AI for Internet Marketing
The Idea
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The Small Business (SMB) marketplace is a large marketplace (over 25 Million in the US alone) which lags the broader marketplace in terms of core business productivity. The SMB market has been traditionally considered to be the “dead end” for B2B companies because of the difficulties of distribution into the SMB marketplace. The SMB marketplace is lodged between the traditional consumer market (over 300M consumers in the US) and the enterprise market (fortune 500 companies). In the enterprise market, the transaction size justifies a dedicated sales channel.
However, for the SMB marketplace, the transaction size is typically much smaller, so a dedicated sales channel is not economically feasible. In the consumer marketplace, the market size is large and broadcast based methods (TV commercials) have been demonstrated to be effective. However, from a point-of-view of market size, reach, and relevance mass broadcast methods are not efficient for the SMB marketplace.
The key idea was to invent an Artificial Intelligence Bot (AIB) technology combined with targeted mass market techniques to build a solution which has the sales focus characteristics of a dedicated sales channel in the context of a consumer like mass marketing campaign. Details of the approach can be found in a technical paper on the topic(paper). Further, the solution focused on services businesses which dominate the SMB marketplace and where innovation was lacking.
The Next Step
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A company was formed and launched (Ocoos) in the 2012 timeframe. The company was formed around the core principles of “Super Lean Software Startup Engineering Management” which the institute had developed and executed for several previous successful startups. This approach focused on an extremely low burn-rate with nearly all compensation coming in the form of stock for employees. This approach works well for capital light industries.
The application we pulled into the AI channel was an all-in-one marketing platform (website, crm, billing, etc). The R&D team, consisting of masters/Phd students from University of Florida, ramped up nicely. The marketing activity also ramped up with the publication of an ebook (coauthored with the CMO of Ansys). In addition, the company built many comarketing partnerships with other entities which were going after the same SMB marketplace (ex. My Corporation) and built out a significant vertical marketing strategy (CPU, Legal, Consultants, Hotels, etc)
Conclusion
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Despite these efforts, the cost of customer acquisition was still high. Further, none of the competitors (GoDaddy, Wix, Web.com, Squarespace, gator, etc) were(are) consistently making a profit. In 2018, it was decided to downsize the company. Given the reputation of the company for technology excellence, the employees were able to find jobs at companies such as Amazon, Linkedin, Jabil Circuit, Facebook, and others.
Significant Lessons from the experience Included:
Low Burn Rate Model: This model is very effective for R&D cost driven companies (software, IP development). However, it has a timeframe of effectiveness of about 3-4 years. After this point, life starts to intervene for employees. They want to have a family, and an offer for 4X the money is very attractive.
Consumer Brand Marketing: In Ocoos, the thought was that this was a low capital intensive environment, but to build a brand in the SMB market is millions of dollars. In many ways, this was the crux of the issue. Unfortunately, the margins in the SMB market cannot justify this brand building investment.
Internet Chaos: The internet should have been a way to lower the cost of customer acquisition, but the internet is a chaotic environment. As an example, spam filters built to protect consumers were often a nemesis in the communication to small business owners for legitimate business purposes.