I've seen the future...and it's a flywheel. Not a physical flywheel, but a system that is actually a more expansive and digital equivalent. Like a flywheel, the system gathers momentum to help you accelerate (also known as the "network effect"). My favorite flywheel these days isn't a physical or digital object--it's SimpleReach, an ad tech startup business based in New York City. (I'm not an investor, but I recently met the CEO at an event and heard his pitch.) SimpleReach has built a content distribution platform and advanced tracking tools that let publishers and brands make much more effective and intelligent use of all of the branded content they are creating. This, in turn, helps companies burnish their brands and better connect with their customers.
The network effect (first formulated by George Gilder and now generally known as Metcalfe's Law) is basically a description of the expanding value of a communications network as it adds additional nodes. The growth and value of the network is not linear, but exponential; it multiplies ever faster as the network expands. What SimpleReach has done is create an enterprise model in which its customers increasingly help build SR's business and expand its user base (without any direct compensation) mainly because it's in the customers' interest to do so. There's no more authentic and convincing promoter and marketer for your business than a satisfied customer who makes it his or her business to invite more people to the party. That's the flywheel in action.
Expanding the Network
Why do users do this? Because it dramatically increases the value of the SR tools and services for each customer. You can never go wrong counting on smart business people to act in their own self-interest. From the brand's standpoint, each new publisher added to the SR network increases that brand's ability to more fully and effectively measure the value and impact of its spending on a given campaign. From the publisher's standpoint, each new brand added to SR has the ability to extend its marketing spend to that publisher's channels, creating more revenue opportunities for the publisher.
Plus, the publishers (and ad agencies) really have no choice but to adopt such a system because their own customers are starting to demand that they use the SR methodology and analysis. Often, a brand will have learned about the SimpleReach service from one publisher and then, in discussions with other publishers, the brand will expect and often demand this type of data and reporting. And if the publishers or agencies don't provide these services to their customers (the brands), the brands will simply go around them to SimpleReach and sign up for the services themselves.
This is the kind of growth engine that you want to grab onto and then hold on tight for the rapid ride. It's very hard to come by and, as often as not, may end up flying off the track and throwing everyone for a loss. But if you find the right engine in the right marketplace and you're the first player there, the extent of the potential upside is hard to imagine. The momentum and earning potential accelerates at such an overwhelmingly rapid pace that even the biggest players can't respond quickly enough to the new competitive threat or use their size and resources to offset the early advantages--and growing cash cushion--of the first mover.
The Benefits of a Flywheel Business
Especially in the case of a new business, that cash cushion provides several layers of comfort and security. First, management can focus on the business, not on fundraising. Second, early mistakes are less likely to threaten the company's existence. Third, the customers are comforted by the bankroll and much less concerned about betting on the new kid in town. Fourth, the company can afford to support simultaneous pilots and trials for far more customers than most startups. And finally, there's very little pressure on the pricing of the business's services since the company doesn't have to engage in price cutting in order to win new accounts.
But there's an even more powerful factor at work in companies like this, and it's the "lock-in" investment, which creates powerful barriers and overwhelming switching costs for clients who might consider leaving. As a result, flywheel businesses enjoy another interesting benefit: even customers who would ordinarily be reluctant to make longer-term commitments seek out and readily agree to multi-year contracts. They want to be sure that the company sticks around and stays in business and that their own needs will continue to be met as demand for the startup's offering grows. As long as the startup retains the ability to continue to raise its prices and otherwise adapt and improve its products and services, this is nothing but great news for the startup, because it offers stability in the form of predictable future revenue streams. It also ensures that the company can make appropriate growth plans and attract first-class talent to what would otherwise appear to be a far riskier opportunity.
The Future of Content Marketing
So what does all this say about the future of content marketing? And what do you need to be thinking about as you try to determine how to most profitably spend your digital marketing resources?
First, it's important to understand that we are moving into the second generation of the digital marketing revolution. If the first generation was about the brute force ability to get your content and messages in front of the digital consumer (on every device), the second generation is all about tracking and measuring the efficacy and amplification of those efforts. It's no longer about tonnage--it's all about transparency and touching the right targets at the right time in order to deliver the appropriate information and incentives.
Second, especially in the media/publishing marketplace, accountability is now the be-all and end-all. No one takes your word for anything these days-- it's a "show me or see ya" world. If you can't convincingly connect spend to traffic to engagement (and organic sharing) and ultimately to conversions and concrete results, you really can't compete for much longer in this space. We know most marketing initiatives won't work, but we need to know which are working and which aren't as soon as possible, so we can tactically adjust to optimize our dollars and our results. The old idea that you would simply "set it and forget it"--spend the same amounts across various campaign channels and just wait for the results--is a lazy and stupid strategy today.
The best players are focused on prognosis (prediction and real-time adjustment) rather than looking backwards to see what worked. They not only help their clients track and measure effectiveness in real-time, but allow them to immediately double down on what is working before these fleeting opportunities pass them by. That's what SimpleReach does. As I always say, you want to be there when the customer wants to buy, and SimpleReach helps its clients track and get the right messages in front of the right customers in order to reach them at the right moment--when they are receptive and ready to buy.
It's that simple (no pun intended), but it's not easy, and these guys are simply crushing it.