You can find a lot of information on the average Canadian Web 2.0 company’s Web site – products still in the alpha stage, a manifesto of corporate philosophy, forums galore – but don’t expect to see an office phone number.
Instead, firms such as Vancouver-based Dabble DB list e-mail links and refer visitors to their executive team’s blog as the primary sources of contact and communication. It’s not that they don’t want to hear from early adopters and prospective users. Having released a hosted combination of spreadsheets, custom databases and intranet Web applications two months ago, Dabble DB is as hungry for revenue as Microsoft and Oracle. But according to Avi Bryant, Dabble DB’s co-CEO, this is simply the way Web 2.0 business is done.
“It’s a generational thing that there is a world of users and of communities out there that have gotten really used to communicating over e-mail and online forums. The first stage is to tap into that world,” he says, adding that resources are also an issue for a four-person startup. “Everyone is actively involved in developing the product. Just to take a phone call can take a huge amount of time.”
The same holds true for a growing number of Canadian entrepreneurs who are developing social networking tools, file-sharing applications and other products built on AJAX or similar platforms. Marketing is strictly viral, through word of mouth or the blogosophere. Products evolve far more quickly than the stately pace of more traditional business software. And more often than not, the IT manager or CIO is not the prime target in the organization.
Wild Apricot, which is based in Toronto, is an example. Earlier this year the firm launched hosted software aimed at non-profit organizations and associations which automates routine tasks such as organizing events, handling registrations and managing member databases. Dmitry Buterin, Wild Apricot’s CEO, observes that many of his potential users work in organizations too small to have an IT manager, or one that would balk at the use of online tools that interoperate with those of other firms.
“IT people, because they want security, they want stability. If you open the system to an external audience, they think it will be a problem and hard to maintain,” he said. “On the other hand, it gives you so many other benefits, such as contributions from all over the world. It will take a while for IT people to get used to this concept, that this system not just in their framework in their organization but something they use to interact with their customers.”
Because many Web 2.0 applications are hosted online and can delivered as a low-cost monthly service, business users choose to use their discretionary funding and pay for it on a company credit card. This can happen without the CIO being any the wiser, says Nathan Rudyck, who helps develop strategies for startup firms at Market2World Communications in Ottawa.
“A lot of that stuff was to sidestep the IT department. Not that the IT department shouldn’t be involved, but people felt there were barriers to purchasing,” he said. “They’d get a response like, ‘Until we can purchase a server or make sure that’s inside our secure firewall, we can’t do that.’”
Going directly after business users is not as easy as it sounds, however, according to Bryant, who says small companies usually have at least one technically-savvy employee who becomes a trusted advisor of sorts.
“Where the IT manager comes in is that they’re more likely to be reading the blogs or Business 2.0,” he says. “It’s much easier for us to get buzz that someone like a CIO is going to see than someone like an end user.”
Rudyk says it has become a religion among many Web 2.0 companies not to darken their marketing strategy with traditional outreach techniques, but it’s important that they don’t ignore avenues that could get their products used. More traditional companies like Microsoft and HP are starting to adopt Web 2.0 as a means to get their message out, but Web 2.0 firms should be similarly open-minded to tried-and-tested marketing techniques as well.
“I don’t know if it’s a form of arrogance or something that gets engrained in the culture of those companies, but they’ll brag about how they’ve never paid a PR firm or spent on traditional advertising,” he says. “At some point, you have to get out of the basement with your buddies and become a real company. The reason there still are trade shows and direct marketing lists is because they still work.”
Some Web 2.0 companies are changing tactics as they become more mature. Like its peers, Toronto-based BlogMatrix gained attention through its executive team’s professional contacts. Three years after it was founded, the company is now developing a more aggressive go-to-market strategy for its products, which facilitate corporate blogging projects, as well as podcasts and Webcasts. For the first time, for instance, BlogMatrix will be hiring a sales force, and will partner with service providers in vertical markets that would offer its products like a reseller might.
“We want to accelerate our sales,” says David Janes, BlogMatrix’s founder and president. “I didn’t want to be the company that’s bleeding until it’s bought by Yahoo! Having a reasonable number of mid-level and large customers has always been appealing to us. The revenue is predictable, we’re not trying to get five dollars out of some guy who may not have it.”
As the sales process becomes more refined, so might the product cycles. Buterin says Wild Apricot originally started out with 300 features, which made it hard to test properly, but user feedback allows the firm to make changes on the fly.
“We don’t have one long development cycle. We can release a product at any moment,” he says. “The sooner you put it out to market, the better equipped to understand what people what you want to do.”
Rudyk says that model works in the early days, but not necessarily once a company’s product or service takes off.
“We’ve actually seen a couple of our clients back away from, ‘We must release something every two weeks,’” he says. “Once the software evolves and you’ve taken in 150 feature requests, suddenly you’ve got a code base that has some interdependencies.”
Even if they eventually set up regular sales and marketing departments, Bryant says the economics of Web 2.0 create unheard-of opportunities for new entrants.
“In the history of enterprise software, you can see it starting out with real direct sales, where someone’s got to go in and meet with the CIO and make the expensive sales,” he said. “Then you’ve got someone like Salesforce.com, which has a huge telesales organization. That would just be impossible at the price point that we’re trying to hit.
“You get down to a point where you’re marketing primarily through blogs and offering substantially the same class of software,” he adds. “As the means to go to market gets cheaper, the price point for the software can come down a lot too. That opens it up to a much larger range of businesses.”
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