White Label for Growth
Last week, I had a great conversation with an entrepreneur who is building a double-sided marketplace for teachers to connect to industry mentors. She already had a significant number of users on both sides of the marketplace using the product regularly, thanks to great relationships she had established with industry professionals. Her challenge, though, was this: how could she grow fast enough in order for this to be a good opportunity?
Under her current model, she sells the product to high schools. The market is extremely fragmented, never mind the fact that schools typically have very limited budgeting cycles. To overcome this bump, she needs another source of revenue. She had done some early experiments with white labeling the product. These relationships were yielding early traction, but she was hesitant to focus on this area. My advice was to give it serious attention.
White labeling and affiliate marketing, which is essentially white labeling, are often perceived as negatives — firm stops in the creation of your own brand. Many companies stay away, because they want total control over the brand experience, or because there is often a stigma of shady players in the marketplace. But when done correctly and ethically, white labeling can be a truly powerful way to reach huge numbers of new customers.
If you don’t have the funds to reach all of the customers for your double-sided marketplace, going through white label channels can generate a huge amount of traffic for you with very low risk. When we were building OneAndOnly (became Match.com), 80% of our revenue came from our white label personals at first. Our partners’ existing distribution relationships gave us a huge surge in volume, which propelled us to a dominant place in the marketplace. It was a way for us to rapidly go to market and build our company out.
In the case of my entrepreneur friend mentioned earlier, she already had a large number of companies approaching her to white label her product. I encouraged her to go for it to increase her volume — because the marketplace with the largest volume always dominated. It’s a virtuous cycle; the information you get from more users enables you to create better product too. If you have a better product with the most users, you will be set up for success.