In the last few years startups have gotten smarter. We now know to validate our assumptions, use feedback to build a product incrementally and above all, ‘build something users love’. However there’s a key piece of the startup puzzle that many still regularly ignore: the distribution channel.
Arguably the hardest part of building a startup is going from nothing to getting your first bit of traction. Once you have that you can start building a real business. It’s a lot like standing at the bottom of a cliff. If steps were carved into the side, then almost any height is doable, just just keep going up. But if it’s a vertical face with no holds, then even a few meters can make the whole thing impossible.
Finding a distribution channel that you can grab hold of and climb your way to your initial users and customers is a key yet often ignored part of the startup journey.
Here are a few examples of how successful companies found external distribution channels to power their growth.
Back in the 00’s getting a video online was challenging. The Youtube founders solved that by making it easy to upload any format and then view it online only using the Flash player most browsers had. More importantly they made it super easy to ‘embed’ the video into another page by just copying and pasting some HTML.
At the same time the most famous social network was a thing called MySpace. MySpace started out as a way of giving artists a way to connect and share their work. Many of them wanted to upload video but it was just too hard.
But when a few Youtube videos started showing up on MySpace pages, it’s not hard to see why more and more people would started using it to upload their own videos. Better still they were using it to promote their work, so they would then send it to even more people. Each time a video was shared a new person would see the little Youtube logo in the bottom right corner.
Whether by luck or design, using MySpace as a distribution channel helped Youtube go from a small personal project to a global product.
Pinterest (and every other photo sharing site)
One thing I’ve learnt while building tuggle (tuggle.com.au & tuggle.co) is the power of long tail search engine optimisation (SEO). Normal SEO is about picking keywords and trying to rank highly. Long tail SEO is the idea that you have loads of content all with slightly different words on the page. If you have a lot of it, you will get a lot of traffic. Which will lead to more users which leads to more content, and you have a pleasant self-improving system.
If you have a product that involves sharing content online, or is a marketplace then this strategy makes perfect sense.
The secret was that every time a photo was published it got pushed to Facebook. Once on Facebook they were seen by all the user’s friends. So starting with a small group of hard core photo filter enthusiasts it’s not hard to see how the product became mainstream. The lesson with Instagram (and Youtube) is, if you can help people share their content in a better or easier way, on existing social networks, and leave your logo and link on that content (in an unobtrusive way), you’re in with a chance.
Today kogan.com is becoming one of the world’s major online retailers. However to start with there was no kogan.com. Instead there was just an eBay page. eBay was already established as a leading retail destination and Ruslan knew that he had a trick up his sleeve to get attention. He set the auction price at just $1 believing that in a properly functioning market the price would eventually be something more reasonable. It was a risk, but one he was prepared to take. The nature of platform meant that as he got more attention to his page, his product (at the time just a flat screen TV) went higher and higher in the listings, getting more attention and helping build that initial traction.
Using eBay and having a detailed understanding of it’s mechanics helped Ruslan Kogan leap-frog over the big-boys and establish a leading Australian brand.
All these examples might seem a bit contrived and leave you asking, ‘what’s this got to do with the price of fish in Fremantle?’.
Similar rules apply to a few successful Perth startups as well.
The other day I saw @drmarcustan tweet that HealthEngine now has over 1 million monthly visitors. If you type in “GP Perth” into Google, HealthEngine has the second spot. And the same is for almost every combination of practitioner type and location in Australia. I would posit that a double digit percentage of Australian searches for medical professionals lead to the user visiting a Health Engine page.
A key point is that while this is long tail SEO strategy similar to Pinterest. It’s subtly different. For each location and speciality type there are one or more pages that are highly related to the location and type of doctor. This is carefully curated and done in a purposeful way, as opposed to Pinterest which has so much content that it can’t help but match a lot of rare keyword combinations to bring in initial traffic.
Pin Payments is another successful Perth startup which makes it easy to accept payments online. If you look at the partners page pin.net.au/partners you’ll notice that many existing online retail platforms allow Pin as one of the payment options. In this way Pin has been able to get its product into that hands of users right from an early stage. Instead of trying to convince larger numbers of customers to find Pin, people already using Shopify and other major platforms find Pin presented as an option when using their existing software.
If you’re building a software as a service (SAAS) business, it makes sense to learn from the Pin Payments experience. There are many platforms that allow you to build an “add-on” product. Well known SAAS businesses such as Atlassian’s Jira or Confluence, Shopify, BigCommerce, Campaign Monitor, Heroku, Salesforce and others allow you to build your app (almost) into their existing product. As a result your product is being looked-at by thousands of customers right from the start.
When Love is Not Enough
A popular startup meme goes, ‘if you build something people love they will come to you’. This is not always true. Yes your product must be good, but people need a way to know about it. Once you’re big you can pay for that attention, or the media will find you newsworthy and write about you. Till then you need something more organic that has little or no marginal cost. Of course you must also juggle the other key issues such as, “are we solving a real problem”, figuring out the mechanics of how users use your product and “where can I get my next free pizza”.
But the one thing that so many ignore only to find they go nowhere, is the all-important distribution channel. If you can think strategically about a way to regularly and cost-effectively get in the mindspace of large numbers of customers, it’s just simple arithmetic, you’ll have a much greater chance of getting the growth that will make all your efforts worthwhile.