Entrepreneurs: Never Forget, Distribution is King
After working at Google in the Partner Solutions Organization , I learned a lot about a side of technology companies I never really spent a.
After working at Google in the Partner Solutions Organization , I learned a lot about a side of technology companies I never really spent a lot of time thinking about before: distribution. PSO played a role in many parts of Google you rarely get to see from the outside: how it acquires (premium, protected) content, distributes its downloadable software, and syndicates (distributes ) all of its online software-as-services like AdSense and search . Other than product management, and engineering --which are incredibly important, but obvious–, distribution is another pillar of a business that can make or break its success. Furthermore…
I postulate that every single successful technology company has had a winning distribution model.
Now before I continue, let me define my terms. Success of a product, and any business for that matter, can be measured by two simple rates:
- usage , how much a customer/user comes back and use your product again and again, and
- user growth (a.k.a customer acquisition), how many new users are finding and using your product
Obviously, both are important areas that products must have a successful strategy for - but user growth is at the heart of measuring success of distribution.
Also, let me make sure I define distribution here, because it usually means different things to different people (versus how Guy Kawasaki defined it ). Primarily because I needed a short, easily understood title (and perhaps one that was link-baitable, -wink-), I am grouping everything that puts your product in front of potential new users’ eyes into a single word ‘distribution’ - including traditional distribution channels (e.g. catalogs, stores, wholesalers, partnership companies, or… well, distributors), advertising, P.R. & marketing, sales and even (especially) viral distribution/marketing.
In fact, distribution is one of the most amazing aspects of the internet - it’s revolutionized distribution. It’s now able to be faster, broader, and more targeted all at the same time. Directories, and email started this revolution. It moved to search engines, advertising, and simple syndication. And it will continue to revolutionize, as we are seeing through social means (e.g. Digg & Facebook ).
Famous Examples
Not sure if you believe me yet? Let’s take a look at some great examples from the past… and even the present!
Microsoft > IBM
Microsoft was paid $50,000 by IBM to put its operating system on every IBM PC that was sold.
Killer distribution for a startup!
Google > Yahoo!
Yahoo chose Google for providing its search results, before it decideded to try to compete with them in search. Not before Google milked this distribution, obviously, and people went directly to google.com.
Apple iPod > Viral
Although I believe Apple started with a viral product (particularly because they were bad at partnering ), the iPod is an even better example. A keynote and ads started the iPod revolution, but the genius was that they built viral distribution into a physical device: the white headphones - make any product a (fashion) statement, and it can be viral.
PayPal > EBay
It was way easier then check & money orders, and the acquisition proved it . Product and network affect were important players as well, but initial distribution went a long way.
YouTube > Viral - blogs & email
Clearly the big winner of the acquired companies recently. It made sharing via blog embedding and emailing so easy, people couldn’t help but show their friends how to waste time too.
Scribd > Digg
A much more recent example, at least from what I’ve heard , a great portion of Scribd’s traffic comes from the fact that its documents frequently get dugg. Obviously, there are similarities to YouTube as well, so viral distribution is also at play.
iLike > Facebook
The power of the newest form of distribution on the web, social sites like Digg & Facebook. Facebook apps, can get more than a million installs in 3 months. And it’s all due to the power of the social graph. Something to keep an eye on.
So How do I Distribute My Startup Product?
This begs the question of how to follow in the footsteps of these companies and design a successful model for distributing your product. Big companies have it easy - they typically rely on money to solve their distribution problems. They can easily afford large marketing budgets and big partnership/distribution deals.
But the internet is the great equalizer, and it will only continue to become more that way. The most popular, but incredibly difficult to pull off explosively well, is viral marketing. It’s still hard because it has to be inherent to the product - people have to intrinsically want to share the use of your product. Only then do the features that enable viral distribution matter, as Andrew Chen explains in Viral Marketing is Not a Marketing Strategy (talk about link-bait!). His tip: don’t think about what viral features you can add, but rather how your product fits into an intrinsic, viral loop . Another way to think about it is why will your user contact their friends about your product, strictly for their own selfish reasons? This could include being perceived as being intelligent, fashionable, fun, or humorous.
Even for viral applications, it can help to use a viral distribution product (and/or platform) that already has traction, like Digg or Facebook. Almost any truly viral applications can exploit the use of these networks, and quite easily at that.
Of course, not all products can be inherently viral. But, of course, you do NOT want to be selling to one customer or user at a time. Aside from the normal online distribution methods, like SEO & link-building , you *have* to find a distributor. Online distributors are typically easiest to find, whether it be the expensive Google AdWords, or some other online advertising. What might be more interesting, depending on your market is affiliate networks - where you pay someone every time they generate a sale for you, on (and even offline). I’ve always thought that college students would make great affiliate marketers, if implemented correctly (I mean, painting , for god’s sake? there has to be something more interesting - not that I want to upset Paul )!
Other strategies including partnerships with real businesses require true salesmanship. There are lots of companies out there looking for a partner to do exactly what you’re doing (more than likely), so you just have to go to relevant industry events (a LOT of them) and meet the people in the companies you want to make relationships with. Amazing things can happen just by talking to a lot of people. Of course, this takes time, and you have to love it. At least, someone on your team has to. And be sure to practice spinning your product and company .
But I believe something better will be built out there for distribution of products, using social-like distribution strategies, but for products that aren’t inherently viral. I mean, searching for something you need after you know you need it is so 2002. The next stage in distribution is when great products are put in front of people who need it so they stumble upon it – before they even heard of it, and before they knew they needed it.
Interested in helping to build something like that? Contact me , or leave a comment! I sincerely enjoy feedback, constructive criticism, etc.!
I’ll leave you with an adage my grandfather would always tell me - but I’ve modified it a bit for the present day & age. With advertising and acquisitions growing in strength, usage takes precedence, and therein lies the importance of distribution.