What Losing $100M and 110 Jobs Can Teach You About Running Ads...
In this live presentation, Hernan Vazquez of ScaleDriven uses a real-world case study of the entertainment company Little Things, which lost $100 million in revenue and 110 jobs after its reliance on Facebook‑driven organic traffic collapsed. He explains how the company built a business on a single platform, the consequences of algorithmic and business‑policy changes, and the stark margin differences between organic (high‑margin) and paid (low‑margin) acquisition. Vazquez argues that comparing organic and paid performance is misleading, and that sustainable growth requires a balanced mix of both, alongside diversification into other channels such as OTT, email, Pinterest, YouTube, and emerging platforms like TikTok. He outlines the cyclical nature of platform incentives—how platforms initially offer low CPMs to attract advertisers, then raise costs once they dominate—emphasizing the need for algorithm‑proof, long‑term marketing systems. Throughout, he offers practical advice on building diversified traffic sources, nurturing email lists, and avoiding reliance on any single channel, positioning ScaleDriven’s services as a solution for entrepreneurs seeking sustainable scaling rather than quick hacks.
Marketing and advertising can be complicated. What's most important? What should I focus on? Direct marketing? Email campaigns? Social media? Cold calling? With Marketing Atlas, you'll have a clear guide to get more leads, close more sales, and take your business to the next level. Welcome to Marketing Atlas. Marketing Atlas.
Marketing Atlas.
With your host, Hernan Vazquez.
Here's what losing $100 million and 110 jobs can teach you on how to run effective ads and growing your business online. What's going on everybody? Welcome to today's, uh, content format, however it is that you're watching this. Welcome to today's live. My name is Hernan Vazquez with scaledriven.com. At scaledriven.com, what we do is we help entrepreneurs build algorithm-proof client-generating machines. If that's something that you want to do, if you want to scale this year, if you want to rest at night knowing that your marketing is being taken care of, head over to scaledriven.com and schedule a call with my team. And this is specifically important in today's day and age because we're gonna go through a case study of a company. In fact, it's a Twitter thread that I'm going to share with you guys of a company that lost $100 million in revenue and potential acquisition and had to let go of 110 people because they relied too much on one source of traffic and on organic traffic as well. So we're going to go through that. If this resonates with you, head over to scale-driven.com. Now, here's the thing. This is a conversation that I had with one of my friends, Good friends and great entrepreneur, super smart guy. His name is PJ, Patch Mangadimi, and I learned a lot from him. And we were talking about how he grew his business. And one of the main things that they used to grow their business back in the day was organic reach on Instagram. So they would post, they would do a post on Instagram and they would get a lot of people sign up for their Secret Entourage Academy at that point. And then they would do the same with some other brands and whatnot. And granted, PJ is a great dude and he's super smart. They were relying super hard on organic reach. Okay? They were relying super hard on organic reach back in the day. And what happened is that when Facebook acquired Instagram, they started implementing the same algorithms, the same throttling of organic reach to Instagram, right? And that's what they saw. Their organic reach plummeted and their growth plummeted. Their growth plateaued. The amount of leads that they were generating, the sales that they were generating also plateaued. So they had to jump into advertising, right? And that's when I came in and helped them develop a system. And now they're doing really, really well because they're super smart, super hardworking guys. And I've learned a lot from them, but this is kind of a similar story. Okay. So I want to share with you a story a thread. It's actually a thread on Twitter that I just came across, and it's showing how Little Things, a company called Little Things, lost $100 million and 110 jobs. They had to let go of 110 people because they were relying on one source of traffic, and most importantly, they were relying on organic traffic. Okay, so let me share my screen real quick, and I'm going to leave a link to the thread, uh, somewhere around here. So if you're watching this, I'm going to leave a link here. If you're listening to this, there's also going to be a link in the description so that you can go ahead and check it out. I think that we need to give credit where credit is due. So the link is going to be here. So it starts by saying, how my dependence on Facebook cost my startup $100 million and 110 jobs. And this is great. Kudos to Joe to actually come out clean and just talking about this. And I'm not going to read the entire thing. I'll let you guys go through it, but I want to kind of pick a couple of things that are really resonating with me right now. And here it says, in early 2018, so 4 years ago, female-focused feel-good entertainment company, which was pushing $75 million a year in revenue, had 110 amazingly creative employees and a fledgling OTT streaming channel. So, they were streaming content on Facebook, basically. So, here it says, we built the business on the back of Facebook. Okay? And granted, they were building their business on the back of Facebook traffic, Okay, our traffic video views skyrocketed beyond BuzzFeed, ABC, CNN, Huffington Post, and Fox because of their demographic, right? They were aiming towards females, and they're, you know, they're— they were getting a lot of organic views back in the day. We became masters of Henderson's Facebook newsfeed with feels-good articles, videos, and stories. 20 million social media followers, 40 million Comscore monthly uniques, uh, 900 million video views per month. Now, at some point, what happened is that Facebook changed gears. In fact, Facebook went down hard on all of these feel-good entertainment companies, Little Things being one of them. And that was mostly a business decision. That was a business decision that Zuckerberg and the board had taken. And basically what happened is that they went ahead and they changed the way they would go out there and present Facebook to the world. So this is a business decision. Okay. So they were relying so much on another company's business that a business decision from another company impacted their bottom line. So this is really important. So it's not just the social media ads decision, or it's not just an algorithm change. It was a business decision that impacted the way they did business. Right. So what happened is that 90% of the organic traffic dried up. Okay, and here's something that I want to show you guys. This is, I think, super interesting. So it says paid yielded a 10 to 20% margin, while organic, 90% margin. And this is where a lot of entrepreneurs and a lot of people that I know that have big followings, or maybe they're building a following, or maybe you're selling stuff on social media organically, they get kind of They get kind of, uh, how do I call it? They, they get kind of confused about how it works. Here, Joe is, it's basically comparing the yield of paid versus the yield of organic, and that's something that you cannot ever do. And here's why. Paid, paid acquisition of eyeballs, of leads, of customers will always, no matter what you do, will be worse. Your numbers will be worse if you compare them toe to toe with organic. Why? Because number one, organic is people choosing to follow you, choosing to opt into your list, choosing to follow you on social media. And the fact that they're choosing to follow you, it's a big leap versus Paid. On paid, usually you're just reaching out to people that they do not know who you are. They do not know anything about you for the most part, especially for cold traffic. And of course, if you compare the two, they're going to suck. That you can say, here's the question between profitability and scale, which is something that we're always dealing with when it comes to paid advertising, profitability and scale. The more you scale, the less profitable you become. This applies for you as a company. The more you scale, the more employees you have, the more overhead you have, the less profitable you become, right? And you do it to the tune of millions of dollars every year. But it also applies to marketing campaigns. The more you scale a marketing campaign, the less profitable it becomes. If you think about it, let's say that you have a list of 1,000 really nurtured and really engaged people. You can send an email and And you will make a ton of money. If you have, let's say, a $5,000 offer, you can make a ton of money just by sending a couple of emails. That is low-scale, super high-profit strategy, right? Now, that doesn't scale because at some point everyone has seen your emails, everyone, you know, and then you can keep on pounding your list, but you're going to burn it out, right? So that doesn't scale. So it's a low-scale, super high-profit strategy. On the flip side, maybe you're getting tons of eyeballs to your content, but it's costing you a lot more to acquire a customer through paid advertising. So your margin gets lower, right? So your margin gets lower. So what happens is that that is a high-scale, low-profit strategy. What you want to do is you want to combine both, right? You want to combine both, and you never ever want to make the mistake of comparing the two, because if you compare the two, you're just going to say, okay, I need to keep on betting on organic because organic is doing well. And you can, of course, but organic is not sustainable. Advertising is. Okay? So this is something that you want to have in the back of your head. And this is something that happened to Little Things. They were relying on 90% margins because of their organic reach. And they weren't investing a lot on advertising because the margin was not there. Okay? So in order for you to build a sustainable machine to generate results, you want to do both. You want to do organic and you want to do paid. Okay, we're not saying, hey, just choose one or the other. That's not how it works. Okay, so let's keep, uh, let's keep going. Uh, we tried for years to diversify by pushing hard into OTT, email, Pinterest, and YouTube. Uh, we were never able to grow the alternative channels big enough to balance out the insanely large amount of views that Facebook was sending. Of course, right? Each channel needs to have its own strategy. And of course, we're doing this, you know, as a post-mortem campaign following Joe's amazing thread. But of course, right, if you compare, hey, I'm going to double down on Facebook, of course you can do it and double down on Facebook, double down on Facebook ads, double down on organic. But that's the thing, right? You cannot rely on organic. So here's something that's happening right now and why I think this is a great case study is because here he says, choose your platforms wisely and always remember, if they can give it, they can take it. Okay, this is super, super, super powerful because right now people are going crazy with TikTok. TikTok is all the rage, right? And it reminds me of the early days of Facebook. You, you can still go viral on TikTok as they develop their ads platform. And I just launched a couple of ads on TikTok, and we're going into the TikTok advertising route as well to offer that to our clients. You know, and we're building the processes and we're launching ads for ourselves as well. And they're giving us great CPMs, great placements. You can still go viral on TikTok. There's a lot of stuff that you can do. But the reality is that that's how it usually works. Okay, they give you a lot of stuff so that you jump platforms with your advertising dollars. They give you better service, better CPMs and whatnot. And once they have a market share, once they have a market share, then they can start doing a lot of additional stuff like raising CPMs and whatnot. We see this, these tides or these waves or these seesaw, if you would, with YouTube and Facebook, right? YouTube and Facebook, YouTube and Facebook. We see it all the time. And now we add TikTok to the thing. So TikTok will rise because, I don't know, Facebook is getting too picky when it comes to policy. So the other 2 platforms rise, and then when they get too picky with policy, then it goes back to Facebook and whatnot. So you want to be sustainable with your advertising and you want to be sustainable with your business. And the way you grow a real business is, of course, you're going to leverage the power of organic. We do it all the time, right? We keep on telling our customers and our agency clients to keep on developing content. We'll use it to advertise, but you want to double down on advertising. And of course, your margins will be lower on the front end, but guess what? A buyer is a buyer is a buyer. Okay. In words of the great Dan Kennedy, and paraphrasing Russell Brunson, he once said that the only person that he kept on buying stuff from was Dan Kennedy. And the reason behind it is because Dan Kennedy kept on offering stuff to him when everyone else stopped. He kept on selling him stuff and he kept on buying because he's a big marketing geek like I am and the rest of these guys are. So I hope that this helps. This was kind of a Case study. Okay, I'm gonna leave a link to the thread. I think that this is super powerful because this is a real thing. Okay, you can build your business on organic alone. Yes, you can, but you cannot grow or sustain your business long term on organic alone. You need to combine traffic sources. You need to do paid advertising. You need to be growing and nurturing that email list, and you want to keep on doubling down on nurturing and diversifying your traffic sources. Okay, if you want my team and I To help you with this, to help you putting together a sustainable, algorithm-proof, long-term business machine, head over to scaledriven.com if you're serious about scaling your business. Not if you're looking for a quick gain, or if you're looking to discover the next hack or the next trick or the next thing that will skyrocket your sales. No, that's not how we work, okay? We work on sustainable, proven, long-term strategies to actually grow any sustainable long-term business because business development is a marathon. It's not a sprint. So if this resonates with you, head over to scale-driven.com, schedule a call with my team. We'll be happy to help you understanding how you can diversify your traffic, how you can use your assets more effectively, which is the main thing that we're here to do.
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We're not just running traffic. We're not just writing copy. We're actually moving the levers that move the needle and increase revenue and profitability. That's something that you want to do. Head over to scaledriven.com. In any case, I hope that this helps. Leave a comment, share this with somebody that needs to see this. Leave a comment if this is helpful. If you want to have any other conversations about marketing, digital marketing, uh, and business development in general, leave the comment below. Thank you guys. I hope that you have an amazing rest of your week. I'll see you guys
