What it Takes to Get 5X returns on Ad Spend and How to Win in Advertising in the Era of AI

Eric Eden: 0:59

Welcome to today's episode. Our guest today on the podcast is John Chan, and he runs a digital marketing agency called 2X. He works with direct-to-consumer brands and he helps them grow via digital marketing. Welcome to the podcast, john.

John Chan: 1:17

Thank you for having me. Eric Glad to be here.

Eric Eden: 1:20

All right, tell us a story, john. Tell us about some of the best digital marketing that you've done Well, for sure.

John Chan: 1:28

It actually has to do with a bit of a chance encounter and a side project that we're basically building where we're basically doing affiliate lead-gen marketing for affiliate brands. And so there's this one financial partner that we have out in Canada that we're doing lead gen for. And this started during the start of the pandemic when a mentor of mine said he bought a domain that's based on a concept that's related to a government lending program that was starting, because the timing of it was that there was new programs were coming out. All these people were searching for it and he built up this WordPress site. It was ugly. He was like, hey, john, I'm going to sell this thing, but before I do, you know what you can do with it. And I looked at it and it was like don't sell the thing, let me play with it. And so, since it started the pandemic, what we did was we took that site, we built out dedicated landing pages around various hybrid concepts and the idea was whoever was looking for that government program for the funding will provide information for it. But for whatever reason, if the application process was archaic or they couldn't qualify, here's an alternative source of funding you could get to. And we found and talked to and negotiated different various partnerships for funding sources, and all we did was we passed those leads to the other financial partners and whoever was going to have a strong closing team basically closed those out, and so we ended up. We're fast forward three to four years and now at this point, same program. We've switched it out slightly with the messaging. We've now done something like $20 million in loans completed, and so the commission structures for that has been fantastic for us. We get deals, commissions on the commissions, on deals that were closed, and we also get deals on commissions for that were renewals. So we ended building effectively a passive income stream for ourselves. Platforms and opportunities can change. Things come and go, but being a great marketer and being opportunistic, a direct situation at the right time, is a lot of what really that separates the good marketers from mediocre ones.

Eric Eden: 3:25

Interesting. So obviously what was easy about it was you got the name so you could be found in the search and you got the opportunity with people. What was hard about generating those $20 million in loans?

John Chan: 3:40

I think in general with any marketing campaigns, including this one, is that what happens when things don't work right, when you run a paid search campaign or paid market, like a paid social campaign, you're going to run into a lot of scenarios where the data is pointing you in a certain direction and you're trying to figure out, or that your data is inconclusive and you're trying to figure out, okay, what's next right. And so in this particular campaign or this particular case, we had to cycle through a few lending partners. We found the right both the commission structures that we sense and made it viable to do this as a campaign at scale, and we also had to figure out the closing ratios and the closing team. So we had to find a good sales team and, as with any marketing campaign, you're only as good as the product that you're marketing. And so if we found a team that couldn't close deals, it didn't matter how efficient our lead gender campaigns were they were, but they but deals couldn't close and we didn't have the right in economics to run a scalable campaign. But luckily we did. We found a great team that was very good, with very diligent about completion. To close, and also whenever you're working with an affiliate space, or even if you set up separate partnerships that are non standard, where you didn't have a great attribution platform, data connections between having a team pass their deal data back over to you in a way that can inform your marketing campaigns. That's always challenging and not a straightforward, and so I think the challenging part is what happens when you need to just reconcile, like, the leads that you passed over versus the deals that were actually closed. How could you tell which campaigns and which streams were effective? That's the inherent challenge with this particular business.

Eric Eden: 5:17

So your agency, what is on your website, is that you work with clients who invested over $6 million and paid advertising across Google and paid social, and you say that what you've been able to achieve for them is driving more than $30 million in sales, and that's interesting because that's a 5x return on what people are investing. How are you able to drive that kind of result for clients? What's the key to the success there?

John Chan: 5:56

The key to success is a good story. What's funny about that and this is the thing that I actually don't like about agencies presenting themselves in this way but in the same time we also have to do it ourselves is that you're only as good as the markets and the products that you market. When there are certain categories where a 1.8x is fantastic, it's not necessarily a bad marketing campaign because their margins are that high, but it just means that the companies and brands that we were lucky to work with had those brand equity built in where they were very efficient with their marketing spend because they could have those campaigns available to them. Part of it is conditions. Part of it is that you have to have a brand that has that type of efficiency available to them and also, as a condition to their growth, they want those efficiencies because when you're having such a high return on ad spend in the campaigns that you have, you're also trading volume for contribution margins, and so it's a bit of a start telling on our part, because in a certain sense, that's what people that are evaluating agencies are looking for. But with any company, any marketer that you hire, it really comes down to the nuance Sometimes a lower return on ad spend doesn't mean that it's actually a bad agency and, conversely, sometimes a high one doesn't necessarily mean that they're good too. But in both cases you'd need to have a marketing team that know the tradeoffs that you're about to make, as you're making these type of tradeoffs and decisions. But what's best for the company is what it comes down to. If you have the right ingredients for a scalable growth campaign, but not the right team or skill sets to diagnose, to uncover those growth opportunities, you're still going to find yourself in a very challenging position.

Eric Eden: 7:39

So it's twofold. The first thing is I heard you say you have to choose the right customers Because, for example, if some people have a product that doesn't have a price point that makes sense for digital marketing, you can't get that high of a return for them. And the second part of it is they have to be able to understand the tradeoffs between getting a high return, like 5X, and volume. Are those the two main things?

John Chan: 8:11

There's certainly conditions, but the third one is basically evaluating a team that can exploit that when they come across that scenario. Because, you're right, you're going to have situations where higher volume decreases the return on ad spend. But that's the tradeoff that you're making. And the other part that you touched on at this first point was margins. But those two are the precursors to the setup, to success. You need a team to be able to know what to do with that.

Eric Eden: 8:36

So how do you think in today's market about some of these digital channels the Google advertising, which has been around for over 20 years, and the paid social channels? How do you think about that? In terms of attribution, Some people are saying, because of the privacy issues today, that the results are being skewed because you really can't track it. Do you find that? Or, with your direct-to-consumer clients, is it easier to do the SI attribution? Get fingerprints on the weapon for the type of campaign you're running for clients For?

John Chan: 9:15

sure, that's an excellent question because markets have shifted and it's definitely harder than it used to be. But in a certain sense, I would also argue that maybe things were too easy back then and so in a sense it's actually not good for consumers when you have marketers be able to attribute everything so easily. But, that said, you do have environment now where cross-device tracking anytime you're on paid social and you have a consumer go under desktop or whatever those type of tracking has definitely been harder. But there are tools around it. There are third-party attribution tools that reconciles that data. You have Shopify coming up with their own direct integrations with Facebook so that when you have independent transactions being passed in, facebook would now deduplicate these type of transactions without really having any type of PII that you have to induce or any type of like persuasive kind of tracking on end consumers. But overall, at least on Meta's platform or on paid social platforms, attributions have gotten a lot harder, if nothing else, even the fact that you have shorter attribution windows, so you only have seven days as opposed to 28 days to teach the system that these are conversions that are valid, and so what it means is that if you have a business with a very high AOV when you have purchased considerations outside the fall, outside of the seven-day window. It just means that you had to be more patient and that you can't look at your numbers and take them at face value. So, first of all, you want to be able to pass in all the conversion data that you would have. You would have deduplications and put things in place. You would use tools like getLFR or anything like some third-party conversion to reconcile that when Facebook is capturing through Pixel and what server-side attribution tools that you're passing with, if it's a Shopify connection or third-party tool. You want to reconcile these type of things. So that's the first thing. But the second thing is you don't take these numbers at face value, because you have to know that, even though the platforms and the attributions have changed, consumer behaviors have not changed. Pre-ios 14, people shopped online. Post-ios 14, people are going to still shop online, and so the psychology and the mechanism of it hasn't changed. You just had to be more uncertain about the data that you're looking at and when you have to tell is it the problem with the numbers I'm looking at or is it the problem with the tools that I'm using, or is it something else and that just makes that job a little bit more, but that much harder, because you're dealing with a lot of uncertainty. That said, search things over to paid search, and now you have an environment where Google is tracking you across multiple platforms because they have that much inventory. They have access to YouTube, you're likely logged in, they can tag you on paid search, and so if you look at the new inventories that they're introducing something like PMAX and yet in fact, you have longer attribution windows it just means that you have new tools available to you and you have to make tradeoffs for your brand. Should your product be on paid search or should your product be on paid, primarily on paid social? And can you take the learnings that you have on paid social and port it over to YouTube shorts or port it over to YouTube right? And so if you look at the changing landscape, there's always new opportunities, there's always new things and you can't exploit Then not everybody is on top of, because, at the end of the day, consumer behaviors have not changed and you're still dealing with an auction and you're still dealing with platforms where other people are betting, and so when you find that there's new territory or new spaces that other people have not adopted. You're going to still find a lot of great arbitrage opportunities.

Eric Eden: 12:32

Interesting. I'm not sure if things were too easy back in the pre-IOS 14 days. It's like saying it was too much fun. There's no such thing.

John Chan: 12:44

Yes and no. I don't know. Maybe the two eases is not the right label, but it definitely meant that there are certain best practices and common patterns that just work for everybody, and things have gotten a little bit more technical. It definitely has helped. It gives you an edge if you understand the implications around tracking and the limitations of tracking, because you know what you're looking at. Is it me? Is it a problem? Is it a platform? You have to be able to diagnose some of things and it's not easy.

Eric Eden: 13:11

So where do you think this is going in 2024 and beyond, with paid social and Google search? What are your top couple predictions for how things are going to evolve? Based on those predictions, what do you recommend to other marketers?

John Chan: 13:31

Okay, if you look at where product development has trended in the last couple years, you have the advent of AI. That's basically taking over a lot of media buying and making it more pervasive. What it means is that app platforms are becoming they already are, but they've become more and more of a black box. What that means is that, if you think about skill levels between a senior or a senior, when you have junior marketers, you have intermediate marketers, you have senior marketers and you have expert market, what happens is that when you have a lot of the tools, extrapolate and abstract a lot of decisions for you set up a regular DSA campaign we'll take care of the rest. Set up an ASC campaigns we'll take care of the rest Any type of those type of practices that are encouraged. It just means that a lot of the skill sets are not dependent on those type of choices, and so you're already seeing a shift to. Then, if those are the levers that are no longer available to you, what are the levers that are available to you? Ai and marketing and work things ahead. They're going to see people invest towards great creative direction or creative ad, creatives, production, and so that's partly the reason why we shifted our messaging and our focus towards that, because it is going to be much more important that if you have the same settings as your competing brand, so if you're a brand owner and you're competing with different brand, your settings and the other person's settings are going to be fairly similar, and so you're not going to be able to beat them with the same level of optimizations on the account level, other than structuring those type of things. But what you're going to beat them out on is going to have better messaging than angles, especially anything that's unique to your brand that other people cannot tell. So creative direction and creative is going to be much more important. The other aspect of it is also paying attention to how platforms are emerging and what kind of inventory that's available to you that was not previously available to you and you move on to the next inventory. It's going to be always something new. So keeping your hand on the pulse of how markets shift and thinking about auctions is, I think, a useful advice for other marketers. And the other aspect of it is focus on the areas that don't change. Ad platforms come and go. Ad platform change over time, but the skill sets behind it being a great direct response marketer or just being a great marketer. That has not changed in the last 20, 30 years. We had great copywriters 20 years ago. We're going to still need great copywriters and creative directors in the next 10 years.

Eric Eden: 15:45

So it all comes full circle to the Mad Men era. That makes sense, all right. Thanks so much, john. Thanks for being on the show today. Thanks for sharing this great story and these insights about where things are going. We really appreciated. I encourage all everyone listening to share this with your friends. These are great insights. Rate, review and subscribe for us so we can keep bringing back great people like John. And thanks for being with us today, john. We appreciate it.

John Chan: 16:13

Thank you, eric, appreciate it.