Infinite Distractions, Finite Attention
What Defining Brands Will Need To Win the 2020s
This originally started as a meditation on how brands and brand marketing needs to evolve over the next 10 years. In light of the recent coronavirus outbreak in the United States, I’ve added more context on what we’re advising companies to do and then also how the online and consumer landscape will change as households stay home for weeks, or potentially months, in 2020.
Ten years ago, I gave a TED talk about how brands would no longer be able to control the message and had to adapt to a world where conversations happening about them online were taking the lead.
Today, that world has evolved to a point where a Google-Facebook duopoly commands a majority of all digital ad spend in The US. That’s right. Think of all the ads you see online across all those different websites and apps . Added up, they’re all still less than half of what Google and Facebook make. This is a $100 billion market and the total dominance of those two companies have long-frustrated advertisers and other platforms alike. (Believe me, I spent a lot on the Reddit turnaround of 2014 to 2018 convincing brands to shift dollars over to us).
So what is a brand to do for the next decade going forward?
First, we have to recognize that today everybody is a brand. Even when conceiving Initialized’s brand strategy, I recognized that just writing blog posts wasn’t going to cut it when the best founders have boundless ways and means to fundraise. We invested heavily in visual collateral and in creating multiple channels through video, social, podcasting and even merch. The brand of Initialized didn’t even exist until a few years ago and we’re already seeing other firms copy our best practices — it’s exciting, because it validates our thesis.
Second, a brand’s ability to capture attention has never mattered more. Today, brands are up against an advertising duopoly that can charge exorbitant customer acquisition costs. Therefore, the brands that can generate organic discussion and build communities and reputations around them, can get around algorithmic filters, have dramatically lower CAC, and bolster their profit margins.
The next 12 to 18 months will exacerbate these trends as we are entering an unprecedented time, with pain in the months and quarters to come. However as people stay at home for at minimum weeks and potentially months amid the COVID-19 pandemic, social media usage will surge and activity on online platforms will skyrocket. (We’re already seeing record DAUs from UGC websites in the portfolio).
Startups that previously have had reckless levels of spending on customer acquisition will run into limits on their access to capital and simultaneously, a dramatic increase of online advertising inventory driven by consumers staying home, will bring rates down, and give more leverage to the strong hands at the table.
So this brings me to the Initialized portfolio. How does the Initialized team identify and support strong consumer-facing companies and brands?
Building a Telehealth Company, Not a Marketing Company
When we look at teams, we look for co-founders that can complement each other. This is no different when it comes to DTC, or direct-to-consumer companies.
The best example of this is Ro (Initialized 2017), which has in two years set the standard for tele-health in the United States by creating one of the easiest ways for patients to access care and medications through a low-barrier doctor-patient evaluation software platform.
What made this team special — and we invested in them pre-launch — was a triumvirate of obsessed founders in CEO Zachariah Reitano, Chief Growth Officer Rob Schutz, and Chief Product Officer Saman Rahmanian. The combination of relentless execution on product, performance marketing, operations, and always putting patients first enabled them to scale revenue by more than 300 percent last year and simultaneously improve margin to that of a software company. Each improvement in Ro’s brand reputation is also a decrease in their CAC. When click-through rates go up, conversion rates go up and churn goes down. The brand’s positioning around being serious and credible about health is a moat against other competitors.
This excellence at brand-plus-performance marketing is what has allowed Ro to strategically deploy money more effectively than their competitors. We were thrilled to see Ro getting copied shamelessly, because it meant they were doing something right. What imitators don’t understand is that you can’t copy the superficial text and aesthetics on the landing page of a company like this. The underlying values and intent of the brand matter. Those values are inherent within the organization and its employees. Unless you have that, you’re always going to be second. Or out of business.
Ro has also been exceptional at iterating quickly and building useful products in a rapidly shifting environment. When COVID-19 began spreading in the United States, Ro put together a free nationwide online assessment for the condition.
Underlying this rapid experimentation is a continued commitment to creating a product that patients love, a reputation for excellence in healthcare, and ability to follow-through using software-powered infrastructure and operations.
We’re proud of the multiple portfolio companies who have stepped up to offer innovative and authentic solutions amid this crisis. Adquick (Initialized 2017) helped me procure very effective billboards in Times Square encouraging people to Stay Home and Save Lives. It proved yet again what we say about the ROI for out-of-home as it organically generated significant press.
To get the billboards up, we worked with new partner Wieden+Kennedy, one of the leading advertising and creative agencies in the world, to craft a message that reaches as many Americans as possible. #StayHomeSaveLives will also touch a number of our portfolio companies, not just Adquick and Ro, but also Athelas (Initialized 2018), supporting testing efforts; Gobble (Initialized 2012), providing easy in-home meals; Instacart (Initialized 2012) for no-contact grocery delivery; and Atoms (Initialized 2018) which converted their Korean sneaker manufacturer to make everyday masks they sell at cost and then also donate one to NYCHA with every mask sold — selling 50,000 in just the first week.
As conventional social channels have become more competitive, other forms of marketing are emerging as comparatively cost-effective channels. Shopify CEO Tobi Lutke said on a recent earnings call, out of home is now more cost effective than digital advertising. AdQuick is positioned quite well as the only software-powered solution for OOH as people start getting back into their daily routines outside the home.
Lowering CAC Through Memes and Creative Attention Hacks
Not only are our consumer-facing companies finding ingenious ways to lower CAC, our enterprise and infrastructure companies are too.
Rippling (Initialized 2017) recently instigated a billboard battle in SF to strategically capture the zeitgeist among SaaS based businesses. Vetcove (Initialized 2016) shares Veterinary Tech Memes on their Facebook page along with inside jokes that few of us reading this LP letter would understand. Every business must be in the business of capturing attention now. Perhaps the most striking area for growth to come during this unprecedented lockdown will be in all the new economies for human creativity that are catalyzed by idleness as long as we still have internet and power.
In particular, creators platforms like Patreon (Initialized 2013) and influencer networks like Jetfuel (Initialized 2016) may see higher engagement numbers and more new entrants. Record numbers of people spending unprecedented hours online will need content to consume and there is now a vast infrastructure in place to assign a real dollar value to all that attention.
Those dollars will come in the form of digital payments or e-commerce, both will be the kind of passion-purchase that is ultimately tribal — flexing your tribe or your status within it. We’re already seeing creators thriving at a time of great economic uncertainty because their fans are more motivated to support their work during these turbulent times. This isn’t the same as buying a T-shirt at Hot Topic of your favorite musician, this is buying it from her to support her. It’s a symbolic statement of tribal support when we look to our leaders in crisis and feel compelled to help for the sake of our community. I know because I helped build this with Reddit arguably the largest community platform in the English-speaking world.
Adapting to a New Normal Amid a Pandemic
Since COVID-19 emerged, we’ve tried to provide frank advice about how to plan for different economic scenarios, including a long or slow reboot in case the world’s economy has to potentially wait a minimum of 12 to 18 months for a vaccine to be deployed at scale. The firm has run live Q-and-A sessions and dispatched memos to the portfolio on how to shift to operating remotely, runway and cash management, renegotiating leases and generally offering our support as well as resources for what it will take to lead in this time of crisis.
This is definitely ‘war-time’ for our CEOs, and we’re lucky to have a new partner who I’ve been in the trenches with during the darkest days of Reddit’s turnaround: Katelin Holloway. She’s already been helping coach our founders through these turbulent times on how to manage their teams. She’s also offered a steady hand with specific tactics and strategies on how to transition teams to full remote. Making the best possible decisions now, swiftly, will help our companies tremendously in the long-term.
Attention was scarce. Now it’s sacred.
Every day, we are in a war for attention. New platforms are always emerging, each with their own rapidly evolving cultures, whether it’s a trending dance on TikTok or a new community on Reddit for sysadmins to rant about how under-appreciated they are. The internet is creating and shaping culture faster than our species evolved to adapt.
This has fundamentally re-ordered trust and influence in our society. If we think back to the world’s very first newspaper, succinctly titled in typical German fashion, Relation aller Fürnemmen und gedenckwürdigen Historien, or “Account of All Distinguished and Commemorable Stories,” published in Strasbourg in 1605, there were at most 100,000 people living in the city back then. Only a very small percentage of them were literate enough to read that newspaper, so stories and ideas could only be generated and shared within the confines of that readership and at the speed of those early printing presses.
The world changed with the ability to print and share news, and the change that’s happened in the last decade as we’ve now reached social media ubiquity is a massive leap from there. The result is that traditional authorities on facts and storytelling, like the news media and government are now among the least trusted institutions in American society, according to a recent Gallup poll.
With quarantines underway, we’ll see record engagement and DAUs for social media channels and entirely new platforms and stars emerge in the next 12 months. There will be lots of idle time, lots of content, and even more competition for attention as you need to beat the algorithm or build a tribe.
When we triumph over this pandemic and life begins to resume, some things will not go back to the way they were. The longer shelter-in-place orders remain, the swifter the underlying changes to our dependence on e-commerce and automation will happen.
The already-in-motion push toward remote-first workflows and software will find new levels of acceptance and companies like Front (Initialized 2014)and Around (Initialized 2018) will help distributed teams stay in touch with each other and their customers better in this new normal.
As we collectively huddle around our computers and smartphones for the next few months, many of us will also be face-to-face with loved ones that we’re used to only seeing in small doses at the start and the end of workdays, on weekends.
Remember that despite all of the technological progress we’ve made collectively as a society, we still live with systemic vulnerability to Mother Nature amid this pandemic. Please be patient and kind to yourself and your loved ones during these difficult times. They’re all that our species started with and, in the end, they’re all that we’ll ever really have.
