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by jenn.kho on April 14, 2010 on Sweat Investor

SweatInvestor Guest Post: Jennifer Kho is a San Francisco Bay Area-based freelancer with more than a decade of reporting experience. Her stories have appeared in The New York Times’ Green Inc. blog, The Wall Street Journal, Los Angeles Times, MIT’s Technology Review, The Christian Science Monitor, Reuters.com, Earth2Tech and more. She has been covering green technology since 2004, when she initiated cleantech coverage for Red Herring magazine. She also helped launch Greentech Media’s news operations as its founding editor in 2007.

Sure, the Google Campfire last month announced its apps marketplace by the glow of kitschy fake campfires, under a canopy of fake tree silhouettes, in a room with a tent and campfire-logo fleece blankets as giveaways. But only the props were fake. The event was backed by a real product with 50 real customers. And, as fitting an enterprise product, it definitely qualified as a restrained launch for a company as big as Google.

Bloom Energy used some of the same tactics when it launched its fuel cells in February — although there was certainly nothing restrained about the event, which took place at eBay headquarters and included California Gov. Arnold Schwarzenegger and former U.S. Secretary of State Collin Powell. As with Google Apps, Bloom kept (mostly) quiet until its launch and then made a splash by announcing key customers, including Wal-Mart, eBay, FedEx, Staples and, of course, Google.

The result, in the case of Bloom, was a huge bang of publicity. With its star lineup of Kleiner Perkins investors and directors such as Powell, the company scored a feature on 60 Minutes and many high-profile publications followed. All the hype has sparked envy from other startups that want the same attention.

Should other startups take a page from the launch book of Bloom, Google or Apple, which also has been known to keep quiet until a product is ready (although not in the case of the iPad), and get more attention by keeping quiet?

If You’re Not Google

Well, it doesn’t always work. One major difference, of course, is that Google and Apple launches are guaranteed to be big news. As a reporter, I knew I’d attend the Campfire regardless of what was being launched – and I was sure I’d get a story out of it. And Bloom had the advantage of big newsworthy backers and partners right out of the gate. Not so for most startups.

Using stealth as a marketing strategy comes with plenty of potential pitfalls, as well. Of course, the main reason to keep a company or technology quiet is to protect intellectual property. Once patents are secured, the decision becomes one of strategy.

Melody Haller, CEO of public-relations firm Antenna Group, explains that if you’re a big company, you have two choices: One is freezing out the competition by pre-announcing products that aren’t ready yet, which is a tactic Microsoft is famous for. (Once Microsoft has announced it is entering a space, competing startups are less likely to score backing from investors or partners as they wait to see what Microsoft has in store.) The other is waiting until a product is ready before launching it, like Google does.

The Cost of Quiet

The choices aren’t the same for most startups, as speaking out is less likely to deter competitors. Keeping quiet might help artificially bolster a launch, but could have the opposite effect if the company isn’t viewed as newsworthy enough to cover. In the meantime, the company may be missing out on potential partnerships and customers that could ultimately help it succeed. “It comes at a cost,” Haller says.

The extent to which a startup should talk largely depends on how much it needs others, she explains. For example, a company with a limited customer base and good access to those customers needs far less publicity than a company targeting consumers or hard-to-reach customers. Building a reputation can help companies meet those partners, or get them to pick up the phone.

In general, if a company’s in stealth mode after patents are filed, it’s a sign its product isn’t ready yet – or it’s still working out an issue that might not stand up to public scrutiny. Personally, I tend to be skeptical if a company makes big claims while keeping its product hidden from public view. Most entrepreneurs I’ve interviewed are proud of their products and want to discover any problems early.

Public Troubleshooting

The danger of avoiding public scrutiny is the same as the danger of skipping peer review in science experiments – you could be missing a significant challenge which could end up being an Achilles heel. Once a product is launched, a company will usually have to spend more time and money to correct the problem than if it discovered the issue earlier.

By isolating themselves, startups also can end up victims of their own company cultures, Haller points out. Because startups tend to be dominated by researchers and engineers, rather than employees focused on marketing and selling products, they might focus on the science and technology and miss usability problems that their customers might face. Companies tend to be optimistic, which can be a key to success, but could also blind them to potential failures.

Finally, if startups succeed in generating huge launch buzz, it could be setting itself up for a fall if it can’t meet the lofty expectations it has (perhaps inadvertently) created. In other words, the greater the publicity, the higher the expectations – and the easier it is to plunge in the public eye.

Slow and Steady…

In the case of hardware, for example, it’s important to match publicity with the company’s ability to deliver products, Haller says. If a big launch creates more demand than a company can fulfill, customers will be disappointed when they can’t buy the product and the company could suffer a backlash, she says.

The best strategy depends on the specific product and its target audience. When the product is a free social networking tool, for example, which depends mainly on popularity for success and doesn’t face product availability obstacles, the challenges are different. In that case, it’s more important than ever to get the word out early and test the product with a beta group of early adopters while the user base grows, Haller says.

All in all, the biggest point startups can take away from Google and Apple product launches is the importance of building a company, she says. Google and Apple didn’t take shortcuts, but first built strong companies and products – then used savvy marketing strategies to get the most out of their launches. They need publicity because the success of their products depends on having users, but they deserve the buzz they get because they have – for the most part – lived up to the claims and expectations they have set, Haller says.