In SMB Group studies, small business decision-makers consistently put colleagues, friends and family at or near the top of the list as key sources for advice when it comes to selecting technology solutions for their businesses (Figure 1).

Figure 1: Who SMBs Turn to for Guidance About Technology Solutions

So when start-up YouDazzle CEO and co-founder Cary Cole told me that YouDazzle will sell its newly launched cloud-based collaboration, storage and online meeting platform via a network marketing distribution strategy, he got my attention. Although companies from Avon to Tupperware have successfully deployed this model, YouDazzle is, as far as I know, the first applications vendor to take this approach.

What YouDazzle Offers

YouDazzle offers small businesses with cloud-based collaboration software that integrates online file sharing, web meetings and screen sharing into a unified service.   As with other small business cloud collaboration offerings, the goal is to make it easy for people to share, access and store any type of file via any type of device. Some of the interesting differentiators include:

  • Integration with Dropbox to provide customers with branded data rooms and other extras. You can sync desktop files to YouDazzle with Dropbox  and vice versa; instantly share Dropbox files with up to 100 people at once via YouDazzle web meetings; and add comments to  files.
  • Built-in analytics to monitor trends and decision-making processes and provide feedback on deals and projects. You can see who has visited your data rooms, uploaded and downloaded files, provided comments, etc., and  customize how you’re notified about user activity.

Pricing includes three options, all of which include live file sharing, screen sharing, unlimited rooms and guests, activity analytics, Dropbox integration and custom branding. Plans start with the entry-level Pro Plan, at $19.99/month, which includes 1 host and 20 GB of storage, and work up from there. YouDazzle offers a 14-day free trial and discounts on yearly subscriptions.

Taking Network Marketing to the Cloud 

Like companies such as Avon, Silpada, PamperedChef and others, YouDazzle intends to deploy a network marketing strategy to sell its products. Here’s how network marketing works for YouDazzle:

  • A $49 sign-up fee gets you in the door to sell YouDazzle. Once you’re signed up, YouDazzle provides you with a business launch pack, which gives you a co-branded replicated web site and storefront (which interfaces with the YouDazzle web site). YouDazzle also provides training via local in person events, webinars, and materials that educate marketers on the network marketing compensation model.
  • When you start selling YouDazzle, you earn a 20% margin on your first 3 sales. After that, you make 35% on subsequent sales–and you get a retroactive bump to 35% on the initial 3 sales that you made. Then the network component comes in, where you can make money on top of the network of other YouDazzle marketers that you recruit when they sell.

Cole believes that cloud solutions for small businesses are a good fit for the model, for several reasons.

  • The cloud has eliminated the need for marketers to install any hardware or software.
  • Unlike network marketing for physical goods, marketers don’t need to invest in inventory (such as the suitcase full of Avon cosmetics).
  • Small business owners look to colleagues, friends and family for guidance on technology solutions (as our research also indicates).
  • Social media is overtaking traditional advertising and marketing.

Will it Work?

There are many competing collaboration solutions on the market for small business–from Citrix’s “GoTo” solutions to Google Apps. And some of these services are free. But YouDazzle believes it has a good blend of collaboration tools, and that custom branding, an easy to use interface, and strong entry point to current Dropbox users will help it develop a foothold in the market.

Of course, the most intriguing bet that YouDazzle is placing is in its marketing and sales model. Cole thinks the network marketing will appeal to marketers that want to capitalize on the cloud opportunity. As important, he believes that their local, personal touch with prospective customers will differentiate YouDazzle from the typical self-service trial approach that is most prevalent in the small business cloud solutions market (although other approaches are emerging — see Going Beyond Free Self-Service Trials: Raising the Bar in Cloud Computing). The rationale is that a little bit of TLC will help prospects see how to use the tool more productively, boost conversion rates and nurture retention.

In my view, this will be interesting to watch. Although network marketing has worked well in the consumer space for products such as personal care products and jewelry, will it work to sell business solutions to small companies? Sure, small businesses turn to friends and colleagues for guidance, but do they actually want to buy from them?

Another challenge is that people seem to be on opposite ends of the spectrum in their perception of network marketing. Although some people love it, for others network marketing has negative connotations–ala “pyramid marketing.” These people get one whiff of network marketer coming and cross the street–they just can’t face another basket party or make-up demonstration from someone that they may feel some obligation to buy from.

That said, I think a lot of YouDazzle’s success–or failure–rests on how well it can train its marketers. YouDazzle will not only need to teach them how to sell and implement the solution, but also how to make it most relevant to the different requirements of each small business. It will also need to structure things to ensure that marketers strike the right balance between recruiting new marketers, signing on new customers and supporting existing customers. Finally, it will need to help marketers avoid being pinned with the negative network marketing stereotype, by helping them understand things such as when a situation is appropriate for selling and when its not.

Let me know what you think!