Friday, June 13, 2008
Guest Speaker Series: Jim Bankoff
Jim Bankoff, formerly the Executive Vice President of Programming and Products at AOL, gave a presentation entitled "How to work with big companies" on June 5th at the LaunchBox Digital offices. Jim spent 10 years at AOL in internet and content services and has been involved with many other successful businesses including Audible and Qloud. Today, he works with Providence Equity, a firm that invests in online media, traditional media, and web businesses (Nextag, Hulu).
Know what you are getting into. Working with a big company is taking a big risk. Big companies have leverage over you because if they don't make the deal, their business will continue. However, your company could be made or broken on that particular deal. For example, Microsoft partnered with IBM to license its operating system and the rest is history. AOL made a strategic decision early on to outsource search technology to Google when they were young and searching for credibility.
Five reasons to work with a big company
1. Marketing. Big companies have invested billions of dollars in their platforms, and while they might partner with you, it isn't going to be for free. Here are some considerations when it comes to a marketing agreement:
- Don't get carried away to the point that you are blind to the core metrics that you would use across distribution channels. Remember, it is just another marketing channel - like all others, it must be evaluated on its own merits (typically, cost per acquisition, lifetime value of customer).
- Brand positioning: Compromise might come in the form of minimizing your direct to consumer brand. Often there is a co-branded relationship where you alter your product to look a little more like theirs. This might involve minimizing your logo, traffic to your URL, etc. Understand what it is going to do to your brand, time and resources, and economics.
- Level of exclusivity - know what kind of tradeoffs you are making.
- Alternative channels - Increasingly, platforms are opening up and the emergence of APIs allows you to get viral by plugging into bigger entities. In doing so, you can achieve a lot of benefits of customer acquisition without much of a signed agreement except for the Terms of Service.
2. Selling to them
Companies might struggle to do both B2B and B2C well. Powering someone else's platform with your service will provide a big check, but could compromise your efforts. If you feel like you don't have a big viral or organic marketing, maybe it is a good idea to power someone else's community. However, know that big customers demand your time and attention and they can overwhelm you with questions and customer service.
3. Monetization
Ad-supported or subscription-supported models provide opportunities to piggyback on other companies' sales forces.
4. Technology
Companies are now building businesses off of technology infrastructure. The most obvious example today is Amazon. Always have market-to-market knowledge about who is making the next platform commitment (e.g. Android, iPhone, etc). All three big email providers are trying to open up their mail experience to allow businesses to expand the experience and take advantage of the platform.
5. Financing
While raising money has its obvious advantages, financing can also be a de facto way for a company to have a first look at buying you out. Consider whether other potential investors will find it to be a turnoff, and whether you are limiting your opportunities by choosing one partner over another. Alternatively, a startup can bridge the gap by offering warrants in the company - options that are given if the startup's value grows as a result of the partnership. It may also be helpful to include an "unwind" provision, which agrees up front to dissolve the partnership between both parties if it isn't successful.
Know what you are getting into. Working with a big company is taking a big risk. Big companies have leverage over you because if they don't make the deal, their business will continue. However, your company could be made or broken on that particular deal. For example, Microsoft partnered with IBM to license its operating system and the rest is history. AOL made a strategic decision early on to outsource search technology to Google when they were young and searching for credibility.
Five reasons to work with a big company
1. Marketing. Big companies have invested billions of dollars in their platforms, and while they might partner with you, it isn't going to be for free. Here are some considerations when it comes to a marketing agreement:
- Don't get carried away to the point that you are blind to the core metrics that you would use across distribution channels. Remember, it is just another marketing channel - like all others, it must be evaluated on its own merits (typically, cost per acquisition, lifetime value of customer).
- Brand positioning: Compromise might come in the form of minimizing your direct to consumer brand. Often there is a co-branded relationship where you alter your product to look a little more like theirs. This might involve minimizing your logo, traffic to your URL, etc. Understand what it is going to do to your brand, time and resources, and economics.
- Level of exclusivity - know what kind of tradeoffs you are making.
- Alternative channels - Increasingly, platforms are opening up and the emergence of APIs allows you to get viral by plugging into bigger entities. In doing so, you can achieve a lot of benefits of customer acquisition without much of a signed agreement except for the Terms of Service.
2. Selling to them
Companies might struggle to do both B2B and B2C well. Powering someone else's platform with your service will provide a big check, but could compromise your efforts. If you feel like you don't have a big viral or organic marketing, maybe it is a good idea to power someone else's community. However, know that big customers demand your time and attention and they can overwhelm you with questions and customer service.
3. Monetization
Ad-supported or subscription-supported models provide opportunities to piggyback on other companies' sales forces.
4. Technology
Companies are now building businesses off of technology infrastructure. The most obvious example today is Amazon. Always have market-to-market knowledge about who is making the next platform commitment (e.g. Android, iPhone, etc). All three big email providers are trying to open up their mail experience to allow businesses to expand the experience and take advantage of the platform.
5. Financing
While raising money has its obvious advantages, financing can also be a de facto way for a company to have a first look at buying you out. Consider whether other potential investors will find it to be a turnoff, and whether you are limiting your opportunities by choosing one partner over another. Alternatively, a startup can bridge the gap by offering warrants in the company - options that are given if the startup's value grows as a result of the partnership. It may also be helpful to include an "unwind" provision, which agrees up front to dissolve the partnership between both parties if it isn't successful.
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