Epiphany Interupted

I've been on the edge of my own epiphany for the last couple months (which keeps getting interrupted by the melt down of the financial markets). So... here it is! The web is changing the very nature of marketing in a profound way. Yes, I'm not deaf and have not been asleep for the last 10 years. We have all heard this before, but on inspection, the Web 1.0 world changed my marketing tactics, but not the nature of the marketing mission.

My career in technology has been and will remain centered on marketing as a discipline. The marketers job is to get the product in front of the customer. In the past, this meant push the product. Get the attention of customers and march in a highly motivated sales force and some brilliant technical sales people. Parade through some carefully chosen and well coached customer references, discount appropriately, close hard, and you stood an excellent chance of getting an order.

Information was scare and information flow inhibited. Vendors knew little about each other and customers knew little about vendors let alone each other. Web 1.0 made the linear flow of information much smother. My marketing budget wasn't spent so much on printed material as it was on slick web communication. Here the web changed the nature of marketing communications tactics.However, my marketing remained the primary source of information for customers. Sure, word of mouth was still the best marketing but no customer was loud enough to be heard without a vendor acting as an amplifier. Since we all remember Milli_Vanilli, no one trusts anything unless they are sure its 100% real.

The buying process today is different. First, the binge buying of the buddle has been replaced by a try-and-buy mentality best epitomized by saleforce.com and its ubiquitous CRM offering. More importantly, my customers’ social and business connections are increasingly becoming a huge electronic network that can be searched and queried as needed to find trusted references for most product choices.

We quickly are moving away from a world where marketing’s principal requirement is to push a product into a customers view. The future looks like a reference driven world where customers pull products based on information gleaned from trusted sources. These source will increasingly be part of unique individual networks. Looking back in 10 years, I’m confident that we will point to this as a Web 2.0 phenomenon with things like blogs and social networks getting much of the credit. However, these tools stand on the shoulders of 10 years of innovation and cultural change. In particular, the global adoption of email as a business-to-business tool has enabled the non-trivial cultural change that makes communications between businesses who view themselves as competitors acceptable.

The implications for marketing stretch far beyond the walls of the marketing organization.

Stronger Together

It now clear to all in the wake of this week's financial market meltdown that the IPO window is closed tight for the foreseeable future. In fact, I would argue that it never really reopened following the meltdown of the last tech bubble. Sure a few companies who built businesses with significant revenue went public, but for the most part, the equity markets have shown little interest in most technology companies during this decade!

So where does this leave VC funds with their portfolios of investment? For many, particularly in the Web 2.0 and consumer internet space, good exits have come from acquisition. Companies from Utube to Kaboodle have provided great investor returns by quickly exiting into the waiting arms of internet giants and media firms. Open source vendors have done equally well, with a long list of attractive exits as the remaining enterprise players gobble up these evangelists of a new business model. Consolidation is the SaaS market, while happening around SF.COM has not yet caught fire.

Yet the brass ring of the public markets remains down the road for those capable of reaching requisite scale. However, getting to this scale seems to take longer and entail more risk than most VC's are willing to bite off. In this light, I'm surprised we have not seen more private - private mergers designed to build companies geared for the public markets. I can think of several spaces with excellent growth prospects were private - private consolidation would make sense. Next generation database and analytics along with on-demand marketing automation are just two example of markets where numerous funded companies are getting decent traction but won't reach public market scale on their own in a reasonable timeframe. Certainly the complexities of private - private mergers can't be underestimated but with the public markets closed and M&A slowing, I would not be surprised if VC's became more flexible in getting deals done in this light.