The tech world is currently embroiled in a civil war over whether or not the startup industry is in the midst of an economic bubble set to burst in the near future.
Team Bubble is represented by people like UBS bigwig Art Cashin, who see the monumental valuations given to companies that don’t produce revenues and extravagant benefits afforded to new startup employees as eerily similar to what preceded the dot-com crash of 2000.
Team No Bubble is fronted by folks like the investment bank Gridley and Co., who see the strong performance of new tech stocks like Twitter and the relatively pedestrian number of deals made in the sector as evidence that the coast is clear for the time being.
Now, it appears that the president of advertising agency MRY has declared himself a proud member of Team Bubble.
In an op-ed published today by Ad Age, MRY president David Berkowitz says that brands won’t be working with startups in 2014 nearly as much as they did in 2013. In his mind, the market for such partnerships has reached saturation, and brands will need to try new things in order to get the attention and results they desire.
Noting that Ad Age wrote more stories about startups in 2012 than it did from 2005 through 2009, Berkowitz says that there are now so many startups looking to work with brands that there are independent shops springing up whose sole purpose is helping brands pick which hot, new, tech company to work with next.
Berkowitz says that as a result, the media will no longer be interested in writing a story every time a company becomes the first brand to do something on the next Vine or Snapchat, or integrates the technology of a startup like Google’s geolocation company, Waze.
Without this publicity, he says, brands working with startups will be measuring their partnerships based on the technologies that are produced, rather than the positive externalties of being perceived as cool and innovative by the public.
Berkowitz concludes that these results by themselves don’t always make working with a startup worth it:
“It sounds rather poetic, but the harsh reality of the natural order is that most species go extinct. Most of the efforts don’t make enough of a difference. Even good bets often don’t pay off. A marketer working with a startup successful enough that it soon gets acquired can soon find a lot of their effort wasted when the acquirer buys the startup, strips it for parts and destroys its original purpose. It’s relatively rare that a partnership between a marketer and a startup delivers results that the chief marketing officer cares about.”
In sum, he says, marketers will have no choice but to decrease their investments in startups as they find other strategies to be more promising. On the bright side, he says, the publicity of all the brand/startup partnerships that have gone down the past several years has at least let marketers know these partnerships are available.
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