Distribution is King: A Personal Story

No matter what business they’re in, the first and hardest problem for any early-stage Web company is distribution. Everything else about doing business online gets cheaper and easier every day, but with an ever-accelerating proliferation of new sites and services, it only becomes more difficult for each new offering to acquire an audience of loyal repeat customers. The power of proven “purchase intent aggregators” like Google (and the hype surrounding unproven next-gen candidates like Facebook) is rooted in their gatekeeper role as trusted personal shoppers in a market of infinite choices.

I was recently reminded of the inverse relationship between the accelerating ease of doing business online and the corresponding difficulty of acquiring an audience by a personal project that I decided to turn into an experiment in online marketing. It’s kind of a long story, but I’ll try to focus only on the part relevant to the topic at hand…

Setup: What Were We Thinking?

A few years ago my wife and I bought an investment property in Whitefish, Montana. We knew we wouldn’t get out there much in the short term (work, kids, etc.), but we love the area and wanted another reason to visit. So we offered the house as a long-term rental through a local property management company and more or less forgot about it.

Fast forward to this spring, when a local friend emailed to ask what was up with the big pile of trash in front of our place. Only after repeated calls to the management company did I learn that the tenant had skipped town, leaving us with the mess our friend had spotted, a long list of bizarre repairs and serious questions about how well our interests were being served by the manager.

Despite the fact that we were already up to our eyeballs in personal and professional to-do lists, my wife and I decided to take on direct management of the property as a furnished seasonal rental. Our gamble was that almost every aspect of the project could be managed more effectively, and with greater transparency for us as owners, via the Web.

Furnishing by Remote Control

The house is a modern design so it was easy to shop for furniture online at places like West Elm, Room & Board, CB2 and Ikea. We bought most of our small appliances, kitchenware and home electronics from Amazon and NewEgg, and bed and bath linens came from places like The Company Store and Restoration Hardware. Because we weren’t on site to receive packages, we had everything delivered to a local moving and storage company, and then worked with a local contractor to bring everything over once all the shipments were complete. So far, so easy.

Free Marketing, Inventory Management and Payment Tools, All Courtesy of Google

I’d been looking for a reason to try Google Sites (Google’s free Web-page building and publishing tool), so I set up an account and put together a simple landing page, adding a slideshow (via Picasa), a custom map of the area (using Google Maps), an availability calendar (Google Calendar), and an inquiry form (using the forms feature in Google Spreadsheets). I even set up a free merchant account with Google Checkout so I could process rental payments.

(Google’s free web publishing tools may be the most complete and integrated, but I could have accomplished many of the same goals via a free blogging platform like WordPress, or one of the many free Website creators like Weebly, Synthasite or the venerable Homestead.com).

OK, How About Some Customers?

On the first two tasks (furnishing and marketing), the Web offers a virtually unlimited array of good options, most of them easily accessible to a (basically) non-technical user like me, and many of them entirely free. But when it came time to offer the house for rent, my universe of good possibilities shrank dramatically. In ascending order of cost and effectiveness, the available options include:

  • craigslist. The power of this platform continues to blow me away. Free customer acquisition with high content quality and transaction liquidity is one of the most compelling value propositions on the Web. The downside for the advertiser is a tight geographic focus (duplicate ads in multiple locations are policed out), and a high maintenance burden (the newest ads are displayed first and older ads expire out automatically, requiring constant refreshing of your ad to stay above the fold).
  • VRBO. Hands-down the best paid lead generation platform in the vacation rental vertical, Vacation Rental By Owner is like a global craigslist strictly for rental properties. Pricing is predictable and fair ($229 a year for a standard listing), quality is carefully policed, and transaction liquidity is (reportedly) the strongest in the industry by an order of magnitude (it helps that the site is now controlled by the #2 player in the industry, HomeAway.com, itself a rollup of vacation-rental sites backed by Austin Ventures).
  • Google AdWords. The 800-pound gorilla in online customer acquisition, Google sits on top of 70% of global search activity and sells inventory alongside as many of those searches as it can according to an increasingly complex menu of keywords, geographies, time slots and formats. No matter what you’re selling, as long as it’s legal and you’re willing to pay the auction-based price, Google can deliver the leads like no one else.

NB – Not wanting to leave them out, I did run a brief experiment in Facebook’s Marketplace, but apart from one friend who emailed to tell me he’d noticed it, the ad delivered exactly zero leads. I admit I’m a Facebook skeptic, but as compared to an intent-driven marketplace like the ones described above their offering is a distant also-ran.

Takeaways So Far

I’m sure I’ll regret adding ‘property manager’ to my list of to-dos, but the experience so far has been a great reminder that, in the hierarchy of online value creation, distribution is king. The more businesses that choose to set up shop online, the more opportunities there will be for specialist firms to deliver them paying customers. Google owns the broad market here, but there are hundreds of niche opportunities still to be tapped.

I’ll plan to update this story in a few months, once I have more data to share on the relative effectiveness of the various lead gen platforms. In the meantime, if you’re planning a trip to Whitefish and need a place to stay