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How to Validate Your Startup Idea with Online Ads

Mike Chan

In my last post I wrote about the process of how my co-founder and I came to the decision to work on Locatize, a location-based content delivery system, for our startup. After we decided on the idea, our next step was to start the customer validation process to evaluate if people actually want a tool like this.
Customer validation is a fundamental concept of the Lean Startup, a framework that helps entrepreneurs minimize uncertainty and waste when building products and companies. By engaging with potential customers early and often, you can learn more about their needs and problems and build products to address them.
A quick and relatively cheap way to validate our idea was to run online ads targeting potential users, lead them to a landing page, and see if they give us their email address to stay updated on Locatize’s progress. A small amount of time and money upfront would give us a gauge on whether to move forward with or ditch the idea and can save lots of time and money down the road. Here’s what we did to test the demand for Locatize and how you can validate your startup idea.
3 Steps to Using Pay-Per-Click Advertising to Validate a Startup Idea
Step 1: Create a Landing Page
The first thing you should do is create a quick and dirty landing page to communicate the benefits and features of your product and collect email addresses from visitors who may be interested.
Since I’m a crappy coder, I used a tool called Launchrock to create Locatize’s landing page. There are plenty of other tools available that serve the same purpose – LeadPages, Unbounce, Kickoff Labs and even WordPress - but Launchrock has served me well.
These tools make it really easy to create a page in a few minutes, as opposed to hours or days. You can host the landing page on your own URL (e.g., which you can purchase from GoDaddy or any other web hosting service) or have Launchrock host the page for you. And you get full control of all of the aspects of the landing page, such as the logo, background image, tagline and description, as well as the verbiage of the confirmation page and emails.  Check out the Locatize landing page below:
Locatize’s Launchrock Landing Page
It’s extremely important to properly and concisely communicate the value that your product will provide to your visitors; after all, you want to determine whether they are interested in what you’re offering. So take your time with crafting your product description and making sure your page and communications are impactful.
Step 2: Run Online Ads
The next step is to gauge how many people are interested in your concept by running pay-per-click (PPC) ads, which upon click lead web surfers to your landing page, where hopefully they’ll give you their email address.
Google AdWords
Google AdWords is a nice way to determine demand for your product, since it leverages explicit keyword searches executed by potential users, and you only pay if they click on your ads. There are so many things you can do with AdWords that it can be overwhelming, but we kept our campaign pretty simple.
The first things we did were set a bid strategy and budget for the campaign. Because Google is smarter than I’ll ever be, I let AdWords set my bid strategy to maximize clicks; after all, I want as many clicks through to the landing page as possible.  I then set my daily budget to $20.
Next, we used the Keyword Planner to select the keywords to target potential Locatize users. One could write a dissertation on everything you can do with Keyword Planner, but in essence, you want to select the keywords that are descriptive of the product or service you’re trying to validate. Here is Google’s help page for Keyword Planner and another How-To from Search Engine Land. In the case of Locatize, we used terms like “GPS location,” “location based services,” “mobile location services,” and others.
Next, we created our ads. We had to be super-concise with ad copy, since Google only allows a 25-character headline, and two 35-character description lines. It’s tough to deliver a lot of information with those restrictions, but this forces you to be really clear and succinct. Just like on the landing page, it’s really important to take your time creating this ad copy, as it will be the determining factor for whether people click or not.
Creating Locatize text ads in Google AdWords
We also created multiple ads to test which copy resonated the most with potential users.
Finally, we set up conversion tracking, which helped us track which keywords performed better with respect to converting visitors on our site.
After that, we went live with our campaign! Exciting stuff.
LinkedIn Ads
One of the value propositions of Locatize is that our system makes implementing location-based content delivery really easy for mobile app developers, so our initial focus was on targeting this segment. We thought that LinkedIn would be a great place to start, as we can select the job titles of people to whom to deliver ads.
We focused on job titles like mobile developer, mobile application developer, head of mobile, and others.
We then set our budget again to $20 per day and created our ads. Creating ads in LinkedIn is pretty similar to AdWords, except that LinkedIn allows you to include an icon, giving you another way to make your ad stand out.

Then we launched our LinkedIn campaign!
Step 3: Measure and Learn!
Now comes the fun part - checking out the numbers to see how potential users are interacting with your ads and if they’re signing up on your landing page! Well, it’s actually not so fun if no one is clicking or signing up.
Fortunately, we did get a bunch of clicks and email sign-ups, at least from AdWords. Here’s our data.
Locatize Google AdWords Campaign Results
While the campaign’s overall click-through rate (CTR) of 1.71% is a little below what’s widely considered to be “good” (around 2%) for our average ad position, we did achieve a solid CTR for the GPS and Navigation ad group (2.88%); thus, we would concentrate on the keywords in that ad group in future campaigns.
What’s really important is that we achieved strong click conversion rates for multiple ad groups, which tells us that we’re on the right track with the way we’ve communicated Locatize’s value proposition on our landing page and it resonated enough with our visitors for them to give us their email address.
We didn’t learn quite as much from our LinkedIn campaign:
Locatize LinkedIn Ad Campaign Results
0 clicks! Womp, womp. Our bid probably wasn’t high enough to achieve clicks. Oh well, at least we didn’t spend any money here.
Overall, we spent about $500 on our campaigns, which was probably a bit much. But I wanted to be thorough and I had just gotten paid for a consulting gig, so I had some money in the bank. You can certainly obtain a good gauge of product demand with $100-200.
In the end, we received 121 signups on our landing page over 3 weeks, which we think is a great end result.
What I Would Do Differently Next Time
This was the first time I’ve used this process to validate a startup idea. I think it went well but would definitely do some things differently next time.
While capturing email addresses is valuable, there is nothing more valuable than actually making sales, even without a finished product. If I were to do this type of campaign again, I would install a PayPal button on the landing page like this guy did and allow people to actually pre-pay for the product.  Then we would really know who would be our future customers and better understand how many people would be willing to pay cold, hard e-cash for Locatize.
Also, now that I have a little bit of Google AdWords experience, I would monitor my keywords more closely and move more of my budget to the ad groups that were more effective.
Finally, I would set a higher bid price for LinkedIn ads to evaluate if that social network can drive any traffic.
The results of this campaign don’t tell us definitively that Locatize is going to be a hit or a flop. But it does give us direction that there are people out there who may be interested in what we have to offer. And that’s worth way more than the couple of hours of work and the relatively small amount of money we spent to run this test.
Customer validation doesn’t stop there. We’ve been interviewing mobile app developers and marketers to understand their pain points and problems, and we’ll continue to do so to further validate the concept of Locatize.
Validation is a never-ending journey and this is just the beginning for us. If you have a business or product idea, this process may be a good start for you as well.
What did you think of this evaluation process? What could we have done better or worse? Do you have an idea to validate where this might help? I’d love to hear your comments.
What’s your take? We want to hear from you. Connect with CEA and Mike on Twitter. You can also follow Mike on his personal blog for future updates.