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Mark Suster is an entrepreneur turned venture capitalist. He is a partner at GRP Partners and he shared his thoughts with Digiday on Twitter’s bad rap, the tech bubble and the opportunity Google+ has to go toe-to-toe with Facebook. Follow him @msuster.
You’ve invested in Twitter platform companies like Adly and DataSift although others are wary of building on the Twitter platform. Why so bullish?
Listen, Twitter is doing something that is truly unique. First, what Twitter has built is an open network. What I mean by that is that data flows in and out of Twitter. They allow that data to do so, and that creates economic opportunities for others. [Twitter CEO] Dick Costolo yesterday was on stage in Aspen and mentioned that the San Diego Chargers had some extra tickets to sell, and then they sold 1,000 tickets on Twitter. Via Twitter you can post stuff with a link, and that link can drive anywhere that you want it to. The fact that it is open, the fact that there are all of these commercial opportunities, and opportunities to drive traffic, means that there are a lot of potentially interesting businesses that can be created around the Twitter ecosystem. And I believe that Twitter is open to seeing that happen. There are really two reasons that Twitter has been underestimated. The first one is one business school people call emergent strategy. It’s something that just happened, it wasn’t planned. And as it happened, people supported it. As a result of this thing accidentally taking off, there was no really grand strategy. And as a result they allowed people to build Twitter clients to consume their feed. And the founders didn’t really worry much about that because it wasn’t a planned company. The first thing that they realized was that it was really important to control the Twitter clients, and so they clamped down. And so that created some bad will in the market, but I think they have put that behind them. The second reason is that everyone that is in the press loves to glom on to this “oh my God they haven’t figured out their business model yet” thing. And so a lot of people are saying, “Eh, Twitter, they haven’t figured out their business model yet, they’re not so interesting.” But I will remind you that Google didn’t figure out their business model for years — and I don’t think people are underestimating Google at this point. So what was important about Google in its early days was that Google drove you to third-party websites. At the time, most market analysts thought that was heresy. The goal back in the 90’s was what people called ‘stickiness’. That is, we want you to come and we want to confuse you into staying. And that’s what AOL did, and that is what Facebook does today. So while people thought that there was no way that AOL could be displaced, look at AOL ten years later. So I’m betting that in the long run open will defeat closed.
What’s the Twitter opportunity for marketers?
Twitter is a really important tool for monitoring trends. There’s tons of data that is available that a brand ought to be mining to see what is happening in the market. If you want to track people living in South Florida, under 25, who vote independent and have positive association with Pepsi more than Coke, you can do that on Twitter. If you want to do correlation analysis to see what else they do, you can do that on Twitter. It’s a way to maintain the brand relationship and really find out who your customers are. One of the biggest problems is not knowing who your customers are. If I’m Joe’s Jeans and someone buys my product at a clothing store, I don’t automatically get that information about a customer. If they tweet, then there’s the possibility that the brand can follow them, and even message them. In the past, we learned that one of the currencies of customer relationship management is an email address. An email address was important because it gave me a way to connect with my end-users directly. The beauty of Twitter is that with a Twitter handle, I not only have the ability to communicate with my customers, I have the ability to actually monitor what they are saying. It’s more powerful than email. I think Twitter is one of the greatest platforms that exists today for gathering data and creating insights that help brands interact with people through interesting campaigns. However, I don’t particularly think that Promoted Tweets is an interesting product. I mean, for me, this is where I disagree with Twitter. The last thing that I want to do as a marketer is put out a tweet where anybody can say anything about my brand. The Promoted Tweet may say, “HTC is incredible, check it out”; in the stream people are probably saying, “HTC sucks I hate it, it’s a terrible phone,” and so you are paying for people to publicly make fun of my brand. I don’t understand that product. I think it’s the least authentic product that exists.
Where do you fall in the bubble debate? Should it matter to the advertising and marketing world?
The important thing is that the technology that is emerging now is continuing to disrupt and change the industry. I really believe in the “adapt or die” mentality. If you look at the roughly $300 billion of marketing spend in the U.S. yearly, $270 billion of it is offline and unmeasurable. About $60 billion still goes to broadcast TV. And I understand why that is today, but the future is certainly not going to look like that. So we need to evolve, and whether or not there’s a bubble is irrelevant for marketers. The fact that there are new technologies changing the way that we deal with customers is the important takeaway. Now, is there an explosion in the number of ad tech companies? Yes. Is that going to continue? No. In a bull market the number of startups in a category multiplies by as much as ten, and then when the market corrects, then they consolidate or shut down, and that is normal. But the valuation of those companies, which is what people are getting at when they mention an ad tech bubble, is unimportant in that context for marketers.
So is industry-wide consolidation definitely on its way?
In the old, pre-tech world reach was consolidated into a few spaces that had volume, like television companies, magazines and newspapers. The digital world is no different. There are a few entities that have volume and users. Those entities are called Google, Facebook and Apple. And those entities will always strive to control the way that the advertising industry is going to work.
Is Google+ a gamechanger?
So in order to talk about Google Plus, I have to talk about the alternative, which is Facebook. Facebook is a place where you mash together all of your relationships. So if I connect with people, I have to connect with my mom the same way I connect with a journalist or a company in my portfolio. So if I want to go to Las Vegas and I want to say something about it, what happens in Vegas can’t stay in Vegas on Facebook. It’s all mixed together. Facebook is a platform trying to get you to stay on Facebook all the time. Facebook is a walled garden, Facebook is AOL. On Google+ I get to separate my different types of friends, so I can communicate with my college buddies differently than my colleagues. Google+ is also trying to enable threaded conversation, which is good. Time will tell if the market values that. The fact that Google+ has launched will force Facebook and Twitter to up their game, and that’s great.
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