Why Digital Marketing is a critical growth engine for Israeli start-ups
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Why Digital Marketing is a critical growth engine for Israeli start-ups

October 28th, 2013, By

In the past, most Israeli start-ups were in the fields of telecommunications, security, hardware, etc., i.e. products that cater to large business customers (B2B). This generation included local industry giants such as Check Point, NICE, Amdocs and others. These companies excelled in developing technology, while the marketing was usually done through local distributors, VARs, or direct sales activities targeting enterprise customers.


But the times are changing; the new generation of Israeli companies don’t hesitate to approach global consumers directly, especially so companies in the fields of Internet, Mobile, SaaS, etc. These companies develop products and applications designed for a much wider audience: end-users (B2C), independent professionals (B2BC, “Pronsumers”), freelancers, small business owners, website owners etc. Many of the ~4800 startups in Israel today, target potential audiences of millions of customers worldwide. Examples of this new generation of companies are: Conduit, Wix, 888, Playtika, Waze , Babylon, Payoneer, Get-Taxi , various online trading and downloadable software companies.


Israelis don’t ‘get’ marketing!?

Historically, marketing was considered the Achilles-heel of Israeli companies. When they reached a certain size, they were either acquired by large international companies or established local marketing and distribution organizations in the main markets, with local staff. Israel was considered lacking the expertise, skills and connections required to establish a top-notch, international consumer brand.


This perception is rapidly changing with the evolution of Marketing into a global, digital, technology-first arena and the transition to automated marketing platforms such as Google and Facebook. Israelis demonstrated excellence in digital marketing, where the qualities necessary for success are entrepreneurship, analytics, daring, and collaborative culture.


“Incubators” such as 888 (Random Logic) and Hotbar produced the first generation of online marketers in early 2000 and since then an entire ecosystem emerged and sprouted many thousands of digital marketing professionals, some of them world class in their field.


An example of a company which underwent a digital marketing metamorphosis is Babylon: with its acquisition by Noam Lanir, the company completely changed its business model; from sales to enterprise customers through local distribution networks, the company moved to a free product, distributed directly to consumers through the Internet, while revenues arrive from revenue sharing with Google search. The results: revenues increased 8-fold between 2009 and 2012, and the share price climbed 500%.


Why online marketing is crucial?

Digital Marketing is essential to a start-up for two reasons:

  1. Creating an independent lead machine
    In the long run, a high quality digital marketing arm provides the company with an independent, valuable and scalable lead / sales machine. Such independence allows the company to grow at a higher rate when the product and the market are ready, reducing geographic and other distribution constraints.
  2. Product shaping
    In today’s dynamic world, products are changing rapidly; competing products are continuously being launched and/or upgraded, creating a constant need to adjust and improve the product, in short iterations and “on the fly”.
    In the past, an R&D cycle for a new product version used to take months or years – now it is a matter of days or weeks. Digital marketing methods enable immediate analysis of the impact of a new product feature or specific market demand, thus reducing R&D expense and providing more accurate results. Google, for example, the market leader in internet technology, performs dozens of small changes and runs dozens of ‘tests’ simultaneously, on each of its major products – on a daily basis!

Marketing Budgets

In many cases, contemporary marketing budgets should comprise a significantly higher ratio of the total expenditure mix than they currently are.

This is especially true for companies with a stable product ready for global distribution.

Successful Internet companies such as Wix, Babylon and IronSource, allocate over 50% of their total budget to online advertising. In Israel, a greatly R&D prone culture, this is a paradigm shift that many start-up entrepreneurs still find hard to accept. With the decrease in R&D overheads (through cloud computing replacing expensive hardware, open source software, overseas R&D teams, etc.) and the increase of digital marketing channels and costs, more resources should be assigned to direct market penetration. Rather than pursue the ultimate version, smart start-ups are developing the Minimum Viable Product, bring it to the market, and continue to roll out short upgrade cycles to improve the product.


An exceptional opportunity in this context lies in multilingual marketing. Online platforms such as Odesk, onehourtranslation and others, enable to translate and adapt marketing content to many languages, at a reasonable cost. Read here a detailed example of such multicultural marketing activity.


Bottom line:

Online companies targeting large global audience must recognize digital marketing as an essential element, which includes the company’s Web sites, applications, social media assets, strategic partners, affiliate programs, advertising accounts, and more. This system as a whole is a strategic asset, which provides the company the means to grow and prosper in the new digital economy.