'Strategic' Alliances with Other Companies Aren't Worth the Effort

Last Updated Nov 18, 2010 12:13 PM EST

By David Ciccarelli, CEO, Voices.com, London, Ontario
My wife and I founded Voices.com, an online marketplace where media companies can handpick voice talent for commercials. We're six years old and already the largest company of our kind, with more than 25,000 multimedia resumes from voice actors on our site.

Still, this is a small industry and I feel like I should constantly look for new ways to grow. For a long time I thought partnering with a company that offered complementary services like copywriting, video and music production was a low-risk, high-reward solution. But then I found out that partnering with other companies almost always means we get the shorter end of the stick in the deal.

No return on investment
We provide a limited library of free stock music and sound effects. So when a company with large inventory of original sound files proposed partnering with us to sell their sound files through our site, I had my development team put several days' work into creating an online marketplace for their files. I thought this arrangement would help us provide more valuable resources to our existing clients, and would give us an additional revenue stream. I didn't charge my new partners for my time, but instead negotiated a 50 percent commission on the files they sold on our site.

We'd had high hopes for the collaboration -- we have more than one million unique visitors each month, so if even a small fraction of them purchased sound files, we could have made a significant amount. But 60 days into the arrangement, we hadn't made a single sale. Our partners were disappointed, but we had a bigger problem: We had made a big investment -- in time and money -- and weren't seeing any return. Even worse, I was concerned that we had hurt our brand by introducing a new product that didn't interest our core customers.

Staying true to the brand
Generally, when other companies want to partner with us, it's because they want access to our client list to test out a new idea. It's potentially great for them. But it's not so great for us: We've already proven our business model, and we know that what we're doing works. We don't need to add other functions to the site -- we're the go-to place for voice-over talent, and companies and voice actors rely on us to fill that role for them.

We operate this marketplace very efficiently, so as soon as we start adding other things into the mix, our existing customers and partners become suspicious. Adding additional services from other companies simply isn't consistent with our brand.

In the case of the partnership with the sound files company, when we realized it wasn't profitable for either party, we shut it down. Fortunately, we had a flexible contract that allowed us to do so -- it would have been really problematic if we hadn't been able to escape from it.

Get it in writing
I'm open to trying another partnership -- but not unless the company has really considered how we can work together and how the deal will benefit both parties. The arrangement needs to do more than work from a technical standpoint; it needs to work with the brand we've built, and represent our core values and functions. If it doesn't do anything to build on the work that we're already doing, I'm not interested.

So now when a company inquires about a partnership, I immediately ask them to write a detailed proposal that explains how they see our alliance working. This request forces them to make the argument for how the partnership will benefit me, and it helps separate serious candidates from people who simply want to ride on our success. After all, if someone can't even articulate an idea on paper, then I know he'll never be able to execute his plan. Not surprisingly, most aren't even willing to take that small step.

Even with a good proposal, I'm still cautious about entering into an agreement. I always insist on a written contract drafted by a lawyer that will commit the other party to fulfilling his end of the deal. I include an exit clause, too -- generally, I'll factor in a testing period that lasts somewhere from 60 to 90 days, so we're only committed to a few months if it doesn't seem to be working out.

Since implementing this strategy, we have made some successful partnerships, but I'm still wary. And you should be, too. If you haven't spent enough time thinking about what you stand to gain from the deal, you could be simply wasting your time.

David Ciccarelli runs a blog called The Biz on Voices.com, where he shares tips and strategies to help other owners of online companies.
-- As told to Kathryn Hawkins