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Kevin Wolf

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Publicitechonomics

Posted: 07/27/10 01:27 PM ET

There's a word I've been using lately that, while made up, would seem to epitomize a primary challenge facing the high-tech marketing and investment/venture capital industries today. The word is "publicitechonomics," pronounced publici-tech-onomics, and it describes the complex relationship between technology vendors, marketing budgets, and how much publicity a technology vendor would like at any given time.

Every time a technology vendor launches a new product, signs a big customer or partner, or plans a merger or acquisition, publicitechonomics comes up. That is: How much time/money should we invest to promote this news? And what is likely to be the return on that investment? Even tech companies with the deepest pockets go through this exercise because promotion and exposure are central to technology vendor success.

Publicitechonomics also takes center stage when tech vendors receive financing from angel investors and venture capitalists. When a tech company gets funded, the pace at which it develops depends (exactly how much is debatable) on the funders. Investors recognize the importance of marketing, so they take a more prominent role in this aspect of the tech company's fledgling business than others.

One way investors help drive marketing is by guiding CEOs in the selection of a PR firm. Of course, shopping for PR services is like shopping for anything else. You check out the expensive agencies first. Then, after considering the price, you look at more modestly priced firms. And if you have to, you visit the "economy" PR lots.

But if you can afford it--and most venture-backed companies easily can--investors and CEOs are going to engage the most expensive agency they can find.

There's no conspiracy theory here. Not all PR agencies are in bed with VC firms. But in the same way most of us like designer clothes, investors and CEOs tend to choose PR firms for how they look versus what they cost.

This is good news, if you happen to be CEO of the next Facebook. Your investors have bottomless pockets and grandiose expectations so why not hire the biggest firm? Heck, buy the whole darned agency! If you're Facebook, your biggest PR concerns are, well, everything and nothing. You may very well need a 10-person team of PR professionals working 'round the clock to promote your business.

The trouble is, most tech companies aren't the next Facebook. Most hope to earn a steady living by selling a product that solves someone's problem and/or makes them happier. These companies need marketing and promotion, too, perhaps more than the Facebooks and Apples of the world. But unlike the big shots they're not in a position to spend lavishly for it, despite how much money they've raised.

Here's the dilemma: PR is an important expense for tech companies. They need it desperately, but every dollar counts. Nowadays more than ever they're under pressure from investors to keep costs down. So, why is it that investors still insist that their portfolio companies hire big, expensive PR agencies?

Here's what happens: The investors say, "Hire a big PR firm, they're big, everyone knows them, they'll take care of you." And guess what. That's exactly what happens.

Next thing you know, the itsy bitsy tech company with lots of ambition but few referenceable customers, rushes out to sign the biggest, baddest PR firm they can find.

Now don't get me wrong: Big PR firms are great. But if you're an early stage tech company, and by that I mean every company not named Facebook, Google, Twitter, etc., etc., you know who you are! Don't fool yourself! What you need is a small PR firm and a marketing program that is aligned with business and fiscal requirements. It's the real-world, common sense, Great Recession-era version of publicitechonomics.

I have a bit of an axe to grind with the investment community. I'm bitter about publicitechonomics this week because it bit me in the ass. A tech company that my small PR firm was courting decided to hire a larger PR agency. The very sincere and earnest internal marketing executive whom we'd been pitching explained to me that she'd chosen the other firm in part because "the VC firm wanted a name."

I had a similar experience recently when a former client described his reasoning for switching to a large PR firm as "something we should do now that we're Series C." As if that would change the fact that they have practically zero news or customer stories.

So, it happens. And I don't necessarily begrudge tech companies for going with big PR firms. They're well known to have shimmery offices, conference rooms overlooking the San Francisco Bay, and expensive cookies and coffees. Besides, investors are footing the bill, so why not? Tech company CEOs and marketing executives will feel special... for a while. That is until the PR agency realizes you aren't quite developed enough to require the resources of a big PR firm, then they'll hand off your account to a team of junior executives. Ugly business, public relations.

In PR as in real life, even the smartest people sometimes make very unwise and potentially damaging financial decisions. Tech companies and investors can mitigate this risk by openly and honestly discussing publicitechonomics. Only then will all parties arrive at a PR solution that is best for them.


Kevin Wolf is founder and president of Tool Guy PR, an unconventional PR services based in Silicon Valley. Kevin can be reached at kevin@toolguypr.com.