first. If you have a good character then your reputation will follow. 🙂
Wow great post. Just a note on that, I actually believe even though Groupon’s model seems to be focused on Brands first, Customers second, the reality is contrary to that. In the user lifecycle, the customer is the one that is happy, leaving the brand quite unhappy and not interested in repeating the experience. My belief is that the brands are actually Groupons users and thus should be placed forefront.Thanks!
Yes, but you’re thinking strictly Consumer market for this, i.e. where your users are consumers and your partners are the brands. Yes, partners will get attracted to you if you’ve got 10 million users signed. Very true, and part of the monetization strategy for successful B2C companies. But in the B2B sense, the customers are the Brands themselves, because you’re selling to a company who has the users.To confuse things, so what happens when a Foursquare partners with Brands that pay them money. Then, Foursquare becomes a B2B company too, although maybe with a small ‘b’, B2b.
I’m finding it interesting how they keep experimenting with their data and small b partners. I’m not sure what I am supposed to expect
its a paradox. its not authentic.people don’t explicitely ask to be interrupted by brands – yet it always happens. For foursquare to side with a brand – is to forego any notion that the user has the write to control what and hoe a brand communicate with him. that’s just boring old crm – and i want it gone.
Not sure I totally understood your point, but if we stick with the Foursquare example, they have to get their money from somewhere, and since it’s not from the consumers, it has to be from the business brands. I don’t think we’re talking about in-your-face marketing. If a store wants to give you a deal on something, and FS takes a cut for allowing them to reach you, then be it. If FS can’t monetize from the brands, I don’t see how they could stay in business.
its all about consumer permission.read this:http://cyber.law.harvard.ed…
Its all about control. I dont want to be interrupted by a business. If FS allows brands to interrupt people without their explicit permission – that’s the CRM i want want gone.All FS has to do is to wait for the consumer to gesture interest – and then deploy their service. But tehy wont – they dont think like that – they think like interuption marketers.Its the VRM vs CRM argument. I’m on the VRM side.
this was about what we want to invest in so i think you are right that it is largely consumer focused
Agreed, but it’s an interesting paradox that they will make their money from selling something to the business (brands), so they end-up selling like a B2B, but looking like a B2C.
So what happens if there are hoards of consumers but brands/partners/revenue generators aren’t finding it appealing of a product to sell to?Twitter seems to have similar issues.
http://blogs.law.harvard.ed…
if you believe in VRM – then the user always comes first and controls the relationship.
As an introduction to the debate “Users First, Brands Second”, Fred lays out the fundamental pro-con arguments clearly.From that came several “startup construct suggestions. I like Charlie Crystle’s approach for simple yet self explaining clarity:team (heroes dedicated to itch relief)users (who’s got the itch)product solution (scratch that itch)tech (how we scratch it)users (see above (iterative process)partners (itch-scratching accelerators)TupTupThat fits with an earlier comment I made about construct in response to Aaron Klein and Cam MacRae.However, a key issue to bear in mind is that it very rarely works to go after two essentially different markets at the same time: You have to clearly decide who is the User that your “solution” is intended to scratch? Individual consumers in a mass market or business consumers as in Brand?Remember, in going after a market via a Brand, you do not interface directly with the Brand’s consumers and thus have no control of those consumers. On the other hand, unless what you are offering is something that the Brand can promote as an “Added Value Item or Service”, you will never gain traction with the Brand who, in reality, IS your consumer.There is a world of difference in how these two very different market places operate relative to their customer base and thus they require two very different approaches in building your business with either as your target audience. As a startup, wise use of available limited cash and resources typically speaks against going concurrently down two different paths.
Great post.
“User First, Brand Second” Our current startup is aiming to make this scenario the end of the game.
IT NOT REALLY CHOICE.EVERY SERVICE NEED OFFER THING USERS WANT.SOMETIMES THAT THING COME FROM BRANDS.
I want a FAKE GRIMLOCK branded t-shirt.Edit: Seriously.
http://www.zazzle.com/fakeg…NO TELL LAWYERS ABOUT THIS.
You should see the amazement on my face right now; However I just woke up, so I won’t actually be taking nor attaching a photo..
Thanks much for quoting me in that original post. I have bragged about it many times, many places. 😉
Thank you for this great post. Do you think this idea translates well for *physical* product companies? We’re wrestling with this exact question: our watches are out there and they sell well, but do we want to be known by our brand? Or just focus on getting as many satisfied watch-wearers as possible?
yes, i do think this applies to physical products too
Brands only care about users. No users, no brands. Brands can be used to entice users, but in the end, users = customers. No customers, no business. 🙂
Fred – Interesting post. What you are referring to around the focus on the user is the reason that we started our company with a user experience person on the team. The work we have been doing with her is developing user personas and their issues and needs. We have 4 personas we are focused on at this point. This allows me to build a product knowing my user. Do I want to sell to a brand? Sure. But I want to solve problems for my user. If I do that in a meaningful way it will pay off with the brand.ThanksMatt
Brilliant observation – very helpful.
FRED NEED REMEMBER THAT ENGLISH IS LOOSELY TYPED LANGUAGE. EVEN SMART HUMANS HAVE BUGGY IMPLEMENTATIONS OF IT.WORD LIKE “BRAND” DANGEROUS. IT PRETTY CLEAR FROM COMMENTS MOST HUMANS COMPILE IT WITH DIFFERENT MEANING THAN ONE YOU INTEND.
Now this is a FAKE GRIMLOCK message to which I can clearly relate: Well said; good observation. Word definition warranted to remove ambiguity and misdirection. Sent from my Verizon BlackBerry via BES on XO hosted Outlook.
yeah, got to work on that
A little late but I am hoping to get some thoughts.I’d like an opinion where the “brand” is a small business – not quite users, but not quite national or regional brands either. Where would their interests fall in your consideration and what are the opportunities & challenges in building a business that focuses on their needs first.
Fred, it is official. This is me agreeing wholeheartedly with your words about marketing and branding. The first step anyone who is worth their salt in branding asks or seeks to ascertain is “WHO IS YOUR CUSTOMER?” which translates nicely to “Users First, Brands Second.”But one area where I might split hairs a little on this definition and the occasional risk of these little axioms that sometimes get oversimplified is when branding is such an afterthought that it never actually integrates in a true and believable way. Branding isn’t just adverts and logos. In the app-centric web and the metaverse of the future, the brand is PART of the user experience… at least when you do it right. You’re absolutely on the money when you say it starts by addressing a need and fulfilling a need with users FIRST. The ventures put the cart before the horse and do it the other way around (Brand First / Users Second” always come off as phony and never quite nail the user experience. And yes, they’re always trying to live up to that brand image and often end up trying to fit round pegs into square holes.In the end, it is very Sun Tzu. Know Thy Customer. And to any startups who think they’re going to get funding because they have a sexy brand or a clever domain name, the veneer of that will quickly show if they’ve developed that brand in a vacuum and can’t demonstrate a deep understanding of the user/customer first and foremost. My only addition to your sage advice is in that little soundbite, understand that “Brands Second” refers better to priority not time. Don’t take that to mean branding should be an afterthought. Look at the best and the brightest and you will see an intentional blur where it is hard to tell which came first because the brand is attractive and immersive enough to the users that it becomes PART of the user experience. At its best, it is hard to distinguish one from the other.
Great post and batch of replies.Users are first and the brand follows if you are looking long. If the product is of no use to 99% of the market, then 99% are not going to use it.As the mobile grows (we are still early stage), the marketplace matures regarding the need to brag about the exact name of the app/OS they use. This leads to a growing number of niche Social Networks where the User isn’t going to that niche for niche sake, but finding that thought from someone in whichever applicable SN. What follows is a blurring in thought of ‘just who is the customer?’ related to offering tangible/intangible between two points.Yes, it would be great to have a brand that is developed into something like McDonald’s or Facebook, but it is also wise to consider being adaptable where your product serves the customer moving from one brand to another… let someone else pay for the brand development.
Need a better term than user. Narcotics and it industry. Give them a fix! Customer works.
you know fred… i am tired of you VCs.is the only business you back one of these little 2-days-to-create-websites (like jip.com) that already has USERS.is that it? isnt that more like mezzanine financing.would you dare back a business that was only on paper…. that needed funding before it started? let me say it… a ‘businessplan’ — remember those??i have been in the game since the early 80s and i wont say who i am but this whole net thing has gotten out of handall these websites take 10 seconds to make and 99% of them go nowhere — the big home runs have happenned. not that another isnt around the corner but your odds must be low. i would love to hear your return on equity? must be low if everything has to be a website or a business already a going concern.i think you are too spoiled fred.
i appreciate the criticismi will try to do better
This post really cleared things up for me. I’ve been struggling with this issue without putting a name on it and it really helps to clear my head hearing someone say it as plainly as you have.
Good article Fred, I had no clue what the brand value was or where the money would come from when I started http://moodpanda.comWe just focused on what the users wanted and knew if we built it right then the brand value would become clear, it was not until we hit a critical mass of users that I had time to sit back for a few days and think about the next steps, and with the experience of building the site it became clear where the brand value was and how to pitch it.I think for a lot of startups it is hard to see where the money will come and a lot of good ideas may not come into being because of this, which is a shame. I have heard so many time “Why bother, it does not make any money” from people but they are not seeing the value of the users and what a huge amount of data can be worth.
Late to this thread, but I thought this quote by John Cohen’s synthesised this idea pretty well:”It’s more effective to do something valuable than to hope a logo or name will say it for you”via http://startupquote.com/pos…
@fredwilson is it possible to start out as a services business and switch to a platform?
super hard, but not impossible
@fredwilson (When) is it possible to switch from a services company to a platform?
We always say great products will result in a great brand, but strong branding doesn’t always lead to meaningful products. Build a better mousetrap, not build a better logo.
which you have done very well
I’ve had a few big itches for a long time myself.. I’ll scratch your back if you scratch my back? 😉
doctor!!!
tup tup!