Eric Siu and Neil Patel argue that performance marketing is arbitrage, not investment. They use Airbnb's Brian Chesky pausing paid ads as an example, and stress that relying on a single platform leaves you vulnerable. Real growth comes from building brand and product alongside paid channels.
All right, so we're going to talk about how performance marketing is not an actual investment and how, well, there's something that is. So let me share the story here. So Neil, did I send you that podcast with the Airbnb CEO Brian Chesky, the Lenny Podcast?
Yeah, you did, but I did not watch it.
Oh, all right. Well, so it's a really good podcast. Everyone should listen to it, whether you're a marketer or CEO. So there's, it's like a masterclass in product marketing, but also marketing, also how to CEO as well. And so I'll just hone in on this one area over here. So he has said that they were spending $1 billion, Airbnb, the company, they're spending, and they're publicly traded, they're spending $1 billion a year on Google. And they decided, hey, you know what? We're just going to shut off performance marketing and we're just going to focus on creating great product. We're going to focus more on— and obviously when they build new products, there's a big SEO component to it as well because they have so many pages. But for them, they get very good organic traffic and they just wanted to focus more on brand. They want to focus more on the product. And Brian said this, I'm not saying everyone should do this, but his whole thing is like, look, at the end of the day, you're paying the fire hose. Once you stop paying the fire hose, it goes away. Now, I wrote a post on X a couple weeks ago just saying that paid ads are not an investment for the most part, right? Most people just, if you're DTC, you're spending on buying a conversion and that's it. But there are situations where you can spend on performance marketing and you can buy like an email, for example. In that case, you're actually investing in the future. But not many people, I would say the majority of people aren't really doing that. So that's what we want to talk about here.
So what is he saying? That he says he stops doing— he doesn't do performance marketing?
Yeah, he— they basically paused. He's not saying he's going to stop forever, but he's like, let's just stop, right? So they stopped for a period. Yeah, they stopped.
You go Google vacation rental, they're still bidding on the terms. You type in Airbnb.
The point is he's just saying like, look, you know, it's renting. Like, yes, it's a nice drug, right? But it's like, At the end of the day, if you're just running it for conversions, you're not really investing.
Yeah, you may not consider, I agree with him in which you're not necessarily investing, you know, for the future because once you stop, it stops. But all that paid ads, people see your brand. It does help with branding as well. You're getting tons of people to your website, right? But here's the kicker. It doesn't matter what Brian or Eric or I think about performance marketing or paid ads or if people say it's a drug or not. If you can spend a dollar and you can make $2 in profit, spend as much as you can. And who cares what anyone has to say? It's that simple.
Yep. And here's the thing. So the key takeaway here is that at the end of the day, it can, sure, it's not an— you can say, yes, it's not an investment, but you can also say like, it's an arbitrage. And most businesses are arbitrages. Actually, all businesses are arbitrages.
Dude, it's making money, right? You could say, oh, good product is an investment, paid ads isn't. But I bet you if they never ran one paid ad, because, you know, we've helped them with marketing over the years, if they never ran one paid ad, they would not be where they are today. The amount of people that have gotten to know Airbnb because of all the money they spent on paid Google Ads is a big chunk of the people. Now, granted, if they had a crappy product, it doesn't matter how much they spend on paid ads, it's not going to be that effective. I still do think you need an amazing company, big TAM, great product, you know, great user experience. All those things are extremely important to the core, but not spending the money on performance marketing when it's driving you an ROI and it's bringing in more profit or more revenue than what you're spending, and overall it's profitable, is a big mistake. It's like you spend as much as you can wherever you can, as long as it's profitable. That's how you grow a business. Dude, I've done paid advertising for so many companies and we've done studies. After some of these guys are spending $100 million, you know, billion dollars, et cetera, even when they stop, it's not like it goes to zero. They're spending so much in quantity that there's so many more people that are familiar with their brand. What we typically see is they're better off than before they actually started to spend.
I think the key takeaway here is that at the end of the day, and what we've been clamoring on this podcast for years is diversifying your marketing and taking that omnichannel approach because You're not beholden to any platform at the end of the day. It just, it continues to reinforce, right? So there are people in the marketing world that say, I'm SEO only, I'm paid ads only, whatever. Neil and I are more in the camp of just whatever works. And also like, I don't want to put all my eggs into one basket because if the basket shatters, then I'm in trouble as a business. So you just want to make sure that you're making smart moves as a marketing leader and a business leader. And I think these types of stories are helpful. But just keep in mind at the end of like, it's, you can hold both of these mindsets. Like you can look at it and say, hey, paid ads aren't necessarily a long-term investment for most people, but still at the same time, business is all about arbitrage and take that arbitrage if it's working. Yep.
So look, at the end of the day, Eric and I both said it, it doesn't matter what anyone thinks. If spending money makes you more money, assuming it's ethical and profitable, do it as long as you can.
All right, that's it for today. Please don't forget to rate, rate, subscribe, and check out this next video here if you want to continue learning marketing and We'll see you tomorrow. Bye.
