Word of Mouth Is the Best Form of Marketing

In case you haven’t heard, word-of-mouth advertising is huge.

That was one of the takeaways today at the Accel Stanford Symposium. Speaking on a panel about the future of social and viral marketing, ModCloth co-founder Susan Gregg Koger said her company’s initial growth was due in large part to her network of friends telling other friends about the seller of vintage apparel and accessories.

Fellow panelists Drew Houston, Garrett Camp and Andrew Mason (the CEOs of Dropbox, StumbleUpon and Groupon, respectively) all agreed that word of mouth was key to their success in the early days of their startups.

“We founded the company in 2002, before Facebook and Twitter,” Koger said, “and we relied on having friends tell their friends, and we grew from that.”

Earlier this year, ModCloth raised $19.8 million in Series B financing led by Accel Partners and including previous investors First Round Capital and Floodgate. The company, based in San Francisco, reportedly earned $15 million in revenue last year, according to a New York Times blog.

“Word of mouth is nothing new in the world of marketing, but what we’re seeing is that with the growth of social media, startups today have the ability to communicate with their customers and accelerate their marketing,” said Theresia Gouw Ranzetta, a partner at Accel and a ModCloth board member.

This isn’t the first I’ve chatted about word-of-mouth marketing this week. On Tuesday, I wrote about how startup Zuberance, a San Carlos, Calif.-based provider of a word-of-mouth marketing platform, raised an $8 million Series B round, led by Canaan Partners.

CEO Rob Fuggetta told me: “Universally, people say word-of-mouth advertising is the most influential form of marketing in any kind of business, whether it’s retail or B2B, but companies aren’t harnessing that.”

I think what he meant was that established companies, many of whom are his customers, aren’t harnessing word of mouth as well as they should. But social media and new Internet startups, such as ModCloth, Dropbox and others, are making a living off of word of mouth.