There are plenty of articles advising startups on how to get media coverage. Many of those articles begin with a message like ‘getting media coverage is one of the best ways for startups to get their products out to the masses’ – for free. But not many articles mention that getting media coverage doesn’t actually prove you have a strong value proposition or that your product will survive long term.
Media coverage is not an appropriate method to validate your product
Media coverage should only be sought after you’ve found both a problem-solution fit and a product-market fit – ideally, during the scale stage. It’s the unspoken prerequisite.
I’ve stated in previous articles that what you believe is a high-value problem worth solving or a necessary shift in the way consumers live their lives may not actually resonate with real customers. Unless you have a customer base or at least a monetisable user base, you don’t really have a business.
As an entrepreneur, you need to first validate that you’ve identified a problem that’s significant enough that people would be willing to pay for a solution, then make sure your solution caters to the needs of your target customers. In an interview with Mixpanel, Uber’s Andrew Chen says “Growth is an after-effect of strong product/market fit and great distribution.”
Consistent growth cannot be achieved without a strong product/market fit. What you’ll experience is ephemeral growth.
You may be thinking ‘but I need people to know about my product before I can have customers!’ If you are, you’re right in a sense, but you’ve approached your startup from the wrong direction. The greatest entrepreneurial minds in the world will tell you to go out and find customers before building a product. This may sound counterintuitive because if you don’t have a product, what will you sell to those customers?
At first, you’re selling your idea. If they don’t buy it, you either haven’t found the right market for your product – Boston wasn’t ready for Uber when it initially launched, but San Francisco was – or your idea isn’t a ‘painkiller’. In other words, it doesn’t provide immediate relief to a significant-enough customer pain – if it did, it would make it easier for customers to adopt because the pain would become a natural trigger to use the product.
Your early adopters or first customers will help you refine the product so that it meets their needs and subsequently, the needs of others who fall into the same customer segment.
In the interview with Mixpanel, Chen says, “Growth is a magnifying glass. If you have a tiny diamond and you put it under a magnifying glass, then you’ll make something big and great. But if it’s just kind of a tiny piece of shit, then it’s just going to be a big piece of shit, right?”
In extension to what Chen is saying, if your product doesn’t solve a high value problem and hasn’t been refined to meet customer needs, then media coverage would shine a massive spotlight on that fact.
To many entrepreneurs, things like getting media coverage, having people turn up to a launch party or even getting an investor to back a product are all signs of validation. However, none of these actually mean anything unless there are real customers paying for the solution.
Besides, journalists don’t care about the strength of your value proposition as much as they care about telling a compelling story. It’s certainly not a journalist’s concern how a story might impact your startup from a user or revenue growth perspective – it’s not their job to make you look good.
If you do manage to get featured on a reputable technology publication, you may very well experience a surge in users or customers. If you do, that’s great – but only if your product meets the needs of its target market.
Big boost, big drop
Sam Hoda, Appster’s Market Dynamics Analyst, says startups may notice a sudden boost in the number of users, but unless there’s a product/market fit, there will be a big drop shortly after.
US-based startup Magic, which is a text-based service that gets you whatever you want whenever you want (within reason), is a great example of how media coverage can significantly boost your user base. Magic made headlines across the US tech media in February last year, and within 48 hours of its launch, received over 17,000 text messages with requests. This kind of impact even has a name – the ‘TechCrunch effect’. Since Magic’s launch, we’ve seen a number of spin-offs emerge in Australia and beyond.
However, the long-term survival of any company depends on the strength of its value proposition. Beyond the initial novelty and excitement, will the market continue using the product?
The answer would be yes if the product relieves a significant pain.
The answer would also be yes if the product is addictive.
In his book Hooked, Nir Eyal explains that products can become habits when associated with a particular trigger – e.g. boredom, loneliness – and how not using the product when the trigger is present creates a craving that turns into actual pain if it’s not satisfied.
Have you ever noticed how people react when Facebook, Twitter or Netflix is down? There’s outrage. There’s annoyance. There’s frustration. People respond as if their lives have been significantly and negatively impacted.
Get media or get customers?
Many technology companies are perpetual headline makers – Apple, Uber and Google are just the obvious examples.
Many startups go through phases where they’re perpetual headline makers. They enjoy the media hype – in fact, they chase the hype. It strokes their egos, especially if all that is said is positive.
But months down the track, there are no news announcements, no feature stories, no commentary from the founders, nothing. Their startup died. They were busier chasing journalists than chasing customers.
Some founders have the courage to admit to the world that they failed. They write an epic blog post and the world reads.
They even list the reasons they believe led to the demise of their startup. But often there’s one bullet point missing in those lists: we didn’t find a product/market fit.
Those startups that were all over the media – annoyingly so – didn’t make it. Who would’ve thought?
Do things that don’t scale
A great point Sam makes is your first customers are going to come through channels that aren’t scalable. Google Adwords, PR, social media are not channels that will get you access to your true innovators and early adopters.
If your product is targeted towards cafe owners, you’ll have to physically go out to cafes and talk to the owners about their pain points and the solution you have in mind to eliminate those pain points. You then take the insights you gain from those discussions and use them to refine your product.
This process is not scalable. You can’t go knocking on the doors of all cafes.
It’s only after you’ve achieved product/market fit that you can look at scalable campaigns.
You can’t have a thousand customers in the validation stage – you need to be able to sit down and talk to each of them, personally. (More information on customer interviews can be found here).
Media isn’t great for everyone
Most people love their 15 minutes of fame.
Being featured in the media gives you a bit of a confidence boost (or completely destroys your reputation, depending on which way the story goes). It creates a perception that you’re important.
But when people say media coverage is one of the best customer acquisition methods, an important thing to keep in mind is a marketing channel that works for one company won’t necessarily work for another.
Let’s say a startup called Bonkerzz chooses to test five different customer acquisition channels – Facebook, Twitter, Google Adwords, direct PR and third-party PR – and decides to invest less than $15,000. Bonkerzz will need to test which marketing channel generates the best results – that is, which channel is the lowest-cost (i.e. has the lowest customer acquisition cost), attracts the highest volume of users, and is the best performing (i.e. has the highest conversion rate).
The following are some hypothetical results:
CAC = Quarterly sales & marketing spend ($) ÷ New customers acquired in that quarter (#)
Facebook CAC = $1,000 ÷1,320 = $0.76
Twitter CAC = $500 ÷410 = $1.22
Google Adwords CAC = $2,000 ÷ 3,450 = $0.58
Direct PR CAC = $600 (30 hours invested at $20/hour) ÷ 180 = $3.33
Third-party PR (getting a PR firm to represent you) = $9,000 ($3,000/month) ÷ 2,140 = $4.20
Based on the hypothetical results above, Google Adwords is the best channel for customer acquisition for Bonkerzz, generating more than 22,500 customers (assuming the entire $13,100 was invested into Google Adwords). Direct PR, on the other hand, would generate a little less than 4,000 customers.
Let’s say, Bonkerzz operates on a subscription model, charging customers $12.99 per month. Bonkerzz’s LTV might look like the following:
If Google Adwords was the only chosen marketing channel
LTV = Revenue per customer per month ÷ monthly churn rate
LTV = $12.99 ÷ 0.25 (25%) = $51.96
If direct PR was the only chosen marketing channel
LTV = $12.99 ÷ 0.65 (75%) = $17.32
The assumption here is also that the drop-off rate is higher with PR.
In both hypothetical cases, the company is not spending more to acquire a customer than the discounted positive cash flow that will come from that customer over their lifetime. If the LTV was not three times greater than the CAC, then it would suggest the startup does not have a good business model in place.
The point to take away is the channel that works for one company might not work for another. Startups need to test what channel works best for them. SEM and PR have proven to be effective marketing channels for Appster. For others, the best customer acquisition method may just be word-of-mouth referrals. If such is the case, the company might then choose to implement a referral programme.
Of course, measuring the efficacy of referral programmes requires an entirely different formula:
K (viral coefficient) = (avg. # of referrals/customer) x (conversion rate – i.e. percentage of users that signed up after being referred)
The almost impossible-to-achieve goal is for K to be larger than 1 (K>1). This means you’ve achieved viral growth. Somewhere between 0.15 and 0.25 is good, 0.5 is great, and 0.7 is brilliant.
Even if media coverage doesn’t immediately appear to be a viable customer acquisition method, it could be valuable in other ways. It can be seen as a long-term strategy, especially if you’re looking to build a certain perception.
Media coverage allows startups to have a public voice, increase their visibility and generate awareness around their value proposition. Startups can use the media to highlight the impact their product is having on real people, share valuable insights with consumers, and contribute to public discussions on issues that are relevant to startups in general or to the specific industry they operate in – e.g. FinTech and HealthTech.
Just because a journalist decided to tell your story doesn’t mean you have found a strong product/market fit or that you have a strong business model. It could mean you have a strong story; and a strong story has more to do with newsworthiness than the quality of your value proposition.
In the upcoming article, I’ll explain the journalist’s process and how you should approach the media.
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