Eric Siu and Neil Patel discuss how to allocate marketing budgets in a tough Q4 2023 economy. They cover scaling without overspending, balancing experiments with profitable channels, and share a cautionary AppSumo flash-sale example that burned cash.
Back then, marketing was kind of on easy mode.
When the economy was really good a year plus ago, it was all about— The hardest part with marketing is actually to scale it up, is what tends to break marketing.
All right, so today we are going to talk about how you can spend on marketing the right way because we're in a tough economic period right now. As of this recording, this is Q4 of 2023. So Neil and I wanted to give you a couple thoughts just to protect yourself moving forward.
In the olden days, and when I say olden days, I'm talking about when the economy was really good a year plus ago, maybe a year and a half ago, it was all about, you know, can you just scale really fast and have high growth? And it's okay if you lose money, just grow at all costs. And now people are realistic. We're like, well, if you spend a dollar and you lose $2, Why would you spend the dollar? Yes, you're getting growth, but you're continually losing money. So why wouldn't you just want to spend a dollar to make a dollar instead of losing a dollar? Sure, you may not have as much growth, but at least you're making real money. And the big thing in marketing, and it's funny because I've, and I know you have too, Eric and I have believed this both in a good economy and a bad economy, but we deal with a lot of companies and, you know, some of them want to hit, you know, fundraising goals, valuation goals. We believe that in any kind of economy, the best way to scale marketing and spend on marketing is in a slow and steady and a profitable way. You got to be very methodical with your marketing spend. It doesn't mean that everything has to be profitable. You got to experiment and try to find new ways that are up and coming and aren't as competitive because all channels eventually get very competitive and saturated. But you can't just Turn on the knob or crank up the knob and just be like, cool, I've went from spending, you know, $1,000 a day to now, or $100 a day to like $1 million a day. It just doesn't work that way. Or even if it's organic marketing, you can't just go from, I'm spending 10 grand a month to now 200 grand a month. Well, you can, but you're just going to end up burning a lot of money and doing a lot of stuff that produces little to no ROI.
Yep. Look, the old days now is, to Neil's point, Those days are gone where it's like you can go raise, you're looking to raise your next round, you're looking to go to VCs, you're looking to increase your valuation and then raise and maybe take some secondary, which means you take some chips off the table, right? Actually, in a couple episodes, we're going to talk about how one company, they raised $1 billion and they sold for $15 million, right? A lot of this stuff, I have a bunch of other numbers that I'm going to share here and we're going to talk about how you can deal with that. But discipline is back. Efficiency is back, right? Yeah. I don't know if you can see over here. You probably can't, but I have these two statues of Warren Buffett and Charlie Munger to constantly remind me that, hey, they're in their 90s, almost 100 years old. I think Warren's 97, Charlie's 99 or so, and they're still playing the game right now. And they have said before that their whole thing is not to, you know, Notre Dame football has a saying that go out there and be champions. It's like, no, we don't want to go out there and be champions. We just want to put our helmets on and play the game, right? And that allows you to play the game for a long time. It's the same thing with marketing. It's not trying to Back then, 2022 or 2020, even before all the privacy changes rolled out, marketing was kind of on easy mode, right? You can just run it through, raise 50% of your— what was it? 50% of VC dollars were going towards Meta ads. They were going towards Google. And that's how it works. And now it's like, no, you got to be more creative now. You got to be efficient with your spend. And if it's not going well, you got to cut it. It's like discipline is back and that's a good thing for the long term.
Yeah, discipline is really good. What you'll also find in marketing too, it doesn't matter what kind of economy you're in, the hardest part with marketing is actually to scale it up. It's not hard to run profitable Google Ads or Facebook Ads or to do SEO. It's hard to do it at scale. And when I mean scale, ranking for millions of keywords organically or scaling up your paid ads to go after many different countries and spending $1 million, $2 million a month. Scale is what tends to break marketing and you can't just scale up and you can't just spend. You got to slowly ease into it. And if you don't, you'll just find that you're burning a lot of money. And it's not about, oh, we're a billion-dollar company or a $100 billion company, we can just spend it. Spending it fast doesn't really solve the problem. When you do slow and steady and you ramp it up, you tend to get much better results even in the long run. Again, this doesn't matter what your valuation is or how much cash you have. It's more so it just produces better results.
You also burn a lot of resources too. So, I don't know if I— I think I probably told this story before, but around when I used to work for this company, we ran an AppSumo deal, which is kind of like you run like a flash sale type of deal, like Groupon back in the day if people remember that. But this one's for software, right? And it's ran by this mutual friend of ours, Noah Kagan. And when I was working at this company, we ran this sale. And for all intents and purposes, this is mass marketing, right? We discounted our product. We got like, I don't know, hundreds or thousands of sales that day. But then our customer service got inundated and everyone was like, everyone was on high alert and I didn't tell anybody. And so what happened here was, sure, marketing worked and we got a lot of customers, but one, they weren't the best customers. And two, everybody hated me for that week because I didn't tell them what was going on, right? So you got to be smart with your marketing too because sometimes if you're too aggressive and you're not paying attention, the train can roll off the rails and that's how you get yourself in trouble. Look, be more efficient in this economy, be smart, and you're going to find a lot of situations where you can buy the economy— sorry, the economy— buy your marketing. Your marketing dollars can be better spent because you're going to be able to buy cheap attention, and that's going to allow you to level up past your competitors. Anything else, Neil?
Nope.
All right. That's it for today. Please don't forget to rate, review, and subscribe, and we will see you tomorrow.
