Ep 645: DTC Rundown: "Don't Run Ads Until $10M?," Evergreen vs Campaigns, and Sites Built for the Wrong Customer

0:00Before we jump into today's all killer, no filler episode, a quick word about who makes this show possible. The D2C podcast is brought to you by Pilothouse, the performance agency behind some of the fastest growing D2C brands in the world. Creative, media and customer journey all under one roof. Performance and brand without the tradeoff. Every Friday, we hand the mic to a Pilothouse operator to break down what's actually working in their space right now. Want a team that treats your growth like their own? That's Pilothouse. Head to Pilothouse.co and now on with the show. There is absolutely no reason you should touch paid ads until you're doing$5 to$10 million in revenue.

0:35What's your take on this, fellas? The biggest issue that we see is people are spending money talking to customers they already have, who are already going to make a purchase, regardless of whether you serve that ad or not.

0:49Jordan Gordon:When you're doing a good job and reaching new people, your metrics should get worse, not better, because you're reaching the hard-to-reach people. If you're in the lead, sail with the same wind as the other leaders. Don't try something crazy unless you're already losing.

1:10This episode is brought to you by Triple Whale, the AI operating system for e-commerce. Just a quick gut check for brand owners and media buyers. Have you started your Black Friday, Cyber Monday planning yet? If the answer is not yet, you're not alone. But the brands that win BFCM aren't the ones scrambling in November. They're the ones planning right now. And here's why it matters. BFCM keeps getting more expensive. Last year, ad spend climbed faster than demand did, CPMs went up, and the seasons stretched from a single weekend into a full month of promotions. Show up unprepared and you spend more to reach the same shoppers right when your margin matters the most.

1:45Triple Whale built a free resource to help, the BFCM Hub. It's like a command center for planning your most profitable Black Friday, with everything in one place. Real benchmarks from tens of thousands of brands so you know what performance should actually look like for brands just like yours. Free tools to set goals and forecast outcomes. Strategy guides and checklists covering ad performance, retention and conversion. And AI-powered tactics you can put to work before BFCM week hits. The best part? It's completely free and there's no login required. Go to triplewhale.com forward slash BFCM26 and start building towards your most profitable Black Friday Cyber Monday today.

2:24It's all killer, no filler. I'm Eric. This is the DTC Podcast. And we're actually doing something a little different today, something I've wanted to do since the beginning of starting this podcast. I don't know. I don't even know if this show is still on anymore, but I followed this sports show called Pardon the Interruption, PTI, where essentially they have their hosts and they basically go through the major topics of the day. Everyone gives their take. Sometimes there's disagreement, always rambunctious, always fun. decided that I could just code this up on Claude and just jump right into it with two eminent leaders on the Pilot House side.

2:56We've got Jordan Gordon, host of Twiburp, the world's best email and retention podcast. He leads post-click and retention at Pilot House. And we've got Raphael Guy, who's a newcomer on the Pilot House podcast scene, but is rapidly rising up the charts, works heavily in partnerships and client strategy. Welcome both to the first ever episode. We have so many titles now of the all killer, no filler DTC podcast, The Rundown. We're doing it live and it's all happening. Welcome, guys.

3:25Jordan Gordon:Thank you. Nice to be here. Nice to be here as well. I'll kick it off because this was a topic that came up. I just got back from a beach vacation and I saw this tweet that was just absolutely blowing up on Twitter. It was from Cody Sanchez, who is an operator in the space. And this is what she said. I'll die on this hill. There is absolutely no reason you should touch paid ads until you're doing 5 to 10 million in revenue. Learn how to create demand organically through content partnerships and outreach first. That's enough to take you to that 5 to 10 million mark. Then once that engine is running, layer ads on top.

3:59If you do it the other way around, the risk is getting eaten up by rising ad costs before your margins can absorb it. Quite the hot take. 1 million impressions on X, which is insane. 706 comments with marketers just freaking out about this concept that they shouldn't be doing their jobs until a brand has hit this critical mass. What's your take on this, fellas?

4:21Jordan Gordon:I'm the free traffic guy, so I'll take the free traffic side of this discussion. I do have some nuanced thoughts on both sides, but I'll start with defending this. I've worked in e-com for 26 years now, I think that the purpose of online marketing is to ultimately drive free traffic. I mean, if you think about like, let's say, you know, your ultimate, you know, your total margin is 20 % and 20 % of your traffic is organic. Well, basically that organic traffic, that's your profit, right? Everything else is paying to just build up that organic where your profit is. Those are obviously some big numbers I'm taking.

4:58Jordan Gordon:But if you are not ending up with people coming to your site for free, right? Typing you into the domain or using very low-cost methods like email to drive people to the site, you're not going to be as profitable as the next guy and the next guy's going to win. I personally am torn because I like the sentiment of the tweet, but not necessarily the facts around it because the sentiment is that ultimately don't build a business that relies on paid media to drive the majority of the revenue because then at the end of the day, all of your sales are going to instantly have a negative margin impact, right?

5:37Because you're paying for every purchase. But there's a reality that exists, you know, where a business can wait to get to five to 10 million. Because generally, like as soon as you're hitting a million, about a million bucks, you can see that there's product traction, good, strong unit economics. Once you start reaching about that five mil mark, there's other copycats out there, you know, so you're already competing for attention. and paid media ultimately does the job of accelerating customer acquisition. You know, if you have a good product, paid media helps it grow. If you have a bad product, you know, paid media is just going to make that business fail quicker.

6:12It's just an accelerant, right? So I guess I sit in the middle where I agree with her sentiment. If she means, hey, make sure that you use paid media to support a strong business. Don't rely on paid media to fund your revenue. A hundred percent agree. And we won't jump to the next topic, but it is yes and, which is kind of the situation here. This is a yes and situation. All the brands that come on the D2C podcast, all the ones that have these amazing stories, most of them have really found incredible product market fit, found their community, have built an organic engine, but not all of them.

6:49especially in the pre-iOS 14 era there was that ability to really gain a lot of traction just from meta and i still think that exists today but again you can't be putting all your ad dollars into a bucket filled with holes which is why you need to have that you know that organic side of

7:05Jordan Gordon:things what were you going to say jordan yeah like this is along the lines of what eric was saying which is you know here's what's real okay i i worked for companies that were financed and the investors are like, this is how big you need to be in five years, you know, or I don't know, where a bunch of these covenants are going to kick in. Who knows, right? It's like, you better get this big. And so I didn't see the tweet coming into this, but whatever the person who tweeted it, like they're speaking about, I would say a truth in marketing, but marketing is downstream from business, right? And business is downstream from markets.

7:41Jordan Gordon:And so it's like, it's not necessarily going to be your decision, right? That the decision on your, on your marketing mix is going to be based on so many other things. Still though, remaining the deeper truth, like, you know, if you're not doing SEO, AEO, GEO, however many EOs there are these days, if you're not doing that stuff, uh, you know, you can't scale with an email. If you're not driving significant low cost traffic, then you better have damn efficient ads. that if you're going to have damn efficient ads, you probably just need to have a really hot product. And we do see these people who have like really hot products.

8:17Jordan Gordon:They just, for whatever it's magic, and they just, boom, scale right on ads. Don't try this at home, kids. If you don't have a mix, you could end up in a really bad spot if free traffic isn't a critical part of your plan. And when I think about this, it's like, okay, first thing you want to do is, you know, get your site set up properly, get yourself converting properly. Then, hey, build out the next part of your post-click, get your flows and everything set up. We're talking about scaling DTC here, right? You know, get your whole post-click environment working well so that when you do advertise, you know, the ads are going into something efficient.

8:57Jordan Gordon:And then what do you do? Then do your keyword research and, you know, work on some intent bearing ad spend because it's going to be more efficient. And then the last thing you do is go super, super large. So you would want to space this out and always have the free traffic sources as part of the plan as you kind of work your way up the funnel. Ralph? Yeah, I love how you're kind of talking about a system and it just kind of sparked a thought for me. For me, the other piece is I love it as a hot take. You know, obviously it's the internet, so people are going to say things to get a reaction. It worked.

9:32With a million impressions going to Cody Sanchez's handle there, it definitely worked. Yeah, and then when you brought up the hot take, I looked it up on LinkedIn and her whole branding is being contrarian. So, you know, kudos, Cody, on being on brand there. But I think the big thing that also popped up to me is, you know, if you take an operator mindset, the other risk is if you're not spending in ads, you're not going to be able to really scale as a business over time. It's skill set that you have to learn within the organization, right? So if you're waiting until your 5 to 10 mil to adopt that workflow, then you're really handcuffing your business.

10:12You're not building that internal knowledge base. You're not building the culture. You're not building the workflows. So you might see some cash up front. But if you're one of the few unicorns that can get to that 5 to 10 million dollars in a very short, condensed period of time, When you get to that$10 million phase, you're going to have to relearn and rebuild your culture and your team and resources to account for this as a cost as well as a skill set that your team adopts. So it's really, yeah, it's just a bit blunt, right? Do we run into brands in our audits that do find themselves in the – this is another tweet I saw a few weeks ago just about like the percentage of your revenue that you're spending on ads.

10:55And if you're over a certain point, you might as well just take a job in finance or something because you're spending, like I say, into a bucket with a lot of holes into it. And do we run into brands that have not figured out the math where they are losing money as they scale? All the time because there's a bit of a lack on spend discipline. And what I mean by that is, to Jogo's point, a big part of what makes a business successful is that repeat purchase rate. But one issue that we see very often, we're auditing anywhere from 10 to 15 businesses every single week, plus all the clients that we work on.

11:33So we see a ton of brands across multiple categories. But the biggest issue that we see in terms of wastage is people are spending money talking to customers they already have, who are already going to make a purchase, regardless of whether you serve that ad or not. then they're using the performance of those ads that converted an existing customer to optimize their creative. So it becomes a self-fulfilling prophecy. And the crazy thing is, if you look at the attribution ads for businesses like that, they might look healthy on a balance sheet for a short period of time. But when you look at the audience delivery and attribution, one thing that we see quite often is most of the revenue attributed was not generated via a click.

12:17It was just a view-through impression, meaning ad was served. The person ignored it. They purchased it anyways. Platform took the attribution. So you're basically spending to people that would already purchase you. Then you're using that false positive signal to optimize your creative. And then it just gets you into a high-frequency hole where you're wasting money talking to people that would already purchase you. And you burn your cohorts. yeah speaking of organic and paid yes and we're going to our next topic which is uh you brought this to us raf which is yes and a lot of times people talk about evergreen versus campaigns today we are talking about yes and evergreen and campaigns frame this up for us yeah 100 i think um the most exciting projects that we tackle at pilot house are like our businesses that are going through some sort of transition.

13:08And from a revenue scale perspective, you know, one of the ones that are really fun to work on is, you know, those businesses are going from seven figures into that 10 figure. And usually the dynamics we see, it's, you know, single skew product, right? Differentiated, you know, create scale, they attract a new customer base, and then they rely on product differentiation and first-time profitability. Competitors come in, copy them, new colors, slight modification because of the increased competition, ad costs rise, profit get impacted, and they have to start introducing new products or new moments and getting people to think about.

13:47But they keep running evergreen ads and bottom of the funnel ads specifically in that evergreen cycle. And talking about muscle, it's like a new muscle that you need to learn, right? So instead of reacting to what your bottom of funnel media accounts are telling you, you need to think about how to create demand versus capture. So what we mean by yes and is as you start scaling past that seven into eight figures, you have to think about how do you do evergreen to capture that product differentiated demand and how do you create artificial demand through partnerships, new product releases, so you can extend the LTV throughout the year, if that makes sense.

14:36And that becomes a new muscle because if you don't plan for it and you react to it, it will mess up, for example, your account setup, right? Because you're introducing a whole new set of variables, new products, you have to update landing pages, set up email sequences. If you're not planned out for that, it will create chaos into your workflow. So it's making sure as you reach that scale, think about how you start structuring both. And be proactive rather than reactive about the campaign side of things. It makes me think of my buddy, Brandon Haroho at Montana Knife Co. when he came to our event in 2023 or 2024, just showed us his product drop schedule for the next year.

15:17And it just gave you a real reason to reach out to your audience and to potentially reach new audiences with each of those drops. And it just sort of punctuated the year and gave them the momentum that they could use, that they eventually had all these evergreen campaigns that caught people, but it was those moments that they were creating with their campaigns that was driving all the momentum. Yes, I love that you said that because one of the lines that I like to use in our conversations is, we need to shift our thinking from tests to bets, right? You get to 10 million, you have something, right?

15:51What's the rule of thumb? The hardest thing is to get the$10 million in revenue. Once you hit$10 million, your likelihood to succeed and scale plus that increases significantly. From there, you got to shift your mindset from scarcity to an expert. So instead of testing things, not knowing what's going to work, relying on the platform to tell you what's working, you got to start creating some bets. Here's the moment, the campaign, whatever that might be, that I know I'm going to bet on. that's going to give me net new eyeballs because I have learned all these lessons from getting to 10 mil, you know?

16:24But again, the hardest thing for any human to do is change, you know, change is hard, right? It's a philosophical change, you know, to go from tests to bets.

16:34Jordan Gordon:On the bets, the other really important thing to keep in mind is when you reach a certain size, you're actually trying to change consumer behavior. So running that test, you can be testing a bunch of people whose behavior you've not yet changed because you have not yet conveyed your idea to a large enough mass of people in the region you're targeting or, you know, kind of whatever. So, you know, testing is for an existing market, but our job is to make new markets by explaining services and products people didn't even realize existed and how they relate to them. What I wanted to add to what you were saying, though, was it's so similar to what happens once they pass through advertising and move into the kind of the post-click and the email and retention world.

17:21Jordan Gordon:I've always seen advertising as vertical and email SMS is horizontal. We're speaking to people over a long period of time, but we also face similar problems or challenges in how to mix ever, you call it evergreen and campaigns. Let's call it, yeah, evergreen and launches, we'll call it for email, right? Because all these things are campaigns. uh i've got by the way i've got an episode everybody on the world's best email retention podcast where i talk about an essential so you can go back and and read further on my thoughts on that but what's important to do is somebody enters into your funnel from the email side yeah of course introduce them to core product send them some evergreen messages in a welcome flow but also after that people they wander through your life cycle and then nine months later they get pulled back in because they hit a new ad that's launched or they like a campaign that goes out and they enter back into your kind of core post-click world.

18:16Jordan Gordon:At that point, you also must resell your core product and revisit that evergreen. You can't only have someone just in your newness because not everybody needs all your newness. You've got some product that is a cornerstone of your revenue. And so we have to also make sure we have the right mix as people re-pass through our system of reintroducing them to evergreen. It's really critical because if they don't want your small purple widget, they're going to just wander off if you don't show your medium-sized red and blue widgets. That's a really good example. I feel like we see that quite often in supplement and beauty type of businesses, right?

18:56Because oftentimes in supplement and beauty businesses, there's two ways you can enter generally. You can enter through an acute need, you know, for supplements, I have, I don't know, I have some flare up or something that I, you know, need to treat. So you come in for an acute need. And another way to enter is potentially somebody who's like, you know, I have acid reflux, so I want something that helps with my digestive system. It's not an acute fix, but it's something I need to take on a routine basis. Same thing with skin, you know, you might have a flare up that you want to treat or you want to do, get a new daily, whatever, skin routine.

19:29So to your point now, depending on the entry points, there's an opportunity to cross sell if they come in through the acute product how do you cross sell them into a routine and if you bring them in through the routine how do you cross all them into the acute so like that's what that muscle in coordinating and thinking about evergreen and campaigns are important right because if you're a routine brand and then you're introducing acute products through campaigns you have to coordinate with email so you have a system that allows you to feed that new customer based on the purchase they made into the product opportunity based on their historical purchase, right?

20:06So that's the complexity that a lot of operators underestimate.

20:11Jordan Gordon:The way that we think about that on our end is largely campaigns are for launches, flows are for the evergreen, and it can be core product evergreen or evergreen that launches based on the product that someone viewed. It's often just triggers off of product. It's harder. we had that recent version where like, hey, how do we send an email, the right email to the mullet guy and then the right email to the preppy guy? That's trickier with email. It's usually based on the product that someone enters on. What I'm interested, Raf, is so, you know, we have this breakdown and it's kind of, it's like a technical breakdown.

20:43Jordan Gordon:And what I wonder is how you control for the amount of evergreen or campaign that someone is going to see, you know, through advertising, considering your advertising funnel might be like three weeks, but people are going to enter it multiple times and you don't always know who it was from time to time. So how do you kind of think about controlling what they see that high up in the funnel? That is a very good question. I guess if we're talking about, let's say, eight-figure businesses to nine-figure businesses, I think the most important thing, at least from the work that we've done, Jogo, that I see that's really tangible and tactical is being able to define your audiences across all your channels.

21:28Who is existing, who's engaged, and once you have those defined, you can truly prospect net new. I find that in that pocket of eight to nine figure brands, there are very few brands who have the technical discipline to keep those audiences clean. And I think unless those audiences are clean, you cannot truly remove wastage in your media spend, right? Because if you don't have your engaged audiences defined, right? So you can engage your audience as somebody who has learned about you, visited your website, showed some sort of intent, you know, visited PDP at the cart, but hadn't purchased. A message that is going to convince them to click, check out, and buy is different than somebody who has a problem, doesn't know about your brand, and we want to convince them to consider them.

22:21But if those audiences aren't set up, then on Meta, Meta doesn't know. Are you talking to a new customer or are you talking to an existing customer?

22:30Jordan Gordon:Yeah, and it'll just optimize for the existing customer, right? Yeah, it's going to optimize towards the customer that's lower in the funnel, but you've already paid to convince them to come to your site. So you're kind of wasting money. And also once they convert, you're not getting the right signal to optimize ads to new customer acquisition because it's largely based on engaged customer converting. So it creates this false dynamic. So to answer your question, I think directly, tactically, it starts with audience definitions because until you define your audiences, then none of your tests are truly valid.