Mastering paid growth | Jonathan Becker (Thrive Digital)

1. 0:00 – 7:25

   Jonathan’s background

   1. JBJonathan Becker0:00

      There's a lot of different ways that we are beginning to use AI to do more with less, basically. The effect, ultimately, that we've seen from a human capital point of view is displacement. We have more people now than we've ever had, but the nature of the work that they do is more strategic. It's more about modeling, validation, asking the right questions, being focused around creative levers, and less so the, like, trench work of implementation and bid modifiers at the keyword level on Google Search and some of the, like, really hardcore manual analysis we had to do. On our creative group, we can come up with mock-ups in literally, like, 1% of the time that it took. And so, you still have to understand what questions to ask of the AI and be capable of iterating, but these, like, rough drafts that you might show, like the artwork of, you know, to a client to say, like, "Do we like this more or do we like this more?" That's AI generated. It's really interesting.

   2. LRLenny Rachitsky0:58

      (instrumental music) Welcome to Lenny's Podcast, where I interview world-class product leaders and growth experts to learn from their hard-won experiences building and growing today's most successful products. Today, my guest is Jonathan Becker. Jonathan is a legend and an OG in the world of performance marketing. On this podcast, we've done deep dives into the many aspects of growth, including SEO, sales, conversion optimization, retention, product-led growth, product-led sales, but this is the first episode where we get super deep on paid growth. For the past decade plus, Jonathan and his team have planned, built, and executed more than three and a half billion dollars in paid acquisition budgets for companies like Uber, Asana, Square, MasterClass, Tempur-Pedic, and many more, and they've built their agency, Thrive Digital, into one of the preeminent independent digital marketing agencies. In our conversation, we get real deep into all things paid growth, including what's changed with recent privacy shifts, why focusing on creatives is the new biggest opportunity within paid growth, how to think about attribution and what's changed there, what to look for in people you hire to run paid growth for you, how AI is already changing how paid growth teams operate, and so much more. Enjoy this episode with Jonathan Becker after a short word from our sponsors. This episode is brought to you by Braintrust, where the world's most innovative companies go to find talent fast so that they can innovate faster. Let's be honest, it's a lot of work to build a company, and if you want to stay ahead of the game, you need to be able to hire the right talent quickly and confidently. Braintrust is the first decentralized talent network where you can find, hire, and manage high-quality contractors in engineering, design, and product for a fraction of the cost of agencies. Braintrust charges a flat rate of only 10%, unlike agency fees of up to 70%, so you can make your budget go four times further. Plus, they're the only network that takes 0% of what the talent makes, so they're able to attract and retain the world's best tech talent. Take it from DoorDash, Airbnb, Plaid, and hundreds of other high-growth startups that have shaved their hiring process from months to weeks at less than a quarter of the cost by hiring through Braintrust's network of 20,000 high-quality vetted candidates ready to work. Whether you're looking to fill in gaps, upscale your staff, or build a team for that dream project that finally got funded, contact Braintrust and you'll get matched with three candidates in just 48 hours. Visit usebraintrust.com/lenny or find them in my show notes for today's episode. That's usebraintrust.com/lenny, for when you need talent yesterday. Today's episode is brought to you by AssemblyAI. If you're looking to build AI-powered features in your audio and video products, then you need to know about AssemblyAI, which makes it easy to transcribe and understand speech at scale. What I love about AssemblyAI is you can use their simple API to access the latest AI breakthroughs from top-tier research labs. Product teams at startups and enterprises are using AssemblyAI to automatically transcribe and summarize phone calls and virtual meetings, detect topics in podcasts, pinpoint when sensitive content is spoken, and lots more. All of AssemblyAI's models which are accessed through their API are production-ready. So many PMs I know are considering or already building with AI, and AssemblyAI is the fastest way to build with AI for audio use cases. Now is the time to check out AssemblyAI, which makes it easy to bring the highest accuracy transcription, plus valuable insights to your customers, just like Spotify, CallRail, and Writer do for theirs. Visit assemblyai.com/lenny to try their API for free and start testing their models with their no-code playground. That's assemblyai.com/lenny. Jonathan, welcome to the podcast.

   3. JBJonathan Becker4:48

      Thank you. It's a pleasure to be here.

   4. LRLenny Rachitsky4:50

      It's my pleasure. So what we're going to be doing with this episode is we're going to be digging real deep into all things paid growth, which we've never done on this podcast yet. And normally I actually skip this part, but I thought it'd be actually helpful for you to spend a little bit of time to give us a little bit of background on your experience in the space of performance marketing, AKA paid growth, AKA paid ads. You tell us what the right term is for this genre. But yeah, just tell us what you've been up to in this, in this area over the past decade and a half, I think.

   5. JBJonathan Becker5:20

      Sure. No, that, that's a great way to kick things off. And again, thank you for, for having me here. If I think about it, my experience goes back about 15 years into this space. I started off as a web developer, and as I built and structured websites for people, I wo- became pretty obsessed and fascinated with the fact that you could build, uh, landing pages or home pages or whatever it was, basically the content on a website, and structure it in a manner where you had the chance to surface in organic, so SEO, you know, results more prominently. And as I became kind of a practitioner of SEO, SEO really being my first love, you know, of marketing, uh, I started, you know, attracting attention and people wanted to hire me on as a freelancer and...What I noticed is that as people, uh, started asking me questions like, you know, what was the ROI of our SEO campaign, or, you know, how do I scale this or whatnot, the answers to their questions ended up being a lot more aligned with what then was the biggest driver in the paid acquisition world, uh, which was paid search. And so I started experimenting with paid search and what I found was that it was a tangible format and lever through which we could basically give people the types of results they were expecting from SEO, but that were obfuscated in terms of, you know, Google's analysis algorithm from an organic point of view being somewhat intangible, and Google slowly kind of removing a lot of the data early on that allowed you to kind of guess and test more easily. So ten plus years later, you know, what started off as this freelancer consultancy that I, you know, started running in a walk-in closet in my old apartment became 130 people and we manage about $500 million a year in ad spend for small and large companies including Uber, Asana, Tempur-Pedic. We've worked with Lululemon, very exciting companies, mostly from the United States even though we randomly happen to be based in Vancouver,

2. 7:25 – 11:56

   The crazy story of how Jonathan won Uber as a client

   1. JBJonathan Becker7:25

      Canada.

   2. LRLenny Rachitsky7:26

      There's a number of threads I'm going to pull on there over the course of our chat, but you mentioned Uber and you told me that you had a crazy story about how you actually landed Uber as a customer. Could you share that?

   3. JBJonathan Becker7:35

      I had been running Thrive for a couple of years, uh, and it was a very excellent regional agency in Canada with really cool local clients. In 2013, I got invited to go down to the TED Conference which was in Long Beach, California, and my friend Andrew Wilkinson asked me to join him at a dinner that night. I didn't know anybody from the TED community at the time. So we have dinner and then afterwards as it goes, you know, at conferences there's an after-party, and so essentially I hop into a taxi, everybody else kind of sped off in their cars or, you know, however which way they were getting there, and as we're talking to the driver saying, "Hey, we're going to, you know, this place. You know, can you take us?" There's a knock on the window and the person outside says, "Hey, I think I'm heading to the same destination. Do you mind if I hop in this car with you?" And so we're like, "Of course." And I turn to him and I'm kind of like, "I'm Jonathan. You know, I run a ten-person agency out of Vancouver." And he says, "Hey, I'm Garrett Camp. Uh, I started a company called Uber." And so ironically I meet the founder of Uber, the company that is in the process of disrupting the entire taxi industry worldwide, in the back of a taxicab, and what happened next basically changed my career forever. We end up at this party. At the time, I was kind of spamming R- Uber's referral program, so kind of a long story, but essentially I was using paid search to camp out on their branded keywords and as people would sign up with my confusingly similar snippet to Uber's organic snippet I was essentially siphoning off, you know, uh, referral credits. So I would get $20 every single time someone signed up, and I ended up making like tens of thousands of dollars doing this. And so fast-forward, you know, I'm getting a drink at the bar next to Garrett and in my head I'm kind of like, "Should I tell him about this? Maybe I can land them as a client. This would be really interesting." And essentially I tell him, I'm like, "Hey, I'm doing this. I'm adding zero value, but this is a loophole in your marketing system and, and, you know, someone should close it." He essentially is like, "I need to report this to the board, but, you know, here's my card. Write me what you're doing and we'll contact you." And so I get contacted by a bunch of his lieutenants. If you've read the book Super Pumped, like all the people that we dealt with at the time, you know, are in the book, including-

   4. LRLenny Rachitsky9:57

      I watched, I watched the show.

   5. JBJonathan Becker10:00

      Yeah, exactly. And, uh, they were kind of like, "Hey, this is bad. You have to stop doing this, but can we hire you to solve the problem?" And so what started off as me, you know, running projects for, like, local bars, you know, in Vancouver or clothing stores or whatever it was turned into me landing early-stage Uber as a client and really graduating us from, like, competent, you know, professionals to, like, leaders in our sector. And so it was a fascinating, you know, project and we worked with Uber for 10 years.

   6. LRLenny Rachitsky10:32

      That is an incredible story. I love the arbitrage (laughs) game you were running there, uh, to basically siphoning VC money out of Uber, and I guess the lesson there a little bit is just like sometimes, you know... Like, it's like this interesting combination of hustle in terms of trying to just, like, make some money and also, uh, taking advantage of this opportunity you kind of were plopped into.

   7. JBJonathan Becker10:53

      Yeah, I think, you know, people often talk about entrepreneurs who have been successful and they, they comment that they're lucky, whereas I actually look at that situation and I think that you have to make your own luck. So I could've been like, "Oh, cool. I met this guy in the back of a taxi," and that was it. But I decided to take a risk, you know, being that I could get embarrassed or nothing could happen or they could shut down, like, this referral, you know, gimmicky thing that I was doing. I had, like, you know, very little to lose, I guess, ultimately, but a lot of people just don't make these moves in life because they're nervous or they're worried too much about what the downside might be. And so I very much was like, "Well, I'm gonna shoot my shot here." And, uh, uh, you put yourself in situations where everybody has luck, but you have to cap- capitalize on it basically. And so that was an example of, you know, uh, being willing to take a risk and it paying off, like, pretty big time, I think.

   8. LRLenny Rachitsky11:46

      Also, uh, being at TED, that seems like a good move, networking paying off. Love that he was in a taxi. That's hilarious. I was gonna ask about that, and, uh, clearly, uh, he was doing some research, I imagine.

   9. JBJonathan Becker11:55

      Yeah.

3. 11:56 – 12:31

   Interchangeable terms for “paid growth”

   1. JBJonathan Becker11:56

      (laughs)

   2. LRLenny Rachitsky11:57

      So let's, uh, let's start diving into the world of paid growth, and if you think about just, like, paid growth, and again a- actually what do you refer to this area as? Paid growth, performance marketing, paid ads?

   3. JBJonathan Becker12:07

      There's a lot of interchangeable terms. Performance marketing is a common term. Paid acquisition is a common term. Some people think of those two things as growth marketing, whereas I see growth marketing as a bigger practice area within which paid acquisition sits, and then of course there's subsets. There's social ads, there's paid search, there's programmatic, uh, and so there's a lot of different ways of saying the same thing.

4. 12:31 – 16:48

   Why you shouldn’t put all your eggs in one basket

   1. JBJonathan Becker12:31

   2. LRLenny Rachitsky12:31

      I'm gonna use performance marketing. I kind of like that term 'cause it really describes what it is. It's like marketing with... You can measure performance. So let's see how that goes. So as a channel, it's such a interesting mix of, on the one hand, it's this incredible growth lever that allows basically any company to spend money and- and understand their ROI in acquiring new users. It's something that, like, never existed before, essentially, Facebook and Google created these platforms. On the other hand, there's this, like, sense that it's this, like, drug that you start and then you get hooked on and you can never leave, and there's a lot of advice of just, like, avoid paid growth. That's just, like not a good, healthy way of growing, especially as a startup. And so my question to you is just how do you think about that element of it, and then even more specifically, what kind of products do you find paid growth as a channel is right for and not right for?

   3. JBJonathan Becker13:24

      Yeah. It's a really great question, and so I think there's a couple different things that need to be unpacked here. So paid acquisition or performance marketing as we-

   4. LRLenny Rachitsky13:33

      Performance marketing, like I can

   5. JBJonathan Becker13:34

      Yeah. ... can be seen as a drug, I suppose, when you are entirely reliant on it to fuel the revenue of your business. And so the analogy that I try and use here is that it would be very dangerous if I was advising you with your life savings and I told you to put it all in a single stock in the stock market. Stocks can be volatile. Instead, uh, and- and as a result of that, you know, your net worth would fluctuate quite a bit in the short term and the long term based on a lot of things that you don't control, like the external markets or, like, things that are happening within the performance of that, you know, particular company that you invested in. When I think about all of the marketing mix, so email, direct mail, linear television, performance marketing, whatever it is, I think about it as investing capital with the expectation of a return, and in the same manner that I would not take all of your life savings and dump it into a single stock, I don't recommend putting all of your money into a single, you know, performance marketing channel and then somewhat exposing you to the volatility of fluctuating CPCs or changing market conditions. And so I would agree with you that it is a drug in a sense if you have all of your eggs in one basket and that basket takes you on a very intense roller coaster in terms of performance, but when I think about the fact that Thrive manages, you know, $500 million a year, I think of myself to an extent as like a fund manager. We are managing people's money with the expectation of a return, and part of the strategy is to diversify across channels. And so we decrease the reliance of any individual project on a singular channel and its performance, and similarly, I always say to people that the first rule of performance marketing is not to forget about offline marketing and the classic marketing that works for organizations. So in other words, direct mail can really work. Email marketing works beautifully. SEO can really work. Like, there's all of these, like, wonderful things at your disposal, and so I think the comments, like the real crash and burn scenarios that I've seen are these, like, not fly by night brands, but brands that, you know, figured out... Just like with Uber, I figured out this weird tie-in where I could, like, make, you know, free money from their referral, you know, system. Sometimes people find kind of, like, shortcuts, hacks if you will, to scale rapidly because of one specific nuance of like o- the Facebook ad platform or something like that, and what they fail to see is that those loopholes come and go. And so if they scale massively and their entire, you know, business is predicated on the performance of this one loophole that they found or, like, you know, investing everything in a single channel and then the conditions change, they're not going to be very happy and the business will suffer dramatically. And so when I think about this, it's, you know, a responsible channel mix, diversity, and- and- and understanding that you can't be overly reliant on performance marketing for the success or failure of your business.

5. 16:48 – 23:07

   What kind of companies should pursue paid growth

   1. JBJonathan Becker16:48

   2. LRLenny Rachitsky16:48

      What about the second part of that question of when you think about when co- companies come to you, what do you look for to help you understand this is gonna be a really good fit for performance marketing and this is gonna give them a lot of opportunity to grow-

   3. JBJonathan Becker17:00

      Yeah.

   4. LRLenny Rachitsky17:00

      ... versus, like, maybe not, maybe they're... Maybe it'll be a small sliver, but it's not, like, gonna be a massive success for them?

   5. JBJonathan Becker17:06

      Yeah. So I would say that- that... The answer to that question is different at different stages of a company's life cycle. So early stage, you know, look at what the company is doing, look at your own company. Do you... Have you established product market fit? So is this an idea that has yet to be tested and are they entirely looking to performance marketing to scale, you know, everything? So are they at risk of it becoming, like, an overreliance on performance marketing? At a later stage, we look at, uh, you know, certain criteria that they might or might not possess, and so typically that will come down to resourcing. So the question at a later stage is not does it work, but to what scale can it work? And so we are looking at things like do they have adequate creative resources and buy-in that... Does- does creative resourcing tie into performance and can we create a feedback loop there around testing? I'll talk to you about that in- in a bit. Do they have professional marketers on staff? So are there people who have experience, you know, doing what we do that- that speak our language, so to speak, or is part of this an organizational educational...... you know, and, and creating buy-in through stakeholders process that needs to take place. Do they have technical resources? If we say, "Hey, tracking and attribution is broken. Here's how to solve that," can you implement it? And so on and so forth. And so there's no, you know, one magic formula for what works or what type of company will be successful on performance marketing channels. I think, like, just as evidence of this, Google, which I think had a down quarter recorded sales this week, and it was 70 billion dollars in three months. And Facebook similarly, I think, just reported yesterday evening and it was 32 billion dollars. And so that's 100 billion dollars on just Google and Facebook in three months, and the majority of that revenue is from ads. And so, like, this works really well for lots of different companies. It's just a question of at what scale.

   6. LRLenny Rachitsky19:05

      Just to pull on that thread a little bit more, something I've heard from other guests is that paid ads are best for products where you get basically payback really quickly, basically to feed the flywheel of spend so that you're not sitting around waiting for someone to buy something in the future, or-

   7. JBJonathan Becker19:22

      Yeah.

   8. LRLenny Rachitsky19:22

      ... it's like a small trickle of pay. How important is that, I guess? Like do you find that you could just do paid-

   9. JBJonathan Becker19:27

      Yeah.

   10. LRLenny Rachitsky19:27

       ... growth for any company, it doesn't matter, their business model, or if there's something you're like, "Okay, this needs to exist for you to s- invest re- serious resources" and even hire that team that you just talked about?

   11. JBJonathan Becker19:37

       It's always nice when there's a quick turnaround on investment and return, and that's wonderful for, like, D2C or e-commerce style businesses where they're essentially taking the revenue to fuel additional inventory and operating costs. However, not all businesses work that way. And so in a B2C or B2B lead generation scenario, we have to undertake pretty sophisticated modeling around these abstract concepts like lifetime value, which is difficult because, like, that's, you know, most businesses are relatively new that we work with. And so the idea of lifetime value is kind of a misnomer, like, they don't know what that is yet, but we have to model things like LTV to CAC, so cost per acquisition, costs versus lifetime value and the period within which the payback occurs. You end up getting to a pretty sophisticated place where you can build out things like a lead scoring model, which predictively can determine in a statistically significant way the likelihood that one lead will convert to revenue over another. And so there are ways around the slower payback period that still end up being pretty accurate based on what you're bidding on today, versus the latent revenue that will be accrued to those campaigns through attribution.

   12. LRLenny Rachitsky20:58

       Do you have any just rules of thumb for someone listening and trying to decide, like, has paid a real model for us, like, either on LTV or CAC or payback period or something? Just like here's what you probably should have, especially early stage for it to be worth... For you to feel like paid growth is gonna be a great lever for you to use and maybe a primary lever?

   13. JBJonathan Becker21:18

       Product market fit. If you know that your business sells into audiences, let's say you are a social media influencer or you had a really strong email marketing game or organically your content surfaces within Google search results, or you did a lot of direct mail and linear television and, and billboard advertising and that worked, if other things work, it is highly likely that paid acquisition will work. The issue for most companies is in this incorrect assumption that the data that is provided through paid channels allows you to have full end-to-end understanding of, like, attribution, which is wrong. It's never been that way. And th- the other aspect of this is the patience to understand that every business is unique and these, these metrics that we know are important are different for every business. Lifetime value, like propensity to repurchase, ROAS, which is return on amount spent, CPA, CAC, like, all of these different things are different for every business. Even if I worked with two hotels in the same city, they would have different results based on the nuances of their budget, their brand, the market that they sit within, the services that they offer and so on and so forth. And so I think that like everything else, the main problem here is that nobody should expect an overnight turnaround with performance marketing. It is a very difficult channel to manage and that's why people hire experts like us to, to help them with it, because it's a never-ending problem with constantly changing issues. It's always been like that. That's not a new thing since pandemic or whatever. And, uh, it's not... You know, it will take some time to work out what works.

6. 23:07 – 27:07

   Is it possible to reach scale exclusively through paid growth?

   1. JBJonathan Becker23:07

   2. LRLenny Rachitsky23:07

      I have this kind of framework of there's these four growth channels, basically growth engines is what I call 'em. There's paid/performance marketing, there's SEO, there's virality and there's sales. And essentially there's some companies whose growth is almost primarily paid. So a few that come to mind are booking.com, which we know well at Airbnb, which is-

   3. JBJonathan Becker23:27

      Mm-hmm.

   4. LRLenny Rachitsky23:27

      ... like almost all paid growth driven. Credit Karma comes to mind as a classic paid performance marketing. I, I keep coming to paid growth as my term, so I'm just gonna stick-

   5. JBJonathan Becker23:35

      (laughs) .

   6. LRLenny Rachitsky23:36

      ... with it. TikTok in initially was very performance marketing, paid growth oriented. Wish was another one I think about. And I want to talk about how much things are changing within this realm, but before we get there, do you think there's still an opportunity for startups to emerge where they get to scale almost exclusively through performance marketing? And this question actually came from Twitter. Someone tweeted this randomly the other day and I was like, "Oh, that's a great question for Jonathan." And by the way, her name is L- Liz Georgie asked this question. So there you go.

   7. JBJonathan Becker24:06

      I'll put it this way, every unicorn from like the, you know, 2010s era that, that scaled did performance marketing, but not everyone during that time who did performance marketing scaled.So I want to remove the bias here that just because all the successful organizations did this didn't mean that it was, like, a magical channel for everyone. We had plenty of projects that we worked on that flat-lined, you know, during that period. And so the sense that there was a period of time where this was easy or, you know, it worked on any project is, is not correct, in, in my opinion. With that said, we see, you know, companies that are spending millions of dollars a month on performance marketing channels like Google and Meta still, despite all the ups and downs that they have faced, and they do so profitably. And I think there's some, uh, really great examples of companies that have scaled, you know, in relatively recent times, uh, almost exclusively through paid. Like, Grammarly is a really good example of this. They have been good at solving for this problem that exists around, like, understanding the cost per acquisition versus lifetime value, like how sticky customers are, predicting how much revenue can come from a customer and backing out into therefore how much we can pay, you know, per, per click, and per lead, and, and so on and so forth. Athletic Greens is another good example. So Athletic Greens is actually a, a pretty old company. I think they've been around for 10 years. I think they have retail distribution. I think they, you know, have done a lot of the, like, more classic marketing things that are, that are important in terms of developing that channel mix. But I think the amplification of that brand really, really gained traction quite recently where now everybody knows what Athletic Greens is, and that's because they're buying loads of ads on TikTok, they're buying loads of ads on other social channels like Facebook, they're investing in podcasting partnerships, and, but this is all digital paid acquisition, right? And so, uh, it had a wonderful effect on this, like, really interesting business that they had already built. So, so yes, it's still doable. We still people- see people doing it. And I think that there's been a bit of a reckoning in the performance marketing industry pertaining to things like privacy and the changes that Apple made and people being very, you know, creeped out at how their data is being used, rightfully so. And then, you know, obviously the economy in 2022, we had a terrible, you know, macroeconomic shift where interest rates rise and inflation's out of control. And so the... Of course, the first thing that people cut are, you know, typically marketing budgets, and we see Facebook and Google and other, you know, ad channels directly suffering from that. So all of that said, these storms pass. And so m- you know, when the economy improves, generally speaking, I imagine people will, you know, go back to trying to find as much inventory from a pay-per-click point of view that they can purchase as possible and figuring out the economics of how to do

7. 27:07 – 29:39

   The evolution of performance marketing

   1. JBJonathan Becker27:07

      that.

   2. LRLenny Rachitsky27:08

      I was definitely gonna ask about that, and I love that you touched on it, of just, like, clearly a lot is changing in paid growth/performance marketing recently. And you talked about privacy stuff, you talked about COVID kind of shifted the way people spend and kind of dropped and then came back. So my question is, who are you finding has the most success these days in performance marketing? And I will plant one seed, which from the examples you just shared, it feels like it's mostly companies that are very efficient. Like, I think Grammarly, they're just, like, super efficient as a business. And then I think Athletic Greens, they're a sponsor, and I just... Like, their negotiations for sponsoring, it's just, like, it's allocated. Here's the number that makes sense for them financially, and they're not gonna go anywhere above that.

   3. JBJonathan Becker27:48

      (laughs)

   4. LRLenny Rachitsky27:49

      And, uh-

   5. JBJonathan Becker27:49

      Yeah, because they know. They, they-

   6. LRLenny Rachitsky27:51

      Yeah.

   7. JBJonathan Becker27:51

      ... understand, like, how many impressions they'll get and on average what the quality of impression is, you know, and how many, uh, how many dollars they can put behind that before it has a cliff, you know, in terms of ROI.

   8. LRLenny Rachitsky28:05

      Exactly. So broadly, who do you think is having the most success now with the changes? And then generally, what should people know about what has changed in the past, like, say, year in the space of performance marketing?

   9. JBJonathan Becker28:18

      I'm not gonna, like, really be able to point to, like, this company is really getting it right. And I think that you can do that, but it's like saying, you know... A friend of mine recently on Twitter tweeted this funny thing where he was like, "You know, this is the number that I used to win the lottery," said every successful founder ever trying to give advice to other founders, right? And so-

   10. LRLenny Rachitsky28:37

       (laughs)

   11. JBJonathan Becker28:37

       ... in other words, like, just because they won the lottery doesn't mean you're gonna be successful picking the same number. To that extent, there is a bit of a playbook around, you know, modern-day performance marketing, and that includes everything from really stringent and rigorous creative testing and thinking about that correctly to understanding the subjectivity of attribution and its strengths and weaknesses, doing a lot of work around validity of these campaigns, so really just, like, the measurement and whatnot. Companies that can do those things and then understand their own marketing economics, in other words, like, quite, quite basically how much can we afford to spend in acquiring a customer on any channel before that acquisition is no longer profitable, so really focusing on the profitability of the bottom line and not just breakneck growth, for instance. Companies that have those capabilities and see the world that way tend to be successful in, uh, performance marketing.

8. 29:39 – 32:18

   Advice for founders choosing between SEO and paid

   1. JBJonathan Becker29:39

   2. LRLenny Rachitsky29:39

      When you were giving your intro, you talked about how you initially started doing SEO, that's where you started, and then you moved to paid growth. Well, how do you think about those two investments as a founder trying to decide which direction to go? What would your advice be of, like, spend your time here versus there if X, Y, Z?

   3. JBJonathan Becker29:56

      When I'm asked a question of, like, you know, should we put money into organic search or paid search, my response is often that they're actually not mutually exclusive to one another. So it's a great idea to do both, and that backs into my strategy of diversification of channels. So don't build up exclusively in one area and create volatility within your marketing mix, essentially. SEO is a wonderful, you know, marketing capability when it's built out correctly. I think the issues that you run into are...... cause and effect related. So one of the things that people really like about performance marketing, theoretically, is that we can spend a certain amount and then, if we're modeling things correctly, we can essentially determine how much revenue was generated from the actions that we took. Finance teams love that, C-suite teams love that. They can build projections, they can budget around it. There's some degree of predictability around it if it's done properly. Search engine optimization is different in that the attribution can be tough. It's difficult to determine whether, you know, ultimately the actions that you took contributed to a rise in organic traffic. You have to essentially correlate that. And the, the reason is because when you build clusters of content, you know, and you, you... It- it's grouped thematically and you're targeting buckets of keywords, whether they're long tail or head keywords, whatever it may be, you could publish all of that on your website. Google still has to crawl it. They run it through their analysis algorithm, which is comprised of 200 different signals, of which maybe, like, 20 to 30 have been publicly disclosed. So it's a bit of a black box. We don't really know ultimately, you know, what ROI comes off of that unless you're very sophisticated, like probably one of your other guests, Ethan, in terms of measurement. Whereas paid, the ROI is still a difficult problem to solve, but there was a lot more of a linear relationship as it relates to attribution. And so paid being tangible was the reason why I leaned heavily into paid and ultimately away from SEO, but I do think that if you do SEO properly, it- the payoffs are indisputable, and it is certainly an important part of a modern mod- a modern media mix.

9. 32:18 – 44:43

   Strategies for optimizing ad creatives

   1. JBJonathan Becker32:18

   2. LRLenny Rachitsky32:18

      You mentioned this earlier, and I've heard this more and more recently, that one of the biggest levers these days in paid growth is around creatives. It's not, like, tooling or, like, smarter data. Uh, or you tell me if I'm wrong, but it's just, like, getting creative, getting better creatives. And so I'll let you actually explain what are creatives. There's this term-

   3. JBJonathan Becker32:37

      Sure.

   4. LRLenny Rachitsky32:37

      ... creatives that people outside the industry don't really necessarily get, and then broadly, what should people be doing to optimize the way they approach creatives?

   5. JBJonathan Becker32:46

      Certainly. So, uh, when we say creative, we're referring to the assets that power typically visual programmatic or pay-per-click campaigns on social channels or display networks. And so literally, you know, the motion graphics ad that you see on Facebook, the user-generated content that you see on TikTok, or a static ad that you might see that has, like, a pretty picture in it or whatever. And so I think that when we talk about creative as a big lever around efficiency and optimization, the underlying, you know, conversation there is that over time, our industry has been heavily automated. So a lot of the levers, so to speak, around performance have been automated by Google and Facebook over the last, you know, seven to ten years. That's because originally when you ran these campaigns, you needed to have, like, a rocket scientist in front of them. There were so... It was so complicated and there were so many different things that you could get wrong. Um, and their solution, the channels, like, the big tech company's solution to this is figuring out for you. So eventually Google wants you to say, "Hey, I'm Google. Give me your credit card and I'll take care of everything else." Facebook-

   6. LRLenny Rachitsky33:57

      And the- and the URL to point people to, and then we'll do the rest.

   7. JBJonathan Becker34:00

      Yeah, yeah. I don't know if that's a great idea for consumers, by the way, but in the meantime, you know, there's certain things that have just been fully automated. In the context of creative, it's still one of these things that for now is not, you know, auto-generated in the world of AI and all the changes that we're seeing. Maybe that's something that will change. But for now, you know, essentially creative directors and their teams are concepting and producing different types of assets, and so there's a bunch of problems that we typically see when people come to us. So number one, performance marketing and brand marketing in a lot of organizations are two different things, and the designers that occupy, you know, brand teams' bandwidth and whatnot often don't have a sense of how paid acquisition works. And so one of the pitfalls of working with certain, you know, companies or- or the mistake that they make is the design team will hand off, like, a file full of, you know, random assets for- for paid acquisition without any sense of, like, how the channel works. And what I mean by that is, you know, we... The- these days, you know, we're using the analogy, the classic analogy of the funnel to organize our thinking around creative assets. So you can think about this as, like, generating intent at the top of funnel and capturing intent at the bottom of the funnel. When I think about an experience that I want, you know, a consumer to have on Facebook and audience targeting and creative, I think about us beginning a conversation at the top of funnel creatively with an audience, having that conversation change as we say different things and the audience that we're targeting ultimately graduates through different behaviors on our website from one to another, and then ultimately resulting in an end to the conversation where they take an action hopefully, you know, that the brand that we're working with is looking for. And so there's a clear beginning, middle and end to that, and one of the major pitfalls that we see is that certain brands just dump one homogenous message into, you know, all of their targeting. You see the same ad over and over again. It creates banner blindness and it's total lack of efficiency. The antidote to that is to, you know, have resources dedicated to paid and essentially iterate upon the creative assets themselves based on the data that we see coming from ad sets and campaigns, you know, in- in various channels. And so what that means is that you have to experiment. You have to take a bit of a scientific approach, although it's a bit of an art and a bit of a science. You have to try and isolate variables, maintain similar conditions across, you know, targeting, and then determine which style and f-feature of an ad performs best at which stage of the funnel versus which audience. And the results that we see are dramatically different from brand to brand. But if you are not undertaking rigorous testing in conjunction with the... how you are driving the iteration and design of your ads, then- then you will not make progress essentially.

   8. LRLenny Rachitsky37:11

      Is there a specific example that comes to mind as here's, like, something we did that just dramatically changed the impact of- of a change to a creative, or if you can't think of one, are there just, like, specific tactics that you can suggest for people to improve the way they approach creatives?

   9. JBJonathan Becker37:28

      Yeah. So I think from a- a testing point of view, let's say I was running ads on Meta, you know, beneath the campaign level, when I create a campaign, I would have the structure that my testing might take, uh, would be that I would have an audience, uh, that... a single audience at the ad set level, and then I would have two nearly identical creatives within that ad set. The only thing being different across those two creative assets is a single variable. So it might be the copy, it might be an image or whatnot. That allows us to isolate a lot of variables and really test into one singular change across two creative assets. There's a lot of nuance to this. So sometimes, like the ad serving algorithms, even when we set up a test, uh, structurally in that way, will serve one ad, you know, a- a different number of impressions than the other ad. In which case, we then have to say, "What is a leveling factor that allows us to look at these two ads equally, even though one received dramatically more impressions than the other?" This becomes where it becomes subjective in terms of how you want to determine success. But a good example is looking at, like, the click-through rate, which is essentially a ratio or a metric like impressions until conversion, which is a, um, you know, leveling, uh, metric that allows us to determine even though... U- in a scenario where two ads facing the same audience within the same campaign received different numbers of impressions, we can still measure the efficiency or effectiveness of one ad over the other using metrics like that. And so from a testing point of view, I think that this is one way that we might look at trying to assess ad performance so that we can gather learnings, send that back to a creative team, um, and say, "Hey, it turns out that when this copy is used at this stage of the funnel, it converts, you know, 50% more frequently than this other copy. So let's now take that copy, use it as our base copy, and challenge it with a different type of copy and see if we can continually iterate and refine." So that's a very practical example of how, like, ad creative testing, uh, might work on a channel like, uh, like- like Meta. You asked for specific examples where we've seen, like, an unlock. There's two that come to mind. Several years ago, we realized that highly produced ads from brand teams... And I'm not... there's nothing wrong with brand teams. We work with them all the time. They do amazing work. I think we're just trying to work as a singular unit as opposed to being fragmented. But a lot of the brand guidelines of different companies would end up y- you know, yielding these, like, highly polished assets. And when you launch those on, like, Instagram, you know, back in the day or something like that, what we found is that they would always underperform next to user-generated assets. So a- a brand that essentially, you know, has an influencer in front of it that says, "I- I tried this product. I love it. I'm filming this ad for my iPhone. Like, look, check it out. Here's the product. Here's me. I'm better off..." or whatever it is that they're talking about. The unpolished, like, you know, iPhone mobile phone creative suddenly we realized massively outperformed these other channels because there was an authenticity to it. And rather than the, you know, brands themselves saying like, "Hey, you know, trust us. Like, our product is great." Here's, like, a third party essentially validating the... what is so great about these brands basically. So I- I can't speak to, like, specific clients 'cause I'm not allowed to talk about, like, the work that we've done in large part, but that would be, you know, one example. And another example is we worked with a furniture company several years ago which scaled dramatically, but they were having difficulty early on thinking through how to scale social ads. And so, you know, paid search worked really well for them. Social ads, again, they had these highly produced styled rooms and one of the owners had their dog, um, in the office all the time. And so, you know, they have these models, like, sitting on furniture or whatever it was, and they would take these beautiful styled shots of- of their furniture in a room and one of the art directors was like, "Put the dog on the couch and let's take some photos of, you know, dogs on- on furniture," which made it more playful and approachable. That one change resulted in a total unlock of their performance on paid social channels. It- it would, like, double or triple, you know, the ROAS that we were seeing type thing. So it's these minute differences that you can test into that ultimately can drive performance.

   10. LRLenny Rachitsky42:04

       That reminds me at Airbnb, the photography team found... Actually the photography team was initially including people in the photos of listings and that was, like, the hero images of listing photos.

   11. JBJonathan Becker42:17

       Yeah.

   12. LRLenny Rachitsky42:17

       And it turns out when there's no people in the listing photo, much higher conversion. And the theory basically people don't want to see other ra- strangers in the place they're gonna sleep. And that's not...

   13. JBJonathan Becker42:28

       Yeah.

   14. LRLenny Rachitsky42:28

       That was not expected.

   15. JBJonathan Becker42:29

       And it's a really great example. And so the- the question becomes, as a company and as a brand, do you arrive at those learnings anecdotally by accident? Is it the brilliance of one person on the team?... that the whole brand, you know, is predicated upon in terms of performance? Or do you put a very rigorous structure around testing and the iteration of assets and how to determine whether something works over another thing that is a process that yields the outcomes that you're looking for? And so a lot of times with agencies people talk to us about the obvious hard skills that we have, but the soft skills are around, you know, process that can be deployed that can actually be the difference between being highly sophisticated or unsophisticated. Internal teams do this too, but that Airbnb example is a great illustration of how if you put the right, you know, testing in place, you can yield an outcome that becomes an unlock for performance.

   16. LRLenny Rachitsky43:28

       Getting even more tactical with that idea of testing a bunch of creatives makes me think about a story from chatting with the guy from Wish, who's head of growth at Wish, about how they uploaded like hundreds of variations, and I think Wish is like the epitome of the opposite of brand highly polished ads, where it's just the most ridiculous looking products with just banners and numbers and prices and cross-outs and all kinds of stuff, just like anything that it would take to get people to click. Is there a tool or process that you can point people to to help them do this testing on creatives, or is it mostly built into the existing tools now and there's nothing really fancy about it?

   17. JBJonathan Becker44:04

       We get asked this a lot, and I think there are tools for different types of functions that we undertake in the, in the process of, you know, running paid acquisition for different brands. But these days most of the testing that we do is within the channels themselves. So Meta Ads, Google Ads, I, I keep touching on those two specifically because they're the most advanced in my opinion. They're really s- they're really powerful and so when I... But the good news here is that you don't necessarily need some exotic tool to do sophisticated creative testing. You can do it in-platform and you can occupy... You, you can use the structure that I just kind of outlined as a starting point.

10. 44:43 – 49:56

    Paid vs. organic search, TikTok and short-form

    1. JBJonathan Becker44:43

    2. LRLenny Rachitsky44:43

       You mentioned Google and Facebook. What is your take on TikTok and YouTube and maybe Snap? Just, do you recommend people go there and there's a big opportunity? Do you think it's overblown? Do you think people should just stick with Google and Facebook basically at this point? What's your general advice?

    3. JBJonathan Becker44:59

       So when I say Google and I say Facebook, I'm talking about the Google ecosystem of channels inclusive of YouTube.

    4. LRLenny Rachitsky45:06

       Mm.

    5. JBJonathan Becker45:06

       And when I talk about Facebook, I'm talking about, you know-

    6. LRLenny Rachitsky45:09

       Instagram.

    7. JBJonathan Becker45:09

       ... Facebook-

    8. LRLenny Rachitsky45:09

       Yeah.

    9. JBJonathan Becker45:10

       ... Instagram and probably eventually WhatsApp, which I think will probably launch ads later this year. With all that said, some interesting opportunities these days really exist on channels like Amazon and TikTok, eh, eh, as well as a number of other challenger channels, I think. Snap I'll talk a little bit less about because I think, you know, really there's just fewer and fewer people potentially using Snap. There's no knock on Snap. I, I use Snap, I like it a lot, but at the same time, you know, most individuals or organizations tend to want to place ads where there's a lot of views and engagement. And so... And the king of this right now is definitely TikTok. And so, uh, TikTok faces its own set of challenges and arguably there is as much an opportunity there as a barrier at the moment. Um, I love TikTok. I'm a consumer of content on TikTok, not a producer of content on TikTok. Their ads platform kind of reminds me of where Facebook Ads was like six, seven years ago. It's not super sophisticated and attribution is not great yet, but you can get cheap CPCs 'cause there's just fewer, you know, organizations advertising there, fewer companies have figured out how to make that work. And same thing with Amazon. I- Amazon is a bit of a bespoke channel, like it doesn't work for a B2B SaaS company. It's more specific to like D2C I would say. But essentially, you know, those channels are wonderful. They're not at the point yet where they're kind of ubiquitous. Like e- every single advertiser that has ever worked with us, (laughs) I think in the last 10 years is for sure on Google. Like they're... Everybody does that and then the question is what else can I invest money in with the expectation of profitability? And so TikTok and, and Amazon and even, you know, if I wanna break out YouTube, they tend to be a little bit more specific and they definitely work, but not for everybody yet. And so the question becomes like will TikTok become as prominent as like a social ads platform like, like Meta Ads? And we just don't know yet. What we see working very nicely on TikTok, by the way, are these like founder-led brands where the founder is the ambassador and they're doing those handheld, you know, videos with their iPhone. They're talking about the merits of, you know, the products that they make. They're talking about the problems that they solve. They are great at cultivating a following. Their, their content is highly engaging. Those types of organizations crush it. Also companies that got really good at partnering with influencers. So we haven't talked about like partner marketing that much, but affiliate marketing companies got into this early and then influencer marketing networks, you know, are all over this, but essentially having these third parties be an ambassador, you know, for your brand in an authentic way, partnering with them, having them generate the content and that's, you know, the, the nature of the partnership. Stuff like that seems to work quite well.

    10. LRLenny Rachitsky48:05

        Awesome. I love those simple points of just like what is likely to work on TikTok.

    11. JBJonathan Becker48:09

        Yeah.

    12. LRLenny Rachitsky48:09

        Just broadly, would you say TikTok advertising today is underrated, overrated or just right?

    13. JBJonathan Becker48:15

        If you are e-comm based, if you're wholesale/retail based, you know, anything like direct to consumer, you have to investigate TikTok and, and try and figure out whether there's a way of promoting your products there basically. It's, it's a massive, highly engaged audience with somewhat specific demographics. It's... It's a very exciting opportunity. Other brands...... who need to pay attention to this and figure out what their entry point is going to be. And just because the innovation hasn't happened for B2B SaaS yet on TikTok doesn't mean it won't. TikTok wants that to happen and so the question becomes how. And so someone will unlock that and they'll make, you know, a billion dollars because of it. But I wouldn't recommend that channel to everybody yet. And like at, at Thrive for instance, we don't have a huge amount of people coming to us yet saying, "Hey, I'm spending $750,000 a month on TikTok. Can you help me?" type thing. The other problem with TikTok is that it's extraordinarily creative asset dependent and heavy. And so like you are launching net new assets several times per week. It is hard for creative teams and brands to produce that much content. It takes a machine and that's expensive. And so that all factors into the cost of not only just the ad dollars but the, you know, creative resourcing and investment that's required to power that. So it can be done in a more nimble manner if you're spending less, but you can't really get to like a million dollars a month on TikTok without having like a huge amount of creative being pushed to that channel.

11. 49:56 – 55:06

    Where to spend money in order to drive growth for B2B SaaS

    1. JBJonathan Becker49:56

    2. LRLenny Rachitsky49:56

       Awesome. That's really good advice. I want to chat about AI soon just because I imagine that could help with some of these things. But you mentioned B2B SaaS and I wanted to ask, I imagine Google is the primary channel for B2B SaaS, and if not or if it is, where else do you find there is value in spending money to drive growth for B2B SaaS? Which, which channels and what networks?

    3. JBJonathan Becker50:20

       So I'm agnostic here in terms of like where people should be spending money. I see the, this world in terms of impressions and clicks and does-

    4. LRLenny Rachitsky50:28

       Mm-hmm.

    5. JBJonathan Becker50:28

       ... that conform to the marketing economics of a project that needs to be achieved in order for it to grow? It's less about where to place your money and how to think about the placement of those funds. And so the common mistake that we see as people build out a funnel, so to speak, for, you know, B2B lead gen projects or B2C lead gen projects is they'll be overly reliant on the first of a sequence of metrics that ultimately yields a sale. So typically it's something like cost per lead, marketing qualified lead, sales accepted lead, there might be a couple more metrics there, and then eventually like a sale occurs. And so the, the thinking is that okay, for sales to occur I need more leads at the top of the funnel. The more leads I have, you know, the more marketing qualified leads I'll get, the more sales accepted leads I'll, I'll get, and ultimately the more opportunities there will be and the more revenue we'll generate. And so if I think about this world of lead generation on performance margin platforms as a function of cost per lead in that sense that I just described, then the tendency is always to want to drive down the cost per lead, thinking that that's the efficiency I can get more cheaper leads and that will yield more revenue. When in fact it turns out that if you flip that conversation on its head and say not all opportunities and sales are equal, and instead of, you know, focusing upfront on a cost per lead I now want to focus on what is a high value customer so the cost per lead is actually higher, but the ROI of targeting those people is also higher. And so to get the higher quality leads, it's not a function of CPL. And so that is a very common pitfall that we see when people come to us. The antidote to this, it's interesting. So Thrive developed an ETL tool, an extract transfer load tool, called Thrive Stack. It's not commercially available but if you wanted a commercially available version of this, you can use something called Super Metrics. Basically Super Metrics is a data connector. There's a world of different data connectors out there but it allows you to pipe via an API revenue data from your CRM into a third party database that can then be joined with data from like the channel itself. You can build tables within a database and normalize them together in a manner where you can start to determine the relationship between, again, the audience that particular cohort of opportunities came from and whether a sufficient degree of revenue was derived from those opportunities. And then you can build upon that what is known as a lead scoring model which allows you to bid in real time on the audiences that have a higher likelihood to convert to high revenue generating customers. And so the magic there, we talked a little bit about, you know, rates of return and instant gratification in the performance marketing world. Um, lead generation inherently is a slow gratification process and so the problem is that if my pipeline is full of opportunities that yield revenue in two months, six months, sometimes 12 months, how do I determine how heavily to bid on different, you know, leads today in order to predictably have an outcome where I'm maximizing revenue? And a lead scoring model basically solves for that.

    6. LRLenny Rachitsky53:57

       (instrumental music) Today's episode is brought to you by Miro, an online collaborative whiteboard that's designed specifically for teams like yours. I have a quick request. Head on over to my Miro board at miro.com/lenny and let me know which guests you'd want me to have on this year. I've already gotten a bunch of great suggestions which you'll see when you go there, so just keep it coming. And while you're on the Miro board, I encourage you to play around with the tool. It's a great shared space to capture ideas, get feedback, and collaborate with your colleagues on anything that you're working on. For example, with Miro, you can plan out next quarter's entire product strategy. You can start by brainstorming using sticky notes, live reactions, a voting tool, even an estimation app to scope out your team sprints. Then your whole distributed team can come together around wireframes, try ideas with the pen tool, and then put full mocks right into the Miro board. And with one of Miro's ready-made templates, you can go from discovery and research to product roadmaps, to customer journey flows, to final mocks, all in Miro. Head on over to miro.com/lenny to leave your suggestions. That's M-I-R-O.com/lenny.

12. 55:06 – 1:04:18

    Attribution in performance marketing

    1. LRLenny Rachitsky55:06

       You talked about attribution, and I thought this would be a great time to get into that. So the way I think about this is, like oftentimes the biggest challenge in driving growth isn't like the actual work you do to drive growth, it's measuring what impact your work is having and understanding where dollars are spent effectively. And things are changing heavily in attribution land with privacy shifts in ATT and iOS 4- 14.5.1 or maybe whatever the version was-

    2. JBJonathan Becker55:36

       Yep.

    3. LRLenny Rachitsky55:36

       ... that came out that changed everything. And so my question is, what changed is, one, in terms of being able to do attribution. Maybe even explain what attribution means for folks who are just like, "What the hell are you even talking about?" And then finally, just what do you recommend people do now to do attribution well and- and in- in this new environment?

    4. JBJonathan Becker55:57

       Yeah, it's a really, really great and pertinent question in the industry and i- it has a lot of focus on it now, but attribution has always been a conversation that's been very important. So just to kick things off, attribution essentially is how we determine the relationship between what we did and what happened. In the context of performance marketing, this means what ads did we serve, what campaigns did we launch, and generally what was the revenue ultimately that was derived from these campaigns? And so there's a funny quote that I love, someone named John Wanamaker in 1919 said, "I know-"

    5. LRLenny Rachitsky56:32

       I bet I'm gonna, I bet I'm gonna guess what it is.

    6. JBJonathan Becker56:34

       Do you want to guess?

    7. LRLenny Rachitsky56:35

       It's, uh, "Half my marketing dollars, uh, are wasted, I just don't know which half."

    8. JBJonathan Becker56:41

       Exactly. I love that you-

    9. LRLenny Rachitsky56:42

       Classic.

    10. JBJonathan Becker56:42

        ... (laughs) I love that you knew that. He said this in 1919. You know, the world was a very different place there. But oddly enough, we still have these types of problems today and it's because the world of what I did and what happened because of what I did is very complicated. There's so many variables, some of which we know and then some of which we don't know that we don't know type thing. And so attribution, as it stands in our industry, is still an incredibly subjective art and somewhat of a science. It doesn't mean that it's impossible and it doesn't mean that there, there aren't varying degrees of sophistication as it relates to attribution, but, but we're still in a place where we have to understand the business and its goals and then start to work on an attribution model. An attribution model is probably something that is never solved, but I'll give you a couple of examples. So number one, around, you know, attribution, it's important to determine whether an organization, a, a company, a client is focused on profitability or growth. Whether I use one attribution lens or another will drive those outcomes. And so these days, for a number of different reasons, we saw, you mentioned iOS 14.5, uh, in addition to, you know, third party cookie deprecation and whatnot, there's no one way necessarily of approaching attribution. The most classic and like commonly held version of attribution used to be a cookie-based form of attribution called last-click attribution, meaning that the last quick click in the sequence of clicks that yielded a conversion would be attributed with all the revenue from that conversion. Other models in a cookie-based world involved first-touch attribution, so it's actually the first click. So like I launch an ad, it's in an audience that doesn't know about my service or my brand, and so the first click that I get should be given all the credit for that sale. And then there's multi-touch attribution, um, which can take several different forms, but essentially is saying it's not one way or the other of the two first versus last click options. It's somewhere in between. So I'm going to create a weighted attribution model where the first touch gets so much of the credit and the last touch gets so much of the credit. This is very subjective, as you can see. I am essentially looking at my business model, determining what my goals are, and then I'm backing out into an attribution methodology that I think adheres to both the economics of my business and the capabilities of these platforms. And again, we live in a world where a single brand might do, you know, television advertising, they might buy media in magazines, they might buy billboards, they might get impressions from Facebook, they might do paid search. And so, so there's a big, you know, argument over how to ultimately model this. So there was something called an IDFA that Apple allowed advertisers to use and essentially what that was, it literally means ID For Advertisers.

    11. LRLenny Rachitsky59:44

        Oh, yeah.

    12. JBJonathan Becker59:44

        Um, and it allowed, you know, Facebook, Google, and other advertisers, Snap, TikTok, whoever you know was essentially selling ads that were predicated on being displayed on a Apple, you know, mobile device or a desktop device, it allowed the advertiser to provide attribution metrics and certain times of, certain types of customer match mets- metrics in their own platforms. And so when, when Apple ultimately, you know, launches its privacy changes, I believe in like mid-2021, overnight it allows users to say, "Uh, well, I don't want to share that information. I'm not going to share my IDFA anymore," or, "Yes, I do want to, you know, share my IDFA." And so what you see as a result of that is less of the core data that Facebook in particular would have required to make attribution more airtight and ultimately validate its advertising. And so because we can no longer, you know, validate attribution on Facebook as seamlessly-... we are in a situation where we're not sure any longer which, which audiences to target and we're not sure how to run all of our creative testing and ultimately we can't even determine, you know, the degree of revenue that's coming from particular campaigns that we've launched and whatnot. And so it created quite a stir in the world of attribution, which is obviously like this core discussion to, is it working or not? People want to answer, you know, John Wanamaker's question, but the modern methodology now is through a number of different approaches to validation. So the cookie-based attribution, which had been probably the most popular, you know, version of attribution in the 2010s, you know, really up to this point, is now one of the ways that we would look at this. But we would also include things like various forms of statistical modeling, customer surveys, population surveys. There's a number of different ways kind of to the same place here. Statistical modeling, by the way, one thing that's very popular these days, which is I think was originally created in the 1950s, is a form of statistical modeling called media mix modeling. It's essentially regression analysis and it, it is trying to determine the causal relationship between, again, what you did and what the effect was on revenue. That's very topical in the industry these days. If you're looking for a tool kind of off the shelf that can help with this, Recast is something that I see people using. But a lot of organizations build these like highly customized bespoke models that ultimately feed the algorithm, you know, inside of an MMM model in a customized manner.

    13. LRLenny Rachitsky1:02:27

        What is it or is there a recommendation of just like, "Hey, if you're doing... You're trying to do attribution today, here's, like, what you should do." Is there like a clear do this kind of piece of advice or is it super personalized depending on what you're trying to do?

    14. JBJonathan Becker1:02:42

        The advice is that there's no single source of truth. Anyone who claims that they are a single source of truth, whether it's an individual, you know, a model that they've created or a tool that they've created is not being accurate. I believe that the approach that works to attribution is that it's an ongoing investigation and it never stops. And essentially what you're doing is looking for evidence that validates the outcome of your performance marketing campaigns one way or the other. There have been plenty of incredibly sophisticated attribution models that we've help- helped build and invalidated with like MMM or other types of tools that have indicated that the campaigns do not work. So I will repeat that. We, a very sophisticated organization, have stood up, you know, campaigns that we measure and ultimately determine do not work. And that is an important finding in terms of an organization's determination of whether they want to continually invest, you know, take budget out of these channels or invest into other, other areas.

    15. LRLenny Rachitsky1:03:48

        Awesome. You mentioned a company called Recast. I don't think you knew this, but I'm actually an investor and so obviously a big fan.

    16. JBJonathan Becker1:03:55

        Cool.

    17. LRLenny Rachitsky1:03:55

        So check it out. I don't know what the site is. Recast.com maybe. I think if you Google Recast Attribution. We'll also have a link in the show notes, but uh, great, great-

    18. JBJonathan Becker1:04:02

        Yeah, they're working with a couple of our clients right now and it, it's interesting.

    19. LRLenny Rachitsky1:04:05

        Amazing.

    20. JBJonathan Becker1:04:05

        I like their approach.

    21. LRLenny Rachitsky1:04:06

        Yeah, they're basically, they're building the model as a SaaS tool to do attribution in a really clever way. Amazing. Okay, just a couple more questions. One is around AI, one is the around agencies and just how to start down this road.

13. 1:04:18 – 1:12:52

    The impact of AI on paid growth

    1. LRLenny Rachitsky1:04:18

       How has AI, if in any way impacted the work you're doing today or the work of PaidGrowth performance marketing, and then where do you think this will go in the next few years?

    2. JBJonathan Becker1:04:29

       Interestingly, and I think I alluded to this earlier, but our industry has been influenced by AI for over a decade. So Google, Facebook, other... Even Microsoft. These are some of the organizations that historically have been at the bleeding edge of artificial intelligence and their goal was always to automate as much as possible within these platforms. And so the effect ultimately that we've seen from a human capital point of view is displacement. So we are actually, we have more people now than we've ever had, but the nature of the work that they do is more strategic. It's more about modeling, validation, asking the right questions, being focused around creative levers, like some of the things that we've talked about, and less so the like trench work of implementation and, you know, bid modifiers at the keyword level on Google Search and some of the, like, really hardcore manual analysis we had to do. So I think if we are like the canary in the coal mine for other industries, what will be interesting is, I assume that if you work in an architecture office that you'll be doing less of, like, the drafting and it's kind of already been a change that's occurred in those offices, but you'll be doing less of the drafting and more of the strategic problem-solving around, like, what kind of building is necessary for the, the client in this scenario type thing. And so on a practical level though, some of these conversational AI like models are very interesting for us in that when I think about creative testing for instance, we can have ChatGPT come up with all kinds of variants of copy that we would not have necessarily thought of. It can do a lot of drafting of things like RFP responses. So we can feed, you know, ChatGPT 100, you know, previous RFP responses that we've done and have it spit out, you know, net new responses to net new questions in a net new RFP and it's like 80% good and still requires like 10 hours of work to like massage to the point where we can send it off to a client. But that replaces like a week of work with five or six people, you know, that it would've previously taken.

    3. LRLenny Rachitsky1:06:33

       And that's already happening today, you're saying?

    4. JBJonathan Becker1:06:35

       That's happening now.

    5. LRLenny Rachitsky1:06:36

       All right.

    6. JBJonathan Becker1:06:36

       Literally right now type thing. All of, all of what I just said. And you know, we're... There's a lot of different ways that we are beginning to use AI to do more with less basically. So that's kind of how, uh, I see it influencing not just our industry but other people's businesses as well.

    7. LRLenny Rachitsky1:06:54

       That's amazing. So just to repeat what you said. Your team now, because of ChatGPT, is able to spend more time higher level and leverage specifically ChatGPT to do this kind of... And RPs are basically proposals people are asking you to pitch to work with them. Is that-

    8. JBJonathan Becker1:07:12

       Yeah.

    9. LRLenny Rachitsky1:07:12

       Okay. Yeah.

    10. JBJonathan Becker1:07:13

        You know, some of these, like, AI-driven organizations that allow you to, like, type in a prompt and it spits out an image, on our creative group, we can, we can come up with, like, mock-ups in, in, like, literally, like, 1% of the time that it took. So you no longer have to, like, draw the initial mock-ups for art. Suddenly, you know, what might have taken one person a week of work on a campaign takes, like, an afternoon type thing. And so you still have to understand what questions to ask of the AI and be capable of iterating, but, like, these, like, rough drafts that you might show, like, the artwork of, you know, to a client to say, like, "Do we like this more or do we like this more?" That's, like, AI generated. It's really interesting.

    11. LRLenny Rachitsky1:07:55

        What's the tool your team uses for that? Is it Midjourney or DALL-E or something else?

    12. JBJonathan Becker1:07:59

        It's DALL-E, and it's Midjourney. So you got it.

    13. LRLenny Rachitsky1:08:03

        Got it. And so what you use it for is you're p- thinking about a concept and you just come up with a mock, coming up with a prompt-

    14. JBJonathan Becker1:08:09

        Yeah.

    15. LRLenny Rachitsky1:08:09

        ... to kind of pitch what this could be.

    16. JBJonathan Becker1:08:11

        Yeah. The interesting thing there is that these concepts often live inside of someone's head, and we do this thing as humans where we verbally discuss it, and I try and put the image in my mind's eye in your mind's eye, which is an inherently inefficient process and actually hurts our ability to be creative leaders. Someone might just see it slightly differently than you do. Now that person theoretically can use DALL-E to output what is inside their head, and they can refine that easily through subsequent prompts in DALL-E or Midjourney or whatever it may be, and then just say, "Do you like this? This is my idea." And so in a way, it's helped humans connect more easily in that context than we were capable of doing before. And then in the context of, like, pitching a client on ideas, we are capable of generating more ideas faster and iterating upon them live. So I can, I can, you know, have a Zoom call with you. I can present my screen, and if you don't like the output of, you know, DALL-E that I just prompted, I can reprompt based on your feedback in real time.

    17. LRLenny Rachitsky1:09:16

        There's the sentiment that AI is gonna take away the fun stuff of jobs, like maybe being creative and coming up with a new, you know, concept in photography, like, you know, setting up a whole photo shoot, whatever.

    18. JBJonathan Becker1:09:29

        Yeah.

    19. LRLenny Rachitsky1:09:30

        Do you find that your team is excited about uploading this to DALL-E? Or are they just like, "Goddammit, this is what I love, and I'm just sitting around in docs writing prompts"?

    20. JBJonathan Becker1:09:40

        I am not an incredible artist, but now I can take those thoughts in my mind and output them just as well as, like, someone who's pretty skilled in artwork. So in a sense, I'm excited because this technology democratizes the ability to do this across everyone. Anyone who can think a thought can generate an image on a, on an AI image generator. How many scribes do you know?

    21. LRLenny Rachitsky1:10:04

        Uh, zero. I believe zero.

    22. JBJonathan Becker1:10:06

        Because we invented something called the printing press, and the printing press, you know, took over what was a cottage industry for very specific individuals that allowed them to control the flow of information. Yet today, it's not like we have fewer writers or creative thinkers. They're just using different tools to arrive at the same place. You could say the same thing of the loom. There used to be people who would stitch your T-shirt together or your sweater together, and none of those people have work anymore. There's still people who knit, I suppose, but your, you know, your clothes are made in factories through, with machines, and the quality of the clothing is arguably a lot better than it was. I, maybe I'm wrong about that point, but you can make more of it and more sophisticated clothing. There's no question that AI is going to displace and replace certain industries of people, certain roles. I'm not gonna pretend like I know whether that's a good or bad thing, and I'm also not a poster child, child for AI. I am really just using the technology that's available to us to run our business the best way we can. We haven't let anybody go yet because of these efficiencies. The people who used to do the artwork are y- are the ones using these tools, and I think they're excited that they're more productive. Is there going to be nuance around that? Of course. Are some people going to be sad about the changes? Yes. I think human nature is that people generally don't like change, but I think over time, we've seen change has been a productive and positive thing for society, not a negative thing.

    23. LRLenny Rachitsky1:11:35

        Awesome. Yeah. So it sounds like the team is, is, is excited generally, and that's, um-

    24. JBJonathan Becker1:11:40

        Yeah.

    25. LRLenny Rachitsky1:11:40

        ... that's a good sign, and that's what I find generally. I think some people will be really upset, but most people will be like, "Amazing. I didn't ever want to do this part." ?

    26. JBJonathan Becker1:11:47

        This generation of people will be upset, and then there will be a subsequent generation that never knew anything different. You know, so the way that I think about this is the, you know, people growing up these days have always had the internet, whereas you and I probably remember a time before the internet existed. AI is a platform like the internet. And just as when the internet was launched, you couldn't conceive of amazon.com or, you know, all of these wonderful or, or social networks or whatever it was, the permutations of what AI will become even in the current like GPT-4 context or DALL-E context or whatever it may be, we don't know what people are gonna create with this. And so it's difficult for the generation that knew what life was like beforehand, before iPhone, before internet, before AI, but there will be people who know nothing but this eventually, and to them, you know, it'll just be normal.

    27. LRLenny Rachitsky1:12:42

        Until we're all just replaced by AI and then it's AI writing ads to get other AI tools to buy-

    28. JBJonathan Becker1:12:47

        (laughs)

    29. LRLenny Rachitsky1:12:47

        ... products from each other-

    30. JBJonathan Becker1:12:48

        Yeah.
14. 1:12:52 – 1:17:09

    Advice for early-stage startups on hiring in-house vs. hiring an agency

    1. LRLenny Rachitsky1:12:53

       There's always this question when you're starting to invest in paid growth, performance marketing of should we work with an agency? Should we work in-house? Should we hire someone junior to figure it out? Should we hire someone senior?

    2. JBJonathan Becker1:13:02

       Yeah.

    3. LRLenny Rachitsky1:13:03

       What's your general advice for, say, an early stage startup when it makes sense to work with an agency, versus bringing someone in-house?

    4. JBJonathan Becker1:13:10

       Mm-hmm. So we need people in-house to do our jobs properly. So agencies are not mutually exclusive to personal in-house. If we don't have a point of contact, uh, for instance, at an earlier stage company and it- we're supposed to report to like the CEO, CEOs tend to be very busy people, um, and we often just like can't get the information and approvals that we need to be successful. So i- if you think that growth marketing is an opportunity and that performance marketing is a subset of growth marketing that you want some focus on, the reality is you're going to need expertise and you probably should start in-house and then hire an agency. Again, there's different stages of companies and different examples of like what makes sense at different stages and the nature of the work that we do at different stages changes. Very, very late stage, we're kind of doing a lot of this like sophisticated, you know, production work, uh, we're implementing sophisticated testing, we're working on attribution, we're building beautiful reporting, but in a sense we're maintaining like this machine that already exists. Earlier stage, we're doing a lot more of net new experimentation, trying to discover what is working and what sequence of audience targeting versus creative asset display, you know, will work, what channel mix works and all of that. And so a lot of times the body of work that's required to nail that and the inputs to like literally like out front like what questions to be asking isn't something that a- a small in-house team possesses, and so they will work with an agency to scale faster to get where they're going quicker, to bring in more resources, uh, you know, quickly basically. And then later stage, sometimes it's a permutation of the same thing or, you know, we're really just managing a whole bunch of different capabilities that they have because it's very complicated and difficult to staff.

    5. LRLenny Rachitsky1:15:05

       That is really interesting. So it's not like agency versus in-house full-time person, it's you need both is what you are finding.

    6. JBJonathan Becker1:15:11

       I don't think we have any projects that we're working on where there's not like a professional, you know, marketing person as our POC. And generally the people that we report to have a background in what we do, whether they ended up doing something different and now they're like a VP or a director level and not directly managing channels themselves is one thing or another, but yeah, I mean, we- we- we work with people that have in-house expertise all day long.

    7. LRLenny Rachitsky1:15:35

       I see. So sometimes it could just be a generalist marketing person that becomes your point of contact.

    8. JBJonathan Becker1:15:39

       Yeah.

    9. LRLenny Rachitsky1:15:39

       They don't have to be experienced in paid growth.

    10. JBJonathan Becker1:15:41

        There, there's one more thing. So as agencies we're constantly solving people's problems in the market, and as a result of that I have a fairly large team of 130 people that think about, you know, performance marketing all day long. It's the first thing we think about when we have our morning coffee and it's the last thing we think about as we're like leaving the office kind of thing. We have very sophisticated and built out capabilities as where... as well as all kinds of software and, you know, processes and capabilities I guess that we've created that most in-house teams just don't have because they're smaller or newer or, you know, someone might be really sophisticated but they don't have the resources to implement it and stuff. And so in the same way that a really sophisticated organization might go to Boston Consulting Group or McKinsey to say, "Hey, like we did this, but you do more of this all day long and we need advice on how to be more efficient," people come to Thrive saying, "Hey, we, we're top of our game. We have really strong people, you know, they absolutely know what they're doing." Which is always the case by the way, but we're looking for extra, you know, sophistication and additional capabilities that are very difficult to create in an in-house organization.

    11. LRLenny Rachitsky1:16:53

        Mm-hmm.

    12. JBJonathan Becker1:16:54

        It's why we worked with Uber for 10 years. It was tough to replace us.

    13. LRLenny Rachitsky1:16:59

        Yeah. That's quite the retention. 10 years, uh, 10 years going. Imagine ARR or, uh, net dollar retention has gone up too.

    14. JBJonathan Becker1:17:07

        (laughs) Yeah.

15. 1:17:09 – 1:23:23

    Qualifications to look for in your hires

    1. JBJonathan Becker1:17:09

    2. LRLenny Rachitsky1:17:09

       When you're looking to hire someone full-time to h- drive the paid growth channel and/or work with an agency, what do you recommend people look for specifically, especially things maybe they're not likely to think about when they're hiring someone that people often miss?

    3. JBJonathan Becker1:17:25

       So there's a couple of competencies that I think are very important. I found that... So I was like a nerd as a child, if you can't tell. I don't know.

    4. LRLenny Rachitsky1:17:35

       No.

    5. JBJonathan Becker1:17:35

       Super nerdy, geeky kid. I would like take apart... (laughs)

    6. LRLenny Rachitsky1:17:39

       Same though.

    7. JBJonathan Becker1:17:39

       (laughs) I would take apart my parents' computers, I'd try and rebuild them. I, you know, was fooling around with bulletin boards, you know, before websites existed, stuff like that, and then I became a web developer, and as I transitioned into a, you know, a performance marketing role, I realized that being technical and having technical aptitudes was extraordinarily helpful in terms of being on the frontline of what we were doing and solving problems. So if you're making your first hire, you probably want them to be... to have the ingenuity and capability to solve a lot of the problems that you're going to run into within the context of tracking, attribution, data visualization, and then campaign management. So number one, do they have a technical background? That can be multidisciplinary. At Thrive, you know, we have someone who is a, uh, a nuclear physicist that left, you know, that discipline and became a performance marketer. We have people who have left mathematics and become performance marketers, people who left finance, full stack engineering, like all kinds of stuff. Those are technical fields where people tend to be good at math and good at problem solving and so that's like a strong piece of evidence that they might have a strong aptitude for performance marketing and, and managing this. Another thing is just, you know, uh, literally do they have experience in this discipline? So like have they managed on any level, you know, Meta ads, Google ads, TikTok, Amazon, some of the things we talked about?... do they have an appreciation for some of the inputs that we just discussed today that, you know, ultimately make, um, for, uh, create the conditions for success within a performance marketing environment? So, do they understand the role of creative, uh, do they understand the role of proper attribution, and are they capable of understanding the mechanics of your business, and so on and so forth. So I would say just fundamentally, those are some of the areas that, you know, when we are interviewing, we're looking for. As an agency too, we are looking for the ability to work with people and be excellent at client services. And so one of the, you know, questions we might ask, I actually borrowed a Jeff Bezos question from early stage Amazon where I asked people, you know, without much warning in an interview, I'll, I'll ask them whether it's okay to do a bit of a thought experiment together and whether they are comfortable, you know, asking a logic or responding to a logic question. And I'll ask the question of how many windows are there in New York City. And so there's two things that I look for in this, in this scenario. One is, can they think on their feet? So I'm not actually looking for the correct answer. It's a pretty difficult question to solve, but like, number one, do you realize that windows are not just building windows and, you know, windows are also in cars and trucks and stuff like that. So there's more than one type of window. And then can you just do the arithmetic of saying like, you know, there's so many buildings per hectare or square mile or whatever it is, and you know, it's division, multiplication type stuff. But also from a client services point of view, I'm trying to see whether in a scenario where I've asked them something that they obviously probably weren't prepared for, that is a strange thing to ask and probably makes them feel a little bit uncomfortable how they react in that situation. So do they remain composed or do they lose their composure? They get frustrated or even angry, you know, that I asked them something that's pretty weird to ask. Their reaction there is often a good leading indicator of whether or not in a client scenario working with our clients, they can, you know, um, compose themselves in a, in a difficult situation.

    8. LRLenny Rachitsky1:21:10

       Very tactically, what c- level of experience do you recommend people look for in their first performance marketing hire, like year two, four or five years longer?

    9. JBJonathan Becker1:21:23

       I've seen people who have like 10 years of experience in the industry not be that great. And then I've seen people who have like one year of experience be absolutely phenomenal. So I would say that like, again, like, you know, the years of service under their belt is one clue or piece of evidence to their potential aptitude. But really, you know, uh, you want someone who can clearly demonstrate to you that they can competently run the channels, I suppose. If, if, if what you're asking is like literally like at the level where someone is like managing, you know, pay-per-click and programmatic media buying, then-

    10. LRLenny Rachitsky1:22:00

        Yeah.

    11. JBJonathan Becker1:22:00

        ... then you wanna make sure that they can just do that. And I would say it's less about like the years of experience. A lot of times people only want to do those types of jobs for a couple years before they're like, "Hey, what's your plan for me? Like, I'm tired of running ads and building campaigns. I want to manage the people who do that now." And so, you know, the people who tend to really do that are often somewhat earlier on in their careers. And so that's just a reality that we see.

Episode duration: 1:34:54