Marketing Missteps: What Went Wrong at TNC?

0:00Yeah, I agree. I think at the end of the day, and it's why if you're going to do acquisitions, you need to be really clear on exactly what it is that you're buying. What is the asset value behind what you're buying? You said it's a content-based event, and I agree that that's right. But really what it was, it was a community-based event. People came because people were there. Like, it was the place.

0:30but when immediately after we did the deal as soon as 2019 during our earn out um it was here are the people who are installed we want to move your people out um and i'm not saying this like with bitterness or negativity or anything, I'm saying it's just a fact. It makes sense. You know, they don't want to depend on all our people. Our people, by the way, are all still employed at our companies that we didn't sell. So they're not going to go and work for this other company. And the company that acquired it, Clarion, already had people that did what all our people did. The problem is, is that they didn't know the market and they didn't know the audience and they didn't know the business model because the business model of running a content-based event versus running an expo hall-based event is completely different.

1:27And so Affiliate Summit did well and continues to do well, as I understand, because it was an expo event all about creating a marketplace of buyers and sellers to come together to interact and do deals. TNC, lots of deals got done, but it was really all about the content. And so without an ability to appreciate the content and with heavy lobbying to monetize by selling speaking slots and things like that to presenting sponsors, focus on the exhibit hall, the expo hall, and not how do we market and sell a content event to the attendees, which we gave a complete, it was included in the price, the complete marketing playbook, but it wasn't executed because in the corporate environment, my opinion again, want to hear yours.

2:27In the corporate environment that it went, the marketers that were charged with doing it didn't understand the direct response marketing that we did, didn't know all of the marketing tactics and strategies that we did, and were not allowed or didn't follow the book. I don't know which, maybe a combination of them. They were budget constrained. One of the models of selling was affiliate sales. And for the first couple of years, they said, no, no, no, we can't pay affiliates any commissions because that goes against our ad budget. And our ad budget is only this. So they weren't, I think they probably weren't budgeted appropriately to do it, but definitely it just didn't follow the playbook.

3:13They didn't understand it. And the people that were doing the execution didn't have the skills, obviously didn't have the skills that some of the best marketers on the planet had to market the event. And they weren't empowered to listen to the resources that they had who were saying, please, please, please run this campaign. Or the campaign would run 12 weeks late, the two weeks before the event, that kind of stuff. That's my primary thinking on it. What do you think? yeah i agree i think at the end of the day and and and it's why if you're going to do acquisitions you need to be really clear on exactly what it is that you're buying what is the asset uh value behind what you're buying you said it's a content-based event and i i agree that that's right but really what it was it was a community-based event people came because people were there.

4:11Like it was the place that the community gathered. It wasn't like you said, with an expo that was this two-sided marketplace. And I think in the beginning, it was the content that gathered everybody there. And then eventually everybody came because everybody was there. Now the content still had to be good or they would stop coming. So the content now was, was going to be the, you know, sort of like static electricity was the bond that was still going to, going to hold it there. But it used to be that when we sold Traffic and Conversion Summit, what sold it was the session titles. You know, it was very little about the event.

4:49It was like, here's this session and bullet points about what you're going to learn. It shifted completely away from that. We barely talked about the session titles. There was an agenda, but nobody really looked at that. They came because they knew the content was going to be good, but more importantly, they knew that everyone was there. And that's the hardest thing in the world to do is to create, you know, a place, but you can lose that way faster than it takes to build. And I think what they thought that they had was another expo two-sided marketplace. And it wasn't a two-sided marketplace.

5:22It was a community based event. And the reason that I don't believe that COVID was the reason that the event struggled is because, and I'll admit, I'll say this now. I don't think this is going to get me or anybody else in trouble. I mean, we're out of the business. The thing is shut down. But going into 2020 and the 2020 event before the pandemic had happened, we were already behind on ticket sales. Do you remember that? I do. We were already way off track behind ticket sales. Now, maybe we would have caught up had there not been the pandemic, but we were already pacing way behind. And the reason we were behind is exactly the reason that you said.

6:06They basically said, digital marketer, stand down. We don't want you promoting as an affiliate. Right. We have your list. Right. We have your list. And if you remember the previous year in 2019, even though they technically owned it, that year, we allowed them to send emails from Ryan Candice. We allowed them to send emails from the people at the company. Now, why did we let them do that? Well, it was a transitionary year. Also, we wanted our earn out. Let's call a spade a spade. But at some point it's like, okay, you bought the thing. You can't keep sending emails from me. The emails need to come from Traffic and Conversion Summit.

6:42And so it was that year when yes, they had the list, but they hadn't put any new people on the list because they weren't marketing it. Digital Marketer was still marketing. They were not doing digital marketers list. They had Exactly. And they weren't doing anything to build the traffic and conversion summit community. And we were basically saying to them, Hey, let us at digital marketer promote, pay us an affiliate commission. And they're like, no, we can't afford to do that because that's going to go against our ad budget. Even though you're only going to pay us if we sell tickets and what we're selling tickets for is less than your cost of acquisition.

7:20This is stupid, But again, corporates, they're limited. We wanted that like 10 different ways and couldn't get past it. And in defense of the people at the company at the time, they knew it was dumb. So I'm not throwing the people who were at the company or the market department. They knew it was dumb. They were running up the chain to finance people. And they're like, this is the dumbest thing in the world. But this is the type of crap that happens. If you wonder why do big companies stall out? It's because they let freaking bean counters make business decisions. And you cannot let that happen.

7:49And I think at the end of the day, that year, before the pandemic happened, that year momentum was lost simply because a bean counter wouldn't pay us an affiliate commission. And therefore, we didn't tell our list about it. And so people didn't know. And then the pandemic happened. And it got another shot because of the virtual event. We did promote that. We did that in partnership. But that still wasn't TNC. And then the next year coming back in 2021, same deal. It was by the time they figured out how to make it work to get Digital Marketer promoted, it was too late. And they had done nothing to grow the community now for two years.

8:30Now you've got a business that has completely lost some momentum. It hasn't created any community. And it is a community event. I think the biggest strategic decision aside from not involving its community partner was the decision to continue to run that 2020-21 event at the convention center. Yeah. Whatever it would have cost to break that contract with the convention center and get it back into an appropriate size space to rebuild it again would have been worth it. I agree 100%. it would have been worth it. So not involving your community partner in it, not, you know, moving it out of the convention center.

9:15And I agree with you in the early days, not running the playbooks because either the people didn't know, or they didn't feel empowered to do it. I think those things are ultimately what doomed the event. It wasn't just a pandemic. um and so that and i want to be clear like i don't i don't know i mean i don't speak for you like do you have do you have bad feelings towards the people there no not at all i i don't to me i don't even have it i mean i feel like we did ridiculously well on the deal um i'm disappointed that that i do believe had the pandemic not happened i believe tnc would still be going and we would be in multiple countries.

10:03Because we were at the end of negotiating the Western European contract for it. And we had already done a license deal for Singapore that was underway and Russia, which would obviously have evolved differently ultimately, but we'd have had a few years. So I feel like we would be in a pretty significantly different place. I do think that it was just a, in conjunction with the things that you mentioned, it was insurmountable with the financial impact of the pandemic on not only Clarion, but even on Blackstone as an investor in Clarion that owns it. I think it was just too much. As I recall, all of the Clarion companies, like options and everything became worthless.

10:56So all of the incentive compensation was gone during this critical time. Everybody was working for the, you know, we'll, we'll not pay you a great wage, but look at where we're going with the plan to sell the company. It's going to be amazing. And you're in the money to, you've got that wage. We're letting a lot of people go work. Our company was in hundreds, I think of millions of debt that it borrowed from, uh, from Blackstone during the deal that, you know, the owner, the primary person that founded the company was basically booted out of the company. I mean, I guess there was at that entity pretty bleak times too, to try to get the motivation.

11:38But I still, I still think with all the mistakes that were made and all the misunderstanding and everything, it would still be alive and doing okay today. If the pandemic hadn't just dealt at that extra a financial, you know, gut punch. I think it would still be alive today if it had continued to lean into community and either double down and build its own, which we were trying to help them do, or strategic partner, or go back to and say like, hey, can we, you know, can we try to buy digital marketer, which they were talking about doing, but didn't have the ability to do. Well, yeah, as I say, which remember, they had us out to London to talk about buying DM.

12:20And then we get in the meeting with everybody and nobody talks about it. And you and I are like, you flew us out here to talk about buying it. And then it's like nothing. And they're like, oh, yeah, we basically don't have the money, right? I was like, didn't we just fly across an ocean? They're like, ah, you know, so weird. Between the time we talked about that, things have changed, which I'm sympathetic to that. Yeah, I feel the same way, though. So, you know, I'm sure that some folks back there were here, I actually do still very, very much like all the folks that were there. And I would do business with them again.

12:54Yeah, absolutely. People were great. I would do business with them again. I hope we can do something with them in the future. But it was like some really good takeaways. ways, the, the, the, the buyout based on EBITDA with no minimum profit, no floor, um, is not anything that I had ever encountered or thought about encountering. And if you think about it, it's like, well, if the company doesn't do well, which it didn't, and it didn't in this case, you know, arguably due to no fault of anybody's, um, then the thing that you sold at that point has no value. So it's just like you owned, uh, you know, what was it?

13:36AIG or, you know, or Enron and it just, you know, that didn't work out. And that, so I, so the interesting thing is I have tried to put floors in the agreement and the put calls going forward. And it's been very, very challenging, but if, but it is something I'm going to be asking for just because of that. Because if you think about it, it's like, well, you know, do I wish we had sold all of it? Yes. Would they have done a deal if we had sold all of it? No. Could we have sold 10 % more? Yes. You could do a 90-10 deal, I think. But it's a great lesson for the pitch from private equity when you're being bought out is, hey, we're going to buy 80 % now at this valuation.

14:20Then we're going to 6 to 10x the business. And then your 20 % that you keep is going to be worth more than the 80 % that you sold. So you're going to get double Applebyte. And that's appealing, but don't count on it because you and I have watched multiple sales of companies, ours in that case, and other people who we know who we've helped with where private equity came in. And it was the fault of private equity. They had inexperienced teams that they put in. They didn't understand business models. They tried to apply old business models to industries that were far past those, et cetera, et cetera.

15:00And then everything falls apart and the, the role in, you know, the carried interest just becomes worth nothing. Uh, so be careful when you're doing that deal. Don't bank on that, you know, that carried interest when you're doing it. And if you can get a floor, also, we were able to negotiate an insanely favorable covenant not to compete, uh, which allowed us to do pretty much anything we wanted except hold an event called trafficking conversion summit at the same time in the same city. And that allowed us to be free because had we been bound by that, like by the originally suggested covenants not to compete, we wouldn't have been able to continue to do all the things that allowed us to continue to use the momentum that we had built elsewhere.

15:47And don't sell your momentum, carve out to only sell the exact assets that are needed by the company that's buying it to realize the value they're buying and keep the rest. And the inverse of that, when you're buying, make sure when you're buying assets that you're buying, you're also acquiring the assets that created that momentum. Because in retrospect, I think the consulting firm that gave them the advice that they did not need to buy a digital marketer was some of the worst advice they probably ever paid for. Yeah. Yeah. Worst advice. And it's not like we were back there, just in case anybody from Claire, it's not like we were back there being like, Moo ha ha.

16:21Like we assumed that, no, if they get the list and if they continue to build this community, cause you could, you could easily build community around just traffic and conversion summit. You could have a free community in between, you know, you could have a virtual thing. Facebook groups, there's all kinds of things that, that they, that they could have done, but they just didn't know how. But we were wrong because you can't do that without innovative marketers who are creating new things and trying new things. Cause like, so, so, so that community was a direct result of how you and Perry and Richard and I all do business, right?

16:57It was that we are constantly networking, testing, absorbing, sharing, you know, and we know how to consolidate and teach all that innovation that we learn from other places. We, we are in so many industries and deals that we see something being done over here. And we're like, Hey, what if we tried that there? And that was the heart and soul of, I think TNC is, is you would go to TNC and say, Holy crap that I did when I came in, you guys were doing it. I was like, I took notes until my hand, you know, hurt. And, uh, I, I had so many things that I could go and do that I hadn't thought of myself, that it ROI'd 10x easily every time that I went.

17:42And they couldn't do that. No one who's not in all these other businesses has the breadth of exposure to all the cool things that are being done, as well as, you know, we're pretty innovative ball around all, all of the people that were principals. Right. So, um, I I'd love to get your take on that because I don't actually think they could have recreated it. They had to buy DM and they had to have us with, and I don't mean that as egoistically as it sounds, they had to have somebody like us, um, who was doing that truly innovative, creative, consolidate, simplify, share, replicate program. And without that, no matter how good the direct response marketers were, nobody would come because the thing they were coming for was the thing that they didn't buy.

18:35Yeah, I think you would have had to have made an investment in embedded editorial. Like, I mean, somebody who is embedded in the marketplace, who understands the community, who understands who the players are, and who could pull those people onto a stage or into a community to talk. And as long as you make that investment and you think about yourself as more of a media company and not just a pure events company, then it works. Because again, it's not a two-sided marketplace where people are going to show up because it's a garage sale or a bazaar, right? It is a community event. So if you're not going to continue to establish the community and you're not going to acquire the community and the community engine, then you've got to know that when upon being decoupled from that, it's only going to slow down.

19:21So what comes to my mind, I just thought of it, but that could have done that would be had they taken the meat market M-E-E-T concept from ASM, they might have been able to create that community in TNC, but they didn't. And that like that, when you go to the meat market at affiliate summit. Yeah. When you go to affiliate summit and you, you go to that meat market, you are blown away at the opportunity to discover and close new deals with people. And they're all, because they're all affiliate deals, they're all new ways to make money. And I think if you had created something like that, which I think when we were looking at doing it in New York.

20:15Remember when we went to New York and they were talking about in that back room, even though the hotel was, was really not suited for it, that back room was going to be a meat market kind of thing. If they had been able to do that, then that also would have been a substitute for having to come up with cutting edge content all the time, which is by the way, exhausting. It's very, it's very hard. Yeah. Running a content company is very, very hard. So anyway, I think, I think those are maybe, those are maybe some, some lessons. Yeah. You know, for me, everybody there, nothing but love. I know everybody tried really, really hard.

20:47I wish it had worked out for our sake. I wish it would have worked out for their sake. I also just wish it would have worked out for the community sake. So shifting, I mean, this has been a really long episode, which is fine. Well, I think let's, let's split it into two because it'll be kind of 30. I think the future one is short, so we can maybe take this one and cut it in. I'll explain later what I'm thinking. I mean, I think we ought to just really literally cut it in two. Oh, okay. We're an hour almost right now. I think we do 30 and 30. But the – shoot, what was I going to say? Daggone it.

21:26Ah, lost it. What's next? Future. Future. So, yeah, so I am, yeah, so I'm sad for, like I said, I'm, you know, I'm sad for us because had they been able to like, oh, you remember that? Go ahead. What you got? No, I was just gonna say, so I disagree. I'm actually not unhappy with the result of having it shut down. From our standpoint, we looked at, by the way, just so you guys all know, we looked at the projections of what the event was going to do and what the valuation would be and decided that it wasn't enough for us to own 20 % of their projected income and valuation going forward for us to take the time to do it.

22:21You remember doing that sitting in the office in London, right? Yeah, it was a very brief, that part was a fairly brief conversation. Yeah. So, so we just told them, we said, you know, this, like, we don't actually, cause they were saying we won't buy out your 20 % and we're like, it doesn't really matter cause we won't do it for that. So, you know, we, we're not willing to like, we're at the end of our contract is expired and everything. So when we're talking about doing something new together, it's not enough. And we realized that you can't get your board and then the board of Blackstone to say okay to that.

22:56So that's a no. But also, I disagree with shutting it down because it appeared to be a timing issue that wasn't really spotted by whoever the superpowers up at the tippity-top were because the event got moved forward by at least two months. I think it was two and a half months yeah two and a half months wise and they looked at last year and said well calendar wise last year we were pacing this many tickets sold and calendar year this year we're pacing less but the two and a half months that they moved it forward are the prime selling time. So, so like they didn't let it, they didn't compare apples to apples.

23:54They compared apples to elephants. And, and, and so I think the decision and, and, you know, they're way more financially models sophisticated than we are, but it feels like that didn't make sense. And it did feel, and all of the NPS, the net promoter scores and the comments from the people and everything from last year, the last TNC, were it's back. And the energy was back. For the first time since 2019, the energy was back. And so in talking with the new team that had come in to run it, who was also excited about it and all the things that we were going to do and how they were kind of turnaround people and had multiple years of experience, and here's all the things we can do to do that.

24:41I feel like we were on track to be back to maybe 2018 in 2024 and then back to what the original plan was going forward after that. But it got chopped off too early because of maybe a calendar misunderstanding. That was what I wanted to say. Yeah, calendar misunderstanding. And I think just also people looking out at the industry, seeing that other industry events were announcing their last year and taking that as just a broad thing about like, oh, what does this say about the industry as a whole? And it's like, look, marketers are always going to exist. Companies are always going to need marketing help.

25:20This whole marketing space didn't get less important or less difficult. So marketers are always going to matter. And so marketers are always going to need a place. And so given that nothing else has stepped into that void, that place should exist. What I regret, I only have one real regret, I think, from the whole thing. I wish it had worked out, obviously, but I don't regret anything about that. Because I could even say, oh, I wish I would have lobbied harder and said, please, don't put it in the convention center and move it back to the hotel. But it wasn't our call. We had sold it. And so who knows?

25:58Maybe that wouldn't have worked either. I only have one real regret. I wish I would have known that the last one was the last one. Yeah, I agree. You know, like I would have lingered out there on stage and like just like taking it in a little bit more. But it was truly it was like, this was great. See you next year. Right. And the fact it was like, see you next year. And that wound up not being true was, you know, is kind of the only regret that I really have. So with that being said, what's the future? You know, what do you think? I mean, we do still. It's time to announce conversion and traffic 2024 happening the exact same date.

26:37TNC will. No. What does the future hold? I mean, what are your thoughts?

26:47All right. I'm speaking out loud, thinking out loud. I withhold. I still, you know, plan to change my mind. You reserve your right to change your mind. I reserve, I started to say I withhold my right, but that's not what I meant at all. Yes, I reserve my right to change my mind. You're not withholding it at all. You're actually using it. Thank you, counselor. I still believe, when I look at Digital Marketer, there weren't just, you know, Trafficking Diversion Summit wasn't the only company, the only business that suffered from, you know, being separated from Digital Marketer. Digital Marketer suffered from being separated from TNC.

27:27You know, because Traffic and Conversion Summit really was the company that launched Digital Marketer, because it was where the community hung out, as those two brands were less associated with it and as Digital Marketer no longer had its event and its place for its community to hang out, because you're right, like we had a fairly broad non-compete, but we're also going to be good partners. We're not going to go and launch another freaking marketing event to compete against our own business partners. Even if we can, we're not going to. And so with those being separated, you know, the digital marketer community as well, like didn't have that, you know, that place.