POD: Master your DTC Brand's Marketing Growth Curve with Insights from Bryan Karas, CEO at Playbook Media

The Profit Forecast: The eComm CEO's Podcast

Episode #5: Bryan Karas of Playbook Media

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Transcript:

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Ben Tregoe: [00:00:00] Awesome. Well, Bryan, great. Thank you for joining. I really appreciate you making the time.

Bryan Karas: Yeah, my pleasure, Ben. Thanks

Ben Tregoe: for having I'm excited. You know, we've had a lot of conversations before this and every time we talk, there's like so much that I feel like we, I wish we could talk more about, so I'm excited to dive into it, but I think what would be a good way to start.

Ben Tregoe: Just to give a little bit of your background and a little bit about what you're up to at playbook.

Bryan Karas: Yeah, sure. Happy to so background about me. So I've been doing digital marketing for gosh, 15 years now. I started out my career in direct response marketing lead gen company called Quinn street, which you may or may not have heard of.

Bryan Karas: Went to Marin software for a little while where I advised some of their biggest companies on their search strategies. And I spent four years at Facebook two years working with a bunch of their big financial services firms, like Wells Fargo and Quicken loans and PNC bank. And then I moved over to what's now the disruptor's vertical, where I helped a lot of venture back startups scale up their advertising on the Facebook platform.

Bryan Karas: And what I found really interesting in working on the disruptors team was I was in charge of reaching out to some of the, venture capitalists and then working with their portfolio companies. So I was in contact with Andreeson and social capital and some of those kinds of guys, and I would reach out to the portfolio companies and they'd be like, oh man, I've been trying to get ahold of somebody at Facebook and I'm.

Bryan Karas: You can't get ahold of anyone here. Right? And then again, no, we have zero support. You know, they might have had a call center rep somewhere who is like an outsource through Accenture. Right. And the people that were supporting them really didn't know how to support them properly and teach them how to actually do customer acquisition.

Bryan Karas: And so they were very happy to hear from me. And then what I also found was a lot of 'em had worked with agencies in the. And then the agency sort of had a one size fits all model, right? They would say like, here's you set up your lookalike audiences and you set up your OCPM bids, which is what they called it back then.

Bryan Karas: And you know, you may or may not have a couple of videos then if it doesn't work, they just look at 'em and go, well, you need to fix your website or maybe you need to change the product. And they'd just sort of leave it at that. And so these companies, they have a lot of money to spend. They didn't know how to actually make it work, make it profitable for.

Bryan Karas: And so we could get in there and start kind of building all the foundational elements to get them to scale up. And and they were really appreciative of it. And then Facebook being Facebook got political circa 2016 you know, right around the, first election. I, the politics set in, and then they decided that they made a higher revenue per head in our org.

Bryan Karas: So they moved us to companies who had a lot more funding who were already spending millions of dollars on the platform. But I knew that there was this area, these companies that really wanted to scale and they didn't know how, and now we were, you know, cutting the lives out from under them once again.

Bryan Karas: And so I decided to start playbook media to focus in on those companies and and help them to scale out customer acquisition. So I left in 2017 to do that. I've been building up my company for the last five years.

Ben Tregoe: so well, that's awesome. So when you said disruptors you, so as 2013, you started then sort of 2015, I take it.

Ben Tregoe: You went to the disruptors group at, Facebook. And, what what did disruptors mean to Facebook at that time? Like sort of what was an example annual spend for disruptor?

Bryan Karas: Yeah, so I would say, you know, it's interesting because we were working with companies who were sometimes really early at that time, they were spending maybe five, $10,000 a month, but we knew they had the capital and the want to scale up.

Bryan Karas: And that's what we were focusing on was how do you actually tip these C. and so at that time, you know, there were lots of great companies that came through the disruptors team. I mean, I remember jet came through us back then Peloton Mac Weldon. If you're familiar with 'em house, there were a bunch of really good companies that we helped to kind of scale up, but there were a lot that, you know, were smaller that weren't quite ready.

Bryan Karas: And so we were more okay with working with those companies and telling them, oh, well, maybe this isn't the right fit for you right now. And then now if you talk to the instructors group, they're only working with the Robin hoods and the, the chimes and all the, you know, Peloton, maybe still [00:05:00] the, you know, bigger businesses of the world that are already spending millions in customer acquisition.

Ben Tregoe: And I, wanna dive into playbook, but I know everybody's. Really fascinated with Facebook and meta. And a question that everybody has, which I, think is still a problem. It's like, how much do I have to spend before I can get somebody on the phone? so like, yeah, no. Or it get somebody assigned to me.

Ben Tregoe: Like, what do you think the

Bryan Karas: answer is now? You know I, think that the waters have gotten even more muddied than they were when was there. And even then, you know, we would sometimes find businesses. Call center reps and they were spending, you know, a million dollars a month and they had no support. And you know, it's a little bit, whenever you look at the Facebook org it's, built out by vertical, right?

Bryan Karas: And then they're also looking at the, size of the company and then how invested they are in Facebook as a partner. Right. And so if, they go in and you know, of course, they're gonna try with all the big companies out there, the Proctor and gambles, and you know, all those kinds of big advertisers and they're gonna have big teams assigned to them, but they're also really big brands that may not have anyone assigned to them.

Bryan Karas: And that's because the brand hasn't really leaned into the platform. So they're gonna look and say, okay, who do we think has the potential and who needs our help? If someone's naturally spending a lot and they don't seem to need any help, then they may not provide support. But if if somebody is starting to scale up and is very vocal with their rep, like we, you need more support, we need more support, then you're more likely to get that rep.

Bryan Karas: And so it's probably not a, it's not a, it's not a science, right? You can't, I can't give a straight. Unfortunately. But what I can say is, that agencies like ours actually have really good support. Yeah, so there's some folks that, you know, come to us and they need a rep. And especially in areas that get more like flag from ad policy and things like that.

Bryan Karas: Like CBD, for example, we can help CBD companies. Yeah. And they may never get a rep. So, you know, finding the right partner is a way to go if you need that. . Yeah, I

Ben Tregoe: think that's a huge advantage of an agency is that you have a relationship with not only just a person at Facebook, but multiple people, you have a much better sense of the product roadmap.

Ben Tregoe: You're getting a lot more inside Intel, you know, just from those relationships about what works and what's coming. And I think people, you know, if you're not, if you're kind of your average performance advertiser, maybe it's not that important, but if you're really trying to push the envelope inside of Facebook, like you absolutely need that stuff to, to, so at agency has a huge value there.

Ben Tregoe: We

Bryan Karas: like to think it helps, you know, not to say that in house teams can't get there. I think the big ones do right. They get the level of support they're looking for. But so it's in between guys, you know where yeah. It could be problem. .

Ben Tregoe: Yeah. So playbook obviously does Facebook and or meta or what are we calling it now?

Ben Tregoe: Is it,

Bryan Karas: do you guys call me? We call it meta. You call it Facebook. I you're probably you call it Facebook just because that's what I'm used to. And then we still advertise on Facebook and Instagram, but yeah it's, meta. We, can call it meta. I'm

Ben Tregoe: showing my, old school this alright, so you do meta.

Ben Tregoe: What else do you do? What other channels do you?

Bryan Karas: So we do Google. A TikTok is obviously a growing. and then we're really excited about connected TV. Right now. That's an area that we're we think is, starting to explode and it's only gonna get even more so as a big channel for advertisers. And I think the big reason there is one, the TV is always been an amazing advertising platform, right.

Bryan Karas: You know, you get that lean back experience. It's kind of a forced view of 30 seconds. And you can do a lot more storytelling there and, you know, traditionally that hadn't really been available to most advertisers, right? You have to go through a bunch of gatekeepers to buy on TV seems complicated.

Bryan Karas: How do you get remnant inventory? You get the lower CPM, you pay millions of dollars for the upfronts, all that kind of stuff. But now you can literally plug in and couple thousand dollars and you can start going right. And then you can layer in all the data audiences that we get on digital. And so your targeting is way better than TV has ever been before.

Bryan Karas: And then to add a third layer in, they have better identity graphs. So you can start to understand true measurement from TV. Whereas before it was like, well, Ray ran in this DMA and we saw an increase in traffic. And so that must mean that's not an ROI. Right. But you can get a true closed loop now, which I think is it's, just gonna be amazing to see what happens in that platform.

Bryan Karas: that's

Ben Tregoe: cool. So, and then you guys are doing [00:10:00] like campaign setup, campaign management. Are you doing creative as well? Yeah, we do have a

Bryan Karas: creative arm. So we have an inhouse videographer and editors, and then you know, graphic design as well. And so we usually do smaller projects in house, but then we have a whole bunch of studio partners throughout the LA area that we partner with.

Bryan Karas: And we can basically scale up to, any kind of creative there. It gets expensive to have those people obviously full time, unless you have so many projects going through that makes sense for you to have a studio. So scaled up projects, we lean on our partnerships, but we do a lot of Dr type creative ourselves.

Bryan Karas: And and we also, you know, go out and source influencers and U GC content through our partnership with gr

Ben Tregoe: yeah. And, you guys have a, I think a really interesting pricing model that's kind of different in the space can like, tell me about that.

Bryan Karas: Yeah. You know, with pricing on agencies has always been been a tough thing, right?

Bryan Karas: Because you get that agent, client dilemma. And so we had led with percentage of span for a long time. And, you know, I think in a lot of ways that pricing model makes sense for agencies because like, You know, when you win, we win and you're only gonna spend more when there's performance, but then the downside makes it hard, right?

Bryan Karas: When things get tough now, the agency's gotta cut their own revenue and that does become a bit of a conflict of interest. So what we've actually moved towards is is actually a, flat rate where we come in and we work with our partners to help them think through. Really their end to end strategy in the marketing funnel.

Bryan Karas: Right. And so we'll go in and, we use what we call a bottoms up model, where we look at, okay, what are all the foundational elements of in their marketing? So what's their conversion rate look like? How's their brand messaging set up? What is their email nurture? And then, you know, what are the different channels they're running and where do we see optimization?

Bryan Karas: Opportu? And then we implement what we, call playbooks, right? Where we go in and we actually help to tackle those optimization opportunities. And we do that actually just on an hourly basis. And the nice thing is, we have our subsidiary grow tile, which is a marketplace for marketing experts.

Bryan Karas: And so we're able to build teams of marketing experts to execute on these different playbook. And then whenever a client feels comfortable, that kind of level of consulting's done and they can do it internally. We can easily ramp back down again. And that way it saves the client cost by not having them continue paying for something that you know, is maybe more of a project work.

Bryan Karas: Or we can just ramp down to a, smaller retainer fee, you know, once you get those upfront yeah.

Ben Tregoe: Pieces done. I love it. Cuz it's, really thoughtful and handle. All the problems of, like you said, that the traditional client agency relationship, like, you know, the percentage spend model is great, but then if the client ever wants to drop, spend, like you said, the agency is like, well, I don't wanna lose money or, you know, not, you know, now I'm gonna make less money.

Ben Tregoe: Do I, how do I staff that differently? Whereas like you've aligned interest and you've allowed flexibility up and down. And within capabilities of, the client, you know, cause as people hire or lose people they need or or don't need so that's really clever. I think it's, a great model.

Ben Tregoe: It's

Bryan Karas: great fit. Yeah. It's taken us a few years to figure it out. And I think, you know, one of the big areas in that too, when you're on percentage of spend, let's say you're scaled up and performance starts to drop all of a sudden, I need to keep my spend high. How do I. Facebook, right. How do I fix meta?

Bryan Karas: I was 14 K man. And now I need to continue spending, well, actually, maybe what you need to do in that case is spend a lot more time looking at analytics, looking at site conversion, looking at your email pass, and even in this current state, right? Like everybody needs to get more profitable. You need to go focus on those fundamentals.

Bryan Karas: Right. And if I'm incentivized to continue spending in a channel, I want to allocate resources that channel. Where it'd actually be better for me to be allocating my agency resources in other areas that are gonna have those downstream effects. Right. And that's kind of moving back down that bottoms up model into this foundational areas that are gonna, you know, impact the channels further downstream.

Ben Tregoe: Yeah. Talk a little bit about grow talent. Cause I think this is really clever too. How you've combined an agency with, you know, sort of a talent marketplace. Yeah,

Bryan Karas: sure. So whenever we started out, right, when we were just doing meta we knew we wanted to expand into additional channels and that clients needed our help [00:15:00] there.

Bryan Karas: And also that clients sometimes wanted to just hire a consultant. Right. They just wanna hire someone freelance. . And so looking at those two kinds of problems within our own P and L hiring a a full-time person, all of a sudden, now you're on their payroll and then you have to try to go sell it.

Bryan Karas: Right. But if you sell it had a hiring, then all of a sudden, you know, you can get into a place where you've oversold. And so we decided, Hey, we should build out a freelance marketplace. And then that way we can bring in these amazing experts. A a marketplace and have them on a bench. Right.

Bryan Karas: And if somebody comes to us, they're too small to pay our minimums, or they don't want a full agency relationship. Hey, we can put, go place that person directly, or when we have a client and we know that they need help with search or some other area that maybe we hadn't hired for you yet out of that point, we could go bring in a freelance.

Bryan Karas: And to execute on that. And so we've been, we decided to do that when we launched in 2020 at the start of the pandemic, we realized, Hey, there's gonna be a lot of talent in the market. Right. So we might as well start putting those people on board. So we accelerated launch and launched in July of 2020 and have been building up that business.

Bryan Karas: And as time has gone on, we've realized having that flexibility in our workforce has really been key, right. Because everybody, even in the great resignation, right, we. We weren't immune to it and a couple people left, right. So when we lose a good media buyer you need to replace them quickly. And it was really easy.

Bryan Karas: We just had someone right in. Right. And so that has been really key for us. And I think key for our clients too, because, you know, we can bring someone in, a week or two versus them spending two months hiring someone.

Ben Tregoe: when you first told it, told me about it. I was like, this sounds crazy because you're gonna lose your best talent to your clients.

Ben Tregoe: And you're like no, it doesn't work that way. Like, there's a lot of these consultants just like being consultants, right? Yeah. And then I thought back to like my Nanigans experience and like when we used to run media and, you know, And I was like, oh wow. He is really right. Like, there's people that love running campaigns and that's all they want to do.

Ben Tregoe: And like, you can totally see it. Like, I don't wanna go work for a company. Like I just wanna run campaign yeah. I don't wanna deal with the headaches of like,

Bryan Karas: I, I think it gives him more job security too, honestly. Yeah. Being independent. I mean, you know, there's so many startups that You know, push heavy into user acquisition and they raise a bunch of money and then eventually things start getting wonky and then what, right.

Bryan Karas: And if you're in a singular kind of company, you're reliant purely on that company's success. Whereas if you're an independent, everybody needs growth marketing and right as if you're good, you can probably run three to five clients at any given. Especially you focused on a single channel.

Ben Tregoe: Right.

Ben Tregoe: And I think that's another thing is like these really good campaign managers. Like they get bored, you know? So if they're just like hammering away on a single brand, you know, they're just like, yep. Yeah. You know what else

Bryan Karas: you got, right. Yeah exactly, And I think it's more lucrative for them in the long run too, because people are willing to pay a good rate for someone fraction.

Bryan Karas: more than they'd be willing to pay them at, a full time, from an hourly perspective. All right. I'm gonna

Ben Tregoe: switch gears a little. Yep. There's a lot of, you know there's a lot of great content on Twitter. A lot of smart people talking on Twitter, a lot of it in D TOC is focused around, you know, ads spend customer acquisition, you know, people sharing ideas.

Ben Tregoe: And there's like, I just, I feel like there's so many different ways that people are. Thinking about campaign performance. Right. So, you know, you often hear Roaz at Banbridge we're you know, we would argue that like, well, that's maybe not the best metric. Right. There's other things that we would say are more important, like, you know your, profitability over time, you know, contribution, profit over time, life and value.

Ben Tregoe: Right? Yep. But how do you handle that? Like, you know, everybody has like their sort. Favorite metrics. And so how do you handle, you know, which metrics are the right ones for the customer and how do you get somebody if they have the wrong metrics kind of onto the right track for what, really drives their business?

Ben Tregoe: Yeah.

Bryan Karas: I mean, I think it's a really good question and I mean, it might sound like a cop out, but it does depend on the business. And could, and one of the bigger reasons is it depends on their financial situation. I think the idea is what you're saying profitability over time. What's your customer lifetime value.

Bryan Karas: What's your [00:20:00] C what, and then what's your payback period. Right. And how much can you stomach from a you know, a marketing budget until you make that back. Right. And so it's about cash flow cycle. And so some folks that have a really, they need a short cash flow cycle Roaz may be something that they need to focus on right then.

Bryan Karas: Right. So they're bootstrapped. They need that money to come back in 30 days so they can buy more inventory or whatever they need. Right. They may need to focus on that short term profitability, but a bigger business that has a bunch of cash in the. And they may be able to purely focus on customer lifetime value and be okay with a longer payback window.

Bryan Karas: And you know, so think it, it really depends on the company. And so we, run it based on what our clients' needs are. So some need that short term profitability, others are okay with something a little bit longer. And then I think, you know, one of the areas that we, try to help where we can is to help secure additional funds.

Bryan Karas: So we have, you know, a partnership with Clearco for example who can bring in some good financing terms for DDC companies, and that can help interesting. Anything that we can do to try to improve that I think is good. Right. But but yeah, it just really depends on what their economics are.

Ben Tregoe: Yeah.

Ben Tregoe: And the problem always with lifetime value. Well, like, you know, everybody calculates it and then, you know, is it revenue? Is it net revenue? Is it, you know, gross profit, what and we would argue it's contribution profit like that, that's the asset test. But the other problem is that you know, people.

Ben Tregoe: We'll fudge a little around the time part of that. Yeah. And because, you know, they know that if they can push the time window out for, you know, then, oh, you know, more revenue, you know, or whatever it is, accumulates. And then in order to justify the higher cash. And we saw that back at, in the Nanigans days all the time.

Ben Tregoe: And people were like, well, my lifetime valued, my lifetime is now like 36 months. Yeah. Like, is it really a long time?

Bryan Karas: well, and the other thing is that if you think about from a cohort perspective on a subscription model or some of these other areas, you know, companies who are early in getting into you know, paid acquisi.

Bryan Karas: they might assume that their organic customers are gonna look the same as their paid customers. And usually those cohorts actually degrade a bit as you scale up. And sure. There's some misconceptions there where people think, oh, my tax's gonna come down. As I scale, generally not the case. Right. And that my customer lifetime value is gonna stay the same, if not improve.

Bryan Karas: As I improve, you know my customer detention and the other efforts I'm. and yes, ideally, but oftentimes not true. And so if you make these assumptions that you're gonna get the contributions down the line, you can end up in real trouble. So tend to lean on the more conservative side of metrics.

Ben Tregoe: Yeah. Yeah. That's smart. Well, every has this problem, right? Like, Hey, we're killing it on the channel. And then they're like, oh, If I kill it at this level, if I just spend 10 X more, I'll just keep and you know, the performance to create. So what, drives that? Like, I mean, I know there's like 101 answers, but like it's just been sort of an iron law of performance advertising that happens.

Ben Tregoe: So what, is behind

Bryan Karas: that? Yeah. Well, I mean, let's say if you're gonna take meta for, as an example, right, me, I've always said this. They're very good at finding. Early adopters, right? So the, pixel will pick up on the signal of the initial people purchasing, and then they start delivering to people like that.

Bryan Karas: In the early days, it was the lookalikes found the 1% of people and the 1% lookalike would work really well. Right. But once you get past that level of early adopters, you get past what I kind of call them their, impulse purchasers, right. So impulse purchases, they're interested in the new shiny thing.

Bryan Karas: They want to try it out. And so you get these, folks coming in, but then you try to scale to the early majority. And if you think about, you know, Simon Cenex, have you ever watched crossing the chasm has a great YouTube. Yeah, of course. Yeah. But you know, crossing that chasm, right. Getting to early majority, all of a sudden you get into in the next group of people who are a bit skeptical, they're a little bit more price conscious.

Bryan Karas: There are. You know, they have those tendencies. And so they're just less likely to purchase on a first impression. And so you need to hit them with multiple impressions. You need to convince them, you know, handle all the objection [00:25:00] handling and, then continue moving up the curve. And so if brands aren't investing in, how do I differentiate my messaging to reach new consumer?

Bryan Karas: How do I improve my conversion rate optimization? How do I diversify my product to reach new consumers, all those kinds of things that are fundamentals further down funnel, the upper funnel metrics are gonna start to degrade. Right? And so your Facebook advertising, right. Or your Google advertising as you expand keywords, right.

Bryan Karas: They're all gonna kind of fall that same curve. And so you have to do that, that harder work of kind of yeah. Reaching new customer segment.

Ben Tregoe: well I I, use the example of like the mattress in a box, you know, companies like when it came out, there were people that like, this is exactly what I've been hoping for is like a mattress in a box that just gets delivered and mattress shopping sucks.

Ben Tregoe: Like, you know, you got this like phenomenal response rate, right. And like the explosion of the Caspers and the purples. But then I think those signals went out and every, like all of a sudden there's like 900 of these guys and you're like, wait, now there's like, you're trying to reach like, you know, people that are like, I don't, why would I buy a mattress in a box?

Ben Tregoe: Yeah. You know, and like you said, you're trying to convert them and it gets more and more expensive. And I, think you just see, you know, I guess part of my theory is also that like some concepts or brands, you know, or offerings just have, you know, there's a limited number of consumers. we're going to convert and you can spend, as we've seen now in D TOC tens, if not hundreds of millions of dollars, trying to convert those harder to convert people with very little success.

Ben Tregoe: You know, so I, you know, I don't know what the answer is there. I don't know. Maybe it's just an observation. Well,

Bryan Karas: I think, you know, I mean, some of it was, you know, those early days when I was in the disruptors team, right. We'd work with a company like bonobo, for example, and at Bonobos, I don't know how much the money that they raised, but they raised a lot of money and it was, oh, we're gonna be the menswear brand for the modern guy.

Bryan Karas: And you can come into our place and you can try everything on and then we'll have it delivered to your house. And we don't have to pay for retail storefronts. Yeah. Is awesome. And I mean, like to, to folks like me, you know, sitting in Silicon valley, young professional, open to new ideas, Right. To me, it seems amazing.

Bryan Karas: And I think it's like the problem of kind of the echo chamber of Silicon valley and, folks of right. It sounds great to us, but to the person who's used to going to Nordstrom all the time and lives and dies by Nordstrom, they may not be as interested. Right. And so the business is, I think really good at re at getting to the segment.

Bryan Karas: It's. but then getting beyond that segment is actually a lot harder than people thought it was gonna be. And so they, they said, oh, this is gonna take over. Men's wear when in fact it was actually just really good for that early adopter kind of techy personality. Right. And so Walmart was able to buy it, you know, when they realized that wasn't gonna happen.

Bryan Karas: Walmart got it. But I think for a pretty good price, I don't remember what the number. And Bose is still there now. And that means that Walmart, you know, they're very conscious under margins. They found a way to run that company and to make it profitable, but it has not become a household name, right. It is not a multi billion dollar business at this point.

Bryan Karas: And so it's probably got to where it's supposed to be. And I think there are a lot of DSC brands that are like that, and they just had eyes were, bigger than one reality. It was gonna. well and, I think

Ben Tregoe: That, you know, not getting to a multibillion dollar brand is okay if like, if you can get there and be profitable, get to where you're supposed to be.

Ben Tregoe: I like how you phrase that and be profitable. Then you've done something really incredible, like, you know, and people use these numbers as if it's like almost dismissive, but. You know, a 20 million a year brand is a huge accomplishment. If you're profitable, you know, like hell like that, there's nothing to

Bryan Karas: sneeze at.

Bryan Karas: Yeah. Yeah. There's a business that I think has done really right. They were one of our early clients' cuts clothing. If you know them. I mean, they, the guy's Steven Burelli he's LA hustler. I think he's probably in his late twenties now. And when I met him he was the only one full time. He had two other guys that were moonlighting.

Bryan Karas: They were working out of a WeWork. He had, you know, found fabric in downtown LA and was making these really nicely cut shirts. And their whole thing was they have crew neck a the three buttons was that. You know. Yeah. [00:30:00] Anyway I should. And, a v-neck and then a couple of different things on the bottom is you could sort of buy, you know, these different ways these shirts were cut and they just leaned into their audience like crazy.

Bryan Karas: It's a, modern, younger guy who cares about his style, but wants to be toned down. Then they started sending all their stuff to NBA players and they've gotten tons of NBA players to wear. They've built up their community on Instagram, they built up their customer acquisition. We helped them early on with that.

Bryan Karas: And they've now built this amazing brand fully bootstrapped. And I'm sure they're a 30 to 50 million brand by now. And they did it over five years and never had the full bunch money. And yeah, I think it's just the right. Yeah. Yeah.

Ben Tregoe: All right. I'm gonna ask a tough question, attri. everybody loves talking about attribution.

Ben Tregoe: My favorite. So like, I'm gonna put you on the spot. Why is it so hard? Right. Why, it's always been, I would argue impossible, but why is it? Has it been hard and why has it gotten harder?

Bryan Karas: Yeah. Well, I mean, so attribution and, you know, it's actually, it is one of my favorite subjects cuz I like talking about it.

Bryan Karas: But it's hard because the data is so disparate. you have Google data, you have your site data, you have meta data, you have all these different places, and they're all sending traffic to your website. And there are only so many purchases to go around, right? And so you end up hitting a customer with multiple touchpoint in different areas where that data is.

Bryan Karas: And then you see these different purchases that are happen. and then it used to be all on a last click basis, right? So it's all click through a URL. You have a UTM tracking that goes in there and, last click says, oh, it was Google. But when Google tells you that you should buy every single time somebody searches on your brand, chances are that a lot of those brand conversions started somewhere else.

Bryan Karas: Right. If you see an add on meta. And then you go, oh, well, I'm really interested in, a cut shirt and you search for it on Google. Well, who should get credit there? Right. And so it's difficult because Google and meta won't play nice together. And then now you throw in apple with their iOS 14 updates.

Bryan Karas: And the pixel now is degrading on Facebook's attribution, which I think was pretty good. Pre iOS 14. And then you have mobile devices and cross device behavior. It just gets really difficult. There's so much data out there. How do you make really good sense of it? And you know, I think people want to know, right?

Bryan Karas: Because you want to know where to put your next dollar. And that's an obvious thing, right? Should I take a dollar from Facebook and put it to Google or a dollar from Google and put it to Facebook? And so, you know, Consumers need to figure this out. And so the way that we think about it is there's a number of simple things you can do.

Bryan Karas: The first thing is get all your data into one place. Right? And so we, take the data from all the different APIs from Shopify, from Google analytics and everywhere, and we put it all into one spreadsheet. And so now you can see what is the performance of each channel side by side? What does it look like on a last click basis?

Bryan Karas: What does it look like within the platform? And then you can make some very basic sort of testing. Right? What happens if I scale one thing up, does my revenue change? Does it change by how much, what did it say in one platform versus another? Right. And so you can do some very basic kind of testing in that way to see what's incremental and what isn't.

Bryan Karas: And then next step from there is starting to think through lift testing, and we'll do lift testing on the different channels. Right. And. What happens when we run a lift test with Facebook's conversion, API lift testing is getting pretty strong again. And you see at least within meta, is it working and how much is it driving?

Bryan Karas: Right. And you can do the same on YouTube in some other areas. And then getting one more step complex. Then you start thinking about media mix modeling and okay. Whenever you look at, from a statistical standpoint, where's the correlation between spend and actual convers. And then you can model out how that should work and where the multipliers are on each one of those channels.

Bryan Karas: And then you can test that by ramping them up and down and see how accurate your model is. Yeah. And then the next step is starting to layer AI into those medium mix models. You know, for a while there was the whole like data driven attribution models. They basically aren't you're you can't do it anymore because of all of the problems with iOS 14 and privacy.

Bryan Karas: But data driven medium mix models I think is, the future. [00:35:00] But you have to have a level of scale before you can get there. Cause now you can start to get real time when you have a lot of scale and your data is structured properly and you can see what is the impact of each channel. Yeah. Long winded response.

Bryan Karas: But hopefully it means no,

Ben Tregoe: it's a great one. And it's, I mean, we saw that you know, the bigger the advertiser, the more, you know, when they got up into these budgets of hundreds of millions, Billions a year, you know, I'm talking like the bookings and Ubers of the world. Right, right. They were, you know, they were just spending, you know, dozens of data scientists and lots of very expensive software and very expensive data scientists.

Ben Tregoe: I mean, they're really, you know, no lack of money for that to try to get to those answers. And I just I always like, kind of felt like either you, you sort of do what you were talking about. Like, oh, well, let's just, you know, kind of get to a certain level of analysis and call it a day. Right. And then, or you make the choice to go all the way down the rabbit hole and you know, the I, don't, you never get to an answer, right.

Ben Tregoe: There's just like, sort of, kind of, I guess, more questions that you raise and you kind, and you sort of get, I guess, better degrees of certainty. Yeah. But if you're only spending a million dollars a year, like it clearly doesn't make sense or, you know, a hundred thousand a year, you know, to go to that level of detail.

Ben Tregoe: But if you're spending a billion, like, I guess it does,

Bryan Karas: you know? Yeah. I would say, you know, once you get into spending the multimillions a year, you want to have a fairly. good understanding. It doesn't have to be perfect and you don't need it in real time. Right. But you do need to understand, like, is something I'm doing incremental or isn't it.

Bryan Karas: Right. And it's, really easy. I mean, if you spend on the wrong audiences on meta, for example, you can make it look like it's getting a much better return than it is through the. You know, you spend a bunch on customers and you have a really robust email program. Well, and I, that was one of my first customers.

Bryan Karas: I remember that you're spending, you know, my first clients, they were spinning, I think it was like 20 to 30% of their dollars through Facebook, on customers. And their agency had been doing this. And then even the prospect audiences, they weren't excluding. Right. And so it made them look like they had this amazing row as, but this company had a huge customer.

Bryan Karas: And they had a very good email program. And so as soon as, you know, we went in and, we started setting up the proper exclusions and we flipped it spending more like on an 80, 20, 80% to prospecting. And it was actually more like 80 10, 10, 10% were targeting and 10% on customers. Right. They still looked a lot worse, but guess what?

Bryan Karas: The revenue went up on the other side. Right. And, so, you know, just thinking through those kinds of things, I think just having a basic understanding. Am I, what I'm doing? Is it incremental or isn't it? And if I have any thought that it might not be, let me test and figure out if that's actually a true hypothesis or not.

Ben Tregoe: Right, right. Which is also another good argument for working with an agency like you guys, cuz oftentimes people. They're so busy, just getting the campaigns going and maintaining the campaigns that like structuring a really good test and being thoughtful about it is very difficult, you know? Or they inadvertently pollute it, cuz somebody who decides to send a bunch of emails to the holdout or something like that, or we target the

Bryan Karas: holdout and forgot to do that.

Bryan Karas: Yeah. Yeah. Part of our job is babysitting our clients. No, Don't do that.

Ben Tregoe: I know another thing that, that we talked about that I thought was really cool. Was the bottoms up analysis or no. Is that what you're calling it? Yeah. The bottoms up analysis. Yeah.

Bryan Karas: Explain. I alluded to it a little bit earlier, but essentially what it is a lot of companies skip steps.

Bryan Karas: Whenever they're building up their marketing, right. You get a basic product and then you build out your website. And then you say, okay, let me go start getting traffic. Right? And so either you start buying Google or you start buying me. And if you're lucky, you'll get some initial traction there. And and so companies will get spending, you know, 30, 5,000 thousand dollars a month.

Bryan Karas: And then they start hitting points of diminishing returns and they decide, oh, we need to fix the channel. Something went wrong, you know, eyes dropped and. What happened was they skipped some fundamentals along the way. Right. And oftentimes you can improve the performance of your marketing channels by going back down funnel and looking at the foundational elements.

Bryan Karas: And I kind of look at it as a pyramid, right. So it's from the bottom up. Yeah, the very bottom as is there a market need for my product. Right. Most people have that figured out by the time they're talking [00:40:00] to us. How am I positioning my product? Am I, how what's my brand positioning? How am I talking about it?

Bryan Karas: That part sometimes we are helping a lot with, and then how are we bringing that to customers? On the website, are we optimizing our conversion rates? And that's a huge piece. Then the next step up from there is, as people come to the website, are we capturing their emails first off? And then if we are, how are we nurturing them?

Bryan Karas: And are we actually doing a good job, converting people that have raised their hand to talk to. And then once you get a customer in, how can you improve their, lifetime value, right. If you're, you know, gonna make $10 each customer, good luck scaling a lot, right. Unless you're gonna go retail and sell that in target.

Bryan Karas: But definitely not D DC. And so how do you get up that customer lifetime value to allow you to spend more upper funnel? And then once you get into the upper funnel channels, you know, and then you can start talking about individual channel tactic. Right. Right. Most of the times they've skipped some of those earlier steps.

Bryan Karas: And so our team will go in and look at it and we get hired to, you know, handle, you know, usually the upper page channels. Then we'll do an audit and say, okay, what other pieces need to be fixed here? And that's kind of the beauty of that grow town model is now we can bring in a team to help with those further down funnel foundations.

Ben Tregoe: Yeah. I love that. And I think now more, than ever in this environment, it's so critical. I've used this analogy with you before, so I'll torture it, but like it's, the leaky bucket, right? Like and, six months ago, or whatever, in the Hey days you know, if water was the, a ad spend, it was super cheap.

Ben Tregoe: So people didn't really care how leaky their bucket was. There's like pour more water in. Right. But now it's like, wait a second. Like, I've got a lot of good stuff in here. Like I need to keep it. And I just think that being thoughtful, like this is forcing a lot of people to redo that, which is a good thing.

Ben Tregoe: You know, people are just gonna be a much better brands and much better businesses by going through that process and really being thoughtful about it, you know, as opposed to just like, where's the next money I can next place I can spend money. Yeah.

Bryan Karas: Yeah. I mean, you know, nobody wants this to go into a recession.

Bryan Karas: Right. But. I think it's gonna be good for business in a lot of ways, right? It proves out who has a real business. Who's really focused on their customers and who we're doing things right. When money is cheap. Yeah. You know that everybody can compete you just pour money into it. And so the best businesses are consistently fighting with people who are just have sheet money.

Bryan Karas: And so this is gonna, you know, help bring out the people who are willing to focus on the foundational elements and do work.

Ben Tregoe: Yeah. So once you go through the, bottoms up analysis are you able to like track then the, relative impacts of that? Or is it more like, Hey, we took pretension from here to here

Bryan Karas: or, yeah.

Bryan Karas: Well, you know, I mean, at the end of the day, like to your point contribution margin, right? So as you're working through each one of those elements, it should have. All the way down to your profitability in the bottom line. And so, you know, we look to see which ones we think are gonna have the most impact and are also, you know, the most addressable and it's kind of, you know, weighing those two things.

Bryan Karas: What's the low hanging fruit, and what's gonna have the most impact. And obviously you take take the easiest ones or the most impact. and then, you know, looking at those metrics, right. There's the main KPI for that metric. So it might be, you know, what is my, customer attention rate. Right. And, but then you can look at, okay, how does that affect things downstream as well?

Bryan Karas: And how much did it, you know, end up impacting my contribution margins,

Ben Tregoe: switching gears again, you've seen a ton of. Great. So in your time, and you've had a great career in, performance and, in ad tech. So I, love that cut story. Like, do you have other companies that you're like, wow, they did a great job or companies that you're like, those guys screwed it up so badly.

Ben Tregoe: Like, whatever you do,

Bryan Karas: don't do that. Yeah. Oh man, I've got lots of stories. So another story that early one that we worked with that I think did a, really great job was liquid IV. And what was interesting with that one was it wasn't the BI biggest success we've ever had. And so do you know, liquid IB?

Bryan Karas: I have know name, but brands. They're like west coast brands that people probably know in, in, LA. It's good for me. Well, I'm an old guy too. They're like they're a an electro length mix that you put in drinks and they got bought by Unilever. I think it was but early on, they wanted to go direct to [00:45:00] consumer and they built out this great Instagram page and they had a bunch of followers and they had this sort of lifestyle.

Bryan Karas: You know, outdoor life, people doing yoga, sort of the young, healthy kind of crowd. Right. And so we started doing the direct to consumer kind of marketing for them buying on MEA. And what we looked at was we're trying to figure out profitability for 'em. And what we found was most people were buying one off.

Bryan Karas: They would buy a pack of 12. And then they'd come back and they would buy, it was like a 20, 10 to 20% return repeat purchase rate. And that just wasn't gonna work on a consumable that was priced at, you know, $24 was shipping and everything. Like there's just no chance they were ever gonna be profitable through meta.

Bryan Karas: And so we told them. , if you want to make this work, you have to push people like hell into a subscription and you gotta keep their subscription rate high. And they said, we don't wanna force people in the subscription. People have subscription fatigue, and that's not our business model. And we said, well, we don't really think this is gonna work for you then, like you can't spend and, do it with this product and to their credit, they leaned in.

Bryan Karas: Right. They said, okay, that's fine. We're gonna go. And they went a hundred percent at Costco Walmart, and then they, partnered with, and I think this was the really brilliant thing was they went out and they partnered with artists. They were an LA brand. They had access to, you know, some of the kind of LA celebrities.

Bryan Karas: So they got the chain smokers to put out a, special flavor. They got Justin Bieber to put out unlimited release and they did a whole bunch of stuff like that. They went after music, venues and artists. And then retail and they blew up and they sold the Unilever. I think it was maybe two years later and it was a great,

Ben Tregoe: great exit.

Ben Tregoe: Excuse. Did they come back into D TOC ever or was it really by that point? Just a retail.

Bryan Karas: So I think you can still buy from their site. I think they never got rid of the channel, but they just decided that was not gonna be their, customer acquisition channel. And I. What's really interesting to me is I've seen a number of brands kind of move that way, right?

Bryan Karas: They're you know, CPG brands at the end of the day. And there was a thought that CPG was gonna be a great DDC play, but it really hasn't turned out that way. I think retail is really important for those brands and, you know, in some ways it almost goes against The, religion I was brought up on, which is everything should be digital.

Bryan Karas: And, you know, the traditional channels are dying, right. Was it turns out retail has a huge, story to play. And in consumables and consumer packaged goods, another good company like that was bevel Walker and co if you know them they were on my book of business when I was at Facebook that came up through the disruptors program and you know, Tristan Walker over there.

Bryan Karas: You know we, did a pretty good job in terms of buying for them. I think they were doing decently well on direct to consumer you know, and they were just after dollar shave and all that. But, you know, he leaned in more heavily into building the brand, you know, sticking with the you know the, black community really knowing his.

Bryan Karas: And then got more and more you know, distribution. And I think they got bought by one of the big ones too. I don't remember it was Proctor and gamble, but one of them, but you know, now they're in all of the targets and Walmarts and all of that. And so you can see that, that, that is in interesting play.

Bryan Karas: Right? You go digital first, build your community, build some D to C. and you know, maybe you're taking a small loss there. If you got some funding up front, then you're okay doing that and then go heavy, into retail. And I think that's a good play. Yeah.

Ben Tregoe: Well I, also like what you said about that, you know, that I think in the.

Ben Tregoe: Height of the D to C you know, people kind of forgot they were building brands. Or I don't know, maybe that's my I'm exaggerating, but, you know, got so transactionally focused because it was relatively straightforward to do. Yeah. Everybody knew how to do it. And, Nanigans probably did as fair share to teach people that, that way of thinking too.

Ben Tregoe: Yeah. But you know, you are building these brands and like, you know, people. Aren't, you know, you wanna have some affinity to, to the thing that you're buying. Right? Some reason that you're buying it clothing, or, you know, [00:50:00] drink supplements or razors or whatever it is. And so I, just think that's a really, you know, interesting what ha is happening now is that people are like, I think getting back to like figuring out, like, how do I really build this brand?

Ben Tregoe: You know, focus on that. Can I focus on the repeat purchase? Cause we would argue that brand is repeat purchase is kind of an indicator of your brand strength, right? Like maybe it's really the indicator. Yeah. If you, don't have a brand, if it doesn't mean anything, if you can't get people to buy it again or, you know, buy it at a higher price or more value to you than, a replacement.

Ben Tregoe: Yeah. Then when you don't really have a brand, you just have sort of like an Amazon saying that, you know, every time you buy the buy box, you get a sale, but you know,

Bryan Karas: that's it. Yeah, exactly. I mean you don't want to be the impulse purchase at the register. Right? You want to be the sought out one, but at the same time.

Bryan Karas: Yeah. I think it's important for brands not to be dogmatic about the distribution channel. Like can lean the consumers, wanna buy where they want to buy and you kind of need where they are. As much as annoying as that might sound for say something like Amazon because they don't share customer data.

Bryan Karas: And it's really hard to understand, you know, different things from there, but people do buy on Amazon. So it's you need to write that box. If you're gonna be the type of product that is not gonna be sought out directly. Right. Right,

Ben Tregoe: right. But you only got there probably because you built your brand somewhere else.

Ben Tregoe: And then, you know, people. I don't know. I don't know enough about Amazon sellers, but yeah. I don't know.

Bryan Karas: I'm a little skeptical. Well, I'm just skeptical about how much money they take from all the brands. I wish that it was a little bit better. Yeah. Yeah, I think some of these new marketplaces popping up will be interesting that actually share some of the data back with sellers and give them an ability to build a community.

Ben Tregoe: Yeah. This is great.

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