Yes, cannabis can. It has been a landmark time for marijuana, with entrepreneurs rushing into the Wild West of the budding industry. They’re not just growers and sellers, but forward-looking tech experts who have seen pot’s bright digital future and are committed to realizing it.
Who can fault their optimism? In the past year, legal cannabis has become the fastest-growing industry in the country. Sales in 2014 totaled $2.7 billion, up a whopping 74 percent from the previous year, according to The ArcView Group, an Oakland, Calif.-based investor network focused on the substance. Their analysts have boldly predicted fourfold growth to nearly $11 billion in sales in the next five years, as the U.S. sees more states easing up on weed laws.
Despite legalization of various forms in 23 states and the District of Columbia (plus 10 more placing legalization of some kind on the 2016 ballot), pot businesses have struggled to get the word out. Cannabis is still viewed by many as a “vice” industry, and online publishers have, for the most part, stayed away from running advertising from companies operating within the sector; Google, Facebook and Twitter don’t run ads for marijuana businesses, even in fully legal states such as Colorado and Washington.
Enter pioneering startups that aim to help cannabis businesses bypass the laggard ad and marketing regulations that are curtailing their growth.
Pot pitchman: Matthew Price of Mantis Network.
Image Credit: Marc Royce
A web designer by trade, Matthew Price, CEO and co-founder of Mantis Network, got into the marijuana industry by way of his blog, MedicalJane.com, which aims to be the “WebMD of medical marijuana.” Since the site’s launch in 2012, it has grown to more than 1 million readers. Last year, Price and his partner, Paris Holley, started to monetize by selling banner ads, which sold out in just two weeks.
Their success led to a related business idea. “As we started talking to other publishers, we found that many had trouble selling ads themselves,” Price explains. The partners decided to put together another company, a network that creates and delivers digital campaigns for cannabis companies. Using MedicalJane.com to jump-start its growth, Los Angeles-based Mantis Network has attracted more than 100 publishing partners in just eight months and is the largest digital ad network focused on the cannabis industry, surpassing competitor WeedMaps, a Yelp-like service that allows dispensaries to pay for more prominent listings on its platform.
According to the latest Quantcast measurements at press time, Mantis reaches 6 million unique visitors each month, while WeedMaps has 2.1 million. “Every single month, we’re growing 25 percent in reach with no advertising, no funding, just natural growth,” Price says, adding that Mantis is on track for $1 million in revenue for 2015, its first year in business.
Price is now seeking capital as he looks beyond the usual online ad network model. Mantis is launching a loyalty program for cannabis businesses and a centralized marketing platform that publishers can use to monetize their websites. Price is also keen on developing analytics.
“Every time we push a deal through MedicalJane.com, that data will come back through Mantis,” he explains. “Eventually, we’ll have all these data sets about what people like in products. Do they like edibles? Oils? All this information is going to be valuable once cannabis becomes legal, and we’ll be one of the few places that have it.”
That kind of information, and subsequent audience targeting, has also been integral to Cannabis Online Marketing Platform (COMP). Founded last year by three experts in the digital advertising industry, Oakland, Calif.-based COMP started in politics, drumming up support for marijuana legalization. “We were successful in Alaska and Oregon,” reports CEO Dakota Sullivan. “We almost had it in Florida, too.”
Sullivan founded the company alongside Scott Berman and Rich Masterson, veterans of Pennsylvania-based Audience Partners, a data-driven ad platform focusing on advocacy, higher education and health. Though COMP began on familiar political territory, the founders soon realized they could apply the same strategies to commercial cannabis companies, which were making products but having problems finding funding and building awareness.
“We asked ourselves, ‘How do you [take] technologies that have been developed for hundreds of millions of dollars for other companies and apply them to cannabis companies?’” Sullivan says.
By the last quarter of 2014, COMP had expanded its client base to assist companies that make cannabis-related products such as edibles, vape pens, extracts and cannabis-infused pain medications. Along the way, the organization debunked the popular perception that you cannot advertise a cannabis product.
“If you really know digital ads, and sit down with the operations team at these ad networks, you start to dissect the policies on cannabis and find out that there are some ads they can take,” Sullivan explains. He points out that ads supporting the legalization of cannabis are kosher; so are those for products that can have other uses, such as e-cigarettes or vape pens that can be used with weed or tobacco. “We started to nibble around the edges.”
COMP touts its ability to target an audience in part by matching a dispensary’s IP address with those of users within three miles. It does the same with mobile users. Sullivan says that unlike websites for liquor companies, COMP doesn’t have to worry about the age of the consumers it reaches because it’s advertising “collateral products—things that deal with cannabis, but not cannabis itself.”
He says that over time, some social platforms, like Twitter, have loosened up. “You can do sponsored tweets that pertain to cannabis now.” COMP has also found that there are ad networks with clients—online publishers, mobile apps, mobile games—that are willing to accept all types of cannabis advertising. “There are ways to promote products other than with Google, Facebook or Yahoo,” Sullivan says. This year, COMP projects $2.5 million in revenue.
COMP’s dive into cannabis marketing led to a complementary business, the Cannabis Rep Network, a team of outsourced sales representatives who help manufacturers get their products into dispensaries. Sullivan says COMP can handle ads, but a producer’s first problem is distribution.
“The distribution infrastructure that exists in every other industry is missing in cannabis,” he says. “Often the person who makes the product is also the one going door to door trying to sell the product.” Sullivan says the plan is to have sales reps call on 2,000 cannabis retailers across the U.S. before the end of the year. Once a business has its distribution in place, it’ll migrate to COMP’s advertising platform, looking to attract more customers.
It’s often the nuts and bolts that cannabis businesses need a hand with, which is why in 2013 Dan Rogers and Chad Jennewine started CannaSys, a Denver company that provides tech-based marketing tools for the niche market. Former marijuana retailers themselves, Rogers and Jennewine believe they have a small-business perspective that gives them an edge in their new venture. “We asked ourselves, ‘If we still had our stores, what programs would we want to see?’” Rogers says.
Though most of CannaSys’ products are B2B, its CannaCash program, which it launched last year, is crafted for consumers. CannaCash is a robust membership rewards program that ties into the company’s BumpUp app. Using the app, retailers can send customers tailored messages via SMS, email or push notifications. BumpUp also becomes an e-wallet where customers can keep track of their purchases, discounts and other deals. Information from BumpUp helps retailers get to know their customers by segmenting them into various groups or behaviors.
Jennewine says CannaSys is at the forefront of a growing market. “All these businesses need efficiency, customer-retention tools—the things that a traditional business needs. But a lot of big companies aren’t going to help them until there’s federal legalization. We’re filling in that gap.”
Despite their differing strategies, these entrepreneurs all agree that the biggest hurdle for their weed 2.0 businesses is to educate mom-and-pop retailers about digital possibilities. Sullivan likens the project to building an entirely new city from the ground up. Until now, big players have mostly stayed away from this expanding market, but the safe-haven period for adventurous entrepreneurs could be drawing to a close as more states adopt weed-friendly regulations. When federal legalization happens, smaller businesses may have a tougher time in the face of industry giants.
“We’re trying to replicate a lot of infrastructure, systems and methodologies that have been growing other industries, specifically for cannabis,” Sullivan says. “There’s just so much to do and a very short amount of time to do it.”