Spending Like Its 1999: Startup Burns $50k of VC Money on Crazy Contest

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Spending Like Its 1999: Startup Burns $50k of VC Money on Crazy Contest

 

You remember 1999, right?  It was the day of the sock puppet and crazy, CRAZY marketing strategies.  By the way, before going too much further, I will confess that I actually bought pets.com shares back in the hey day.  Why?  Because everyone was doing it, and my wife and I thought the commercials was creative and funny.  Granted, my "due diligence" bar was lower back then, but I'd understand if many of my colleagues would revoke my angel investor license just for that.

But I digress.  Today's article is about new ways startups are using to try and attract attention and -- wait for it -- eyeballs!  A software company in Cambridge, MA is running a "viral marketing contest" whereby they are giving away a total of $50,000 for bloggers, videographers (basically anyone with a video camera) and others into the "new, new marketing". 

Here's the article: 

Insanely Brilliant or Just Insane?  The HubSpot $50,000 Viral Marketing Contest

Now normally, I'd be having a jolly old time making fun of this startup with references back to every lame attempt at "marketing" we saw out of dot-com startups back in 1999.  There's just one problem.  It's my startup that's doing the crazy stuff!  Yep, that's right, my startup HubSpot, which recently raised $12 million in venture funding is giving away $50,000 of that in a viral marketing contest. 

I figured once people get wind of this, many of my friends, colleagues and bloggers are going to send me emails saying, "Dharmesh, what the hell?".  Actually, I might get an email from an investor or too as well, because we haven't run this by them yet.  I figured I'd try and pre-emptively answer some of the inevitable questions.

1.  Why do it?  Well, it's kind of simple.  We've been having great success with attracting leads (and closing customers) through our blog and other online channels.  Some of our most successful marketing efforts have been blog articles that went viral on social media sites like digg and reddit.  Last week, we tried to do a rough economic analysis and estimated the value to us of leads generated from these successful pieces.  It was high.  So, there's opportunity here.  Plus, we don't like spending too much money on AdWords.  It pains us.

2.  Why not just do it ourselves?  Well, frankly, because developing viral content that spreads like wildfire is a tricky business.  We have a team of great folks writing content all the time for our blog (including me), and sometimes we hit it out of the park.  But our guess is that there are folks much more talented than us that are capable of producing remarkable content (as Seth Godin would say).  We figured it's worth a shot trying to draw those people out.

3.  If it works, it could work big.  We're at a stage now where experimentation is reasonably cheap.  Instead of getting stuck in the rut of turn this dial a bit, flip this switch a bit, and crank out the customers -- we'd like to look for some non-linear growth opportunities. 

Oh, and if you're a VC reading this (particularly one of our VCs), we're doing the same thing in marketing that you do when looking for investments:  Pick projects that have potentially huge impact, even if they are a bit whacky and high-risk.  If we do a dozen of these crazy projects, if just one wins, we're golden!  Champagne and chocolate-covered strawberries for everyone! 

So, what are your thoughts?  Is this genius or desperation?  Would love to hear your comments.

Posted by Dharmesh Shah on Tue, Jul 29, 2008

COMMENTS

Hehe ... 
Dharmesh, I'm guessing its having the desired effect. The site has been down since the past 5 minutes reporting a system error ... 
 
I guess it got too popular too soon?

posted on Tuesday, July 29, 2008 at 12:39 PM by Saurabh Jain


Your link is broken. You need to remove the "onstartup.com" before "blog.hubspot.com"...

posted on Tuesday, July 29, 2008 at 12:50 PM by Stephen


Stephen: Thanks for the note. Link is now fixed.

posted on Tuesday, July 29, 2008 at 12:53 PM by Dharmesh Shah


I applaud your ideas and point to a favorite book of mine, Buzz Marketing by Mark Hughes. Half.com used a similar high risk strategy (they renamed Halfway, Oregon to Half.com, Oregon) and sold something in the range of 6 months later for $300 Mil to Ebay. 
 
I also have to say that I am a bit envious, as chair of a group of very strong startups called Digital Edge Mi in Michigan, we are faced with a very conservative investment pool that would have our heads if we tried anything like this! 
 
Keep up the great work, if you're ever in Mi, look us up!

posted on Tuesday, July 29, 2008 at 12:54 PM by Joe Minock


VenCorps (nee Cambrian House, name changed to avoid investors) is already giving away $50k.

posted on Tuesday, July 29, 2008 at 10:12 PM by been done


Unique marketing efforts pay off when you can differentiate your self from others. If you do what others are not willing to do, then you will likely get more attention. Dharmesh, you have some good ideas. Please contact us.

posted on Thursday, July 31, 2008 at 10:04 AM by Tom


Dharmesh, I'll be the devil's advocate here. There are two potential problems here: 
 
1) Contests are more of a B2C play and I think you're B2B right? 
 
2) Paying (or indirectly paying) bloggers to blog about something that they have no connection to, might not fly.  
 
 
 
Having said that, good luck! I'll be interested in what happens.

posted on Thursday, July 31, 2008 at 11:45 AM by Fred Yee


Hi Dharmesh, 
You are daring, I will give you that. But as any investor determines the potential for ROI. I am sure you know this answer, and from knowing what your service costs (not that I am a customer, yet) I know it too. You would have to get X number of new customers as a result of this marketing ploy to get your $50,000 back within 12 months... The only thing that I find interesting is how are you going to come up with a fraction of a customer? 
 
All fun aside, I can see where the risk involved is very low and can have a good ROI even if moderately successful. Nice work and good luck. 
 
Chris

posted on Thursday, July 31, 2008 at 2:12 PM by Christopher Mancini


It's brilliant. Given what you could spend to have an agency or PR firm try to run a viral campaign for you, you're getting a bargain.  
 
It loosely reminds me of the Doritos commercial contest, where the winner won some money and had their user-submitted ad shown during the super bowl. It created quite a buzz, and produced tons of content for Frito Lay that was still useful, even if it didn't win.

posted on Friday, August 01, 2008 at 1:04 PM by Peter Jackson


Cool idea. So, how's it going? How many submissions did you get, and how many winners?

posted on Thursday, September 11, 2008 at 8:21 AM by Daniel Weinreb


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