Ep 597: How Jon Bond Built a $90M Agency with 27% Margins (and the “Tip of the Spear” Playbook)

0:00Hello and welcome to the all killer, no filler D2C podcast. I'm Eric Dick. Today, I am off to Tofino with my daughter to enjoy spring break with her. Really excited about getting away for that. In the meantime, I'm really also excited to preview a new podcast that we're debuting on the D2C podcast network. This one is by the co-founder of Pilothouse and the co-founder of D2C, Jeff Shannon, who has also with me started a company called Agency, which is a community for digital and digital. agency founders of all stripes. We're up to like 70 members now on the agency community. So if we have any agency listeners, agency side listeners to the D2C podcast, make sure you check out joinagency.co.

0:42And you can also subscribe to our new podcast, Agency Confidential, where Jeff Shannon is going to be working with some agency legends to talk about some incredible stories of growth. And this week's is with John Bond, who worked for a company in the 80s and 90s and got their billings up to over a billion dollars a year. Kirshenbaum and Bond basically invented guerrilla marketing in the late 80s, early 90s, the absolute heyday of that kind of marketing. And this podcast is just an absolute wealth of knowledge from someone who scaled an agency to the absolute heights. There's lots of information in here, whether your brand side or agency side.

1:25I think there's a lot you'll get out of it. Jeff, the handsome devil, is such a good podcast host. He's going to be stealing my job soon enough, maybe filling in when I go on vacation. But I hope you enjoy it. It's a labor of love. We only have two episodes in the can right now, but we'll be filming more soon. Hope you enjoy Agency Confidential, the behind-the-scenes stories of incredible agency growth with Jeff Shannon. And on with the show. What was your secret? Billion dollars in billings. It's crazy. Culture. The real core to the culture was our whole philosophy was word of mouth. Even today, you know, 95 % of all word of mouth is dribble.

2:03Only 5 % happens online. Give me the key to word of mouth. There's two things. The smartest thing I ever learned from hiring.

2:18This episode is brought to you by Contentful. Marketers, you know that feeling when your creative clicks, when that social post sends engagement through the roof, when your outside-of-the-box campaign hits ROI positive, when a personalized homepage turns prospects into customers? It's utter marketing bliss. Contentful helps you create tailored omni-channel experiences without working overtime. No stress, no limits, only possibilities. Get the feels at contentful.com. Hello, everybody. Welcome to Agency Confidential, where we uncover the stories behind the business of running an agency. Today, I'm really excited to have a conversation with John Bond.

3:00John is a legend in the advertising space. He's been in the agency game since the 80s. His first agency, Kirshenbaum Bond, started as two guys in New York City, pioneered guerrilla marketing, which went on to become what we know as viral marketing, and went on to become the largest independently held agency in the U.S. before being sold in 2009 with over a billion dollars in agency billings, annual billings. He's gone to build, lead, and sell multiple other agencies. He's an author of the book Under the Radar, which is the story of how he built his first agency, which I'm really excited to read, John.

3:34And he's a big name in the space, and we're lucky to have him. So thanks so much for joining. Thanks, guys. Nice to be here. Hello to everyone in Adland. I'm a recovering agency guy. I'm on step 10 of a 12-step program. Don't tempt me or anything. I'd love to go back to the beginning, hear a bit about the story. You guys were two guys in New York. You were in your 20s. What prompted you to start an agency? How did you get into the agency life? I worked for every bad agency in New York, and I kept going, oh, shit, I can do this. If they can do it. Have you been an ads guy your whole life from the start?

4:14The only thing I'm good at, we started doing this freelance work for Kenneth Cole. We did the first Kenneth Cole ads, you know, and they were all about current events, like Mel DeMarcos bought 2 ,700 pairs of shoes. She could have at least had the courtesy to buy a pair of ours, Kenneth Cole. So we'd wait for something to happen and then do an ad on it, and then it would get picked up. You know, you said viral, right? Everything was viral and got picked up by the press. and um richard we were working at different agencies within a block or two of each other and richard's creative director was james patterson who's sold more books than anyone but you know the bible and uh he he was still working on his first novel and he came went around to the creative department at j welter thompson with our ads why can't we do ads like this and then Richard told him he's like oh bring it into the agency and it's like well we already use your art department to do our mechanicals so you know this whole campaign just became famous then we went you know well let's start this agency and uh we had a retainer of$2 ,500 a month and a beach chair uh and then we rented this space in a friend of ours real estate office because he had the whole floor.

5:38And when clients would come, we'd put a picture of, we'd put our sign, we made a big sign over his sign. So it looked like we had the whole floor. People would be like, well, why do you have all these pictures of buildings everywhere? Oh my God, that's amazing. I love that. Yeah. So it was a little bit of faking it till you make it in the early days in terms of the office and the... It was a lot of faking it. It was a lot of faking it. But, you know, we were really the first in that sort of painfully young hip category, believe it or not. Because before that, it was still the end of the Mad Men era.

6:14You know, so people in their 40s, they had a client, they had a reputation. We didn't have anything. They'd start these agencies and people thought we were just obnoxious upstarts. I remember one person said, do your parents know you're doing this? so kenneth cole was that your first yeah i was first client yeah what did client 234 look like and not the specifics but how did you go and actually turn it into a real business you know when you're in your 20s what was good about that is uh all the media reps were women in their 20s basically and um they all thought we were cool they started sending us business Yes.

6:54So six months after we started, there was a seven-page article in New York Magazine, and the headline was Hot Copy. And then Barbara Walters saw it and did 20 minutes on us on national TV. That's six months old. That was maybe seven months after we started. So it was crazy. The agency was always hot. It was just straight up from the very beginning. Do you put that to luck or do you put that to you guys had this plan to make it the hot agency from day one? Oh, no, we had a plan to make it hot because everyone says it takes 10 years to build an agency. We're like, I will be old by then. We were like 25, you know.

7:34The whole idea was to create the perception that we were hot, you know. So we had, you know, the Kenneth Cole thing and got a couple of other clients. And then we just would announce these things one at a time. And then all the ads were crazy and outrageous. So it was very orchestrated. That's very cool. How long was it before you started hiring? Maybe a few months. Do you remember your first hire? Yeah, it was a guy named Dennis who was an art director. And he was the same price as another guy who became like a big famous art director. except Dennis could draw. You had to draw a comp, so we hired Dennis.

8:20Then one of the first people we hired was Andy Spade, whose brother's David Spade. And then eventually he married Kate Spade, started Kate Spade. And I remember I paid him$22 ,000. He had the ugliest portfolio ever, but he was a writer. But his ideas were good. at what point did you i mean obviously it might be the six month mark when you were you know on on in new york magazine and barbara walters but what was the inflection point you're like holy shit we got something here we can scale this up really big well for the first few years we were very famous but not very big because we had lots of cool clients cool clients that would do cool things but weren't big you know so one day we go you know it'd be good if we had clients that paid us that would be good what were some of those campaigns in the early days oh my god the kenneth cole stuff um sharavari never coming to a mall near you you know it had all those cool japanese designers everything was very edgy and very cool first big client we got was hennessy in a big pitch they sent us over to cognac to meet the guys who ran the account that ran the business out of france and um we came with the brand managers and then they show them the new campaign and the french you know because this is like a 250 year old brand they go oh that's nice come back next year if you still like it we'll pay you and then we'll run it then and everyone's freaking out.

10:01What? The brand managers. And they go, look out the window. We all look. You see the grass over there? Yeah. We just planted seeds that will grow up to be oak trees, that will age the cognac, that we will sell when we're all gone. That's what they said. So that we did actually run the campaign. But then as we were leaving, they go, you know, we like you guys take this guy with you who had been our tour guide who was 22 patrick morley fletcher and um it turned out he was 17th generation hennessy you know so then he stood up next to the wall of all the portraits and then like he looks the same so he came back to new york with us for two years no way that was really cool the early days of starting an agency, almost always it's craftsmen.

10:58It's people that are good at the craft of what they're doing. They're artists, they're directors, they're copywriters. With your partnership, which one of you guys took lead on the business side of things? And how was that transition from working in the art of it to working into the business of running an agency? We both kind of did everything. We both came up with the ideas, both did client service, both did everything. What's good about a small agency is you learn to do everything. I mean, to this day, I still understand media because I had to do media. There was no one else to do media. I think that people who run agencies are very underrated in terms of how hard that is.

11:36I always used to remind me of if you look at the old Star Treks and they'd go, you know, a starship commander is a very rare person. They need to, there are people shooting at you and this and that. And I'm going like, yeah, that's my job. Exactly. It's a freaking starship commander. Yeah. You know? Yeah. Because they really are out to get you. A hundred percent. Every piece of it, you got angry clients. You got angry staff. You got creatives all over the place. You're trying to put it all together to actually make a buck. It's tough. It's a tough go. Oh, no. You're like the sandwich and noodle.

12:11You've got like the clients that everyone wants to steal. Then you have the star people that everyone wants to steal. And what the hell? How do I keep this thing together? What was your secret? How did you do it? How did you grow? I mean, because obviously, you know, billion dollars in billings. It's crazy. Culture. You have a culture. Now, it's not like I read some book and knew to do that. Who knew? But we had an incredible, incredible culture. Now, people wouldn't leave the office because people in the office were much cooler than their friends at home, you know. And, you know, I thought about what the culture is.

12:52and um you know it was a lot about questioning everything i mean we were cynical young right who thought well why would anyone believe advertising you know why would believe people believe this crap you know um so we came at it that way but looking back on it i think the real core to the culture was acceptance. You know, you could be some nerd who people made fun of in high school or gay or person of color. You could be anything. And people felt accepted. And they didn't have to be two different people, the person at work and the person at home. They could be the same person. And that is what made it really sticky and passionate.

13:40Look, to this day, God forbid somebody died who worked at the agency who people know, I could get an email or a notice on Facebook, 150 people will show up tomorrow night at some obscure bar in Soho. Guaranteed, 100, 150 people, boom, like that. That's culture. They don't have that very much today. I think it's way harder to do to create today remote working um fame is hard to create because there's too much digital advertising that people don't see it's not you know like we would put stuff out and everyone would see it at the same time you know here's a magazine ad or tv commercial but now it's hard to be like did you see that you know no i didn't i didn't see it that's the game is getting that Omnitale coverage.

14:32Yeah, what was it? Like, is, you know, if you look back into, what was it, 80s, mid-80s that you started Kirshenbaum? Late 80s. What's the biggest difference between then and now? You work with agencies now, you consult, you invest. Like, what's the biggest thing? There's so many differences. Well, we were a Michelin star restaurant, you know? Like, it took us the whole year to make, you know, three frigging Hennessy ads. you know from the how many angels can dance on the head of a pin i don't know how many should the period go there and it was actually overdone to to tell you the truth and we'd go wow three ads in a year i'm so tired that's like in a day now so we've gone from michelin stardom to mcdonald's drive-thru um so i think it's a lot less fun uh and you get paid less you know And you work a lot and there's a lot more busy work to do.

15:28And I think that the currency of ideas has declined dramatically. People don't really know what an idea is. So, yeah, I think it's a lot less fun and a lot less profitable than it used to be. You guys have it. You guys have it tough. I mean, it's still better than a real job. I love it. I love it for a bunch of reasons, but I agree. It's always – and it's the pace of change is absolutely insane these days. It's absolutely insane. It's insane. With, I mean, AI entering the market with basically everyone and their dog going remote. It's a completely different world than it was even five years ago.

16:04Completely different. You know, it started with the internet, which was a big shocker. You know, I remember we had some tech guys and they were like, you got to, you know, surf the web. And I'm like, what? and they were like what those little teeny ads those little teeny banner ads that's so suck who wants to do that or john when you were explaining the campaign back with Imelda Marcos and sort of hijack the idea of sort of hijacking culture it's funny I after going through black friday here at pilot I was seeing some of the ads that were created there was a real flair for sort of creative communication I saw in them that made me think of your idea of newsjacking or of creating momentum in a moment with the culture is actually not that dissimilar to meme marketing now, right?

16:58You're right. It's a lot harder to get broadcast, but it's the same thing. No, that area is easier now because of social media. I mean, all that stuff that we did, that whole approach would be even better today, You know, because we were relying on word of mouth and media press pickup and all that. All that would work incredibly well today. I mean, that was our whole philosophy was word of mouth before social media. But even today, you know, 95 % of all word of mouth is dribble. Only 5 % happens online. What's the key? What's the key to, give me the key to word of mouth. There's two things. And you know, it's funny you say that because nobody strategizes about it.

17:43Well, Ogilvy used to say, word of mouth is manna from heaven. It's great when it happens, but how do you do it on purpose? And I think there's a couple of things. One is, what's the thing you want people to say? And that's the easy part. And the second thing is how can you do something that instigates people to talk? That's the harder thing. I mean, I look at it as the most powerful thing is word of mouth at scale, right? So if you talk about scale, paid media gets scale. How many million impressions do you want? Push a button, write a check, right? But that scale isn't credible, isn't necessarily talked about because it's obvious that it's paid.

18:29And then on the other side, right, you look at what's believable and what people talk about. And that's third party, that's press. But that's really hard to get at scale. Or you can get it for a minute and then it vaporizes and goes back to zero. How do you do something that has both? That's the home run. That's what you got to look for. something that has scale that you can do over and over again and generates buzz, you know, at scale. What are the best examples of that in the past few years in like this era of marketing? Well, you know, I could say Sidney Sweeney, but I think sales are pretty flat because I think that the super woke generation didn't like it.

19:17But you know what went up? The stock price. The stock went way up, yeah. Because the older people went, hey, that's cool, American Eagle. And they went and bought the stock. Again, because there's good and bad BR. It can go south just as easily as it can go north. The same with Cracker Barrel rebrand, which was really stupid because they took the soul out of it. What I would have done, and they were like, our customer is getting older. or we need to get rid of the old guy. No, you never get rid of it. What they should have done is turned him into an avatar and had him say cool, funny things that were kind of Southern wisdom, country wisdom.

20:03That's what I would have done with it. But I have still haven't answered your question. So there are, I think you need to own something that's repeatable. For example, Small Business Saturday, which has been going for 13 years, I think. When that came out, Obama tweeted about it. I mean, that's pretty crazy when the president of the United States tweets about your marketing idea. But every year, the day after Black Friday is American Express Small Business Saturday. Now, that's pretty powerful. So I think the key is to create an actual asset that regenerates itself on a regular basis, right? And there's a bunch of examples of that, but that's how I look at it.

20:50You need a thing, you know, like, and I've done things like, I had a stake in an influencer tool and I created this thing called the 50 Most Influential CMOs. And I got Forbes to partner with us and Forbes ran the article and then that company got sold. But to this day, 14 years later, every year it can, they announced the 50 most influential CMOs. It's an asset. It's going to get buzzed every single time. Every CMO is going to tweet about it, right? And everyone that didn't get on the list is going to call up and go, how do I get on the list? You know, again, so it's about an actual, I think there's too much renting your marketing, like messaging.

21:38Messaging's overrated. You know, messaging it, you hear it, it's gone, you know, and then it just atrophies. You run ads and then you turn off the advertising, it atrophies. Eventually it goes back to zero. You're propping it back up all the time. You need something that is more permanent. That's my theory. I love that theory. It's what we did at Pilot House. We built a media company kind of by chance, honestly. Well, not this podcast, but another podcast that Eric hosts and a newsletter. And it was, you know, we were talking to a potential acquirer once and he was saying that, he's like, man, you guys built your own pipes.

22:17I've just never seen someone really do that. And that was the moment where you're like, aha, we've actually built something up here. And it's been a fantastic growth tool for us. going back to the agency world and like the business behind it i mean you guys grew to how big were you guys at the peak over 100 million in revenue with 27 margins every year that's amazing in that growth journey where there are ups and downs did you have those moments of like holy shit we're going out of business like all the time talk about those i'd love to hear a little bit about that okay that's a really great question let me that's gonna take me a while to explain Okay, number one, I looked at it like if you know anything about baseball, you know, there's the different levels of the minor league, right?

22:58Triple A, if you hit the fastball, you get promoted to double A. You hit the curveball, you go to triple A. You know, you get the slider, then you go to the major leagues, right? Each level, you're competing against completely different competition. And you got to figure out what's required to beat them. Once you beat them, you get promoted. And each level, the clients are bigger, more sophisticated. There's more at risk. So originally, it was just this crazy creative shit that I talked about. Then, Shaiate invented this idea of account planning back in the day. But the second agency to do it was us.

23:44We hired all the 20-something-year-old planners from Shaiate. They got really pissed at us, but that was a huge advantage because there was nobody else but us two for a long time that had it. The next thing was integrated marketing. If each strand is a line into a client, when you have lots of strands, it becomes a fabric, and it's stronger, and it's more profitable. Then we spun out all the specialty agencies with their own name so we could have competitive clients. We had three liquor clients, you know. But if they're under different names with different things, the client was cool. Oh, so you actually had multiple names under your main moniker.

24:26Yeah, we had four or five different agencies, media, you know, have agency, media kitchen. And then they also could go out and pitch their own clients. So now we had diversity. That was from a business standpoint the thing that made the agency really sing and take off. How did you – I mean, I don't know what agencies were like back then in terms of whether 27 % was normal year over year. That's pretty hot now. How did you manage that from a day-to-day point of view? I don't mean like day-to-day, but how do you – like what came first? The profit or the work or how did you do it? For years, we had like 5 % profit, 4%.

25:05We sucked, right? And then we got tired of it and had to grow up. But here's how we ran the agency. All right. So we had a CFO. We had a CEO. Basically, everyone in an agency always comes to you and says, I need more money. I have to hire more people. So the first answer is always no. Then if they come back, so half of them go away and figure it out. then half of them come back and go no i really do need money then we go all right six people said that we're gonna bet on these two but we're but here's the rule what's that revenue if we give you a hundred thousand dollars what's that going to produce they go okay we're gonna get three hundred thousand we go okay yeah five months and here's what you're gonna do if that revenue doesn't materialize.

26:06You're going to cut this, you're going to that. And so it was, there were consequences. That's what we did. It worked incredibly well. I love that. And how was the, I mean, that must've been a pretty big shift in how you run the business going from two, 4 % margins up to 27. Like how was that on culture compared to what it was before. Everyone said it would fuck up the culture. We're a creative agency. We're not this, we're that. It didn't. It made us better, more disciplined. It only made us better because before people would ask for money and we would overstaff and this and that. And by the way, it didn't make anything better.

26:51That's the crazy thing. Yeah, we found the same. Every time we hire more. In those days, you got to this 27 % margin. I got to imagine it takes a, you know, to build up the agency you did, hiring has got to be a super important part of that. Obviously, what was your hiring methodology? How did you find these people that would go, you know, kill it for you? Well, if you have a culture, you know what a KB person is and isn't. So we had a type of person. The smartest thing I ever learned from hiring was we had a lot of people from other countries and we had particularly a lot of Brits because in let's say London there isn't the film industry there is here so all the cool creative people go into advertising because no Hollywood right and I thought wow there's so much better and I had the maximum number of Brits on retainer I possibly could so one day I said I'm going to go do a recruiting trip to London I went to London and I met all kinds of people and I went oh they're no better what the heck is going on.

27:54Ah, it hit me. If you are willing to move by yourself from a country you've lived in your whole life, you may never have been in New York in your life. And there were people I hired and go away, go do that. What's that say about you? It says you're confident, says you're willing to tolerate change. And what's happening in our industry, it's been changing fast. Yeah, I love that. Always has. And I hired people from Montana, from wherever the hell they were. And those were always the best people. People that would move to New York from wherever. So you guys became this melting pot of people that they were there for that.

28:37And remember, I said about acceptance as the core. Perfect. Couldn't be better. You know, I mean, New York is a melting pot because of that, because of it, because of the Dutch. used to be called New Amsterdam. Holland has got no land. So they had to trade and you can't trade unless you can accept different people. That's the culture of New York, right? Yeah, that's amazing. What were the biggest swings you guys took that like put the company in a place where it could have all gone to shit? That's a great question. One day we had this consultant, a really great guy, former agency CEO, who I loved.

29:16And one day we had an offsite with all the partners. And he said this, you guys must stop and fight the urge to f**k mice. In other words, stop with the little clients. Stop doing that. From that day, we started focusing and we got big, massively huge clients, BMW and Wendy's. Jeff has a formative moment that we talk a lot as we built out agency talking about his formative advice about building an agency was someone very influential told him to stop picking up pennies in front of the steamroller. The same idea. A little less colorful, but yeah. We see a lot of people in agency and us included.

30:01We started that way. When you start an agency, you're just taking on whoever's going to pay anything. But a lot of people get stuck. They hit that plateau because you can't get any bigger. The clients are too small. It takes too many man hours to do it. How do you see people get over that hump? Is it just doing it? Is it tenacity? What is it? I think it's two things. Focus on the bigger client. Two is shameless self-promotion. Like, here's what happens, okay? Agencies, you've got clients, right? Who is your most important client, Jeff? The one that pays me the most. No. Pilot house is the most important client.