Brian's Blog

As we enter 2008, I thought it would make sense to break away from the year-end top-10 lists and shift right into the 2008 Presidential election season. As I was watching the Iowa Caucus shape up, I thought it was interesting to think about applying observations from the Iowa Caucus to being an entrepreneur:

One mistake can derail you for a while, but it’s how you deal with it that will guide your recovery. At the debate in Philadelphia, Hillary Clinton was the target of the other Democratic candidates. Many think that it was not her performance during the debate that led to her third place finish in Iowa and slide in the national polls, it was how she handled it afterwards that led to her third place finish in Iowa. Instead of using this as an opportunity to attack her opponents from a defensive position, she stayed defensive through the Caucus. This colored her entire Iowa campaign as defensive. For a great strategy on how she could have recovered, see Chris Matthews’ point of view.

There are countless examples of mistakes being made and handled poorly and well in the start-up world. For example, in Spetember 2006 when Facebook automatically added its news feed feature which posted content from facebook applications, such as “The Wall” to everyone in your network’s News Feed, there was an immediate and loud outcry from Facebook users. Facebook responded quickly and listened to its users. More recently, Facebook made another mistake and added its new “Beacon Technology” that analyzes the users’ actions on Facebook and other partner sites and makes these actions public.

In a statement, Facebook founder and CEO Mark Zuckerberg quickly takes responsibility and takes action to rectify the mistake: “We simply did a bad job with this release, and I apologize for it,” he said. “We’ve made a lot of mistakes building this feature, but we’ve made even more with how we’ve handled them.”

An example of a start-up that didn’t react quickly enough is Friendster in 2004. Friendster had over 60 million page views a day, within 6 months of starting up. That traffic crushed Friendster’s back-end. As a result, Friendster chose to re-architect its entire back-end. The target architecture may have been a better choice – they moved to the LAMP stack from a Java, Apache, MySQL architecture – but it took far too long and frustrated far too many users and Friendster’s waning popularity left room for other entrants such as MySpace and Facebook.

Viral Marketing can sometimes beat big-budget media. In an amazing statistic published on MSNBC’s Hardball, they report that in Iowa, Huckabee spent $35 per vote versus Romney’s $238 per vote. By McCain sitting out the Iowa Caucus, it seems as though his campaign foresaw this potentially high marginal cost of votes in Iowa. Therefore McCain’s campaign staff decided to conserve cash and focus on New Hampshire – we’ll see the impact of this decision in a few days.

Now, this is not to say that a high marginal cost of voter (customer) acquisition is necessarily a bad thing. For example, if you think (know) that you have a superior product and the business model and price point supports the high customer acquisition, then such as downstream ROI might be acceptable. On the other hand, don’t assume that a high customer acquisition is the only alternative. As the world of politics has known forever, it takes both grassroots and grass-tops campaigning to win an election, while also playing to your strengths. For example, both presidential candidates Ron Paul and Mike Huckabee both have had successful online campaigns. Paul holds the Republican one-day fundraising blitz record of $4.2 million, on November 5.

In addition to using the internet to raise money, Huckabee has had some creative uses the internet for his viral marketing campaigns, such as his Chuck Norris TV ads that have had wide-spread distribution via YouTube. Although this is all interesting, it is not particularly groundbreaking. Recall Howard Dean’s use of the internet in the 2004 election until his Iowa victory “scream” derailed him. Of course, it wasn’t the actual scream, it was the advent of online video and the myriad of impersonations captured and rapidly distributed. What is new about online viral marketing is that this is the first widespread use of the internet for Republican fundraising and viral online video distribution – leading to a state victory.

Nonetheless, the exciting part is yet to come. How will candidates use the internet to convert grassroots support to actual votes? Will the underdog grass-roots supported candidate support hold up in other states?

Getting to the White House will be a marathon not a sprint. We saw some interesting numbers coming out of Iowa, but just like running a start-up, running a presidential campaign is a marathon, not a sprint.
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