Who remembers these movies? North Shore, where a lonely Arizonan breaks into the radical pro surfing culture on Oahu. Rad, where a persistent BMX rider is determined to take on the Helltrack despite many obstacles. Donnie Brasco, where an undercover agent infiltrates the mafia. These movies all provide a realistic analogy of the inclusive exclusivity of micro-cultures.
If we go back 60 years, our marketing segments were much more homogenized and binary, in the sense of cool|not-cool, athlete|nerd, pretty|average, good|evil, smoker|non-smoker, clean|dirty, homemaker|breadwinner, man|woman, sweater|jacket, ketchup|mustard, red|menthol. These more binary social/cultural constructions also led to easier segmentation of customers into larger ‘buckets.’ Marginal interest groups were marketed to on back pages and local newsprint at best.
Internet culture has changed everything. We’re seeing thousands of micro-communities emerge as positive, creative and inclusive respites for a new tide of special interests. This is creating an incredible breadth of community content to market against. As their breadth continues to increase, micro-cultures also remain nuanced and exclusive, creating new challenges for marketers.
In his 1996 book Cultures of the Internet: Virtual Spaces, Real Histories, Living Bodies, Professor Robert Shields and some of his contemporaries explored the ideas of Internet sub-cultures very early on. 19 years ago Professor Shields wrote:
New discursive norms are being invented and disseminated on the Internet and from there ‘infect’ the design, layout and textual strategies of advertising, literary works and research reports.
It is essential to treat computer-mediated communication as a process involving differentiated ‘bodies.’ The tendency has been to treat all users as alike according to a stereotype of young, socially inept and thus culturally marginalized male ‘computer addicts.’
Professor Shields’ notes underscore the importance of this rapidly growing space of Internet culture and the general misunderstanding of it’s cultural phenomena, which have taken on great importance in the consciousness of young people.
These new communities are not unlike the punk music, skateboarding and surfing communities of the 80s and 90s. Marketers have always required an authentic connection to touch and influence these groups. Any communications that were outside of what the community considered authentic would be quickly deflected and/or ostracized. Consider the success of Reddit and it’s hyper-moderated list groups. These function in just the same way.
With new micro-cultures emerging around interests like pizza, cats, memes, yoga, crossfit, footwear, crafts, wellness, normcore, fit goth, seapunk, furries, otherkin, survival, webcams, fan fiction, and many more, marginalized obscurity is the new ‘normal.’
Few people talk about why the majority of online companies, particularly e-commerce and non-platform SaaS, are so hard to scale. Many have raised $100M dollars, yet struggle to turn a profit as online customers are harder to find, isolate and impress. It is becoming more difficult for our online ad units to create an authentic connection with viewers because their online interests are becoming hyper-nuanced and continually informed by a new real-time culture, i.e. a finitely engaged and fundamentally distracted Internet culture. Cultural fragmentation away from the status quo continues at an accelerated pace.
And so, we take this rapidly expanding Internet culture space, with all of its nuance, breadth and complexity, and we layer on top of it the most vile, often unmentioned cancer on the web: Bots.
According to a study by Incapsula, over 50% of current web traffic could be different forms of fraudulent ‘bot’ traffic. According to the Wall Street Journal, over 30% of our paid advertising clicks could also be from fraudulent bots. This is scary stuff and applicable to every class of online ad: video, search, affiliate, streaming, display. During my time building data warehouses and analytics products, I can say that these reports are completely consistent with what I’ve seen in the real world.
With all of the cultural fragmentation and low-quality traffic, we have to take a much closer look at brand narrative and content.
How do we speak to all of these micro-cultures instead of just describing them as attributes in a database of millions? Authenticity of brand communication and narrative has never been more important. Sincere connection will be the future currency of marketing products online. [Tweet this]
The allure of web-scale often distracts our brands from a truly unique identity and narrative. Even more troubling for marketers, we find that micro-community influencers like Adam Gallagher, Veronica Belmont, Gregory Han, Justine Ezarik, Christian Kimber, Annaka Linowska, Abdulqadir, Johnie Gall, Karl-Edwin Guerre, and Tom Emrich have become the new narrators of ‘cool.’ It is becoming much more difficult for brands to compete with content that commodifies brands and champions unique community-driven narratives.
Knowing if I’m male or female, or knowing that my zip code is 90254, is not the same as marketing to my culture. Cultural connection requires authenticity and knowledge of a nuanced complexity of language, semantics, tone and color. Often this is ‘tribal’ information, changing organically with the community.
A great example of authentic micro-culture marketing with larger mass influence is Poler Outdoor Stuff. Benji Wagner, Founder and Creative Director explains, “Poler is meant to inspire people to reconnect with the outdoors in simple everyday ways that are meaningful to them. Because of this, we’ve seen great support across different culture segments like outdoor exploration, hiking, car camping, skateboarding, snowboarding, surfing and dirtbiking. Also, because of our unique content and storytelling, Poler has really been embraced by a spectrum of influencers, artists and content creators.”
The wider the scope of our online marketing programs, the more our content needs to be customized to meet the cultural expectations of each visitor. This goes far beyond just contextual and personalized customization. This will be the big challenge for brands in the next decade.
The future may dictate that each new customer segment require an entirely new narrative and marketing strategy. Some of our tech-focused CRM companies are just scratching the surface of this new reality, companies like SailThru, Retention Science, Afinity, Custora, RichRelevance.
In order to grow sustainably, we need to be honest about the potential scale of our products. For example, e-commerce brands sometimes confuse themselves with platforms, anticipating unrealistic organic growth.
Some of our products seem to sell themselves, either from brilliant design execution or broad platform dynamics. The last decade has clearly shown us that content communities and platforms matter. If a company can combine revenue generation with platform dynamics, the possibilities are great. In this case, micro-communities can adopt, self-select and enforce their cultures on each platform while driving incremental revenue in specialized segments. We have seen this with companies like Slack, VBulletin, IFTTT, Salesforce, Heroku, Shopify, Magento, Pinterest and more.
The reality of Internet marketing for a non-platform product is brutal. If we are paying $1 per click for qualified traffic and 2% of our new visitors make a purchase, that means it costs us $100 per hundred people and we get two purchasers. If we sell our product for $40, we might make $15 in gross margin (link to great slide deck). So we’ve made $30 for our two purchases and spent $100, which leaves us with a $70 loss. Let’s say our LTV is $120 (or three purchases), that would be six purchases across the lifetime of our two new customers, which would result in $90 in gross margin. We still end up with a $10 loss over the lifetime of these new customers for our $100 spent on clicks.
Because our current content production model cannot keep up with the pace of micro-community growth, it might cost $100,000 of these ads to find $10k of sustainably reproducible traffic. Need more scale, $10M to find $1M of reproducible traffic, and so on.
“Micro-testing campaigns with authentic content is so important,” says Dirk McGregor, VP of Customer Acquisition at Regent Equity Partners, whose portfolio companies generate over $300M in revenue. “I think what we’re seeing on the larger market are companies scaling too wide with their standard ad campaigns from day one. They sadly end up losing a substantial piece of that investment without first considering the rising tide of low-quality traffic on today’s networks. Without a disciplined approach, it’s tough to find the quick scale people often expect.”
Given our new reality, we not only need to focus on authentic content and narrative, but we also need to limit our financial risk when testing new audiences. While more traditional growth initiatives like email marketing, affiliate marketing, physical events, and traditional lead-generation have a much lower risk profile, they do not scale as quickly as display advertising (which is growing to include internet radio, video and various new social ad units).
Just like using Lean methodologies for product development, we can also apply these core ideas to scale our marketing initiatives. We want to reduce our risk profile, or batch size, as much as possible in order to test our hypotheses, i.e. spend less, learn more. We can achieve this with disciplined hypothesis testing for new audience segments.
Something like this is a good start:
If we take the Lean approach, we increase our chances for success and remove a large amount of waste/risk from our advertising machine. If we can combine this methodology with real tech and significant resources for programmatic buying, content production and targeting across large ad networks, we have a much better chance for sustainable scale. When we talk about this, we are saying that we can automate our audience segment testing and analysis, including partial automation of content production. Obviously this is no small task.
Many search companies have proven this model, companies like Culture Machine, TubeMogul, 26.2 Media Agency, Dex Media, CampusExplorer, YP.com, Rubicon, [ more research on this, these are probably no longer relevant… ]
As we successfully test our audience segments and develop new narratives, authentic content production will become a large cost center. We see companies like Tongal, Kapost, Marketo, Infusionsoft, and Hubspot creating efficiencies in the content lifecycle. Can we merge cultural understanding with authentic content production at scale?
As a general rule, founding level employees build the first culture narrative for a product or service. What about the next audience segment? What if there are 1,000s of these audience segments?
It’s a scary idea that as conversion rates drop and Internet pollution increases by orders of magnitude, we might need experts for each micro-culture to create a narrative effective enough to break through the noise.
Who is this person? Is this a new position entirely? I think it might be. This person is almost an Internet anthropologist, in charge of understanding several important micro-cultures.
Jason Provisor, Head of Marketing Strategy at Tongal, expands on this idea: “Many of the companies we work with are too close to their own brands. It’s the age of the consumer. You no longer tell, you ask. At Tongal we’ve built a platform that crowdsources insights from within important micro-cultures to drive marketing content production. It’s no longer about creating ads, but creating narratives that resonate with each community.”
Our primary paradigm in the ‘lean startup’ era is to just follow the data; test everything, measure everything and respond to the data. Unfortunately this is not going to help much if our marketers or product developers are completely detached from the micro-cultures they are meant to serve. If we use the example of the skateboarding and surfing communities, imagine a fresh Ivy League MBA who grew up playing competitive chess and doubles badminton trying to ‘learn’ his way into marketing to these communities, it would be a massacre.
Much of what we’re seeing is the confluence of a new breadth of Internet micro-cultures and the new reality of Internet ad performance. In many ways, we have been collectively floating down a widening river into a vast ocean of marketing inefficiencies, a black hole of phantom clicks and ad narrative lost in translation.
Surely there is no single formula to combat our new reality. Risk mitigation is generally my number one priority. While it’s easy and fun to spend VC money and corporate display budgets on underperforming ads, perhaps that’s more a sign of the times than a long-term strategy. An honest and introspective approach to building new products and authentic culture narratives, together with lean testing of new audience segments will be essential in the coming years.