Gurley lists Google, Skype, OpenTable, and LinkedIn as examples of companies that never ran ads to grow.
“Google never ran marketing ads, you know, in its day to get to get big. Skype never ran ads. OpenTable never ran ads. Linkedin doesn't run ads.”
Gurley contrasts Google, Skype, OpenTable, and LinkedIn as examples of organic growth versus companies renting customers through marketing.
“Skype never ran ads. OpenTable never ran ads. Linkedin doesn't run ads. People that are having to spend heavily on marketing are basically renting or borrowing customers.”
Gurley argues organic versus bought traffic is a critical distinction for valuing Internet businesses.
“One that one that I think people really should focus on is where, especially for these Internet businesses, is whether traffic is organic or bought.”
Gurley argues marketing-heavy companies rent customers and should trade at lower multiples than organic-growth companies.
“I don't see any reason why a company that's heavy on marketing will get the same kind of multiple as someone with an organic customer base.”
Gurley distinguishes between companies that buy traffic through marketing versus those with organic customer acquisition.
“Any company that's spending heavily on marketing to drive people in, that's just a far different value proposition than someone who has a product that's so good that everyone comes to it.”