Eric Siu and Neil Patel break down why overfunded startups waste millions on ineffective marketing. One company spent tens of millions on a mobile billboard that made their competitor's name bigger than their own. They argue real opportunity lies with older enterprises needing AI help, not Bay Area hype.
You have this topic here, why raising too much money causes founders to burn it on silly things. So I assume you are referring to a picture that I sent you the other day.
Yeah, we won't mention the brand name, but Eric was at an event and I texted our mutual friend and then he's like, I'm the one who sent it to Eric. And when I texted him, I'm like, by the way, I got it from Eric. And then he's just like, I'm the one who sent it to Eric. So I was just cracking up and you, him, and I were laughing. And I was messing with him, I'm like, this is what happens when companies raise too much money.
Yeah.
Because they start burning it on silly marketing things. And—
Let me describe what happened first.
Yeah.
Okay, so this was at the Ahrefs conference and then this company, they hired a truck and these, like a driving billboard basically. And on the billboard it said, you know, try our tool, right? Use code Ahrefs for 80% off. But the ironic thing was the word Ahrefs was bigger than all the other words on that ad. And it actually drove more signups for Ahrefs.
Really?
Yeah, because people saw the word. So they, they, everyone started the next day. I was talking to someone, Patrick on their team, and Patrick's like, dude, we got a lot more signups and people are looking for an 80% discount. I was like, maybe you guys should offer some form of 80% discount just to capitalize on it.
Oh yeah, that's smart.
Yeah, but continue on. So this company, I think they've raised, let's just say tens of millions of dollars, right?
More than tens of millions. It's quite a bit higher. It's not 100, but it's high up.
But either way, even in the Bay Area, you see all these people having all these billboards on the freeway to the city.
And I'm like, dude, most of these billboards don't convert the way that people want and they're paying an arm and a leg and they just want branding.
And it all says the same shit. AI, AI, AI, AI.
Yes. And I'm like, dude, this is just a waste of money. Marketing dollars could be spent more efficiently. And I look up some of these companies, And I was like, Ethan, have you ever heard of this company? He's my brother-in-law. I've created some companies with him in the past. And he's like, no. He's like, they must be decently big if they're spending money on these billboards. I look it up, raised over half a billion dollars. I'm like, wow, some of these companies are just raised a ton of money. I'm like, no wonder they're running these useless ads.
Yep.
And it's just like, you're not going to get an ROI from a lot of stuff. It's not that billboard ads are a bad idea, it's the messaging that they're putting in on the billboard ads and it's the offer are really terrible and they're just doing these things because they have money to blow and they should be spending it in performance areas first because that'll convert a lot higher. And I get billboard ads and offline are versions of performance, but they're just blowing money.
I also don't think that's the right person or the right company to target. Like, you know what I mean? Like you don't see other Ahrefs competitors doing that type of stuff. And so, yeah.
Yes, and even with the Bay Area billboards and them talking about AI, I'm like, dude, when I look at your offer, like I looked at the companies spending over, who raised over half a billion, I'm like, your ideal companies are outside the Bay, not in the Bay. You're trying to help old school companies adapt with AI. The companies in the Bay are very AI forward. You got to go push all these big enterprises that aren't headquartered there and convince them to, leverages technology and they want to and they don't know how, instead of targeting these startups and corporations in the Bay who think they already know everything and can do it all themselves.
So the last thing I'll say is this, I've been interviewing more people because we're going on, like we're just pushing, been pushing for more headcount right now. And when I talk to people, like a lot of these people, I'm just, I become so disappointed because it's like to what you say, you just need to think a little more to go the extra mile to understand, oh, maybe my customer base isn't here, or maybe I shouldn't have my billboard say the competitor's name bigger than like all the other words, right? And so when I talk to people, Like I can tell like the person that said the 75,000-person agency is doomed, I'm like in my mind, okay, this guy invests $0 in AI per month and then he's kind of expecting the next company he goes to to save him. And I'm just like, people are trapped in this like prison and all you need to do to break out of this prison is just to think a little further out and then you'll perform much better than all these other companies.
Yes, but before you leave, I'll give you the Dentsu example, 'cause a lot of people think these big ad agencies don't try to adapt. Years and years ago before ChatGPT was even out, we hired a guy from Dentsu whose only job was to automate and leverage technology to replace humans. These organizations have spent a ton of money, not a million, not tens of millions, much more on this stuff well before ChatGPT. The issue that they end up running into is, I'll give you a prime example. Imagine you had 50,000 employees and you told your employees internally, hey, I got this new person named Lindsay. I'm making up a name.
Lindsay again.
Okay. Lindsay here is to help automate things with AI. So then that way we can just do things with less humans. How many of those 50,000 people would want to help Lindsay replace their job?
Very small.
Exactly. That's the issue with it.
Yeah. Well, I mean, you can't, it comes down to the story, right?
No, I know, but it was worded really differently because I was talking to him because we hired him and he's just like, it doesn't matter how we positioned it. This is one of the largest holding companies. He's just like, people all saw the writing on the wall where if they helped me automate their job, they would get fired. So no, everyone pushed back and just wouldn't give me the time of day or they would run me around in circles.
This will be a good next episode. So that's it for today, guys. Please don't forget to rate, review, subscribe, and we'll see you tomorrow.
