I haven’t really seen any one large company, I’m talking about multi-billion dollar companies where they’re like, “We make all our money “from Facebook ads, or just Google ads, or SEO so most aren’t really worried about a moat, or search, it’s omnichannel.
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What we’ve seen with the big brands is the moment you take an omnichannel approach and you embrace everything, we notice that the CPAs for all your channels go down by more than 10%.
Yeah, I think that’s pretty true, like when you get to a certain scale, you don’t have one golden channel, you have multiple channels that actually acquit a certain part of your revenue. I guess because we’re on tactics, and you are, you know, renowned for coming up with tactics across the web on different things if you had to sit a marketer down today and just say like, you know, “You’re a best practice marketer, “like you actually see the world in terms “of like all this best practice advice, “and let me like correct you in a couple of things.
“Here are some controversial things you probably have never, “thought about that work really well.” What are some of those, like some of the more controversial things that if you were in a, you know, a marketing conference, and you said it, would you get some certain reactions from marketers?
So one, I think the software is a race to the bottom. A great way to market is just to give away tools for free. HubSpot’s been a big advocate of this for years. If you look at Dharmesh and what he did with, is it the Website Grader, The Website Grader is not a freemium tool, it’s a free tool, and a portion of them, if you get a lot of users, I get all of them won’t be HubSpot users, but a small fraction of them can be HubSpot users. Email signature, don’t pay for email signature, it’s free. A very, very small fraction of them, even though it’s not the majority, can end up using your product.
If you look at Zapier, most companies, don’t need to pay for Zapier. You can do a lot of it for free, especially if you’re a small business. The moment you get big enough, you don’t care, like you’re already using it, you’ll pay, because you have a lot of hooks, and you’re making enough money where it’s really worth it for you, then you don’t have to hire full-time developers, right? So that’s one controversial thing.
It’s funny, I’ve talked to a lot of VCs, I was talking to Sequoia Capital, I don’t know when this was like a year and a half ago, and I was telling them, you know, what’s funny is like if you look at MailChimp as a market, like an email segment, we were doing back to the napkin math on how much, how many emails MailChimp sends out, they got bought out for, I think, $11 billion, or somewhere around there, and I could get the same amount of emails sent out as them using third parties for around $5 million a year. It was something like that. It actually wasn’t that expensive to send out the emails. The big cost is to acquire the customer.
If you look at Paychex, Paychex, I think, is a 40-ish, 50-ish billion-dollar company? I’m guessing on the market cap, but it’s somewhere there. I can actually Google the stock right now. So Paychex stock and Paychex is a payroll solution, so Paychex has a market cap of $39.43 billion for this recording, all right? You guys are all familiar with UnitedHealthcare, I’m assuming?UnitedHealthcare, Their stock is one of the biggest insurance companies, this health insurance, is $485 billion. They’re 10 times bigger. It doesn’t cost that much to send out payroll and just send people money.
There are ways to make this super, super efficient, and really affordable. The cost-per-click for a lot of these payroll software words is like 60, 80, sometimes even over $100 a click. That’s not for a customer, that’s for a click. Give away the software for free, make your money, to all the people that are using your software, eventually they get big enough and say, “Hey, do you want health insurance? “We offer it,” plug and play And make your commission there.
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– Yeah, and when you own (beep), You don't have to worry about
the ChatGPTs, or the Bards, Or anything like that.
– Yeah, yeah. (Kipp laughing) – You're only listening-
– You're owning the media, You're owning the attention.
– Yeah. (bright music) – Neil, you work with
some of the biggest brands Across the globe. What are you telling brands
that are heavily reliant On search right now? Because there's like a lot of, I think, Fear among companies
(image chiming) Who SEO may be a moat, And they're looking at a lot of the people Who are saying, "Wow, like this is really "disruptive to search,"
like me, and others, And saying like, "Wow."
(Kipp laughing) Like, "Do we even have a
moat in this post-AI world?" Like "Does search become
much less powerful?" Are you having those conversations, And kind of what are you
telling those people? – Yeah, so it's a little bit different, So we're five years old, we're
small compared to you guys. We're around 750 employees. I don't know how, I know
HubSpot has a ton of employees. We're bootstrapped, we grew
really quickly to nine figures. It wasn't that hard, because
I also had a really big brand, And again, most of our customers
are larger corporations, And when I'm saying larger corporations, I'm talking about like, Adobe, and Cisco, And just like really large brands, And we do work with, you know, If you look at Zapier and HubSpot,
You guys are actually large companies, Multi-billion dollar companies, But I'm talking about like
really large corporations Where they're like, "We
have 100,000 employees, "and we don't even know what
most employees do," right? That's the reality, like,
(hosts laughing) If you're a manager at
a really big company, There's no way you know what
100,000 people are doing, And not to talk crap,
it's just the reality. When you look at most big companies, We don't have one client
that says, "SEO is a moat," Or search is a moat
– Right. – When it comes to paid ads. All big companies, if you look at them, If you even look at like
a HubSpot or a Zapier, Your revenue, once you
get to a certain size, It's not coming from one channel, It's coming from a mixture
– Right. – Of all channels, and a lot of it, When we look at one similarity Across all the companies we work with, A lot of the revenue
comes from their brand. No joke, it doesn't matter if It's a boring B2B company,
– Yeah. – Majority is coming from the brand, And we work with a lot of cool companies, And most people haven't heard of them. Like one that we work with
is called Fortive, right? They're a spinoff from Danaher, It's publicly traded,
they're really large. No one, most people
have not heard of them, But most people have used
their products in their life. You just don't know what they are, Like if you went to a gas station,
You've used one of their products, right? Like almost everyone has, and it's just, They're necessities in this world, But if you think about
a lot of the revenue That these big companies generate, It's their brand, and
outside of their brand, – Right.
– It's a massive, long tail Of "Oh, it's some search,
SEO, some paid ads, "some social media, Instagram and TikTok, "and email marketing, and word of mouth, "and partnership programs,"
like it's a combo of all. I haven't really seen
any one large company, I'm talking about
multi-billion dollar company Where they're like, "We make all our money "from like Facebook ads, or
just Google ads, or SEO," (Kipp laughing)
so most aren't really Worried about a moat or
search, it's omnichannel. What we've seen with the big brands Is the moment you take
an omnichannel approach And you embrace everything, We notice that the CPAs
for all your channels Go down by more than 10%. – Yeah, I think that's pretty true, Like when you get to a certain scale, You don't have one golden channel, You have multiple channels that actually Acquit a certain part of your revenue. I guess because we're on tactics, And you are, you know,
renowned for coming up With tactics across the
web on different things, If you had to sit a marketer down today And just say like, you know, "You're a best practice marketer, "like you actually see the world in terms
"of like all this best practice advice, "and let me like correct
you in a couple of things. "Here's some controversial
things you probably have never "thought about that work really well." What are some of those,
like some of the more Controversial things that
if you were in a, you know, A marketing conference, and you said it, You would get some certain
reactions from marketers? – So one, I think software
is a race to the bottom. A great way to market is just
give away tools for free. HubSpot's been a big
advocate of this for years. If you look at Dharmesh and what he did With, is it the Website Grader,
is that what it's called? – Website Grader.
– Website Grader? – Yep.
– Website Grader, yeah. – The Website Grader
is not a freemium tool, It's a free tool, and a portion of them, If you get a lot of users, I get all of them won't be HubSpot users, But a small fraction of
them can be HubSpot users. Email signature, don't pay for
email signature, it's free. Very, very small fraction of them, Even though it's not the majority, Can end up using your product. If you look at Zapier, for most companies, They don't need to pay for Zapier. You can do a lot of it for free, Especially if you're a small business. The moment you get big
enough, you don't care, Like you're already using it, you'll pay, Because you have a lot of hooks, And you're making enough money Where it's really worth it for you, Then you don't have to hire
full-time developers, right?
So that's one controversial thing. It's funny, I've talked to a lot of VCs, I was talking to Sequoia
Capital, I don't know when, This was like a year and a half ago, And I was telling them, you know, What's funny is like if you
look at MailChimp as a market, Like the email segment, We were doing back to the napkin math On how much, how many
emails MailChimp sends out, They got bought out for,
I think, $11 billion, Or somewhere around there, And I could get the same
amount of emails sent out As them using third parties
for around $5 million a year. It was something like that. It actually wasn't that
expensive to send out the emails. The big cost is to acquire
the customer. (chuckling) – Correct.
– It's not actually To run the emailing
system to send out emails. Yeah, you got to deal with
spam and other things, But like, the big cost is
actually generating the customer, And I'm like, huh, it would be cheaper To sell software for free
or give it away for free And figure out a better way to make money, And I'll give you a great example of this I think that'll resonate with everyone. If you look at Paychex, Paychex, I think, Is a 40-ish, 50-ish
billion dollar company? I'm guessing on the market
cap, but it's somewhere there. I can actually Google the stock right now. So Paychex stock, and Paychex
is a payroll solution, So Paychex has a market
cap of $39.43 billion Of this recording, all right? You guys are all familiar With UnitedHealthcare, I'm assuming?
– Yep, I am. – Their stock is one of the
biggest insurance companies, This is health insurance, is $485 billion. They're 10 times bigger. It doesn't cost that
much to send out payroll And just send people money. There's ways to make this
super, super efficient And really affordable. The cost-per-click for a lot
of these payroll software words Is like 60, 80, sometimes
even over $100 a click. That's not for a customer,
that's for a click. Give away the software
(Kipp chuckling) For free, make your money, To all the people that
are using your software, Eventually they get big enough and say, "Hey, do you want health insurance? "We offer it," plug and play,
– Mm hmm. – And make your commission there. – And you did something like
that for your agency, right? You bought Ubersuggest, do you want to Like, give a little
– We got Ubersuggest for… – Synopsis of how that went? – Yeah, so we bought Ubersuggest for 120, I probably put in maybe 3
million into the software To get it to a place where
it can generate enough leads. We did the same with a tool
called Answer The Public. We bought it for 8.6, we overpaid for it. At the time, it was doing
maybe 100 grand in EBITDA. – We looked at that, Kieran and I Thought about buying that
– Yeah, yeah. – A couple of different times. – Yeah, I didn't know,
– Yeah, 8.6- – You bought that, actually,
yeah, I didn't know You bought that.
– Yeah, I didn't know
You bought that, 8.6 is definitely more Than I would've spent, dude. – It was expensive, so… – It was expensive. – And you know, they were like, All these other companies
are, and we're like, Man, we couldn't get them down
low enough into price point, And we were trying to buy them for, I think it was $6 million,
somewhere around there, Maybe six, and they… Because it wasn't fully burdened, When they're like, "Yeah, we're doing "100 grand a month of profit," I'm like, "You have no employees, and no
expenses other than servers." This is not a true
– Yeah, no. (chuckling) – 100 grand a month EBITDA business. (image chiming)
So they're just like, "We want 8.6," they're like, "How about you give us 6 up front, "and then you give us the
remainder over a year and a half," Or two years, it was something
like that on payment plans, So we're like, "All right." We still don't want to pay it, But we ended up changing some
things with the business. The traffic grew 30, 40% really fast, And we changed some
things with the business. We got the EBITDA to 200
grand a month really fast, Fully burdened with employees,
and all that kind of stuff, So 2.4, we'll get it to 3 million a month, I mean 3 million a year
really quickly in EBITDA, But we didn't care about any of that. So when we were doing
diligence on the business, We were looking at how
many enterprise companies Were using these tools,
And you had a lot of big
brands, a lot of Fortune 1000. When we were looking at
Fortune 1000 companies, It was something like close
to 70% of Fortune 1000 brands Were using Answer The Public. All right, so the way
– Wow. – We make money, forget the tool, Even if it didn't make
100 grand in EBITDA, We wouldn't care. We start calling up those customers, And we're pitching them on services That are costing them not 1 million, But in the multi-multimillions
of dollars a year In closing deals. So when you look at it from that aspect, It has a big user base. We don't care about the
revenue from SEO software, Or PR software, We're like, land and expand. Some of the deals will
only sign up with us For like, 3, 4, 500 grand a year, But this will be Fortune
1000 companies that have 30, 40 divisions and a few
hundred thousand employees, And we're just like, land and expand. Oh, you're insurance company? We got one division, then
we got three divisions, Because we did good work, And then we're at seven divisions, And next thing you know,
that customer is paying Five and a half million dollars a year Because we got them from
using Answer the Public, And we only bought that company for 8.6, And if you look at a customer,
for us, that's enterprise, They should last at
least five years, right? Numbers are a little bit skewed
because we're still young,
We're only five years old, And a bad economy makes
churn go up in marketing For pretty much any segment, But in theory,
(Kipp interjecting) Our CEO comes from Dentsu, Which is one of the big ad
agency holding companies. He's like, "Your enterprise
clients should last "at least seven years," So if you got someone from one
of these software solutions Paying you $5 million
in the last seven years, The EBITDA that we're
making from that one deal More than paid for the whole acquisition. – Yeah, it's pretty cool. – And you made Answer The
Public profitable, right? Like this is the magic trick. You took the risks to
outlay the capital, right? – Yes.
– For Answer The Public As a lead source, But you knew you could still
basically make it break even Or profitable as just a standalone thing, And most companies won't
do either one of those. Most companies won't say, "Hey,
I'm not going to take the risk. "I'm going to go and rent some attention "from Google and Facebook. "I'm not actually going
to go and actually buy "or build any real assets,"
and that's what you did, And if you're watching the show, Like, that's what
matters in today's world. You got to own shit, and
if you don't own shit, There's little to like no
leverage that exists there. – Yeah, and when you own shit, You don't have to worry about
the ChatGPTs or the Bards, Or anything like that.
– Yeah, yeah, yeah. (Kipp laughing)
You're only listening-
– You're owning the media, You're owning the attention.
– Yeah. – Neil, can I just go back to, Just so I make sure I
get the numbers right, Ubersuggest, you paid 120K and put in 3 million on that tool? – Uh huh, the data
– Yeah. – Was really expensive, And the server costs
were really expensive, Then we started monetizing a little bit From a software standpoint. Our goal was never to generate
a ton of money from software, But we try to keep enough of it free Where we keep getting more and
more leads year after year, And then what we do is we monetize enough Of the software for it to be profitable, Similar to Answer The Public, But those two tools, Ubersuggest alone Accounts for more than 40% of our revenue. So if we look at our
– Wow. – Clients at our ad agency, More than 40% of them
are Ubersuggest users. Answer The Public, when we
were looking at acquiring, It was roughly 60% of the traffic. We've grown it, we've also
grown Ubersuggest's traffic. Answer The Public right now
gets around 80% of the traffic That Ubersuggest gets, And Answer The Public, when we look at it From a revenue standpoint, It doesn't even make up 5% of our revenue, But it's going in the right direction, So we think over time,
it'll have a massive impact, And when we look at if we were in all The countries we needed to be,
We think there's a really quick roadmap To getting into half a
billion a year in revenue Just from all the leads
that we're generating. We just need to add the headcount
and the region expansion. I think it'll be a
struggle, it'll take a while For us to get to a billion
without M&A and bolt-ons, But it's a bootstrap business, right? No investors, no board,
it's a great lifestyle. – Yeah, not a bad life when
you can build a big business Without the investors and
the board to yell at you. So okay, so those two
tools are essentially Like half the revenue
for this agency, right? Like half the revenue are attributable To those two tools we just talked about. Where's the rest come from? – Word of mouth, and good work. – Okay, client upgrades, and
word of mouth and referrals. – So 40 plus percent of our customers Are Ubersuggest users, right? Forget the Ubersuggest software revenue, That's not really the revenue, That Answer The Public
revenue, the software portion, Not really much revenue for us. The real revenue comes
from the services, right? Because when we were
looking to raise money, That's why the calls with the
Sequoia and stuff like that, We were struggling to
get, paying debt for AR, Because when you're dealing with some Of these big customers, they're just like, "Yeah we want you to float
142 million in ad spend," And even when you're making Millions a month in profit,
(hosts laughing) You can't float a hundred million dollars In ad spend really easily.
– No way.
– Like that's… – Not even for, and
they want that on like, 60, 90-day net terms, too.
– Hey, yeah, yeah. – 90, yes, some want 120. So then we started going,
– What's that? – We started calling up the
Sequoias and this stuff, Because we're like a new
version of Pilot accounting, They invested in Pilot, And then we had a call
with Bezos Expedition, Melinda from there, she's like, "You know you can just
go to, at your size, "you don't need venture capital anymore, "you're highly profitable. "You can just go to the banks "and just go get them to float your AR." So then we switched to
talking to VCs, and be like, "Hey, let's just talk to the banks," And the bank's like, "As long
as it's a market account, "like a Microsoft, or one of the…" They're just like, "We'll float your AR "on ad spend all day long, "because the risk of a
Microsoft not paying?" – Mm hmm.
– This isn't like a cool, Cool startup that just went public, You're talking about real
– Yeah. – EBITDA on a quarterly
basis where you don't have To worry in a recession
or not if they're not Going to be able to pay their bills, And their valuation isn't
based on stock prices, Based on real EBITDA, and
the banks would fund it, So at that point we're like,
"Oh, we don't need to raise "any venture capital,"
(image chiming) But going back to the
statement I was trying to make Or the point I was trying to make,
It used to be 40 plus percent
came from the software, The service portion, And I remember in our pitch decks, We would actually use HubSpot example. If you look at the marketing industry, We thought it was backwards. We're like, HubSpot has
majority of the market cap. If you look at your market cap, At the time I was doing my presentations, It was like 15, 16 billion, And we're like, if you look
at a market cap of Omnicom, It was the same market cap, But Omnicom was doing in EBITDA
what HubSpot had as revenue, And the reason that
market caps were the same Is Omnicom is an inefficient business, And what we were saying to
investors was we can build, Majority of the money spent in marketing Was on services, not software. Give away software for
free, or close to free, Charge for services,
and then go and use AI And tools to automate as much
as the services as possible, You won't be able to automate everything, And then go have these services businesses Be super efficient, And we started producing good results, And the good results ended up making it Where if we look at around 71%, 72% The last few months of our business, It's actually coming from word of mouth. – Hmm.
– It's not even coming From SEO or software, And we believe if you fast forward, Call it three to five years, Almost all our revenue will
come from word of mouth
And none of the tools
or anything like that. – Especially because of the
kind of companies you sell into, Like larger companies,
– Yeah. – It is such like word of
mouth within that, you know, You get to a certain company size, And they all just kind
of recommend each other. I think that is a really
incredible insight, which is… I've always thought of
like, buying software To help other software grow, Like that's, typically,
even when we looked at that, It was like, okay, well,
– Mm hmm. – How does that help
our core platform grow? Whereas what you're doing is you're like, Buying incredible tools,
but then wrap in services, Like the services thing
is the actual thing You're going to monetize on, And I hadn't thought about that before, Which is like, freemium for services. – Yeah, but let me rephrase this. I would've done what a
Zapier or HubSpot did. I'm too late to the game. Your business models
– Yeah. – Are amazing, I wish
I could have done that. Look at the market caps. The public markets will
value them very high For a very long time. I don't think Zapier's public, But the private markets will value high For a very long time. I'm late to that game, So I look at entrepreneurship
as disruption. (image chiming)
– It's too hard to say, "I'm going to go and create
a freer version of HubSpot," It's already free enough.
I'm going to go create a
– Totally. – Freer version of Zapier. It's free enough, it's too late, But there's these dinosaurs
like WPP and Omnicom, And they're not doing
(Kipp laughing) Like a billion, 2 billion in revenue, They're like, "Oh, we do 15,
18 like billion in revenue," Like these are massive markets. – Right.
– Not from a market Cap perspective, I'm talking about from
a dollar perspective, Like just pure business
– Yeah. – Economics, massive revenue, Massive EBITDA that needs disruption, And well, we were like, huh, Majority of marketing dollars
other than advertising Is not actually spent on
software, it's spent on services Was what our realization was,
– Mm hmm. – And it was too hard to
disrupt the software players, And we're like, let's
disrupt these old school Service providers, And what we ended up
learning as we kept growing, The reason we grow through word of mouth Is because it's really edge cases. Oh, we're like Mitsubishi, we're in Peru, We need a global ad agency
that we can deal with In the US or Canada that speaks English, That has people down
there that's big enough Where we don't have to
worry about the laws, And business ethics, and practices, And they can just handle this one thing For us in those regions, And we're gotten to a
point where that's where A lot of our revenue comes from,
And then they do it in one market, And they start doing it
in more, and they're like, "Oh, Mitsubishi also
owns this other brand, "and this brand, and this division," And then it's land and expand. – Love it.
– Classic enterprise, Land and expand, all right,
we're running out of time. I got one last question, Kieran, Unless you have anything else. Did you want me to go?
– No, go for it. You go for it. – We got to give the people one. What is the most underrated
part of marketing right now? What's the thing that like, you feel like Too many people are ignoring,
– Easy. – And they should be be going harder? – Creatives, so I'm actually
going to give you two things, And they both kind of line. – Okay, please.
– The first one is creatives. I know ChatGPT or OpenAI has tools That can now spin up images, And there's a few other
ones that are working On spinning images and
all that kind of stuff, But one of the biggest leverage points In marketing is creative, And I'm talking about creative
from like, your ad image, To the landing page, how
creative you're getting, Like the Squatty Potty videos, Which you guys have all
seen, or the Harmon Brothers, – Yeah,
– Like that kind of stuff Is really hard for AI to produce, Because it's like, what
kind of crazy stuff Can you just end up coming out that will Just cause conversions to go up,
Which brings me to my
second point, AB testing. Those are the two things
that most people ignore And don't really focus on, But they provide massive leverage, Because if you look at ad costs,
they're continually rising. I understand right now, in a bad economy, Sure, it's getting cheaper, But if you look historically,
it keeps going up Quarter over quarter, So the real winner is how can
you optimize for conversions? And whether that's copy, landing pages, But a lot has to do with creativity, Not just in your ad creatives, But your copy, and your scripts, And how you're going
to produce more things Like Harmon Brothers, or get creative, Like in the B2B world, like
what we did in marketing. Hey, don't charge for tools, buy tools, Give them away for free. The HubSpots of the world
and the Zapiers can't do this Because at your guys' size, You can't go to the publicly
traded market saying, "Hey, we're going to make
HubSpot fully for free, "be a service company, "and start a business over again," right? – (laughing) No, no way.
– So it's How do you do things in a different way To make your marketing economics work? – I love creative, not just for visuals, But even just for the
way you described it, Which is how can you do something
much more differentiated In how you grow your company? Like not, like you were
disrupting an archaic model By doing things that were much more
In a typical like, software go-to-market, Like have freemium, like wrap, Up-market a product around
it, land and expand, And brought that to
like an archaic market, And so that's just creativity In how you build your business, And so I think there's
like the creative part Of just like the visuals
and the aesthetics, And how you stand out on the internet, But then there's like
the creativity you bring To how you think about problem solving, And people don't think about that, Like everyone just falls into the lazy, This is the way it's
been solved in the past, So this is the way I'll solve it, And that is just surefire way To do average work.
(image chiming) – Totally.
– First of all, couldn't agree With either one of you any more. Also, remember, in the
world of AI, I love AI, AI models give you more
of what they know about, What has already existed in the world, And true creative that
brings something brand new Into the world that's never existed before Is really how you stand out
and how you're differentiated, So I'm totally in with you on
the creative side of things. Neil, this has been awesome. I think we covered a bunch of ground. It was really fun having you here, And until next time, everyone, This has been "Marketing
Against The Grain."