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TV Ads: The Secret to Taking a Tech Start-up Mainstream?

Tech start-ups are launching old-school TV campaigns. A return to the dot bomb era? Not quite--but think twice before stealing this strategy.
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When you look at a chair recently, does it get you thinking about Facebook? If you use the social network, you've undoubtedly seen that video ad at some point when you log in or out. But you may have noticed the infamous, existential Facebook-as-a-chair ad elsewhere: namely, TV.

That's right, the major online community of our times is using traditional broadcast to reach out to the nearly half of the country that doesn't currently use the site. And Facebook isn't alone. Payment systems PayPal and Square as well as online home accessories flash sale site One King's Lane have all taken the TV ad plunge.

Is this a return to the dreaded days of the dot-com bomb, when Pets.com spent lots of venture and IPO cash (check latter) on making an innocent literal sock puppet the most despised and ridiculed celebrity of its time? No, this is a sign of growing maturity.

But be warned: Ads can still go wrong and if you're in start-up mode, think twice about following their lead.

What's Changed

Television ads are typically for a mainstream business that needs to reach wide for prospects. In the dot-com era, such companies as Pets.com or Kozmo.com weren't even close to mainstream. Too many people back then were reluctant to pay for goods with credit cards over an Internet connection. Essentially, these companies were spending money to reach a large group of people, too many of whom wouldn't become customers. There was also a lot of ego tied up with the big marketing, large sums of cash, and vague marketing plans.

Things have changed since then. You can see ads for Amazon or Google on television. The question is whether some of the newer high-profile names are spending their money wisely.

Facebook, for one, is running an odd campaign, with its "we're like a chair." Maybe the company wants to ramp up its number of users, as its North American user growth has slowed significantly. But vague advertising alone might not do that.

Additionally, Facebook makes too little money on the average user--about $5 per user per year. It needs specific programs to get people more engaged, so it should invest in developing such programs, and then convincing people to use them.

Square and PayPal are already heavily involved in the heated mobile payments market and racing to establish themselves as leaders in this nascent industry, reaching both consumers and small business owners. Their effort makes a lot more sense because it's tied to tangible efforts to expand their base of business.

One King's Lane seems somewhere in between. Maybe television advertising makes sense, but the company would have to see whether the ads will really reach the subset of people who want to buy home products online. Or maybe the cost per customer will be far too high.

Here are a few things to think about before trying out broadcast media:

  • Because TV advertising is a tactic for scaling up a business, wait until you've got enough critical mass... and enough cash.
  • If television advertising does make sense, have a tangible reason to do so. If your plan doesn't articulate a hard potential benefit, you're not ready.
  • On the other hand, don't automatically rule out television. If there's a clear strategy and you have the size and cash to justify such ads, they could pay off.
  • Test ahead of time. There's the brilliance of using YouTube and other streaming platforms before you head to the television station. It's now possible to test your concepts and see how consumers react to them.

Also, if you do decide that TV is the way to go, get help from people who know the advertising medium and pay to get strategic consulting, rather than dealing with someone who will make his or her profit from your actual ad buy. Smart help can save you a lot in the long run.

Last updated: Oct 18, 2012

ERIK SHERMAN | Columnist

Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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