501: Neil Patel Thinks Free Products Are the Best Marketing Tactic

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2:42All right. So I was saying offline, Neil, I interviewed you over 10 years ago, which is absolutely crazy. And it was your magazine cover that was responsible for the lawsuit because we had your face and head blocking the key too and then Success Magazine sued us, which is crazy. Well, yeah, you changed it now to Founder, right? You've been Founder for a while now. Yep, yep. So hopefully it all worked out. Yeah, yeah, yeah. So thanks for coming on, man. Really excited to speak with you. The first question that I ask everyone that comes on is, how did you get your job? How did you find yourself doing the work you're doing today?

3:26Yeah, so I got to where I am today because years and years ago, I wanted to be an entrepreneur. And I set up a website. It was a job board and no one came to it. So I had to learn marketing and how to get people to the site. And that's how it all started. Yeah. And your big focus now is Neil Patel Digital, right? Like that is your main, like, yeah. It is. The ad agency is my main focus by far. Yeah. And man, I remember you talking to me like five, six years ago being like, man, I'm getting out of the software game. We're going to build a massive agency. It's where it's at. And that's what you did.

4:04Like how big is the agency now? We're a decent size. Maybe we're getting close to 800 employees-ish. So we've grown quite a bit and we're five years old, so not a bad size. Yeah, that's crazy. And I guess you still drive all that traffic pretty much from your age, like to your agency, all the leads just comes from your personal brand, right? From your skills with digital marketing, SEO mainly, right? Not anymore. It used to be that way. So we started the agency purely based off the leads I was getting from my blog and personal brand. And now I don't know the exact percentage. I know it's more than 70 % and I know it's less than 80%.

4:45So somewhere between 70 and 80 % of our leads come from RFPs, employee referrals, and client referrals. So when you combine those three things, it's somewhere between 70 and 80%. Yeah, got you. And in the past decade, you've really focused on encouraging founders to focus on growth, but now it's profitability. Can you talk to us about that and how they can make that shift? Yeah. So I think growth is still important and you need growth, but you can't have growth at all costs? What's the point of having a business like, yeah, we went from a hundred million to 300 million to now a billion. Well, you also took your losses from 10 million a year to now negative 40 million a year to now negative 300 million a year.

5:29Like if your losses just keep climbing and you can't actually generate revenue and grow that in a profitable way, there's no point in the long run. Yeah. So how can founders start to make that shift? What's like, is that, a challenge that you went through? No, not really. All my businesses, we focus on profitability. Some of them, we focus on profitability too early. So I had the opposite problem in which I focus on profitability before growth. And it should have been where I spent more money on growth and less profitability. As a founder, it's not really you need to make a shift. You need to just think long-term and it starts with your analytics.

6:09So things like the lifetime value of your customer, the cost to acquire a customer. And as long as your metrics are profitable at a level that you're okay with, then by all means, spend as much. And that could mean that you lose money in the short run, but if your lifetime value is high and you know, after year two, you know, it's all profit and a customer stays for five years, you still have a lot of profit to make off that customer. You just have to be patient. And so when it comes to kind of what's working now, when it comes to digital marketing growth, you know, you, you're, you're one of the OGs when it comes to content marketing.

6:42Really, you've been building a personal brand for a long time. Like, man, I remember when you were interested and you and I kind of connected even on the Instagram stuff and then you had a personal brand on Instagram. Do you still have that? So you've been doing this stuff for a long time. What do you find is working now to drive traffic to your site? If you were to start a business tomorrow, perhaps an e-commerce business, I know not really into e-com, but if you were, how would you drive traffic to that site? Well, how would you go about it? I would do it very differently than most people. I don't think about AI or content, you know, as ways to hack marketing for e-commerce.

7:19And I look at marketing as very expensive. You know, you've been doing this for a while. Marketing seven, eight, 10 years ago was much cheaper than it is now. The cost of products that you're buying in many cases are not double than what people used to pay 10 years ago. People are still price sensitive. What we found is it's actually cheaper in most cases to give away something for free. So let's take Gillette, for example. Instead of spending all the money on marketing, give away the razor for free and sell them the blades. Because people keep shaving, the blades go bad. Give them the razor for free, sell them the blades.

7:56Like the handle, the part you hold, you give that for free, you sell them the blades. Keep making money. Another example is there is a company called Orobrush. or a brush was a tongue cleaner. Free tongue cleaner, you pay for shipping, they upsell you on everything else. Mouthwash, toothpaste, et cetera, floss, whatever you want to call it. And the company ended up eventually getting acquired. I do think the better strategy is what can you give away and lose money on and make money on selling them everything else, right? So find something that's cheap and affordable, give it away for free, make your money selling them bigger products.

8:30I think that's a better solution to e-commerce than it is to spend a ton of money on marketing. I own a marketing agency. You know, I help people manage their ads, their SEO, their email marketing, their conversions, et cetera. It doesn't matter for all industries, including e-commerce, even DTC, even marketplace stuff like helping companies optimize with their Amazon listings or Walmart, et cetera. And companies should do marketing, especially if it's profitable, why wouldn't you? But what I think is a better long-term fit is you figure out what product to give away for free. It just gets the flywheel going so much faster.

9:04Yeah, no, it's an interesting concept because look, in the, I guess the online education info space, that's what's called like a self-liquidating offer in many ways, right? You give some sort of tripwire or something away. I think probably Vistaprint was the first to do it in a really like impressive way, right? Free business cards, X amount for free. Want more? pay for additional cards. It was a smart idea. Yeah. And then it's the optional upgrades and all that kind of stuff along the way. Thing is though, like Shopify doesn't really have the capability natively to do these post-purchase one-click upsells.

9:50You've got to use all these different tools, but you can still do it. Yeah. Yeah. You can still do it. But I think if you're e-commerce and you can't figure out something to give away for free, you're missing out on a big opportunity. Yeah, I agree. So it's interesting take. So what else should, what else should e-com founders be thinking about? Let's say you've got a good funnel. How else, like how, then, then do you, you know, start to ramp it up with ads, start to, you know, apply SEO, content marketing. You don't really see, it's not really that common for e-commerce businesses to be incredible at content marketing, right?

10:25No, but you can, like you're selling toasters, 10 best toaster ovens, create recipes and show them how to do it within your toaster. Like you can generate sales in many different ways. I think content, SEO, social media, um, instructional videos on like TikTok and Instagram and YouTube do really well. And even Facebook, there's, there's tons of opportunities. What you have to get at in the e-commerce world is how can you end up getting the average order size large enough where marketing makes sense. So to make e-commerce work from a marketing angle, you either have to have A, people coming back and continually buying from you, which is hard.

11:05B, which is easier is to have upsells and downsells to increase your average order value. Yeah. Gotcha. And when it comes to SEO, like you're one of the OGs, you're very, very good at it. You've been doing it for a long, long time. And the introduction to AI and that whole space, how are you using AI now when it comes to SEO? So the way I'm using AI when it comes to SEO is how can AI help you analyze your analytics and data? So most people use AI for SEO for things like keyword research, helping write content. And it's not bad for keyword research. It's not bad for helping content, but you still need a human to modify it to make it better.

11:51The way I'm really using AI, though, is analytics. So imagine you have a lot of your marketing in different places. In SEO, you have data in Google Analytics, Google Search Console. Imagine using AI to slice and dice your data to give you more informed decisions. So then that way, you can adjust your marketing to be more profitable. Because in SEO, people optimize for traffic instead of conversions, or they optimize for creating new content versus just updating their old content. Like if you look at Wikipedia, the reason Wikipedia ranks for everything is because they keep updating their old pieces of content.

12:23It's not about just always writing new pieces of content. You can use AI to write your old piece of content that are slowly starting to lose traffic and rankings to get them to climb back up. And it's things like that that people aren't using AI for, but instead they look at AI as like, oh, cool, write me 500 blog posts. Well, they suck. So, you know, no one's going to read them. But you can have a modified blog post and or have them write blog posts and have a human modify them. So is it chat GPT? Like what are the tools that you're using? People are using chat GPT. We use Bart a lot. We find Bart to be better than chat GPT.

12:56Yeah, gotcha. Hey, founder fam, I want to talk to you about something super exciting. We're officially partnered with OmniSend, the email marketing and SMS platform built specifically for e-commerce founders. We've been recommending OmniSend to founder students for a while now because it just works. Whether you're launching your first store or you're scaling to seven figures, it really helps you automate your marketing and get real results. Did you know on average, OmniSend customers make$68 for every$1 they spend, which is an insanely good return on investment. And because you're part of the founder community, you get 50 % off your first three months with the code FOUNDER50.

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13:48And I guess when it comes to AI, you know, one thing you taught me as well when it comes to, I guess, SEO and content is it's about volume as well. It's like quality content at volume. since the introduction of ai really taking off do you do you really scale up production now when it comes to content or or is it has has that volume changed or it hasn't really changed but yeah you can scale it up if you haven't we've been scaled up pre-ai so for us there's not really much of a difference yeah got you most people look at as you can just it can do the work for you, but it really can't. It's not there yet.

14:28AI is a helper. It's not something that can just solve all your problems. It's no magic pill. Yeah. So it's really like a co-pilot, right? And yeah, it's a co-pilot to help you move faster and it gets you to maybe 70%. Yeah. And in some industries it's getting you a little bit more. Some industries it's getting you a little bit less, but it can help you with at least 30 to 50 % of the job, no problem. And do you think when it comes to creating content with AI, like SEO is going to catch up? Google can already detect that. How do you see things working out there? Do you think forever people will use AI to crank out content and then just edit it?

15:09Or how do you see that going? I think people, there's going to be a shift in which people are going to start creating content manually. Again, they already are right now, but I think they're going to start going, not everyone, but I think a large group of people are going to start going to manual. It may not be the majority. And the reason being is we've done so many tests. You just generate way more traffic when it's manually created. The ROI is better. Yeah. But you would still use like BARD to get it to like a certain percentage or you like to create it manually from scratch? You can do either or.

15:43We tend to use AI to get you there 20, 30, 40 % and then the rest is manual. Yeah, got you. and this is for neilpatel.com or yeah this is for neilpatel.com yeah got you so what's the traffic like these days believe it or not i have inject i haven't logged into my google analytics to check my own traffic stats for probably 120 days no joke you know what man i've asked you that before and like i think offline and you're like man i don't know or you haven't looked at it in a while But yeah, obviously like a few million monthly, like five, five million plus monthly unique visitors around that ballpark, right?

16:24It has to be somewhere around there. But yeah, we get millions and millions. The reason I don't check as much, I used to check much more is, no joke, forget how many clients we get it because there's two ways to look at it. You get revenue based on it. When I say we get 70 to 80 % of our clients from RFPs, client referrals or employee referrals, when you want to look at majority of the revenue, forget logos, the majority of our revenue is coming from things like RFPs, right? Request for proposals, where really large corporations send out proposals and they want companies to bid on them. So it's like we optimize for that.

16:58We're not really optimizing for traffic. We're optimizing more for revenue. Yeah, gotcha. So how else are you using AI in your business? We're mainly using it in data and analytics. So you do Facebook ads, you do Instagram ads, you do TikTok ads, you do Google ads, You do media buys, email marketing, and the list goes on and on. The data is everywhere. You can use like Google Data Studio or Tableau or whatever you want to end up using to start pulling the data into one place. And then we have AI analyze the analytics and the data and come up with insights and push it to our team on a daily basis.

17:34It doesn't actually go and make changes to the campaigns. It just gives them insights. Where's this wastage? What's performing the best? What could be tweaked? What's been going on that's been declining? what's been going on that's been increasing. So that way our team knows, hey, this is what the data is telling us. These are some things we should look at to see if we can improve the marketing areas or cut back on spend and reallocate. That's been really, really helpful. Something that a lot of people don't talk about. It's not as sexy. But if you just look at the numbers, over$160 billion USD is being spent on Google ads roughly every single year.

18:10Facebook ads are over$100 billion. the real money in AI isn't saying like, Hey, it'll write more blog posts for me. The real money in the AI is like, help me save on some of that ad spend and be more efficient. That's interesting. And you're using BARD. BARD and chat GPT. Yep. Okay. And what do you think some of the main challenges businesses are facing when it comes to implementing AI in their business? Some of the main challenges that businesses are facing when they're implementing AI, I would actually say the big thing is that they don't know where to start. And it's tough. There's tons of tools, there's tons of options, and people don't know what to do with it.

18:51And they read about these magic pills and AI is not a magic pill, at least in its current form. Yeah. Yeah. And you think the best place people should start is using it to analyze data, not to create content? For marketing, yes. The other thing I would say is I think companies need to have a culture of being okay with AI and having their team members experiment with AI in ways that are safe, like not uploading all customer data or private data to the web. And then the next thing they need to do is have weekly meetings. It could be 15 minutes and 30 minutes and people sharing what's something cool that they did with AI that helped their job and share it with other people in the organization and show them how they did it step by step.

19:36So then that way more people have this culture of, hey, we should use AI and we can get better at it. And what about chatbots? Like that's coming. You know, you guys have an outbound sales team, right? Like have you guys started to play around with using AI to do sales, customer service, client, you know, not client facing, but like customer driven facing stuff yet? Not entirely. Keep in mind we're enterprise. so like we're not trying to pitch a business on 100 grand we're trying to pitch someone ideally on millions of dollars so it's just like you usually aren't using ai for those kind of interactions yeah gotcha at least in this time in life uh we have tested stuff like we have an ai bot that sounds just like me it's a little bit slower on its speed of talking but it sounds just like me, at least for English.

20:30And we're working on like creating chatbots with it, engaging with companies and customers. We just haven't released it yet. It's technically not something we would release to the public. It's more so we would release and use it for ourselves. Interesting. So how are you guys building that custom or are you using a tool or something? Good question. I don't know the answer to that, but my team showed it to me. Once you have a you know a good amount of people working for you we're still small but let's say if you get to around 800 people there's a point where it's just like you know people are working on stuff that you don't even know about you also don't know everyone in the organization at that point there's just too many people i wish i knew everyone it's just it's too hard to get to know every single person yeah yeah that's fair enough but so you guys are playing around with chatbots and training it to answer questions as you but it'd be more of an internal thing or a customer facing thing Correct.

21:26In my voice, not like a text-based response, like actual voice and video. Yeah, that's crazy. And then you would use that maybe to create content? To A, create content, B, to deepen relationships with potential customers. Hey guys, I hope you're enjoying this episode and learning a ton. As you know, in this series, we interview some of the greatest founders of our generation to find out how they did it. However, if you're thinking of starting your own business and you want to hear from some incredible stories from everyday people like you or I who are actually in the trenches, only been building their business for maybe one year or two years, like they're building right now and they're really in the early stages, but they're getting success.

22:09You should come and check out our new podcast from zero to founder hosted by our community manager, Molly Flynn. These are in the trenches stories from our very own successful students that have gone through some of our programs. People just like you who are deep within the process of building their very own successful business. These are the founders of tomorrow. You can find the From Zero to Founder podcast on all platforms. And remember, it's founder without the E. All right, now let's jump in the show. You know, what you were saying about having 800 employees when you get to that stage, this is what happens.

22:46I actually remember a conversation that you and I had a long time ago and it was early days for me, founder, and he said to me, Nathan, when you get to a certain point as a founder, you have enough money where you don't do the hard yards. Like you just don't do the grinding stuff and you know, you've either got money or you've got time and you're like, Nathan, you've obviously got time. I don't have that. So I get other people to do it. And yeah, I remember you talking to me about that. Like how have things changed in terms of leverage for you? I remember you said that back in the day, like, you know, you don't rate the operations still don't like it.

23:30What does things look like now? Yeah. I deal with clients and that's because I love it. but I am strapped for time more than ever. And I use capital to buy more time. And I try to spend that time on the business when I can and when I have extra time. And I make sure I carve out enough of this time. I spend it with kids, wife, family. But it is the most important aspect for me. And, you know, it's like people take time for granted and it's just, it's precious. Like, what am I going to do? die with money you know it's just like i i rather have the memories of my family or children are running around the block chasing my kids and the little bicycles i tried to do that with them at least once a week like that kind of stuff to me matters more than you know just making extra dollar well you're at a different phase of your life now yeah the kids changed a lot for me perspective wise yeah yeah i used to have a lot of different goals like i used to care about like homes and what kind of homes I lived in or what I had and what people thought perception-wise.

24:40Now, I don't really care about anything. I just hope my kids love me and will give me the time of the day once I get old and they get older. Yeah. Well, that's awesome, man. So when it comes to, I guess, AI, the e-commerce space in the next five years, where do you see AI going? What are you excited about? What I'm really excited about, and I love saying this, is if you look at right now in the short run, most people overestimate AI. They believe it can do everything for them. It's a magic pill and it's not. And once they start really experimenting and trying, they realize that quite quickly. In the long run, though, I believe people are underestimating AI and it can do much more than they'll ever imagine.

25:24I think you're going to have a scenario like iRobot the movie, not where robots are taking over the world and trying to kill humans or anything. I'm more so talking about you'll have a robot assistant that's there next to you, understanding your life and helping you with everything. And I think the possibilities are endless. I just think it'll take a long time. And when I mean long time, I'm talking about like five to 10 years. It's still not that long. It's not that long in the grand scheme of things, But technology moves so fast these days, right? It's not as slow as it once used to. And how do you keep up, right?