Have you considered business acquisition as a marketing tactic?
Would you buy a Super Bowl ad if your marketing team had the budget? Imagine the hype. Creativity. This would be a no-brainer for many small businesses looking to put their brand on the map. But what if your company was, for example, a welding company with a target audience in the construction industry? It might be better to reconsider your options.
What is the most efficient use of this budget? You can launch a massive digital advertising campaign. You can buy traditional media on shows that are more of interest to your target customers, such as a time slot on HGTV. Or maybe you would use the budget to hire a prestigious agency to help you rethink your entire marketing strategy from scratch. The options are plentiful. But there is one tactic that many companies might overlook: strategic acquisitions.
“Acquisition” doesn’t exactly fall under the marketing category on most balance sheets. But for some companies, this is exactly where it belongs. A few weeks ago, AppSumo commissioned me to write an introductory guide to buying and selling businesses. While researching the article, I interviewed several people with experience in buying businesses. The number of people who cited marketing is a surprising result. as the main reason for acquiring other companies. This is what i learned.
Super Bowl-sized target audience
Greg Elfrink is Director of Marketing at Empire Flippers, an online brokerage website for buying and selling businesses. He was the one who told me about the lean company that struggled with deciding whether or not to buy a Super Bowl commercial. The company decided not to go ahead with the idea, determining that the general public was too fuzzy for its niche offerings. So what could they do instead?
According to Elfrink, they decided to use their budget to start a series of acquisitions in their space. They bought a mix of lean – and adjacent lean – businesses, blogs, and newsletters. The results have been astounding.
As Elfrink explains:
By the end of all of these acquisitions, they realized that with the push of a button, they could now send an email for free to an audience the same size as buying a Super Bowl ad – except much more focused. They basically created a self-fulfilling marketing funnel, which is a beautiful principle of content marketing that not many people ever use.
Opportunity in the ‘Newsletters graveyard‘
Codie Sanchez has an impressive career in M&A (mergers and acquisitions). She has worked in some of the most well-known financial institutions in the United States, including Vanguard and Goldman Sachs. She has also taken the path of entrepreneurship by launching several successful investment funds and buying several small businesses herself. Most recently, she has turned to teaching others about buying and selling businesses through her newsletter, Unconventional Acquisitions.
Newsletters really caught Sanchez’s attention a few years ago due to their growing role in the larger media landscape. “I think the media industry has always been a target for large-scale private equity.Sanchez said. “Most newspapers and media around the world are actually owned by private equity firms or billionaires. And a lot of them these days have been bought as opposed to built.
Before Sanchez even started acquiring newsletters, she scanned the media space. “Private equity firms love underwriting firms and anything that has a constant cash flow. Theoretically, online newsletters could have this. “
As a former journalist and current newsletter writer, Sanchez understands the challenge of maintaining a content-driven business. She felt that many people would not have the patience to maintain a newsletter for the long term, even if their newsletter gained a significant following before it was dropped. And she wonders if there might be an opportunity to acquire inactive newsletters in order to develop its own newsletter business.
When I started seeing the massive proliferation of newsletters, I realized this: it wouldn’t last for them to proliferate and continue at this rate because people are tired of creating content. Everyone thinks it’s a great idea, but it’s hard to create content consistently. So there is a massive graveyard of newsletters with a large audience.
Sanchez now contacts owners of inactive newsletters. She is looking for audiences in her niche who might like to read her content. When a former newsletter writer shows interest, Sanchez will test subscriber engagement by paying to run an ad first. If there is a significant commitment, she could offer to acquire the newsletter. If there is a good fit, she will buy the newsletter and send emails to the list asking them to sign up for her similar newsletters. She is scaling up her sequel by drawing on the work of other creators.
There is a plugin for that
WordPress works as an open-source tool, which means literally thousands of developers have designed unique plugins to support various functions for website builders. Most of these plugins are available for free, so creators rarely receive a profit for their work. This is where Noah Kagan, founder of AppSumo, a marketplace for the purchase of digital tools, saw a potential marketing opportunity.
These plugins did not offer cash flow. But owning these plugins offered a key advantage: reach. Kagan explained:
We noticed that a lot of people are using WordPress and that a lot of WordPress plugins are not monetized. I reached out to the top 500 plugins and said, “Hey, can I buy you?” Since they don’t make any money and there is no market to sell plugins, you can get some really good deals. I think we have a few million WordPress plugin installations – which we’ve used to direct people to AppSumo.
Getting users to install a WordPress plugin often requires a significant marketing effort. By acquiring non-monetized plugins, Kagan was able to buy someone else’s marketing effort at a great price, much the same way Sanchez acquires email subscribers. When a user wants to learn more about a particular plugin, it might just be a click or two away from AppSumo.com..
Look beyond conventional marketing textbooks
Marketing isn’t just limited to social media ads, SEO, and traditional media. Sometimes the most successful campaigns, at first glance, are nothing like the marketing tactics you’ve learned.
Instead of buying an ad slot at the Super Bowl, you could slowly build an audience of millions of people that you can reach with one click. Or instead of using standard acceptance techniques to develop a WordPress email or follow-up, you can shorten the line by buying an audience that someone else has taken the time to build.
Maybe it’s time for more companies to add “acquisition” to the marketing category of their balance sheets.