The AI Models That Are 100x Cheaper

0:00Neil Patel:I actually spend my time on two things as an organization. I don't actually spend too much time on recruiting anymore, being quite frank. When we were much smaller, I did spend the time on recruiting and building up the team. Now my team spends the time recruiting other great people, but if you have great people, they don't want to manage them. So they'll work to find really good people and they deal with the headaches of recruiting because it is a long process. It's not simple. I don't care if you use AI. you still have to build the relationships with the people and talk to them to figure out who's the right fit or not i'm not saying ai can't help you speed up some of the process but it just takes quite a bit of uh time the second thing is uh i spend a lot of time hitting up companies to buy and building the relationships there i spend an arm like i would say that is probably on a daily basis at this point, 60 % of my time.

0:59Neil Patel:It's maybe 70%. It's just reaching out to businesses myself and trying to see which ones I want to buy.

1:06Eric Siu:And how are you thinking about them now? Because some people have the angle where it's like, okay, I'll just buy these logos and then get rid of the people. Or are you thinking about, hey, I'm going to buy these logos, but also maybe I'm internationalizing because the clients that we want, they require us to be in these

1:22Neil Patel:areas yeah uh so the way i look at it is we've done enough deals where i did one deal where the founders did not stay actually i did two deals where the founders did not stay one of them was a software company called answer the public so we already knew the founders weren't staying and felt they're doing things wrong and we didn't want the founders to stay um uh so i didn't mind that one we did another deal in asia pacific called search guru where the founders were checked out they didn't want to stay they had a guaranteed earn out i wouldn't ever structure a deal like that anymore but the upside was very capped and i didn't understand how relationship heavy Asia Pacific was.

2:14Neil Patel:So for a service-based business, whether the founders are checked out or not, I'll never buy a business again where A, the founders are checked out and B, they don't want to continue. That's two different things. You can be checked out and want to continue, but if you're checked out, that means you're not putting enough effort into there. So why would I want a business where you're not willing to spend your own time, especially if I'm compensating you? And if you don't want to work there, it just creates more risk on me. So I'm looking for businesses where the founders want to stay in the game for at least three years.

2:46Neil Patel:And I'm ideally looking for founders who are like, yeah, you know, it'd be great if we can work out a deal where we continue longer than that, because it shows they really care and they believe in the future. And my fear is when you buy businesses and people aren't in it long enough, there's knowledge transfer, client relationships and the list goes on and on of stuff that may not be able to be ported over which just creates risk so i try to find companies and i build relationships with the right people um and then go from there and the way i look at mna is what are the regions so if you look at ad agencies specifically uh and i'll ask you this question do you know where most of the global rfps come from like what countries i would imagine let's go top five let's rank them top five us for sure uh-huh it's number one uh-huh what's number two you probably have uh

3:44Eric Siu:i would say i'll give you somewhere in europe that's english speaking what's number two

3:50Neil Patel:uk yeah yeah number three close to your homeland Japan your homeland

4:00Eric Siu:that's close to my homeland

4:02Neil Patel:I'm saying your homeland because you were born in Taiwan right? oh you were born here but your parents are from Taiwan

4:07Eric Siu:Taiwanese, Cantonese, so China

4:09Neil Patel:China is number 3 number 4 and 5 is kind of like a split Middle Eastern number 4 and 5 is a split usually between France and Germany number 6 is usually some other areas in APAC

4:24Eric Siu:Yeah. And so where were you going with this?

4:27Neil Patel:So I'm trying to infill in the regions where we get the RFPs. So that way I don't have to travel as much to those regions. That's a lie. I'm not saying I won't travel. I would still travel, but I wouldn't need to travel as much because when we look at the ROI of me traveling, what we found is building relationships has helped building the pipe for the long haul. it would just be more effective if I traveled less, bought the companies, and then paid to speak at the biggest events within those regions.

4:58Eric Siu:I guess let me ask you this question. So you had said before doing this podcast, you're reaching out to at least what, 10 people per day for sales, and then maybe like how many people are for M &A per day?

5:11Neil Patel:I've slowed down on the sales side, so I'm probably reaching out to three four people max a day for sales M &A maybe 15 16 a day yep

5:20Eric Siu:and so my point of asking this question is like this stuff changes right because what I'm doing right now is probably I reach out to 15 20 people a day that I know because it like my thing has all my it knows my connections right for single brain these single brain pilots because we're right now we're just trying to figure out like how do we just have more of these customer conversations and inevitably, like most of them lead to, they wanna engage with us, right? And then from there we do customer development and then it's like, okay, how do we scale it? But then in a year or two, that might change where it's like, oh damn, this stuff is working really well.

5:52Eric Siu:Now the scaffolding is working really well. Maybe it shifts over to some more strategic calls or maybe it shifts more into executive recruiting or maybe it shifts over to M &A, right? So this stuff ebbs and flows. It's not to say that you should always focus on sales every day. It's what is the highest leverage thing that you can do every single day that if you did that one thing, the day will be good. And that's the way to think about it.

6:15Neil Patel:Yeah. And I think that should change every single day or every single week for most entrepreneurs. And I think a lot of them don't keep adjusting. It's like, just because something's working and you're focusing on it, doesn't mean it's a thing that you should continually focus on over the next 30 days or 60 days or even year. Yep.

6:33Eric Siu:By the way, so I want to talk about why open weights matter for marketing. So open weights are basically these open source models, right? So you can use like a GLM 5.2 or a Kimi K3 as of this recording. These are strong open weights. And so when you use these, when you think about the cost savings, you're talking about 25 to even 100x savings on these open weights, right? So a lot of people are talking about, oh, like, why should I pay the frontier models like Anthropic and OpenAI if we can get these open weights? And so this matters for marketing, because if you think about when you're generating a ton of creative volume, okay, you think about you're generating maybe AEO SEO pages, You think you're generating all this strategy, right?

7:12Eric Siu:How do you think about mixing this up from a token optimization standpoint? So my stance on this is that 5 % of the strongest strategic thoughts that you have should go to the frontier models, right? That's where the most expensive stuff is. 15 % goes to maybe you're paying subscriptions, for example. And then maybe 80 % goes to these open weights, right? and there's plenty of things that you can use right now like open router to kind of handle this but everything is downstream because marketing costs a lot of money like you think about all the things all the emails you need to send all the sequences that you need to do maybe like all the stuff that you need to do right and so again keep in mind you're talking about a 25 to 100x savings but that's not to say that you should use your open weights for everything because sometimes you do need the more powerful weights

8:00Neil Patel:well and we work with quite a few organizations I wouldn't say it's the majority but it's a decent enough number because they're publicly traded. Some have a lot of restrictions on what they're allowed to use when it comes to open source and what they're not allowed to use. Some companies are restricted on using technology, let's say from China and places like that, that we work with. And what I always tell people in marketing is there's a big problem in which I see a lot of marketers using AI and specifically frontier models for really basic stuff. if you want to end up using the Frontier models, use them for stuff that's more complex and what they're really needed for.

8:41Neil Patel:You can use some of the older models, which are much cheaper, or you can just use your subscriptions to get a lot of the basic stuff done. And you don't need to pay the latest model released by Claude for something basic like keyword research. It's crazy on how much more expensive that's going to be versus paying an older model that can do just as good of a job.

9:01Eric Siu:Yeah, so let me show you the meme here that I like looking at. So the meme here is, let's see, it's this one over here. So Neil, do you see my screen? Right?

9:12Neil Patel:A saxophone? Oh no, a flamethrower.

9:16Eric Siu:It's a blowtorch. So this guy is using a blowtorch to light his big cigar, right? And so when you use frontier models to just do like a simple search, you are wasting tokens, right? So that's what Neil's ultimately talking about. So I think this meme goes a long way to explain that.

9:32Neil Patel:Yeah, and almost every single company we work with, especially the larger ones, they're very cost sensitive now to how much they're spending on AI because most of them have not seen the revenue growth compared to the cost that they're spending.

9:46Eric Siu:You know what's interesting? So Neil, I was on a chat last Monday and so I'm in these like AI executive groups. And again, these are people that operate at, we're talking about nine figure, 10 figure companies. and some of these people are like the AI transformation people, for example. So the topic of the conversation was what's the ROI of AI and how are people managing it, right? Nobody really had good answers is what I'll say. It's like, you know, you shouldn't message, you shouldn't manage like token usage or measuring people on token usage is stupid, which I do agree, like primarily on token usage is stupid.

10:18Eric Siu:But, you know, nobody has a clear model right now. And then one of the people even said like, why are we even trying to measure this? Because this is akin to the internet, which I think is wrong because this is not, the internet, by the way, costs you like, it's a flat cost, right, that you're paying. But when you're paying API usage costs, it's not the same cost. Like you do have to measure in some way. But also when someone else like, oh, you know, measuring on estimated time saved is also not a smart thing because it's estimated time saved, right? So how do you measure it ultimately at the end of the day?

10:50Eric Siu:I think it's still a conversation that we're having. But again, on a call with like 10, 12 people that think about this stuff all day, nobody had a good answer. Isn't that interesting?

10:59Neil Patel:It is. And even people who are really smart and sophisticated, I don't think there's exact solution because I honestly don't think most companies have figured out how to use AI to create more revenue. Other than the AI companies or some really tech forward companies, I believe the majority of organizations who have used AI and see financial ROI have seen it from cost savings, not necessarily revenue growth. And that's the harder one to tackle in which, yes, we all want cost savings. But what we really want is more revenue growth. Revenue fixes everything. Cost savings is definitely a plus. But how do you get more revenue from using AI?

11:43Neil Patel:And there's some obvious ways like, hey, how about rank on chat GPT? But when it comes to actually token costs, and using it for work, what we're finding is companies are using it to get more done, but their customers are expecting more. So it's not like they can do the same amount as before or less and still make the same amount of revenue. And that's the conundrum. It's in theory, you should be able to get more growth, but because everyone's doing it, the customer's expecting more.

12:12Eric Siu:So what I would say is this, I find that measuring revenue per employee is a healthy way to look at it as of today. So one of the people on the call, their revenue per employee last year was 600 ,000. Today, it's 1.2 million. And so I'm like, okay, there's some efficiencies there, right? And they're not necessarily looking cut. I will say one more thing. The narratives that a lot of the CEOs that they work for previously, that all the CEOs were like, how do we cut more people? How do we cut more people? How do we cut more people? And they're all saying now that that doesn't work anymore and that they've like backtracked on that.

12:42Eric Siu:And so I find that interesting. By the way, you didn't see the founders in the room reacting to that much, right? But the people that were working at companies are like, yeah, you know, we had to backtrack on that. So I'm just reporting on kind of what happened in there. But I think revenue per employee is one thing. I will say one more thing too. All right.

12:59Neil Patel:So I wanted to take a moment to tell you about my podcast co-host,

13:03Eric Siu:Neil's agency called NP Digital. And they work with a whole host of global companies or a global organization. Also, Neil has SEO tools such as Ubersuggest and Answer to Public. All you have

13:14Neil Patel:to do is go to npdigital.com to learn more and we'll see you on the other side with these single

13:19Eric Siu:brain implementations that we've been doing right now where we set up these these uh these um these these agents these managed agents um we've noticed that a lot of these calls neil it's more like tech support now so we've realized that a lot of these companies even though we set these these agents up in slack that these these marketing agents um they need a lot of support and at a certain point it's just like, whoa, why don't we just charge them on outcomes? Because it's like, you just want these outcomes and your team's not going to learn how to use this stuff, even though they live inside of Slack.

13:50Eric Siu:And so what I kind of landed on talking to my CTO yesterday was like, at the end of the day with this AI stuff right now, maybe the edge is being on the cutting edge. And that is very much something that is an advantage because I remember reading a tweet. It's like, oh, So if you're on Twitter right now and you're into AI, maybe you're six months behind the Frontier Labs. Now the rest of the world is probably like way behind you, right? And so that's why I think that if you're in services right now, I don't care what service you're in, if you have the AI augmentation piece, if you're in services, there's going to be more demand for your stuff.

14:24Eric Siu:Because to Neil's point, the expectations keep getting higher and higher. So that actually means more people need to be hired.