Zero-sum marketing channels: Good or bad for a startup to pursue?

Creates Awareness

Many marketing channels are “zero-sum,” meaning that if one company wins a piece of the channel, other companies cannot also use that piece.

Example: AdWords, where the price is set by the highest (dumbest?) bidder, and the few companies who get the good slots will get the vast majority of the clicks, whereas the other companies cannot get enough clicks to materially impact their sales.

Example: SEO, where the top three search results receive nearly all the traffic. Even getting 10 of the slots ranged 11-30 doesn’t add up to a fraction of what the winners get.

Counter-Example: Social Media. If company X has an awesome Twitter feed, that doesn’t prevent company Y from also having an awesome Twitter feed. Great tweets or content by X doesn’t prevent Y from to earning attention in the same manner.

You might conclude that it’s wise to try to win zero-sum games, because there’s “double” value. That is, not only do you get the sale, all your competitors don’t get the sale. But, especially with auction-style zero-sum games, this means paying top-dollar. Even then, the available inventory is limited, e.g. the top few slots in AdWords or SEO.

So, even if you win a zero-sum channel, your growth in that channel is capped, and expensive.

Whereas if you invest in non-zero-sum channels like social media, long-tail SEO, brand-building, content, value-added resellers, or even cold-calling, the limit of the channel is closer to the limit of the market itself, rather than the sliver of the market which might reach you via a single advertising channel.

And, your success is dependent almost exclusively on yourself, not dependent on how some advertising platform works, or how much money some competitor is willing lose.

This is especially true for smaller companies, because you don’t have the resources (money, consultants, in-house expertise) that the big guys employ in the gladiator-style kill-or-be-killed arenas of zero-sum games, but there’s nothing the big guys can do to prevent you from shining in the other games.

There are few things in startups that you control. The product, your culture, and your voice online are among the few. Take advantage of those when you can!

  • http://startuplift.com/ Pranaya from StartUpLift

    Hi Jason,

    Excellent point. However, the “zero-sum” channels are not exactly black and white like the way you described.

    I have no affiliiation with Google or Adwords – but I would like to point it out that It becomes race to the bottom only if you haven’t fully understood the channel and strategized specifically for that channel.

    For example, if you are blindly going after the 1st placement of “best wordpress hosting” despite the cost, it becomes pointless. However, if you implement a comprehensive long-tail keyword strategy and pay attention to various ranking factors (it’s not always the highest bid), you are bound to come up with a solid marketing plan with a good return on investment.

    I am sure a variation of similar strategy is applicable to any other “zero-sum” marketing channel that more or less levels the playing field. Otherwise, they won’t be in business.

  • http://nathanTbaker.com/ @nathanTbaker

    The characteristics of a channel don’t matter much if (1) your time and money investment pays off and (2) if you’re able to use the audience to build fans of your brand you can later reach (e.g. collecting emails). You can accomplish this on zero-sum or non zero-sum channels.