Comment by ssharp | Hacker News Reader

Comment by ssharp | Hacker News Reader

I was at one company several years ago and made two big changes to digital advertising:

#1 - Eliminated all paid search other than some limited branded search terms and shifted all the money to affiliates who were way better at making profits on the keywords we were competing on

#2 - Eliminated all display advertising after running numerous experiments showing it provided almost not incremental conversions, even though the platforms happily took credit for them.

Those two things drove our blended CAC down substantially and by building better affiliate relationships, sales actually increased.

The lesson here is that you need to try a lot of things out and you should be continuously questioning what you're doing and running specific experiments to gut check effectiveness of any ad platform that is slapping cookies on wide groups of users and claiming conversions.

My suspicion is that this is near impossible at any large organization, even one as new as Airbnb. I can just imagine someone walking into a team of 20+ performance marketers and suggesting they need to experiment to determine if any of it is remotely effective. COVID forced them into this but it's something that they should have already been doing.

I also suspect that the top line focus/obsession of most VC-backed companies make this type of exercise seem almost counterintuitive. Don't mess with or question the momentum.

Performance marketing is essentially the only way most startup marketers can go. The reason is that they generally have 6 to 12 months to prove themselves as performance marketers. Generally the CEO has sold some insane growth model to the VCs. As a marketer, you do the math: $ growth required/ASP = number of deals. You get to your lead targets by reversing the funnel (Closed Won -> Opportunity -> Lead). And you see you need a sh*t-ton of leads to ever get close to hitting that number. And you need them quick because the number just bigger every quarter. So you can't even think about long-term approaches - you have to grab at tactics that you know can maybe generate the number of leads - even if you know in your heart-of-hearts that they won't generate anywhere near the number of opportunities.

This is all just my opinion and I'm sure there are better marketers than me that make this work, but this is what I've seen happen in too many VC-funded/backed companies. And it gets even harder when we're at the super levels of funding that we're now seeing. So if I'm a relatively small company (funded to $50m) that is spending $5m a year on marketing, and I'm competing against a company with $500m in funding and, say $100m on marketing, then it's even worse.

Yup. Scaling marketing without accurate LTV's is normally a terrible idea. I've seen so many startups go bust because of mistakes here (especially if you have a long sales cycle/top heavy revenue (like most f2p games)).

But, as you said, the incentives point towards terrible outcomes, so this keeps happening.

Maybe your situation or industry is an exception, but my view is that affiliate marketing is one of the most corrosive influences on today's internet. It drives a truly mind boggling amount of spam of all types, from affiliates who add literally no value other than inserting their affiliate code into the transaction. The proportion of content on the web that provides no true new information, but exists solely to drive affiliate traffic, is surely massive.

So, it's great for your business that this worked, but I personally don't see any strategy that leans on affiliates to be worth celebrating.

A lot of things can fall under the "affiliate" umbrella but what we did was doing 1-on-1 deals with content providers who were acquiring a lot of relevant traffic. It was not promo code spamming.

Wait, so what was the monetization channel for the influencer?

#2 is basically an industry standard for ad firms (at least good ones), you'll usually only get people buying those ads to fill budgets or to do branded advertising that's only purpose is to raise brand awareness. I don't really agree with your #1 point, but that really depends on your vertical. You couldn't really do that well in service industries or financial/legal services, etc.

Oddly enough, display ads crush it for restaurant catering

In my example, I saw a lot of competitors try and fail at acquiring customers profitably. You could see the ebbs and flows of them trying as well as the well-financed players dominating spend. When the industry numbers came out, things never lined up.

That said, I’ve worked at brands where paid search and paid social are incredibly valuable channels.

Reply on news.ycombinator.com