Why 36% of Marketers Work With Startups

That startup may have a really great tool that meets your business needs, but are you putting yourself at risk by avoiding a more established brand?

A new study from the Association of National Advertisers  (opens in a new tab) and the Consumer Technology Association  (opens in a new tab) finds that—in the marketing space at least—there’s room for startups  (opens in a new tab) to take a piece of the pie. The “Brands Working With Startups” study highlights the growing trend of marketers jumping on board with fledgling companies.

What’s the reason for the growing trend? More established companies aren’t offering the same kinds of services as startups.

“We work with startups as they offer a new approach or technology not available from other, more established, companies,” one ANA member said in a survey.

The study highlighted responses from 171 ANA members and in-depth interviews with 12 selected marketing executives. Among the survey’s highlights:

More than a third of all surveyed marketers, or 36 percent, said they had worked with startups in the past year, compared with 47 percent who hadn’t. (The remaining 17 percent said they weren’t sure.) Companies that do use startup services tend to largely make room for those services within existing marketing budgets.

The most common uses for startup services were for social media (53 percent) and content development and management (49 percent). Other common uses for startups included research and analytics (45 percent), mobile advertising (43 percent), and marketing automation (39 percent).

Startups fill a need other vendors aren’t filling. There is an opening for startups to provide business solutions that companies struggle to fill internally or that more established vendors aren’t prepared to offer. “For us to go and develop, say, a social listening platform, it would be too arduous to do. We would rather just outsource that to a startup vendor,” one senior manager explained in the survey. “That’s why they exist, so they can reduce inefficiencies and be lean and provide that value.”

A degree of vetting is important. Many companies that use startups tend to rely on recommendations from an outside agency, rather than making a decision on their own. And larger companies tend to prefer to go with a startup that is somewhat established and past its early funding rounds. “Ultimately, the marketer is looking for a startup that is a ‘good fit’ not only in terms of technology solutions but also in terms of stage of development,” the report states.

Startups need to adapt to companies. Ultimately, a larger company will not adapt its offerings to better make room for a startup, and if a startup firm fails to live up to its offering, there’s a good chance it might lose its contract. And occasionally, of course, that startup might go out of business. “If something fails, my name’s attached to it. So I need to make sure my level of confidence is to the point where we’re comfortable to move forward,” one entertainment-industry executive explained in a response.

“Marketers clearly take a serious approach to engaging with startups, and this survey takes a deep dive into exploring the nuances of those relationships,” Bob Liodice, ANA president and CEO, said of the report in a news release  (opens in a new tab). “It examines and reveals not only how but why advertisers turn to startups and what they expect of them.”

You can read the full study here [PDF].

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