Would you purchase a Super Bowl ad if your marketing team had the budget? Imagine the hype. The creativity. It would be a no brainer for many small businesses wanting to put their brand on the map. But what if your company was, say, a soldering company with a target audience in the construction industry? Might be better to reconsider your options.
What’s the most effective use for that budget? You could run a massive digital ads campaign. You might purchase traditional media during shows that appeal more to your target customers, like a time slot on HGTV. Or maybe you’d use the budget to hire a prestigious agency to help you reimagine your entire marketing strategy from the ground up. The options are many. But there’s one tactic many businesses might overlook: strategic acquisitions.
"Acquisition" doesn’t exactly fall under the marketing category on most balance sheets. But for some companies, that’s exactly where it belongs. A few weeks ago, AppSumo commissioned me to write an introductory guide to buying and selling businesses. As I researched the piece, I interviewed several people with experience buying companies. A surprising takeaway was just how many people cited marketing as the primary reason for acquiring other companies. Here’s what I learned.
Super Bowl-Sized Target Audience
Greg Elfrink is the director of marketing at Empire Flippers, an online brokerage website for buying and selling businesses. He’s the one who told me about the soldering company that wrestled with a decision of whether they should purchase a Super Bowl ad. The company decided not to move forward with the idea, determining that the mass, general audience was too unfocused for their niche offerings. So what could they do instead?
According to Elfrink, they decided to use their budget to begin a series of acquisitions within their space. They purchased a mix of soldering — and soldering-adjacent — companies, blogs, and newsletters. The results were staggering.
As Elfrink explained:
At the end of all these acquisitions, they realized that at a press of a button, they could now send out an email for free to an audience that was the same size as buying a Super Bowl ad — except way more targeted. They basically created a self-fulfilling marketing funnel, which is a beautiful content marketing principle that not many people ever use.
Opportunity in the ‘Graveyard of Newsletters’
Codie Sanchez has an impressive career within M&A (mergers and acquisitions). She has worked in some of the most well-known financial institutions in the U.S., including Vanguard and Goldman Sachs. She has also taken the entrepreneurial route, launching multiple successful investment funds and purchasing several small businesses on her own. Lately, she’s turned to teaching others about buying and selling businesses through her newsletter, Unconventional Acquisitions.
Newsletters really caught Sanchez’s attention a few years ago because of their growing role in the larger media landscape. “I think that the media industry has historically been a target for private equity at a broad scale,” Sanchez said. “Most newspapers and media outlets globally are actually owned by private equity firms or billionaires. And many of them these days have been bought, as opposed to built.”
Even before Sanchez began acquiring newsletters, she analyzed the media space. “Private equity firms love subscription businesses and anything that has steady cash flow. Theoretically, online newsletters could have that.”
As a former journalist and current newsletter writer, Sanchez understands the challenge of maintaining a content-driven business. She reasoned that many people wouldn’t have the patience to maintain a newsletter long term, even if their newsletter amassed a significant audience before being abandoned. And she wondered if there might be an opportunity to acquire inactive newsletters as a way to grow her own newsletter businesses.
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 get tired of creating content. Everybody thinks it’s a great idea but it’s hard work to create content consistently. So there’s a mass graveyard of newsletters with significant audiences.
Sanchez now contacts the owners of inactive newsletters. She’s looking for audiences within her niche that might enjoy reading her content. When a former newsletter writer shows interest, Sanchez will test the engagement of the subscribers by first paying to run an ad. If there’s significant engagement, she might offer to acquire the newsletter. If there’s a good fit, she’ll purchase the newsletter and send emails to the list asking them to opt-in to her similar newsletters. She scales her following by building upon the work of other creators.
There’s a Plugin for That
WordPress functions as an open-source tool, which means that literally thousands of developers have designed unique plugins to support various functions for website creators. Most of these plugins are available for free, so the creators seldom receive a profit for their work. That’s where Noah Kagan, founder of AppSumo, a marketplace for buying digital tools, saw a potential marketing opportunity.
These plugins didn’t offer cash flow. But owning these plugins did offer one key benefit: reach. Kagan explained:
We noticed that a lot of people were using WordPress and that a lot of WordPress plugins weren’t monetized. I contacted the top 500 or so plugins and said, “Hey, can I buy you?” Since they’re not making money, and because there isn’t a market for selling plugins, you can get really good deals. I think we own a few million installs of WordPress plugins — which we used to drive people to AppSumo.
Getting users to install a WordPress plugin often requires an extensive marketing effort. By acquiring un-monetized plugins, Kagan was able to purchase someone else’s marketing effort at a steep discount, similar to how Sanchez acquires email subscribers. When a user wants to learn more about a particular plugin, they might only be a click or two away from AppSumo.com.
Look Beyond the Conventional Marketing Playbooks
Marketing isn’t limited to social media ads, SEO, and traditional media. Sometimes the most successful campaigns, on the surface, sound nothing like the marketing tactics you’ve learned about.
Instead of buying an advertising slot at the Super Bowl, you might slowly acquire an audience millions strong who you can reach at the click of a button. Or instead of using standard opt-in techniques to grow an email or WordPress following, you might shortcut the line by buying an audience that someone else took the time to build.
Maybe it’s time for more companies to add "acquisition" to the marketing category on their balance sheets.