Even with interest rates up, valuations haven’t returned to historical norms. Many people argue this is a bubble. But what if higher valuations reflect a structural shift in how investors participate in the market?
Continue reading →Very soon, AI will let brands know all publicly available info about their customers. This is going to revolutionize ecommerce.
Continue reading →Ever since I began acquiring DTC e-commerce businesses, people have asked me which business categories are ’the best.’ But I’ve concluded there’s no such thing as a universally good or bad category.
Continue reading →I often talk with friends in the ecom space who acknowledge that valuations are low today but expect them to recover to 2016-2021 levels soon. Hate to burst your bubble, but the Fed isn’t going to save us.
Continue reading →Many people I know invest in the industry in which they work. I think this is a mistake. You should be diversifying your career risk through your investment portfolio.
Continue reading →One of the best things about ecommerce entrepreneurship is that it doesn’t require much technical skill. Paradoxically, this is what makes it incredibly difficult.
Continue reading →Most people expect the Fed to lower interest rates soon. But if they don’t, startup valuations will shrink more than you expect: probably lower by 50%+ from where they were just 2 years ago.
Continue reading →A DTC ecommerce brand’s data is valuable, but only to the brand–not an external acquirer.
Continue reading →What is the best way for ecom business owners to incentivize the CEOs / general managers of their businesses? This is genuinely a puzzle.
Continue reading →With some key exceptions, it's worse than last year
I wrote last year about how poorly DTC companies were performing in the public markets. Unfortunately now, with some key exceptions, it’s worse.
Here’s a representative sample of public DTC brands, the same as last year.
As of this time last year, most DTC stocks were down 85-90% from peak. Now, if anything, it’s closer to 90-95%.
Continue reading →It's never been easier to start a DTC business—and that's the problem
It’s never been easier to start a DTC business. Paradoxically, that’s made it much harder to run a profitable DTC business. Why? Lower barriers to entry has led to stifling competition.
I got my start in DTC in 2014 at Harry’s, the men’s shaving company. Harry’s, launched in 2012, had a custom-built site which required a full team of developers to maintain and update.
When I co-founded Hubble in 2016, we chose to launch on Shopify and only needed 1 developer. Now at Agora, the DTC sites we’re operating have 0 dedicated devs. Shopify has largely replaced the dev team.
Continue reading →It's because the VC's investors control the money—and they want it to be hard
Hearing about how hard it is to raise from VCs right now? It’s because the VC’s investors control the money–and they want it to be hard.
A recent article in the Financial Times reported that VC’s have a record amount of “dry powder”–more than $300bn. Dry powder is money that VCs have raised from their investors, limited partners (LPs), but have not yet deployed into startups.
But in 2023, despite the record, deployment fell to a 5 year low. Why?
Continue reading →Like WeWork's Community Adjusted EBITDA, it's not real
Wework infamously reported “Community Adjusted EBITDA” as an ultimately fake measure of profitability. Unfortunately, I’ve noticed that many ecom brands report what I’ve taken to call “DTC Adjusted EBITDA.”
It’s also not real.
DTC Adjusted EBITDA is a collective set of accounting choices that allow brand owners to lie to themselves about how profitable their business really is. After almost 3 years of diligencing and acquiring DTC brands, here are some of the most common issues I’ve seen:.
Continue reading →Is the future of DTC a bootstrapped swimwear company run by a 26-year-old Tiktoker?
Is the future of DTC a bootstrapped swimwear company run by a 26-year-old Tiktoker who calls herself Strawberry Milk Mob? Quite possibly.
One of the cliches about DTC ecommerce is that it allows a company to “cut out the middleman.” Because the company is selling directly to consumers without having to pay retail store markups, it can pass on the savings to you, the consumer. This pitch is part of the reason I started Hubble Contacts.
Continue reading →Stock options in startups that are external, but under their control
Large tech companies have figured out a new compensation model to incentivize their most productive employees: stock options in startups that are external, but under their control.
Compensation is not structured consistently in the tech industry.
Startup employees, especially founders, earn a base cash salary but the vast majority of their compensation, in upside cases, comes through equity. The most successful startups employees can earn many millions of dollars or more if their company has a big exit. It’s pay for performance.
Continue reading →Their size makes them unprofitable
VC-backed ecommerce businesses often generate a ton of revenue. But somehow few have reached consistent profitability. It’s not an accident: their size makes them unprofitable.
I’ve previously written about how few VC-backed ecom businesses have reached profitability. For example, in the last 12 months:
This is just a sample. The average public VC-backed ecom business does $100mm+ in revenue but loses $50mm+ a year. Why?
Continue reading →Some exceptional brands can only exist online—and that's their advantage
Most consumer shopping happens in physical stores, not online. But some exceptional brands can only exist online. These exceptions highlight a neglected strategy for ecom brands to succeed.
While I’ve made my career in ecommerce, I need to be honest about its shortcomings. In many ways, buying products in stores is better:
For in-store purchases, there are no shipping costs; consumers are their own fulfillment and delivery. This should be passed on to consumers in the form of lower prices.
Continue reading →VC-backed ecommerce isn't dead—but how VCs invest will change
VC-backed ecommerce has struggled recently. I don’t think it’s dead, though. How VCs invest in ecom will change, but the invested companies will be much stronger for it.
The modern ecom VC cycle kicked off around 2010 when Warby Parker was founded. Warby sold directly to consumers and was a huge hit with investors. Pretty soon, dozens of companies sprang up with similar models like Casper, Dollar Shave Club, and Harry’s, raising hundreds of millions each. They largely used the capital to buy inventory, build teams and, most of all, spend on marketing, especially Facebook ads. This era lasted from 2010 to around 2018; let’s call it Ecom 1.0.
Continue reading →In many cases it's not just worth less—it's worth 0
Many founders and employees don’t realize what the startup downturn means for their equity. In many cases it’s not just worth less–it’s worth 0.
The crash in startup valuations in the last 24 months is difficult to overstate. In the space I know best, ecommerce, average revenue multiples peaked at ~5x. Today, the new normal is 0.5-1x–down 80-90%.
But it’s not just ecommerce. Recently, Bessemer estimated that SaaS multiples are down 75% from peak. Fintech multiples are down from 19x revenue to ~5x now, also down 75%. Multiples for marketplaces businesses like Fiverr or Etsy are down from 10x to 2x, or 80%.
Continue reading →The acquired businesses have if anything done worse than the public ones
VC-backed DTC companies can exit in two ways: go public, or get acquired. The public brands have performed poorly. Unfortunately, the acquired businesses have if anything done worse.
I’ve written about how most public DTC brands like Allbirds or Smile Direct Club are down 85%+ from their peak value. The performance of brands which have been acquired is much trickier to gauge as their financials are rolled up into the buyers’. Still, it’s possible to piece it together.
Continue reading →They collectively raised more than $15B—now they're starting to collapse
Ecom aggregators, companies that purchase small profitable ecom brands, collectively raised more than $15B in ‘20/‘21. Now, less than two years after peaking in value, they’re starting to collapse.
Last month, it was reported that Thrasio, the original aggregator which raised over $3.4B, had engaged restructuring advisors, likely indicating a bankruptcy announcement soon. Benitago, which raised $325mm, went bankrupt last month. Many others are teetering.
I’ve been somewhat reluctant to write on this topic because I myself co-founded an ecom aggregator, Agora, in 2021. I’m friends with many in the industry.
Continue reading →Two major public DTC companies just declared bankruptcy or sold for pennies—and it's not hard to predict who's next
It’s finally happening–2 major public DTC companies just declared bankruptcy or sold for pennies on the dollar, respectively. And it’s not hard to predict who’s likely to be next.
On Friday, Smile Direct Club filed for bankruptcy. It was valued at almost $9B in its IPO in 2019. It’s currently worth nearly $0. Also on Friday, Blue Apron announced that it is selling itself for $103mm. While this is a premium to its pre-acquisition valuation, at peak Blue Apron was worth over $3B, so the sale price represents a drop of 97%.
Continue reading →Lower costs for you means lower costs for everyone else
There has been a lot of excitement around new AI tools that are supposedly going to make it much easier to start and operate DTC businesses. Unfortunately, I think these tools are eventually going to make it harder to run a profitable DTC business.
Since ChatGPT exploded onto the scene, everyone and their mother has launched their own new generative AI tools. DTC software providers are no exception. Last month, Shopify launched Shopify Magic, which they describe as “a suite of free AI-enabled features … to make it easier for you to start, run, and grow your business.” Basically, it’s AI tools that allow you to do things like automatically write site content or generate email copy. These tools seem helpful and I definitely see how they could lower the costs of running a DTC site.
Continue reading →The S&P 500 is near all-time highs but startups are still down 50-70%
As of today, the S&P 500 is back within 4% of its all-time high. Even NASDAQ is now only down 11% from peak. So the party must be back on for high-flying startups too? Nope - don’t bring out the punch bowl yet. Startups are still trading down 50-70%.
First, it’s worth emphasizing how well the overall US stock market has performed recently. The S&P 500, an index that represents the stock market performance of the 500 largest US companies, fell almost 20% in 2022 but is now up almost 20% this year. As mentioned, it’s 4% off its high.
Continue reading →They're not just unprofitable—they have an even bigger issue
Public direct-to-consumer businesses not only are nearly universally unprofitable, they have an even bigger issue: negative cash flow.
First, let’s recap some Accounting 101 concepts. Profitability is the amount of money left over after deducting all of a company’s expenses from its revenue. If a company makes capital investments like opening new stores or warehouses, those investments do not count as a cost against profit (other than the initial amount depreciated).
Continue reading →I've started to think it's basically impossible
I’m going to get a lot of pushback on this one but I’ve started to think it’s basically impossible for any large ($20mm+), 100% ecommerce brand to be meaningfully profitable.
By the way, I don’t just mean DTC ecom–I mean any brand selling online including through Amazon or other online retailers. And I’m not referring to VC-backed businesses only. Here’s my thought process:
Let’s start by surveying the ecommerce landscape. I’ve written about how there are basically no profitable public DTC ecom businesses. Allbirds, Warby Parker, Bark and many others all lose money (though those are not 100% ecom). HelloFresh and FIGS are barely profitable but were unprofitable last quarter.
Continue reading →A significant enough sample of direct sales captures most of the benefits
Selling direct-to-consumer can be incredibly powerful. I’ve come to believe, though, that businesses can realize most of the benefits of DTC if a significant enough sample of sales is direct–it doesn’t have to be the entire business.
First, DTC of course gives brands access to a treasure trove of first-party data on their customers. While I think the value of data like this is frankly overrated, it does have practical importance. First, it’s much easier to remarket someone when you have their email address, so DTC in theory should have higher reorder rates than other channels. Second, having the ability to survey or talk to individual customers allows businesses to get direct feedback. But even if a business is omnichannel, you just need a sizable enough DTC channel to find enough customers to survey.
Continue reading →By their very nature, most VC-backed DTC businesses can't get there
This may be a tough read but I’m starting to think that most venture capital-backed DTC businesses will likely never be, by their very nature, profitable.
Let’s start with the facts before getting to the theory. As I’ve written about before, there are almost no examples of public DTC businesses which are profitable. Allbirds, Warby Parker, Bark, Smile Direct Club, Honest Co, and nearly all others lose money. Oddity, IPOing soon, could be a very rare exception.
Continue reading →DTC companies are distorting their true profitability
For years, public companies have been distorting their true profitability by emphasizing their “Adjusted EBITDA”, not their true Net Income profit. Unfortunately, newly-public DTC companies are getting in on the game.
I was at a conference last week where someone working at HelloFresh, the DTC meal kit company, told me the company made €66mm in Q1 of this year. This surprised me, as I knew the company actually lost €25mm this past quarter. Why the discrepancy? He was talking about HelloFresh’s Adjusted EBITDA, not Net Income.
Continue reading →Public DTC ecommerce growth rates declined ~5x in 2022 vs. 2021
Public DTC ecommerce growth rates declined ~5x in 2022 vs. 2021. Profitability worsened. Unfortunately, 2023 does not look better.
Here’s a representative sample of public DTC companies revenue growth rates for the last two years:
For the above companies, the median growth rate from 2020 to 2021 was 51% and for 2021 to 2022 it was 11%. That’s down nearly 5x.
Continue reading →Public DTC ecommerce companies are down about 80% from peak
Public DTC ecommerce companies are now trading at ~1x revenue, down about 80% from peak. Growing businesses get a small premium. Shrinking businesses are closing in on 0.
Here’s a representative list of public DTC companies:
Growing:
Shrinking:
Continue reading →DTC has been a very bad investment for equity investors
The vast majority of VC-backed public DTC e-commerce businesses are now worth less than they have raised. In general, DTC has been a very bad investment for equity investors.
Here’s just a sample of the public DTC businesses who have raised more in equity capital (including at their IPOs) than they are currently worth:
Some businesses are still worth about ~2x what they raised:
Continue reading →Of hundreds of public VC-backed companies founded in the last 15 years, only one is meaningfully profitable
Do you know how many public VC-backed companies founded in the US in the last 15 years are meaningfully profitable? One.
Here’s a list of some of the most prominent venture-backed companies which went public in the last few years, along with the net income of each company in 2022:
I’ll stop there, though the list is several hundred long. Nearly none of them are profitable.
Continue reading →DTC stocks are down 85-90%, worse than the dot-com bubble
I don’t think most people working in DTC understand how badly public DTC companies have performed in the stock market. It’s bad–really bad.
Almost no one has been spared. Here’s a rundown of the performance of some representative brands:
In general, DTC stocks are down 85-90%. For context, during the dot-com bubble, NASDAQ fell about 75%.
Continue reading →It's much easier to align incentives and pay for performance
One of the underrated benefits of working with a marketing agency is it’s much easier to align incentives and pay for perfomance.
There’s a never ending debate about whether it’s better for brands to in-house marketing expertise or work with external agency partners. I’m not going to try to engage with that here. But I do think the fact that it’s easier to incentivize agency partners is under-discussed.
Effective marketing is the lifeblood of any consumer company. If there is a person or group responsible for marketing your company effectively, they should be paid a large fraction of the incremental profit they are generating for the brand. For larger companies, this fraction could potentially be hundreds of thousands of dollars a year–or more.
Continue reading →What's worked best from the brand's perspective
I’ve worked with dozens of marketing agencies over the years. Their fee structures have varied widely. Here’s my two cents on what’s worked best from my–the brand’s–perspective.
There are many ways to skin a cat, as they say, but below are four agency fee structures I’ve actually used along with their pluses and minuses. I declare a winner at the end.
Pros: Good Ol’ Faithful, almost certainly the most common fee structure. Paying higher fees with greater spend both compensates the agency for having to manage a more complex account and rewards them for growing the account.
Continue reading →There's a third campaign type that many companies surprisingly forget
You’re probably running prospecting and retargeting campaigns on Facebook. But there’s a third campaign type that many companies surprisingly forget: remarketing.
First of all, what is remarketing? It’s marketing to former customers. Here’s the taxonomy for the three types of campaigns.
Prospecting: marketing to consumers who have never visited your site, at least according to the platform. Retargeting: marketing to consumers who have visited your site but have not purchased Remarketing: marketing to former customers.
Continue reading →Up to 50% lower than prospecting campaign targets
Retargeting campaign ROAS or CPA targets should be significantly lower than prospecting campaign targets. Up to 50% lower. Unfortunately, I see brands failing to set differentiated ROAS targets all the time.
As usual, I’m going to return to my favorite hobby horse: emphasizing that you need to be thinking about everything in your business on a marginal, or incremental, basis.
Incrementality explains why prospecting and retargeting return on ad spend targets should be different. For prospecting campaigns, as the user by definition has not visited your site, it’s pretty likely that the conversions you get from these campaigns are incremental–customers you wouldn’t have converted otherwise.
Continue reading →The SVB collapse highlighted the importance of diversifying where you keep your money
It fortunately looks like Silicon Valley Bank depositors are going to be made whole. But, if nothing else, the SVB collapse has highlighted the importance of diversifying where you keep your personal money.
I’ve written several posts about investment diversification. All of them have been about diversifying in what you invest. But I think it’s also important to diversify where you invest. In short, even though it’s pretty paranoid, I think you should invest across two–and potentially more–brokerages.
Continue reading →Customers from different marketing channels are not equally valuable
The customers you acquire from different marketing channels are not equally valuable. Certain channels have customers with consistently high or low LTV. Ranking is below:
First, for credibility, the DTC e-commerce businesses I’ve co-founded or acquired have spent well over $100mm on paid marketing. And I’ve seen the detailed marketing stats for dozens of businesses.
And, for clarity, by more valuable customers I mean customers who have higher AOV, better retention / greater order frequency, purchase higher margin products, and refer a greater number of other customers.
Continue reading →Don't hire people based on job interviews—part-time work trials are better for everyone
Startups: don’t hire people based on job interviews. Part-time work trials are better for everyone.
I’ve hired dozens of people directly and my companies have hired many hundreds more. After my first few hires, I quickly learned that interviews are, at best, only weakly correlated to future job success. At Hubble and now Agora, we almost always try to instead work with late-stage candidates first on a paid part-time or consulting basis to decide if we should hire them full time. Our hiring hit rate has soared.
Continue reading →Most people over-invest in US stocks and miss the free lunch of geographic diversification
Most people I know accept the benefits of stock market diversification. But they fail to apply this logic geographically and over-invest in US stocks. This is called “home bias” and it’s a mistake.
As the saying goes, diversification is the only free lunch in investing. Why is that? Because buying a diversified basket of similar investments allows you to get the same expected return as a non-diversified basket but with much lower risk. And I think most people understand this.
Continue reading →Market cap tells you whether a marketing platform actually works
Want to know if a marketing platform will work for your brand? Check the stock market.
The insight here is pretty simple. If a marketing platform is generally effective, many businesses will use it. If many businesses use it, the company will make a lot of money. If the company makes a lot of money, its stock will go up.
Stock price times share count will get you market capitalization, which is what investors think a business is worth overall. And you can use a company’s market capitalization as a quick reference point on whether ads work on its platform.
Continue reading →What matters is customer lifetime value, not Shopify's returning customer rate
Your store’s “returning customer rate” doesn’t matter at all. Instead, what matters is customer lifetime value.
These statements sound contradictory so let me explain.
When I’m diligencing businesses to acquire for Agora, founders often talk about their “returning customer rate.” I believe they do this because Shopify has, inexplicably, placed this metric at the very top of every store’s Analytics tab.
Shopify defines the returning customer rate as “the percentage of customers that have placed more than one order from your store, out of customers that placed an order within the selected date range.” Basically this means it’s the percentage of returning customer orders out of all orders at any particular time.
Continue reading →NPS is actually a pretty bad and overhyped metric
I think NPS is actually a pretty bad and overhyped metric. Don’t use it to make important decisions about your business.
NPS stands for “Net Promoter Score” and it was invented by a management consultant in 2003. It’s derived by asking customers “How likely is it that you would recommend this company to a friend or colleague?” on a scale of 0-10 and subtracting the percentage of people who say 0-6 from those who say 9 or 10.
Continue reading →You need to include all costs, not just marketing platform spend
Don’t lie to yourself about your all-in acquisition costs. You need to include all costs, not just how much you’re spending on marketing platforms.
The golden metric in any e-commerce business–arguably any business–is LTV / CAC, or lifetime value to customer acquisition cost. I constantly see, however, that brands are failing to include all relevant costs in their CAC.
Everyone knows you should include marketing platforms costs, like Facebook and Google ad costs.
Continue reading →You could be paying customers to make referrals they would have made anyway
I’m going to be honest. In many cases, paid referral programs are a waste of money.
What’s a paid referral program? It’s a program where you incentivize customers to refer other customers to your company. You can incentivize the customer who refers, the customer who is referred, or both. The incentive can come in the form of a free product, a discount on the next order, or even cash.
What’s not to like? Usually referral incentives are smaller than your normal acquisition cost so it seems like you’re getting customers inexpensively. And if you’re giving a discount to the referrer, you’re incentivizing another purchase.
Continue reading →If your ROAS is too high, you are likely leaving a lot of money on the table
It’s a big problem if your ROAS is too high. You are likely leaving a lot of money on the table.
A lot of marketing analysis is trying to figure out how to improve return on ad spend (ROAS) when it’s too low. This makes sense–if ROAS is low, by definition, your advertising isn’t profitable.
But ROAS being too high is a problem too. This sounds like an obvious point but you’d be surprised how many ad accounts I’ve seen where it’s happening.
Continue reading →The conventional wisdom about working with friends is wrong
The conventional wisdom about working with friends is wrong. In many cases, friends are the absolute best people to work or start a company with.
I’ve started several businesses with good friends: Hubble Contacts + Agora with Jesse Horwitz (friends for 5 years before working together), Willow with William Herlands (9 years), and BZR with John Shi (7 years). Also, our first two hires at Hubble were some of my and Jesse’s closest friends.
Continue reading →Credit card decline is one of the main reasons for subscription business churn
Credit card decline is one of the main reasons for subscription business churn.
The vast majority of businesses I’ve talked to are doing way too little to fix it.
Fundamentally, there’s two types of churn. The first is active churn, which is customers intentionally canceling. The second is passive churn, which is customers canceling because their credit card declines when you attempt to rebill them.
Passive churn can be, in my experience, up to 40% of cancellation. It’s also especially frustrating because these are usually people who want to continue to be your customers!
Continue reading →Businesses usually forget that part of their customers' LTV is their referral of other customers
When calculating lifetime value, businesses usually forget that part of their customers’ LTV is their referral of other customers. Missing this makes businesses underspend on marketing.
The golden ratio for an e-commerce business is customer acquisition cost (CAC) to lifetime value (LTV) ratio. Of course, the LTV of your customers matters a lot. And if your customers are more valuable, you can afford to spend more to acquire them.
How should you think about the LTV of the customers you acquire through paid marketing?
Continue reading →Most founders don't know how many customers come through paid vs. organic channels
Most founders I talk to don’t know how many of their customers are coming through paid marketing channels vs. organic. This can really damage your business. Here’s how to figure it out.
Fundamentally, there’s two ways e-commerce businesses can acquire customers. Through paid channels like Facebook, Google, etc. Or organically–which is basically customers telling their friends about your business and then they become customers.
In most ways, organic acquisition is just better. You don’t have to pay Mark Zuckerburg anything to get more customers.
Continue reading →Most founders confuse these three customer acquisition cost metrics
There are 3 types of Customer Acquisition Cost metrics–and most founders I know confuse them and hurt their business.
First, there’s overall blended CAC. This is your overall customer acquisition cost and is calculated by summing the amount you’re spending to acquire customers–including variable agency fees and creative costs–over the total number of new customers acquired in any given time period.
You’ll note that this includes all customers acquired, including customers you got organically through word of mouth and so didn’t pay anything to acquire. This number doesn’t exactly tell you how much it’s costing you to acquire a customer on your paid marketing spend. But it’s still a very important acquisition metric to track because the overall health of your business is determined by your LTV / (overall blended CAC) ratio.
Continue reading →When calculating lifetime value, you need to include all relevant costs
Don’t lie to yourself about the value of your customers. When calculating your customer’s lifetime value, you need to include all relevant costs–including ones you’ve likely missed.
When evaluating direct-to-consumer e-commerce businesses to acquire, one of the metrics we of course look at is LTV to CAC ratio, or the ratio of the lifetime value of a customer in profit dollars to the cost of acquiring a customer. A brand’s incremental CAC or ROAS can sometimes be difficult to calculate but the LTV part is supposed to be fairly straightforward.
Continue reading →There's an even better, more tax-efficient way to save for the future
You’re hopefully saving for retirement through an IRA or 401K. That’s great. But there’s an even better, more tax-efficient way to save for the future: 529 accounts.
First, let me be clear: if you’re able to save for retirement through an IRA / 401K, I would save as much as possible through these vehicles up to the maximum legal limits.
But once you max out, people I know usually start investing in taxable brokerage accounts. If you’re doing this because you’re saving up to buy a home or some other medium-term financial need, that’s fine. But if you’re saving for longer-term investment goals, you’re potentially missing out on an additional tax-advantaged account: 529s.
Continue reading →In many cases, the customers you acquire through branded search aren't truly incremental
OK, I’ll say it. In many cases, branded search is a waste of money.
To recap, branded search ads are the ads you see when you bid on your own brand’s name on Google. If I’m Toyota and I bid on “Toyota Camry” that’s branded search. If I bid on “best crossover SUV,” that’s non-brand search.
Non-brand search is great and, if you bid correctly, should get you incremental customers profitably. Branded search, though, has a major flaw.
Continue reading →Being a good investor matters far more than earning a high income for long-term wealth
In the first half of your career, is it more important to earn a high income or to be a good investor? The answer is a good investor–and it’s not even close.
I’ll be a bit more specific. I wanted to analyze how important early career earning vs. investing is for your long-term wealth. The benefit of earning a lot is obvious: you have a lot more to invest. The benefit of investing well is your investments compound at a higher rate. How do these two effects interact?
Continue reading →Choosing the correct return on ad spend target is critical to maximizing profitability
Choosing the correct return on ad spend target is critical to maximizing your brand’s profitability.
Most of the brands I talk to are doing it wrong.
When chatting about marketing, I often meet with founders who don’t really have a reason for why their return on ad spend or cost per acquisition target is what it is. Sometimes they arrived at their target by gut feeling or by using rough heuristics. But in my view, there’s actually a right way to do this for each brand.
Continue reading →Marketing agencies get paid when they spend more—here's how we solved the conflict of interest
When you hire a marketing agency there’s a big conflict of interest. They get paid when they spend more–even if it’s bad for your business. Here’s how we solved it.
Most, though not all, marketing agencies have a spend-based fee structure. They get paid as a percentage of marketing spend so if you spend more they get paid more. Putting aside the question of whether this makes sense, why is this a problem for you? Because it’s not in your interest to spend as much as possible on marketing. You should spend up to the incremental point of profitability and no further. Marketing agencies have an incentive to get you to spend beyond that point–in theory, way beyond.
Continue reading →A calm stock market is bad for most investors in the long run
I love stock market volatility and you should too. A calm stock market is bad for most investors in the long run. Here’s why:
Most people are upset when the stock market tanks, especially when it’s over a fairly long period of time. In 2022, the S&P 500 dropped almost 20%. In the moment, losing money admittedly doesn’t feel great. But when you think about it, these periods are necessary for the stock market to have any excess returns. Why?
Continue reading →You only need to buy one thing to be maximally diversified in public stocks
They tell you when investing in stocks it’s smart to diversify.
And that’s true … which is why you only need to buy 1. It’s VT, the king of stocks!
OK, to be fair VT, or Vanguard Total World Stock ETF, is not an individual stock–it’s an index-fund-esque ETF (which you buy like a stock) which tracks the FTSE Global All Cap Index. I just liked the headline.
And I must caveat you with the obligatory comment that this one is really not investing advice.
Continue reading →You should hedge your career risk, not double down on it with your portfolio
They say invest in what you know.
I think you should do the opposite.
I often talk to entrepreneurs or others who work in startups who invest their hard-earned money in individual stocks in the same field they work in. For example, e-commerce founders investing in Shopify or B2B SaaS founders investing in Salesforce.
What’s the reason? I think it’s partly because they are most familiar with those companies, having worked in the field, and partly because they feel (correctly) they have more information about working with those companies as a customer or partner.
Continue reading →