Part 1: Evolution of marketing funnels

The most fundamental construct in marketing is ‘the funnel,’ which stipulates that consumers go through four decision phases when making a purchase: They learn about your brand (awareness), they decide they want to explore/ buy your product (intent), they buy the product (purchase), and they return to repurchase it in the future (loyalty)

Amazon, Facebook, and Google built trillion-dollar companies by centering their business models around this funnel, initially focusing on one part, but rapidly expanding to cover other areas, generating 470% (Google), 710% (Facebook), and 1,130% (Amazon) returns for their shareholders over the past eight years.

Amazon = Full Funnel Leadership

What started as an online bookstore, quickly turned into a national marketplace, capturing 1 out of 3 products bought online. The company’s investments in customer experience (e.g., one-click purchase), transparency (e.g., customer reviews), and fulfillment (same-day delivery in some cities) enabled its control over the purchase part of the funnel.

But things didn’t stop there, as Amazon used the cheap capital (P/E at 80x) at its disposal to build the most formidable stronghold across the entire funnel. Today, PrimeVideo gets half the viewership time of Netflix (awareness), controls 45% share product searches vs. 33% for google (intent), and Amazon Prime is available in 80% of US households (loyalty)

Google = Top funnel heavy

Google focused on the intent, becoming the global go-to search engine across the globe. Again, things didn’t stop there: YouTube and Doubleclick were acquired to gain a foothold at the top of the funnel, allowing the tech giant to attract 44% of US digital ad spend in 2018 (vs. 22% for Facebook).

The search giant has also been trying to expand its shop offerings, but it hasn’t worked out well yet: Google Express was a failure in 2013, and although Google Shopping showed potential early on, brands have not adopted the platform.

Facebook = Awareness++

Facebook focused on awareness, aiming to monetize their ~2.9bn users across their platforms (Facebook, Instagram, WhatsApp) by serving them digital ads.

Instagram Shops, announced last month, is the company’s latest strategic move to establish itself in the intent and purchase parts of the funnel. Brands can now sell directly through facebook’s platforms, and users can buy their products in one tap.

This is a tremendous move and will push Facebook’s valuation to Trillion dollars by 2021.

Unfortunately, the partnership between Facebook and brands/ creators will benefit one party eventually: the one that owns distribution (Facebook), I will discuss why in the second part of this post.

Marketing funnel evolution
Imad El Fay

Imad El Fay

Partner & Venture Builder @HBInvestments | @McKinsey alumn, @Harvard alumn