Search-related keyword advertising is a multibillion-dollar industry for a reason — namely, it works extremely well when it comes to converting shoppers who are searching for information into shoppers who want to buy something. But it doesn’t work for everything, and it’s worth being reminded of that sometimes. Dropbox CEO and founder Drew Houston provided another example of that in a presentation at the recent Stanford Accel Symposium, where he talked about how the cloud-based storage company grew to where it is now, with more than 4 million users. Among other things, he described how search ads didn’t really work for the company when it was starting out.
The way Houston described it, Dropbox did lots of things that it thought young startups should do to get attention — including hiring a PR firm and buying search ads for Google keywords. But none of those worked particularly well: in particular, he said, search ads were a complete bust, because the company was paying hundreds and hundreds of dollars on advertising just to get a single new user — far more than it would ever likely make from that user.
So why didn’t Dropbox get much traction from search ads? Houston says it’s because people didn’t really know what they needed, or weren’t aware of how Dropbox could solve problems for them in their lives, so didn’t really respond as well to the keyword ads. Houston said something very similar about the growth of Dropbox at a startup conference Liz attended earlier this year — saying the company got far more mileage from word-of-mouth and
This goes right to the heart of something we have talked about a lot, which is the threat that Google faces from social media in general, and Facebook in particular. Google does well with search advertising because that involves people who have already made up their mind to buy something, and they are looking for where they can go to do so — but it doesn’t do as well with people who are just looking to talk or network with others around issues. To the extent that your potential customer base is closer to the networking end of the spectrum — as Dropbox’s were, because they likely weren’t even aware that the product could fill a need in their lives — social media is likely going to be more effective, because it is about word of mouth recommendations.
Where do you get word-of-mouth recommendations and related discussion about various issues from Google? The short answer is that you don’t. Maybe you get some of that from Buzz, but as a mainstream product Buzz is (no offence, Google) pretty much a bust. That’s not to say Google itself isn’t useful, of course, or that keyword ads are worthless — it’s a multibillion-dollar market for a reason. Even in Dropbox’s case, once users heard about how great it was from a social network, they would probably (as I did) go and search for the company and look for reviews, information about other related products, etc. before deciding whether to try it out or pay for it.
But Houston’s observations are just another example of why, as Om argued in a GigaOM Pro report last year (subscription required) Google needs to be afraid of social and what it implies. It’s why the company is focusing on adding what CEO Eric Schmidt called a “social layer” to its products and services — although being truly social, as I noted in a post, is not the same as simply adding a widget to your existing features, which is why Facebook has a leg up in that department. As ** noted in a blog post, Google is good at appealing to those who want to get information and move on, but not so good at appealing to those who want to engage with others around a shared goal or topic of interest.