Happy Sunday!
Before we start the newsletter, I wanted to take a second to acknowledge and remember those who responded and lost their lives on 9/11/2001. Every year when this day comes around, it makes me so upset to know that some people never got to see their parents, or their children, or their siblings or best friends ever again. It's so gut-wrenching. Rest in peace to all of them.
I hope you're sitting down, feeling hydrated, vibing (potentially listening to Come Back 2 Me) and ready to jump into a couple of topics:
- A genius way to leverage new technology by T-Mobile
- The future of audiences (creators)
Before that, I have some exciting news! Tomorrow, Moiz and I are recording an episode of Limited Supply with Harley, the President of Shopify. If you have a second, please reply to this tweet with a question for Harley! I want to make sure he feels the love from our community!
Ok, let's get into today's newsletter! Thank you again for the question.
One of my favorite things in marketing is when there is an advancement in technology that a company figures out how to use, first, and can use that advancement as a competitive advantage to outdo their competitors in the market. Today that was this T-Mobile example — you can now download and install a SIM card to your iPhone, just by installing an app (eSIM), and T-Mobile has made it easy to trial their service for free, for 3 months.
The COGS of a 3-month trial are probably almost nothing to T-Mobile, and then compared to the LTV of a potential customer (T-Mobile's churn is 1.01%, the lowest among all carriers), it's a brilliant move.
One random thought with must-have services, with low NPS, like cell service, internet, insurance, etc. Consumers go where they feel a combination of two things:
- Priority/high standards for customer service and support
- The brand that appeals to be the most innovative, working hardest for their customers, and being the "cool" one among competitors — I think T-Mobile did a phenomenal job becoming the cool brand, over the last decade.
If you're a brand that sells physical goods, you should try to partner with companies that sell digital goods — the perceived value is immensely higher than the cost of those digital goods sold, and they can make for awesome partnerships.
For example, if Long Wknd partnered with Spotify and said, "If you subscribe to Long Wknd, you get 3 months of Spotify on us for the best shower jams" — the perceived value is $9.99 x 3 months, but in reality, Spotify's COGS on a 3-month trial (usually labels have lower rates they get paid for trial account streams) is significantly cheaper than paying Facebook to acquire another user the old fashioned way.
Anyways, let's get into today's email...
The punchline is: If you want to thrive and build a consumer business, you need to come to the table with an audience.
Think about the B2B company you hate most, with sales reps that reach out relentlessly. First of all, they're incredibly annoying. Second, the reason it works for them is they have built a business model where they have room for sales peoples' salaries, bonuses, overhead, etc.
Consumer brands don't really have that. The traditional model of consumer brands has always been to spend 10-20% of your revenue on marketing. In 2018, I wrote an article called, The Customer Acquisition Pricing Parade, where we talked about the unsustainable nature of spending 40% of your dollars directly with Meta and Google, even alluding to Warren Buffet's definition of a parade:
“One spectator, determined to get a better view, stands on their tiptoes. It works well initially until everyone else does the same. Then, the taxing effort of standing on your toes becomes table stakes to be able to see anything at all. Now, not only is any advantage squandered, but we’re all worse off than we were when we first started.”
David and I wrote, "The future of holding companies will be built around audiences, not industries."
With the growth of the internet, the institutions that used to capture attention have gotten less and less relevant, especially ones where consumers would discover new brands or products. Then, thanks to the democratization of content creation, brands started working and paying creators or media companies with an owned audience to get in front of their next customers. It worked insanely well.
It wasn't the first time brands hired a new face — think about red-carpet celebrities and fashion companies, or Wilson x Roger Federer — but, it was the first time that someone who was a YouTuber or someone who posted high-quality Instagram content was able to monetize their following. There are a few reasons this started working so well:
- The best creators didn't traditionally market products they didn't personally believe in.
- Brands were not just buying their "post", they were buying alignment, trust from the creators' audience, and a piece of content they could re-use on their own.
- People actually want to see what creators have to talk about when something new comes out. It's like watching Real Housewives of Salt Lake City — you can't wait to turn it on and see what happens next, which doesn't happen with billboards or TV ads.
- They make the products cool. Either by broadcasting the story behind the product/brand or just by consuming/using/wearing the product, it can instantly become "cool" as the kids say.
On the latest All-In Podcast, David Friedberg said, "If you don't have content creation in your blood, you have to buy a content business, or you're gonna die." I mostly agree.
I agree because I do believe that brands need to have a strong focus on how they acquire customers consistently through organic content. Whether that is a really defined newsletter, a series of YouTube content, creating shows for other platforms (think Bake Squad with Christina Tosi, founder of Milk Bar), etc., it's important to have an engaged audience.
In the beginning, an audience gives you a huge advantage to grow and put some cash in the bank. In the long run, having a strong content business allows you to move faster as a marketing organization, and insert your brand into opportunities.
Friedberg also touched on how this plays out so fortunately for Penn Entertainment, which bought all of Barstool. They didn't have an internal content machine, nor an audience, so they just bought the audience. Recently Ridge Wallet also bought Everyday Carry, which gets >600k monthly visitors (source: similarweb). While Conor (CMO) has built an internal content machine combining freelancers, agencies, and internal creative, an additional audience makes both sides even more powerful together.
Unlike with paid customer acquisition, as you grow, the cost becomes cheaper when you are building an audience for good content. It's like the loss-leader item on your site or the gift with purchase — content is a product, but when it's always a free product, and the social proof (views, engagement, interaction, following, etc) gets stronger, the barrier becomes lower for new people to explore it.
That said, it's not easy to do it. In fact, it's really hard. That's why we're seeing more creators launch the brands themselves. The barrier to entry for them is 80% lowered — they have the customers if their content matches up. Some winners:
- Chamberlain Coffee by Emma Chamberlain
- Love Wellness by Lo Bosworth
- Skims by Kim Kardashian
- Happy Dad by NELK
- Apparel by Danny Duncan
This works in B2B too — you could say HOOX by Nik Sharma (yes, speaking in the third person) is a creator
brand, too.
So what's the punchline? The audience is a huge competitive advantage. Your audience is what makes you a functioning brand — work on building it or buy it. Treat the audience like a product on subscription with a growing amount of monthly subscribers that you can't let down.
What do you think? Reply with your thoughts to this email — I'm really curious to know what you think.
On to some fun stuff...
Vendor of the Week:
#paid — The easiest way to run creator-whitelisted TikTok ads that feel organic
When it comes to advertising on TikTok, it requires a little bit more finesse, than running Instagram traffic, in my opinion. The TikTok platform itself moves so fast, that your web experience has to match it. A good percentage of HOOX customers have us imagine & develop pages that are specific to TikTok — when someone is used to moving 100 mph through the For You page, the web experience has to reciprocate that.
Additionally, the video content needs to be at a level that survives the ruthless nature of TikTok users. If you scroll TikTok, look for how often brands turn off comments in their ads — it's because they get called out by TikTok users for having such horrible ads and ruining the TikTok experience.
So what's the solution? There are 2 main solutions in my eyes:
- You do what Jones Road Beauty does so well, which is you invest heavily into building an organic TikTok account. As you find things that have a higher-than-baseline engagement level, then you begin running ads behind them.
- You plug in with a platform like #paid, where you can manage the process of hand-picking and onboarding creators to the brand, message them, ship creators their products, review their content, see the analytics, and then run ads behind the content that goes live.
Every time I've worked with #paid, I've always loved it. You get to choose from so many options of creators, so it's very hard to end up with content you're unhappy with.
If you want to check out #paid and see how easy it can be to run effective TikTok ads, enter your email out on this page, it’ll take 4 seconds.
The last thing I'll say about #paid, is if you ask any creator who's worked on the platform about their experience, you often hear that they treat creators the best among all the platforms that exist. We love to hear that!
Book a demo for #paid by clicking here.
Brand of the Week:
Hero Cosmetics — The brand behind Mighty Patch, that just sold for $630,000,000 to Church & Dwight
We can't forget about the incredible news from Hero Cosmetics this week! 5 years ago, Ju Rhyu created a better acne-fighting cosmetic tool after discovering it in South Korea and called it Hero Cosmetics.
Since then, Hero Cosmetics did incredibly well, growing each year and expanding quickly into retail channels, eRetail, and building a direct business as well. Now, the same company behind Arm & Hammer, OxiClean, and Nair will continue to expand the brand through its distribution, as well as launch new products with their supply chain.
Try the Mighty Patch here!
That's all for this week
What can I talk about that would be helpful? Tweet me, email me, DM me... I'd love to hear.
I hope you all have a great rest of your Sunday or Monday, depending on where you are in the world. Stay hydrated, get a sweat in, and get those 9 hours of sleep. You'll be shocked at how good you feel when you wake up.
Have a great upcoming week!
