Money Matters

Dozens Of Brands Have Built Businesses On Facebook And Instagram. But It’s Getting A Lot Harder

(Source: www.forbes.com)

Courtesy of MVMT

Jake Kassan and Kramer LaPlante dropped out of college and founded MVMT with the idea of selling stylish, inexpensive watches that would appeal to Millennials direct to consumers over the Internet. In five years, they built a business with $80 million in sales, creating a playbook for a successful digital-only brand.

They started in 2013 with a crowdfunding campaign on Indiegogo, which helped MVMT gain consumer recognition and $1 million in sales in its first year. Then Kassan and LaPlante started using Instagram, where MVMT now has nearly 1 million followers, sharing user-generated content under the hashtag #jointhemvmt and paying Instagram influencers to, subtly, push the brand at a time when the concept was still relatively unknown. As they scaled MVMT, which hit $7 million in revenue the second year, they rolled out on Facebook, Twitter, YouTube and podcasts, using a mix of paid advertising and organic posts to drive traffic to their website and sell watches. Because all of the sales came from that website, they could track, fairly precisely, which efforts worked and which didn’t – tweaking the message and marketing over time. “It was really like the secret formula for scaling the brand online,” says Kassan, who ditched college at 19 to focus on watches.

In an era when dozens of companies seemed to have come out of nowhere to get buzz and tens of millions (or more) in sales, MVMT was “the poster child of how to build a business on the dark arts of Instagram with influencers and microinfluencers,” says Gabriel Anderson, who runs VaynerMedia’s small business division. But times have changed over the past year, and already, the golden age of building a major direct-to-consumer brand on Instagram or Facebook is ending, as competition for digital eyeballs has increased, costs have gone up exponentially, and the use of influencers has spread to mainstream brands. “It’s much more difficult without a doubt,” says MVMT’s Kassan. “It’s still possible, but it would be very difficult to scale as fast as we did. We used channels that just aren’t as efficient or easy to use anymore.”

There’s no question that Facebook and Instagram have gobbled up other forms of advertising over the past few years with their ability to access vast numbers of potential consumers – specifically targeted by their demographics – at relatively low cost. They also offer an ability to see exactly what’s working and what isn’t, a transparency that’s not been available to advertisers in print media, television or other offline channels. But as with any marketplace, success has meant more competition, and more competition has meant higher prices, especially as deep-pocketed corporations have joined the fray. That means startups will need to be smarter.

“It was shooting fish in a barrel to start,” says Steve Dinelli, founder of digital marketing agency Blackbird Garage. “Now it is a lot trickier.” In 2015 (his first year in business) and 2016, he says, he had six client companies that went from startup to $30 million in revenue in one year. In 2017, he says, there was only one. Increasing competition from big corporations, as well as a flood of new startups, without a corresponding rise in ad slots has resulted in prices going up and competition to get the best slots increasing. That’s squeezed startups that either have to afford the higher prices or come up with a different strategy. “There is a lot more competition that is coming not only from these smaller direct-to-consumer brands popping up, but from bigger brands moving budgets away from traditional media,” he says. “Getting to $30 million is much harder than it was even a year ago.”

For companies that missed the golden moment, here’s how to think about Facebook and Instagram marketing, whether you’re just starting out or scaling up.

It’s the brand, stupid. Maybe it goes without saying that the brand is key, but a year or two ago it seemed even half-baked efforts could succeed on Facebook or Instagram because the idea of selling direct to consumers at a better price was new. “Before you could get away with not having a great brand. Today, you’ve got to have a great brand so that people will come back and repeat buy. The brand is what’s going to survive,” Dinelli says.

More Info: www.forbes.com

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