A couple of weeks ago, Car Throttle broke our story of how German car manufacturer Volkswagen appeared to have taken the idea of my London-based startup RjDj and used it for its own promotional campaign called #playtheroad.
“This event was off the charts”
Gary Vaynerchuk was so impressed with TNW Conference 2016 he paused mid-talk to applaud us.
Car Throttle’s story provoked a lot of negative user comments on the Volkswagen campaign, and I’m still trying to decide what the true implications of Volkswagen’s actions were. Either way, it had a negative effect on VW, its agency and my little startup, RjDj, alike.
There are many examples of how co-operation between startups and big brands or corporations worked out well, but unfortunately there are many more examples where it didn’t work out well. In this guest post I want to share some insights and I hope that other entrepreneurs and corporations can learn from this story.
Rjdj’s app, which it demoed for Volkswagen
Startup or development shop?
After this whole Volkswagen ‘#playtheroadgate’ I spoke to my initial contact from Volkswagen again. It is now very clear to me that our contact assumed from day one that all any startup wants is to land a development contract with Volkswagen. From his perspective, or from Volkswagen’s perspective, there is not a big difference between a startup and an external development shop. I can’t even blame them for that because I know that many startups are really development shops who would take on any job as long as it pays. The developers behind the Volkswagen project are a great example of such a startup/development shop.
However, there is a big difference between a startup and a development shop. To grow a startup into a thriving company that works financially and can scale, the goal generally isn’t landing individual development contracts, but rather to pursue more scalable business models like licensing, SaaS, white labelling, B2C, etc.
In our case, we proposed a couple of different options to Volkswagen, from a revenue share model to a white labelling/licensing model. None of these options matched Volkswagen’s expectations. So when our contact from Volkswagen realised that we were not interested in a simple development contract, he just did the logical next thing which was to look for a different company for the job. The fact that there was an NDA in place with RjDj and that a lot of ideas and IP for this project came from RjDj didn’t seem relevant to him.
Volkswagen’s #playtheroad app video
Welcome to the Agency-Corporation-Complex
Very often, the simplest thing for big corporations is working with big agencies who have existing contracts with these corporations. So, here comes another player in this all: the agencies.
Agencies are always looking out for new ideas, innovations and creativity that they can sell to the big companies. One great source for inspiration is startups. You won’t believe how often I have been approached over the years from agencies who saw some of our products and wanted me to help them to pitch them to their clients. Once the agency lands the pitch it often means for the startup that it has landed a one-off development contract and nothing more. The startup often ends up as the last link in the value chain and that is usually also how they are treated.
In the specific case of Volkswagen, it has very close ties with an agency called Tribal, which also happens to be the agency behind the #playtheroad campaign. When Tribal looked for an app developer for the project, they hired Reactify. Reactify are great friends of RjDj and they knew that we were working on a dynamic driving music app for some time and that we had solved most of the challenges of this project.
I can’t say if Volkswagen took the idea to Tribal after they spoke to us or if Tribal pitched the idea to Volkswagen independently from us. It certainly makes a difference from a legal perspective, but more relevant to this story is the fact that in both scenarios, the agency knew about RjDj’s project. However Volkswagen and their agency were more interested in a one-off deal with a development shop than developing a scalable business with an experienced startup.
Volkswagen’s #playtheroad campaign is a great example of how the interests of corporations and agencies are very well aligned and how in between their corporate structures, startups are getting simply lost or exploited.
Why should this all bother the consumer?
For the agency and for Volkswagen, producing a video of the app without releasing an app was a quick win. Both parties are now able to present the project as a big success because they managed to get a lot of views on YouTube, loads of clicks on the website etc. Also, Volkswagen has now ‘claimed’ this topic, and any other car manufacturer will have to be careful if they touch it.
Will Volkswagen actually release this app and actually give it into the hands of the consumer? We can’t say for sure, but whether this particular app flies or not isn’t important for the brand or the agency, because both earn their money with completely different services. The only party in this all that has a real interest in making this app fly is the startup because its whole life depends on it.
That is the reason why startups are often successful in launching new products when agencies or big corporations fail. So, if a big corporation decides to go with its agency instead of finding a slightly less comfortable agreement with a startup, the losing party is very often the consumer.
I hope that this post helps startups and big corporations alike. Feel free to reach out to me and of course, I would love to continue the conversation with Volkswagen or Tribal :-) To wrap things up, here are my five learnings from this experience.
As a startup, before you deal with big corporations you need to have your business model in place and you need to know exactly where this corporation fits into your model. If it doesn’t fit, don’t touch it, however good it might sound.
If your startup approaches a big corporation you need to give the corporation a reason why it should do this project with you instead its agency. You need to have something that is better than anything the agency can deliver. Technological or creative advantages are usually not a reason, whereas having a product in the market which has proven traction often is.
This one is obvious… Employee number X in big corporation number Y: Don’t just ignore NDA’s, copyrights and even contributions from others just to get your promotion. Sometimes it works but more often it will backfire on you.
As a big corporation you should support more sustainable startup business models. Why is this beneficial for you? Because, if the startup doesn’t survive the deal you’ll have nobody to support your product.
Many agencies aren’t made to launch products, they are made to create advertising. Corporations who have the opportunity to embrace startups should develop a corporate structure that supports those startups’ business models instead of ignoring them.
Volkswagen was contacted for comment on this story but has not responded at the time of publishing.