Performance marketing is NOT an investment. THIS is.

0:00All right. So we're going to talk about how performance marketing is not an actual investment and how well there's something that is. So let me share the story here. So Neil, did I send you that podcast with the Airbnb CEO, Brian Chesky, the Lenny podcast? You did, but I did not watch it. All right. Well, so it's a really good podcast. Everyone should listen to it, whether you're a marketer or CEO. So it's like a masterclass in product marketing, but also marketing, also how to CEO as well. And so I'll just hone in on this one area over here. So he has said that they were spending a billion dollars, Airbnb, the company, they're spending, and they're publicly traded.

0:37They're spending a billion dollars a year on Google. And they decided, hey, you know what? We're just going to shut off performance marketing. And we're just going to focus on creating great product. We're going to focus more on... And obviously, when they build new products, there's a big SEO component to it as well because they have so many pages. But for them, they get very good organic traffic. And they just wanted to focus more on brand. They want to focus more on the product. And Brian said this. I'm not saying everyone should do this. But his whole thing is like, look, at the end of the day, you're paying the fire hose.

1:05Once you stop paying the fire hose, it goes away. Now, I wrote a post on X a couple of weeks ago just saying that paid ads are not an investment for the most part, right? Most people just, you know, if you're DTC, you're spending on buying a conversion and that's it. But, you know, there are situations where you can spend on performance marketing and you can buy like an email, for example. In that case, you're actually investing in the future. But not many people, I would say the majority of people aren't really doing that. So that's what we want to talk about here. so what is he saying that he says he stops doing he doesn't do performance marketing yeah he they basically pause he's not saying he's going to stop forever but he's like like let's just stop right so they stop you go google vacation rental they're still bidding on the terms the point is he's just saying like look you know it's it's renting like yes it's it's it's a nice drug right but it's like um at the end of the day if you're just running it for conversions you're not really investing.

1:59Yeah, you may not consider, I agree with him in which you're not necessarily investing, you know, for the future, because once you stop, it stops. But all that paid ads, people see your brand, it does help with branding as well. You're getting tons of people to your website, right? But here's a kicker. It doesn't matter what Brian or Eric or I think about performance marketing or paid ads, or if people say it's a drug or not. If you can spend a dollar and you can make$2 in profit, spend as much as you can. And who cares what anyone has to say? It's that simple. Yep. And here's the thing. So the key takeaway here is that at the end of the day, it can, sure.

2:38It's not an, you can say, yes, it's not an investment, but you can also say like, it's an arbitrage and most businesses are arbitrages. Actually, all businesses are arbitrages. Dude, it's, it's making money, right? Like you could say, oh, good product is investment paid ads isn't. But I bet you if they never ran one paid ad, because we've helped them with marketing over the years, if they never ran one paid ad, they would not be where they are today. The amount of people that have gone to know Airbnb because of all the money they spent on paid Google ads is a big chunk of the people. Now, granted, if they had a crappy product, it doesn't matter how much they spend on paid ads, it's not going to be that effective.

3:19I still do think you need an amazing company, big time, great product, great user experience. All those things are extremely important to the core. But not spending the money on performance marketing, when it's driving you an ROI and it's bringing in more profit or more revenue than what you're spending and overall it's profitable, is a big mistake. It's like you spend as much as you can wherever you can as long as it's profitable. That's how you grow a business. Dude, I've done paid advertising for so many companies and we've done studies. After some of these guys are spending$100 million, you know, billion dollars, etc.

3:58Even when they stop, it's not like it goes to zero. They're spending so much in quantity that there's so many more people that are familiar with their brand. What we typically see is they're better off than before they actually started to spend. I think the key takeaway here is that at the end of the day, and what we've been clamoring on this podcast for years, is diversifying your marketing and taking that omnichannel approach because you're not beholden to any platform at the end of the day. It just continues to reinforce, right? So there are people in the marketing world that say, I'm SEO only, I'm paid ads only or whatever.

4:30Neil and I are more in the camp of just whatever works. And also like, I don't want to put all my eggs into one basket because if the basket shatters, then I'm in trouble as a business. So you just want to make sure that you're making smart moves as a marketing leader and a business leader. and I think these types of stories are helpful but just keep in mind at the end you can hold both of these mindsets you can look at and say paid ads aren't necessarily a long term investment for most people but still at the same time business is all about arbitrage and take that arbitrage if it's working yep so look at the end of the day Eric and I both said it it doesn't matter what anyone thinks if spending money makes you more money assuming it's ethical and it's profitable do it as long as you can All right, that's it for today.

5:16Please don't forget to rate, read, subscribe, and check out this next video here if you want to continue learning marketing. And we'll see you tomorrow.