Super Bowl Lessons for Startups
I reluctantly watched the Super Bowl last night. I'm not a football fan, but the biggest game of the year is usually entertaining, and the commercials are icing on the cake. While watching the game — nay, the event — I noticed many lessons that apply to startups as much as they apply to football and the Super Bowl.
The most memorable ads are the ones that tell stories and evoke emotions. Companies that do a great job of this include Google (example 1; example 2; example 3) and Apple. These commercials don't sell a list of features, they sell an experience: Easy to use. Beautiful. Something to share with your closest friends. Something that will change your life. When you're selling your product or pitching your company to investors, tell a story and make it personal.
The are numerous internet debates about the ROI for a $4m ad -- especially if you're doing "brand advertising." Getting eyeballs for your product is nice, but you need to understand the cost of user acquisition (CUA) vs. a customer's lifetime value (LTV). Super Bowl ads have a $35 CPM. If your product has an LTV of $15 and you expect 0.2% of ad viewers to become paying customers, then you need to find a different marketing venue. Businesses should apply this kind of analysis to their marketing activities, and they should focus on measurable marketing channels when possible.
The more money is at stake, the more polished you have to be. When it costs $4m just to get a 30-second slot, advertisers will pay millions for high production values — that's why the ads are so good! It would be foolish to pay $4m for a time slot and then skimp on the script or the famous director. Inversely, if there's not much money at stake, you don't need as much polish. PayPal can't release a new API without exhaustive documentation and extreme load testing, but a 5-month-old payment startup can do just that. Having the freedom to release products that are not 100% polished is a huge advantage that small startups have over big companies.
Creativity can overcome inferior resources. Two of my favorite examples from the Super Bowl were Esurance's ad, which exploded on Twitter, and DiGiorno's hilarious tweets, which didn't cost anything to produce.
You might watch the Super Bowl because you love football; or because your home team is playing; or because you think the commercials are great; or because you like hanging out with your friends, eating nachos, and drinking beer. Many people watch the game for all of those reasons. The Super Bowl would be a lot less significant if it only appealed to die-hard football fans. Similarly, great products make users happy in multiple ways: they improve productivity and save money and are easy to learn and are fun to use. Having one or two of those four attributes is nice, but having all four is a killer combo.
- Products with network effects deserve a special mention here. If your product is only useful if tons of people are using it, then you're going to have a hard time with early user growth. However, if you can provide value that's independent of network effects, then people will sign up without waiting for all of their friends to sign up first. Pinterest is a great example of this: it's more fun when your friends are repinning your photos, but it's pretty useful as a personal photo curation tool even if you're the only user in the system.
As the adage goes, the most predictable way to make money in a gold rush is to sell shovels. Maybe advertisers got a good return on their ad investments, or maybe they didn't. Either way, the NFL and Fox made a killing. Try to be the person who's selling shovels.
How to Win
Winning is a mix of skill, hard work, and luck. This week, the Seattle Seahawks played very well and won. Several weeks ago, the San Francisco 49ers played well against the Seahawks but suffered through several significant referee calls that were questionable. They lost. Sometimes executing well isn't enough to overcome bad luck. It's unfair, but it happens. The only thing you can do is to try many times so that your luck averages out in the long run.
It's hard to come from behind, but not impossible. In yesterday's game, there was clearly no chance of a comeback after the first half was over. However, there have been Super Bowls in the past where teams came back from a sizable deficit. In Super Bowl XXII, the Redskins were trailing 0-10 against the Broncos, then came back to win 42-10. In the startup world, when you're starting to work on some idea, it's easy to get discouraged when you find out someone's been working on the same idea for 6 months longer than you. Six months is not an insurmountable deficit and does not justify giving up; plenty of successful companies were not the first to market.
Execution and team quality are critical to success. Over the last few years, the "idea vs. execution" debate has swung solidly in favor of execution, and for good reason. To continue with the football analogies, who do you think would win: a Super Bowl quality team with a mediocre playbook or a mediocre team with a Super Bowl quality playbook? The best game plan is useless if you don't have a great team to execute it. That's true about business plans, too. The following chart offers a great summary:
Finally, a meta-lesson: there are lessons present in every context. Of the hundreds of founders whom I've met, the most impressive ones are often the ones who are observant and analytical, and who use their thoughtfulness to come up with unexpected, non-obvious insights. Whether you're watching a football game or in an improv class or feeling frustrated by the poor menu design at your favorite restaurant, make it a habit to stop, analyze, and generalize what you observe. It'll make you a better entrepreneur.