Lenny Rachitsky: evaluation

Transcript context

…I'll put it this way. Every unicorn from the 2010s era that scale 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 a magical channel for everyone. We had plenty of projects that we worked on that flatlined during that period. And so the sense that there was a period of time where this was easy or it worked on any project is not correct in my opinion. With that said, we see 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 really great examples of companies that have scaled in relatively recent times, almost exclusively through paid. Grammarly is a really good example of this. They have been good at solving for this problem that exists around understanding the cost per acquisition versus lifetime value, how sticky customers are, predicting how much revenue can come from a customer and backing out into therefore how much we can pay per click and per lead and so on and so forth. Athletic Greens is another good example. So Athletic Greens is actually a pretty old company. I think they've been around for 10 years. I think they have retail distribution. I think they have done a lot of the more classic marketing things 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. But this is all digital paid acquisition. And so it had a wonderful effect on this really interesting business that they had already built. So yes, it's still doable. We still 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 creeped out at how their data is being used rightfully so. And then obviously the economy in 2022, we had a terrible macroeconomic shift where interest rates rise and inflation's out of control. And so of course the first thing that people cut are typically marketing budgets and we see Facebook and Google and other ad channels directly suffering from that. So all of that said, these storms pass. And so when the economy improves, generally speaking, I imagine people will 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 that. I was definitely going to ask about that, and I love that you touched on it, just clearly a lot is changing in paid growth/performance marketing recently. You talked about the 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. I think Grammarly, they're just super efficient as a business. And then I think Analytic Greens, they're a sponsor and their negotiations for sponsoring is just like, okay, here's the number that makes sense for them financially, and they're not going to go anywhere above that. Yeah. Because they know, they understand how many impressions they'll get and on average what the quality of impression is and how many dollars they can put behind that before it has a cliff in terms of ROI.…

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