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The Failure of Marketing 2.0

Coming out of the pandemic and the recession, it's clear that the Sales and Marketing functions are in trouble. The two departments most responsible for stimulating demand and generating revenue have been revealed, at many companies, to be unable to achieve their goals. This has resulted in an historically high business failure rate, far beyond what one would expect in a recession, despite the stimulus money and an excess of investment capital. The problem, for many, is that the entire Marketing 2.0 concept is turning out to be a virtual fraud. Marketing professionals who have been schooled in the concepts of Digital Marketing, inbound, content marketing, Twitter, going viral, and the various forms of self-promotion have found themselves bouncing from job to job as they run from failure to failure. And salespeople who couldn't sell their way out of a paper bag, because they haven't had proper training, troll for recommendations on LinkedIn so they can get their next gig - one that hopefully has a decent base - and enables them to hold on for just one more paycheck.

The problem starts, of course, with the rise of Google, Amazon, LinkedIn and Facebook. Specifically, the initial advantage to businesses of the Web was that it could remove barriers-to-success such as the high cost of advertising and media access. Every business would have a storefront on the Internet; and if you build it, they will come. Creating these websites and getting visibility online were the foundations of Web 1.0, a legitimate enough enterprise, even if it hurt the traditional (especially print) media. After a while though, because of the sheer number of businesses on the Web it became necessary for a tool to rise - i.e. Search - that would help people navigate the Web and find what they needed among a virtual ocean of Web sites. The problem was, of course, that weak anti-trust laws, as well as natural selection, allowed Google to dominate the search market. This means that businesses now have to kowtow to Google's algorithms if they want to get visibility. Entire industries grew up around guessing what would make Google happy, and enable businesses to get a position on the first page of search results, to the point where today SEO, inbound marketing, content marketing, Digital Marketing, and the thousands of their technological progeny constitute a $200B+/year industry.

The problem is that, for most companies, none of this works. And the reason is basic physics. There is, for example, on the first page of Google search results, room for only 10 or 15 organic hits. This means that 95%, or 98% and potentially 100% (in the case of scammed search terms) of the businesses that are seeking visibility online will basically get none. (It makes you wonder why Google's search results are paginated instead of scrollable, but that's a scam for another day.) At least in the days of print you could buy a quarter page ad in a Trade Journal, and know that it was going to get into readers' hands; while today you could spend 10 times as much money and get no visibility whatsoever. And so companies play the game, and then they fail.

A similar thing happens with Facebook and the consumer market, and LinkedIn for businesses. Companies spend billions of dollars on Facebook ads hoping to get an impression, a click, and maybe a lead, and LinkedIn is moving to the same model. But given the competition for attention, fewer than 1% of the companies that advertise on Facebook or LinkedIn ever get a positive ROI on it. As a fallback offering, these sites are more than happy to sell you their users' data, which businesses are free to exploit using thousands of different tools, most of which are equally ineffective. But the tens of billions of dollars that companies spend each year on these platforms generates little ROI for most. And so most just quickly and quietly go out of business.

And finally there's Amazon, the killer of retail, who exploits businesses with a 40% commission, and the enablement of fraudulent reviews to skew results such that a legitimate business has little chance of thriving in this toxic ecosystem. Anecdotally, we've talked to almost no one in the past year who sells on Amazon who is happy with it. And yet it's the only game in town for many companies, most of whom die in a race to the bottom.

So let's say you're a sales or marketing professional, what do you do? Recent college graduates who have a degree in marketing, of course, go into Digital Marketing. It's a rapidly growing field, and one that shows no signs of slowing down. (Do you really think Google, Facebook, LinkedIn and Amazon are going to just stop?) As long as companies believe that the only way they can reach their market is through Digital Marketing (a belief constantly being reinforced by the Digital Marketing companies), they're going to continue to hire kids to pump out content, and develop and manage programs, in the hopes of getting traction, if not going viral. But even the concept of going viral itself is one that's fraught, as recent studies have shown that, outside of click-bait, going viral is an entirely random event. That aside, the whole industry is simply an arms race where the more you spend, the more you have to spend in order to keep up with the competition; and the only ones who win are the arms dealers. And so young Marketing professionals are churned out like good little soldiers, and chewed up like dross. And the business eventually fails.

Most of the older professionals in marketing, of course, have been forced to adapt. Some get re-educated, and hopefully their age doesn't keep them from consideration. But most can't keep up with the kids, and they eventually retire. Or they find a niche - maybe one that plays to their strengths - one that lets them pay the rent, but give up their visions of wealth and fame. But it's not their fault; no one is winning. For every SalesForce, there are a million Just like for every Lead Forensics, oh wait, they went bust, too.

And the sales side is no better. Companies that have invested way too much in demand generation now have to underpay their salespeople because there isn't enough money to overfund both. The lies told by the digital marketers about the quality of their leads further devalues the sales function - which then fails when the lie is ultimately revealed. Of course, at the other end of the spectrum are companies that overpay for salespeople in the hope of finding a rainmaker, the sales equivalent of a unicorn. But they're not to be found. And so again, the business fails.

The unspoken truth is the whole situation is a mess, summed up by the fact that businesses have drunk the Kool-Aid with regard to Digital Marketing - because there's basically no alternative. You can try telemarketing, but competition has driven prices to marginal costs, so good callers are as rare as hen's teeth. And trade shows don't happen in a pandemic; and there won't be enough when they come back. As a result, the business failure rate is catastrophic. And there is nothing that most business owners can do about it, as long as they play that game.

Ironically, the capital markets provide precisely the wrong help at precisely the right time, because that's what they're designed to do. Aided by PPP, an overvalued stock market and low interest rates, there's no shortage of money available to invest in these businesses - again in the hope of getting lucky. But a Private Equity firm that previously would have expected a 35% success rate is grateful if 5% of their investments pay off. Fund managers use FANG stocks as a hedge. And now we have SPACS (Special Purpose Acquisition Companies) because there's so much money around, and not enough businesses to invest in, that people no longer care about due diligence. While one is hard pressed to say this is a recipe for macroeconomic disaster - after all, creative destruction is the point of capitalism - it's a guarantee under this model that most businesses will fail, and they will do so spectacularly.

In spite of this, business owners remain convinced that they have to invest in Digital Marketing because there's no alternative. They then hire digital marketers who have to lie to the owner about their failures, and somehow claim that an MQL is something other than manure. Or they try to push the hockey stick out in order to hold onto their job until they can find another gig. At the same time, the salespeople complain about the quality of the leads - until the owner gets fed up, and just fires the one he trusts the least. Or he hires a Chief Revenue Officer who supposedly has expertise in both Sales and Marketing, although probably has expertise in neither, to manage the finger-pointing. But this cycle of Whac-a-Mole just goes on-and-on until the owner runs out of money, and he goes into consulting.

Obviously, everyone in this scenario has an incentive to delude themselves, and the people they work with, about how great they're doing. The owners go all in on the Digital Marketing because there's no other option - a position they're forced to defend to justify their investment. They hire marketing people who promise to deliver on it - an illusion they're forced to defend in order to keep their jobs. And they hire salespeople to handle the junk leads that the marketing people produce, and who get to blame the marketing people for the fact that they maybe don't know how to sell. It's like Communism, where the rule was "We pretend to work, and they pretend to pay us." Or a circular firing squad. But everybody in this scenario is kidding themselves - including the bank (who lies to their depositors and investors about risk and return) that lent them the money to do it in the first place.

There is, however, a solution - one that doesn't rely on Kool-Aid for sustenance, one that uses tried-and-true marketing and sales techniques, old-fashioned grit, and reality-based analyses to solve your sales or marketing challenges.

All you have to do is put down the Kool-Aid for a minute.

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