Why digital marketing agencies can’t solve your startup’s problem?

Founders come to D.Labs with an idea that will change a market. They sometimes have strong funding in place, but they almost always have two key missing ingredients:

An actual product (technology) and actual customers.

Building technology is what D.Labs is about. Acquiring users and building a user acquisition strategy is usually at least as difficult as building the initial technology. These two activities are actually interrelated. In fact, we notice that pre-Series-A clients that are getting great sustained value from D.Labs (and likely to reach Series A) tend to shift into a mode we sometimes call “marketing driven development” or “analytic-driven development”. Lean Product benefits really happen when these two activities are tightly coupled.

General engineering services/outsourcing companies almost never work effectively for startups, hence the reason D.Labs exists. Similarly, there are a number of reasons why traditional Digital Agencies also struggle to meet the needs of early-stage startups.

1. Agencies traditionally make their money through optimizing and expanding a successful marketing idea. If Instagram influencers are working for you, a good agency in this field will be able to spend 10x the amount and keep the effectiveness of the spend the same. The main source of revenue in an agency is a fee on spending. This rewards them for finding more and more pockets of efficient spending, but it means they are less effective in activities where spend is necessarily low– like recipe discovery.
2. Agencies tend to specialize on a few channel types. As a startup, you can’t afford to spend on every channel and you don’t know what channel will work for you. To an Agency that is great at video, every marketing problem can look like a video problem. You need to test video and social and native and all the others as well as cocktails of all the others. Few agencies have the breadth of skills to handle such a mission and are not set up to simply learn on the fly.
3. Your competitions have already exploited most of the obvious digital channel traffic. In most of these channels, the successful get an unfair advantage and even if a startup brings large budgets, legacy companies are difficult to bid against. One theory that some of us at D.Labs believe is that as a startup, it is likely that your breakthrough channel will be found using an approach that is unknown to your competitors or simply does not have enough inventory to be interesting to them. Agencies focus on channels with inventory, thus to compete, you need to experiment with the channels are by definition not used by Agencies.
4. Discovering the breakthrough, scalable marketing channel will require a lot of failures. It often feels like the children’s game of Battleship, except each turn of the game requires money and effort and it feels like there is far more ocean and far smaller battleships to hit. Keeping track of the failures is the learning path to getting “lucky” earlier. Agencies are rarely systematic and if they track failures, this information usually stays with them. Failures are your investment — you need to own and use this information in the early stages.

To date, we have not worked with a successful startup-focused Agency. Our current recommendations are:

1. Hire internally a digital marketing team. Prioritize energy over experience — your magic strategy is quite possibly found where the successful/experienced ones are not trying.
2. Use agile development strategies. Each week, plan 3 to 6 “experiments” that the team will test. Assess the results and repeat weekly until you either stumble upon or systematically close in on your first working channel. Once you have success, Agencies can be deployed effectively.
3. Track your failures and learning in detail.
4. Focus on keeping the cost of each test low and focus on learning directed toward the ultimate discovery of a scalable, cost-effective channel. Avoid focusing on traffic goals, user acquisition goals, or cost of customer acquisition too early — these are for after you find your first recipe. Using scale-type KPIs too early will eliminate options and push spending onto weakly effective channels — exactly where you should not be focused.

Because of that D.Labs now offers Junior Marketing services to execute tests planned by our clients and coordinate with the development teams as needed. For now, this is the best we can do. All the rest seems to be the inevitable work of our clients.

Need help with finding the right channel for your product?Drop me an email at matt.mayfield@dlabs.si

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