Monday, June 28, 2004

Law #20: The Law of Hype

(This entry is part of a series I am writing on The 22 Immutable Laws of Marketing.)

The Law of Hype talks about the fact that "history is filled with marketing failures that were successful in the press".

This chapter talks primarily about new things which claim to make existing things obsolete.  Such products tend to become darlings in the press, because the notion of breakthru innovation is very attractive to readers.  People love to read stories about things like the personal helicopter, which was supposed to make cars obsolete several decades ago.  So the press jumps on the bandwagon, stories get written, newspapers get sold, and people get excited.  And they still drive their cars to work everyday.

What I love about this chapter is that it was written in the early nineties, before the Web, and it still rings amazingly true.  The Web was supposed to obsolete almost everything.  Today we can see that the Web has changed life in many ways, but most of the previous structures and systems are still with us. 

There are lots of examples in the chapter, all of them prior to 1994.  Polyester did not obsolete wool.  The videophone has now been getting press for 40 years, but most people still use a plain-old audio phone.  Compare those examples to the overhyped things of the last ten years.  Webvan came, and I still shop at a grocery store.  The Segway came, and I still drive my car.  Amazon came, and I still go to the Borders store near my home.  The truth is that fundamental change doesn't occur so easily.  Even when the innovation is quite real, people are not quick to give up existing mainstream products and services.

The chapter doesn't mention this, but I think the venture capital industry deserves as much blame for excess hype as the press.  Perhaps even more than magazine readers, VCs love the idea of a product which obsoletes existing mainstream products.  They need high-risk/high-reward investments.  Convincing a VC that your product will make cars obsolete is a great way to get funded.  If we are upset about the level of hype in our world (and I'm not saying that we are), the press and the VCs are equally guilty.

The vast majority of companies thrive and make a profit in a world which is completely disjoint from the one where the VCs and the press live.  They don't spend their time convincing investors and reporters that their product will change the world.  Instead, they spend their time convincing customers that their product is a good purchase.  It's very difficult to do both -- that's why the companies you see on the front page are often dead within a few years, while the companies making real money are the ones you hardly ever hear about.

It's a choice between fame and fortune.  Rare is the product which achieves both.  So, the important thing here is for entrepreneurs to see both paths clearly and make a conscious choice.  For small ISVs, it is inconceivable to me that the path of hype is the wise choice.  Find something boring and profitable.