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Spencer Rascoff, former CEO of Zillow, offers valuable advice to any startup founder: Forget about advertising in the beginning. For the first few years, Rascoff and his team at Zillow deliberately chose not to spend money on advertising. Instead, they invested everything into building the best product possible.
Photo: Getty Images
Why Ignore Ads?
The reasoning behind this decision is simple—Rascoff believes that early success comes from having a strong, viral product, not from paid marketing. Companies like Uber, Snapchat, Instagram, and Facebook followed the same strategy in their early days. You won’t see ads for these services until they’ve established a solid user base and a great product. Zillow followed the same playbook: it wasn’t until years into the company’s growth that they started spending heavily on ads.
Invest in the Product
Rascoff’s approach was to reinvest potential advertising dollars into hiring engineers, designers, and product managers to focus on making the product better. This helped build Zillow’s reputation for innovation and solid product development. For startups, the key takeaway is that investing in product development builds long-term value. Paid marketing can come later once the product has proven itself.
A Lesson for Angel Investors
Rascoff’s philosophy carries over into his work as an angel investor. He’s wary of investing in any B2C startup that spends too much on paid marketing in its early stages. If a founder pitches a plan that includes a big marketing budget in the first few years, Rascoff is immediately out. For him, this shows a lack of confidence in the product’s ability to generate organic growth.
The bottom line is clear: build a great product first, and let the users come to you. Advertising is important, but only after you’ve created something people can’t resist.
Listen to Spencer Rascoff:
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