What big brands actually sell, Mcdonald’s Netherlands put up unbranded billboards that smell like french fries, Is the marketing industry recovering?, and The Instagram $1B acquisition revisited - how to think about m&a

0:00What do you think big brands actually sell? I think they sell some sort of type of experience. Close. Basically there. So I was watching this video on Instagram and basically this video shows McDonald's brand page on Instagram. It doesn't really show their food. When you look at Nike's page, it doesn't really show their products. At the end of the day, they're showing experiences. They're showing feelings to people. Feelings are ultimately stories, right? Yeah. And so that's what big brands do at the end of the day. When you think about Walmart, they're not like, hey, come buy our $2.99 Mr. Beast chocolate or something.

0:40Look at Walmart. I don't even know what it looks like. Hopefully, I'm wrong. But Nike and McDonald's are good examples of this. So go take a look at their Instagrams and you'll get a good sense for what they actually do from a corporate branding standpoint. Dude, speaking of McDonald's, did you see what Ad Age posted about them? No. What happened? What they did in the Netherlands? No. So, you know, I don't know if you can see my screen. It's blocked. I already used my daily limit. In the Netherlands, they're showing a big banner, like a billboard or whatever you want to call it, an image. It doesn't have a McDonald's logo.

1:14It's red. But guess what it does? It smells like French rice. Oh, that's cool. Yeah. And, you know, their overall goal is it's unbranded billboards, right? So there's no M logo, but it has their color scheme. Yeah. And it just smells like French. That's a feeling. That's an experience at the end of the day. So, you know, us, by the way, us doing this versus us lecturing at you, this is more of a feeling. You guys are experiencing us having a conversation here. This is why it's more interesting, at least to us. Yeah. But by the way, what was I going to say? I forgot what I was going to say. Continue.

1:49You're going to say something. Yeah. So the other thing, dude, and I'm curious on what you're seeing on your end. but I was looking at an article and the Perryman group estimates, wait, not that. Where's the article? Oh, here you go. NBCUniversal has generated$1.2 billion in Olympic ad sales. It's the highest that it's ever been. Publicist stock is up. Omnicom is recovering. WPP earnings are slightly down, but Publicist is doing pretty well. Omnicom is not doing that bad. you know they're showing signs of recovery densu aegis has gone hit hard but not hit that hard google is doing well financially facebook is doing well at least their ad units the real question is is do you think the marketing industry is recovering how was your q1 my q1 was it was decent it wasn't as good as we wanted but it was decent but u.s was way up year-on-year comparison versus last year.

2:49Yes. Quarter-on-quarter. Year-on-year on over-quarter. Yeah, yeah, yeah. The U.S. did really well. Because we're in 19 countries, some of the other countries are lagging quite a bit behind the United States. Like Latin America is lagging quite a bit. So I'm U.S.-based only. And so, yeah, Q1 looked a lot better. And then Q2 is still looking pretty good, I would say. um so i'm like i'm still cautiously optimistic but because you just don't know what's going to happen right it's still like would you say the magnificent seven are still overvalued i would say yeah they're probably a little overvalued right now when you're comparing your q1 of this year to q1 of last year oh way better uh also include your tuckens no but do you have this revenue has a tuck in so i'm curious to see what would it be last year if you had the tuckens in there.

3:42Well, I have to tell you offline, but yeah, but you get what I mean, right? Cause then you'd have a true apples to apples comparison. Yeah. But we'll just say it's up significantly. Yeah. Yeah. Um, but yeah, no, we're, we're seeing like in certain markets for us, like India, we never saw a dip. We can grow 40, 50 plus percent year over year in India. No problem. Like it's just booming. So you're still flying on in India right now, dude, we're almost at 200 employees just in india for the india market not to outsource i'm talking about india working in india for india companies like in india we work with amazon india tata tata owns range rover jaguar they own a lot of stuff jaguar not jaguar jaguar i don't know how to say it dude uh uh pwc espn black and decker apollo health which is one of their biggest hospital uh companies in india ZTV, which is Sony.

4:38But we work with massive brands there for the India market. And they pay well. It's not like we're charging$1 ,000,$2 ,000 a month or anything like that. Dude, speaking of ESPN, I was watching a documentary recently about how ESPN is struggling, right? Because when you look at, I think it was over the last, I don't know, 10 years or so, there's been 40 or 50 million people that have cord cut it or cut the cable cord basically, right so they're not paying for cable anymore yeah um but espn is part of those bundles so when you when people sign up for like comcast for example like 50 60 70 bucks a month espn actually takes 10 10 dollars of that it's actually pretty significant really and that number gets higher and higher that the espn tax gets higher and higher right but with all the people cord cutting um it's actually starting to hurt espn so espn they're owned by disney i think disney owns 80 actually and what's what's happening and 20 is owned by hearst yeah you got it so what's happening is ESPN is they're going to try to make a, they're doing a streaming collab service with Fox and somebody else now.

5:40And eventually they're going to make their own too. But that's how they're planning to diversify because media is just getting so much harder now. And really what ESPN has is that 1.2 or$1.7 billion college football deal that they have for the playoffs. So they don't have many deals, but I just think it's getting harder and harder. And even for them, they have to, they have to adapt with the times or else they're going to die. Well, a lot of the other networks have taken some of the sports deals. Amazon has taken some of them. Yeah, and they have all the money in the world. They just do it all day.

6:11Yeah, Disney has money, but not Amazon kind of money. No, they don't have Amazon money. They don't have YouTube money, aka Google money. Yeah. Dude, those guys just print cash. Because it's like their business, they can probably cut half their staff and they still would do well. Just like Elon cut so many people out of Twitter. And it's like, oh, it gets more traffic than it used to. 75%. And everyone's like, all the papers that we're writing about him, this is where everyone gives us negative reviews for talking about Elon. But all the negative reviews, it's like, hey, Twitter is a ghost town.

6:43It's not going to work anymore. It's probably going to shut down next week. And it's like, nope, still going. It's still going. It's still popular. Yes, their ad revenue may not be doing as well as it used to be. But here's what's funny. He has, call it 25 % of the staff, based on what you read. Yeah. And I've seen more releases on Twitter or X, whatever you want to call it, since he's owned it than in the prior years before. Neil's saying they're just shipping a lot faster. Like, by the way, there's a new blog writing feature here too, Grok shipped. And then there's like, there's more of an emphasis on video too.

7:14And oh, I can even bold my text now. Who knew? So yeah. But not on all platforms, depending on what you're using it on. But yes. All right, real quick. I need to tell you about the group that Neil and I created called the Agency Owners Association. And this is a group that's similar to entrepreneurial organizations such as YPO or EO. By the way, Neil and I are both in YPO, but we thought it'd be really cool if we're able to create a group that's dedicated to agency owners to helping them scale. So you can be at six figures, seven figures, eight figures. We have different groups for different levels.

7:45All you have to do is go to marketingschool.io slash agency. Again, that's marketingschool.io slash agency. And you can go there to apply. And I will tell you right now what we're doing is there's an online community. There is, we do calls every now and then. There's stuff that we share in there that we don't share publicly. And you can, at least the online community, you can cancel at any time. So you can go there to learn more about it. And that being said, back to the podcast. You know, remember the Instagram acquisition from back then when everyone's like, oh my God, Mark Zuckerberg overpaid.

8:18He overpaid because he paid a billion dollars for Instagram. So you've seen the numbers, I'm sure. but it took six years for Instagram to go from universally mocked as a waste of money to doing $11.3 billion a year in revenue and growing at almost 50 % a year. It's even higher than that now. 2021 was$32.4 billion and just so everyone knows that's actually more than YouTube. Is it more than YouTube in ad revenue? That was 2021 but it's higher now. So when you look at the numbers if you click on it, it's higher than YouTube. So I saw the 2023 numbers I don't have off the top my head, or the more recent numbers.

8:56There was an article about it. Facebook.com generates more revenue than Instagram, but it's actually getting really close. So it looks like based on the growth rates that I saw in that article, Instagram will overtake Facebook. It's just a question of time, and it's probably going to happen in the next few years. Look, I was surprised Instagram is bigger than YouTube. I would have thought that YouTube is bigger. So that means Instagram is also bigger than Netflix too. You can look it up. But YouTube ad revenue. But I think the takeaways here is that sometimes these acquisitions take a long time to realize.

9:28And also people were discounting Zuck and saying, oh, he doesn't know how to build products anymore. But you look at all the things that they shipped and all the things that they added to Instagram, it's gotten a lot better and they figured out how to make it work. So YouTube in Q4 of 2023 did $9.2 billion just in revenue. Q4. So I don't have the whole years, but Q4s alone was. So it's either really close or Instagram's bigger, but a couple of people said that Instagram's bigger. Either way, they were both great buys. Remember how they bought YouTube for a billion? Both of them were a billion.

9:59Yeah. Yeah. And so it's like, again, these things take time. Like you, you never know at the moment and you won't really know for like maybe a decade. My business partner, Mike Camel was listening to a podcast with Ben Horowitz and Ben Horowitz was giving advice on acquisitions, which I think he's spot on because we also talked with a lot of private equity companies when we were going through the process of, you know, back in the day, we were thinking about selling NP digital and we were getting hit up a lot by private equity. We chose not to, of course. And it was funny. The best thing I got from those conversations, there was two things that I got from the conversations.

10:38One, there was this amazing gentleman named Michael Delaney. He owns a private equity company called Court Square. Eventually, he bought Power Digital. He sat down with a dinner with me and Mike Hamo in Vegas, and he was going over private equity. He was part of a bank back in the day. He's been doing this for pretty much as long as I've been born. But back in the day, private equity didn't have a clock on how fast you would have to sell. So they would just buy and hold the companies. And he would tell me, he's like, back in the day, it was a great days. He's like, we would buy a company, fix it, grow it.

11:14And he's just like, and we just keep it. Why would you ever want to sell it? You did all the hard work. And he's like, nowadays we buy companies and I got to sell them because I have LPs. And it hit me when he said that. I was like, huh. So you're telling me a better model is to just buy and then hold. Or in my case, build, keep growing and holding. I was like, oh, okay. I didn't say anything to him right then and there. but he was like, those are the best days of private equity. We made way more money. And I was like, oh, cool, thanks for telling me that I should just, cool, goodbye. You know what's interesting?

11:45So I told you, I met with a wealth advisor right before this, right? And I could tell that they didn't like the fact that I said, so what do you think about your investment? I'm like, look, I just think about my business and that's the best compounding machine. And I just think about compounding it for a long time. So what about your other business? You got to diversify. Warren Buffett said diversification is for idiots. What do you think about that? And then it's like, well, it's too risky, blah, blah, blah. I was like, so tell me about your portfolio performance. And then it was like, well, it's like a here, and muni funds, this and that.

12:22And our response is probably the same. It's like, we've learned that, yes, asset allocation, all these things, focusing on too many things, you're not going to get the best return. It's better to just focus on your business. what you and I don't diversify and we hope our businesses do well. Knock on wood. Dude, speaking of diversification, Warren Buffett talked to Bill Gates about it. And if Bill Gates didn't diversify, he would be a trillioner at this point. Yeah. He should have never diversified and sold Microsoft Talk. Look at Steve Ballmer. So like, you know, the thing you hear from Wealth Advisor and there's nothing wrong with this, like they have to talk their book.

12:54That's their incentive, right? But it's actually, it doesn't seem risky to me to put all my efforts into my business. Nope. like if I fail, I fail. That means I suck. Right. Well, check this out. Most wealth advisors that I've met up with like aim for like, you know, seven, 8 % a year, good ones get you 10%. So I'm like, so I'm better just keeping my business and growing at seven to 8 % because I grow more than that. I would be pissed at seven, 8%. Yeah. Um, but going back to the private equity, it was two things. What one, Michael Delaney said, he's like, you know, hold onto it and just keep growing.

13:25I I was like, oh yeah, this makes a lot of sense. Thanks for that. And the second one with Ben Horowitz, when Mike was listening to him, he was talking about some of the best things that Andreessen Horowitz has done is they'll overpay for really good deals. If something's going really fast, you have conviction, it's worth paying a premium for really good deals versus paying a good price for mediocre deals. Because, okay, I mean, right now, NVIDIA is a good example of this. People might be like, NVIDIA is overvalued, but in 10 years, is it going to continue to run up? My argument would be yes. Now, if I was focused on stocks right now, yeah, I'd put my money into NVIDIA, right?

14:06That's a good example of that, where it might be a little overvalued right now, but still. And that's not financial advice from Eric. We don't give investment advice here. Yeah, or the YouTube example or Instagram example, when Facebook bought Instagram and Google bought YouTube. everyone thought they overpaid for it. Even they thought they overpaid for WhatsApp which I think was like 17 or 16 billion. And at that time it was a lot of money. It's still a lot of money but WhatsApp has a massive community. Facebook just has to monetize WhatsApp and then things will be really good for them. Dude, so you're saying all the phone conversations you had when you were running a process where I said it doesn't make sense to sell.

14:43You mean I didn't convince you? I know, yeah. Eric was telling me actually no when we had conversations about should i sell or not you're telling me it depends on the multiple you know i said why would you sell you have something great going why why don't you just keep compounding it you did say that but you did also say if someone offers you a ridiculous number yeah if they gave you like a hundred billion dollars or something yeah no no but we're talking about multiples right like if someone gives you like 25 times or something crazy or that overvalues the market, you know, you can just arbitrage the money and just buy it all back again when it goes to reality.

15:18And now, but now I'm like, no, probably not because it's so much work. Honestly, if I had to go back and do it, I'm really happy that I kept the business. But if I had to redo it, I would have sold a hundred percent of the business when the valuations were really high and then bought it back. Cause you think, oh, you could, you think you could have gotten a discount on it. I know I could have got a discount. The whole market. Dude, I know so many people that paid 18, 19, 17 times for these agencies. Some of them were, quote unquote, digital transfer agencies, but they're really marketing shops and they got above 20 times EBITDA.

15:52No joke, they're trading for 10 times right now, nine times. And not all of them will sell back. It's hard to buy it back, but some of these funds are struggling and yeah, you can go buy back the business. Let's brainstorm this. So there's a company that we will not name that sold a couple of years ago. and a big holding company bought them. And it's not going so well for that company right now. If you were to come back and buy them at this point, I'm just like all the turmoil that's happened, all the cultural differences, you're buying a... The founder tried buying it. Yeah? He hit him up. I just think it's difficult at that point.

16:28It's like, how are you going to reset? You have to bring the entire executive team back and bring the band back. He would have brought it back. He would have done really well with it. But guess what they said to him when he hit him back up? What? F-U? Yeah, they're like, we'll never sell it back to you. If you've ever built a website, you know how tough it can be to keep a strong design while ensuring site performance is fast. That's where Framer comes in, and it totally changes the game. Framer is the design-first, no-code website builder that lets anyone ship a production-ready site in minutes.

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18:38Sign up for your$1 per month trial and start selling today at shopify.com slash marketing school. Go to shopify.com slash marketing school. Shopify.com slash marketing school. so it and he could have picked it up at a steal pennies on the dollar compared to what he got paid out but here's the thing the company that he sold it to was a publicly traded company they were worth billions and billions of dollars and their revenue i don't have the stock in front of me but if i had a guess is well over you know 10 billion or 8 billion or somewhere like that so if you got call it let's just round let's say you got 100 million for the company when you sold it and now you can buy it back for 15 or 20 because they just screwed it up they don't want mud on their face it's not or egg on their face or whatever the saying is they're so rich they refuse to just sell it back because they don't care for their bears yeah they want to save face That's a better way to put it.

19:45Thank you. So we're going to end it. Go to marketingschool.io slash agency if you want to grow your agency faster. That's the community that Neil and I have. We're like, community is everything. We think it's the next funnel, the next way of growing your audience through community. Check it out. Don't forget to rate, rate, rate, subscribe. It helps grow. Let us know what you continue to think about these long-form episodes. And we'll see you in the next episode.