LITMIR.BIZ

      When Social Networking Doesn’t Work: The Cannabis Business in America

      In this chapter and throughout the book I talk a lot about how social networking is a great way to reach buyers. But occasionally a market exists where social networking is not appropriate.

As American voters pass referenda permitting the use of medical marijuana and legalizing it for recreational use, many businesses have cropped up to service this emerging market. As I write this, 33 U.S. states have legalized medical marijuana, while 11, plus Washington, D.C., have legalized recreational use. However, because it is still illegal at the federal level, laws often forbid the use of social networking to market products from this fledgling industry.

      “Marijuana from a marketing perspective is fascinating, because you can’t market in the usual way. It’s illegal,” says Larry Schwartz, president of Cannabiz Media, the most comprehensive source for U.S. marijuana licensing information. Data from Cannabiz Media helps journalists, regulators, researchers, businesspeople, and investors understand and operate confidently in the evolving U.S. marijuana marketplace.

      When Schwartz first started to market his business, he tried to run Google AdWords and Facebook Ads but was quickly rejected by both companies. Twitter and Instagram also forbid such advertising.

      Google’s representative emailed Schwartz: “Thank you for calling the Google AdWords Welcome center. I looked into and tried to see if there was a way that I could help you to be able to advertise with AdWords. However I was unsuccessful in my pursuit. Google won’t allow your website to be advertised with AdWords. While your Business model is solid and company is legal it does fall into Dangerous products or services. With that being said, your ads can show organically. The Search Console will assist you [sic] Organic ad results.”

      “We realized we had to go the old-fashioned route,” Schwartz says. “In the marijuana business, believe it or not, print magazines are huge. I think there are about 20 magazines in this space, titles like Cannabis Business Times, Marijuana Business Magazine, and Marijuana Venture. So for us, our marketing strategy quickly became trade shows, getting out our own email list, and bartering with these magazines and trade show providers. We’ve got deals with all the big guys now where we trade them our database for free ads and trade show booth space. This was the way everyone marketed 15 or 20 years ago!”

Most of the online action happens on more specialized marijuana search engines and review sites. “Dispensaries are the ones who need to advertise to consumers,” Schwartz told me. “And each state has different laws regulating marketing. For instance, in Connecticut and Massachusetts if you put a website up, the state has to approve it. It gets complicated and there are a lot of really strange laws. Now people are bypassing Google and the other traditional search engines and they’re using weed search engines like Leafly and Weed Map to find dispensaries, strains, news, all sorts of information. These are big marijuana search engines, and that’s where consumers are going.”

      Schwartz’s business is booming. Whenever companies want to enter the cannabis business in a new state, there is a whole new set of laws to deal with. And those laws are constantly changing. Schwartz’s business tracks all of those new and changing laws and regulations.

      “This business is going to go through a gold-rush mentality,” Schwartz says. “It’s like the dot-com boom starting in 1995. When California legalizes marijuana it will double the size of the market. And then we’re going to have a big bust. Then we’ll come back again, just like the Internet business over the past 20 years.”

      As new states permit medical marijuana or legalize cannabis for recreational use, there are more and more people who want to grow the plant as a business. And with that an entire industry has grown to service cannabis entrepreneurs. As a marketer, I am fascinated by the business-to-business marketing strategies these companies must use.

      “We are witnessing a dramatic shift within the USA. Cannabis can now be grown out in the open and with commercial greenhouse methods,” says Tom Springer, founder and president of NurserySource. Springer’s company has been selling RediRoot root development containers and GroPro root development fabric bags since 2010. The products help growers’ profitability by increasing their yield due to root health.

      “The changing state laws have certainly encouraged us,” Springer says. “But since we manufacture an agricultural product, we have needed a few years of field testing to make sure our products worked as well in developing cannabis roots as they do developing shade tree and conifer roots.”

Springer faced a number of marketing challenges. “Suppliers who service cannabis growers are quickly learning how to service full-scale and open commercial enterprises who are paying hefty tax rates,” Springer says. “This is entirely different than servicing a more clandestine, black market group of growers utilizing cash for all their supplies. Cannabis farming is maturing at a rapid rate, and grow equipment suppliers are watching margins shrink and sales channels constrict. The market is hyperdynamic, and numerous people will be getting rich over the next few years. And a ton of people will go broke. Companies wishing to stay in this market long-term must utilize good business principles to survive.”

      It’s rare that a market emerges from nothing and grows into a multibillion-dollar industry in a few short years. And just as we saw in those early Internet days, the rules of marketing in this industry are still being written. I expect that over time the cannabis business will be marketing via social media like so many other industries, but for now marketers like Schwartz and Springer must use more traditional marketing strategies.