Aug 20, 2020
Erik Huberman is Founder and CEO of Hawke Media, an agency serving as “an outsourced CMO-level expert” which, Eric says, “puts client success ahead of our own.” The agency’s “SWOT team” identifies “holes” in a client’s marketing program and provides a “comprehensive à la carte menu of services and month-to-month contracts” to address those needs in a timely manner. Month-to-month works, Erik says, because the idea of signing a long-term contract with someone you have just met is like getting married to someone you’ve never even dated.”
When the agency started 6-1/2 years ago, the scope of services was relatively narrow – primarily e-commerce. In short order, Erik added content creation, production work, and web design. Last year, the agency purchased its first affiliate agency. Erik says that it was the -commerce community that built Hawke Media and e-commerce is still 70 percent of the agency’s business.
Today, customized, data-driven, performance-based solutions facilitate product launch, scaling, and business vitalization for a broad range of industries and business sizes. “Big” companies are responsible for only two percent of the agency’s revenues.
Erik says his agency’s goal is to expand into 3 to 5 new territories this year. Rather than acquiring agencies or opening offices in new locations, Hawke hires talent in places “of interest.” When things in a particular area “start to open up,” the agency evaluates the kind of space they want . . . and if they want a space. New markets are selected based on market opportunity, cost of living. high concentration of ecommerce brands, SMBs, startup community, and agency saturation. He believes that TikTok, once it scrapes through the political issues, will be “one of the first things since Facebook and Instagram, to be a viable [and quite possibly great] advertising platform.”
Erik notes that building community is one of his agency’s core values. Hawkefest, an annual summit, has drawn 600 brand owners every year for the past 3 years. Since inception, the agency has sponsored weekly e-commerce Happy Hours, recently started fun bi-weekly Zoom events, and even more recently introduced a trivia night. The agency will partner with the city of LA to hose an e-commerce week starting September 28.
Erik says that one thing he has learned over the years is that hiring and investing ahead of expected growth is “always a mistake.” Reacting to reality makes growth far more sustainable than proactively building for something that might or might not happen. Hiring and training executive talent is more difficult than hiring and training staff.
Hawke operates a venture fund that invests in marketing and e-commerce technology and e-commerce brands. E-commerce-related business doubled in Q2 of this year . . . both large businesses and small. Eric sees cellphone SNS (social networking service) marketing as a massive opportunity in the coming months, even more so than email.
Erik can be found on his agency’s website at https://hawkemedia.com/ or on any social media platform, including TikTok, @ or /ErikHuberman.
ROB: Welcome to the Marketing Agency Leadership Podcast. I’m your host, Rob Kischuk, and I am very excited to be joined today by Erik Huberman, Founder and CEO and Hawke Media based in Santa Monica, California. Welcome to the podcast, Erik.
ERIK: Thank you. Thank you for having me. It’s good to be here.
ROB: Excellent to have you here. I’ve heard about Hawke Media for years; why don’t you tell us about Hawke Media?
ERIK: Sure. Started about 6-½ years ago, basically with the idea that great marketing is not accessible. As a business, it is really hard to find great marketing talent, whether to hire in-house or good marketers as agencies. I just got sick of the ecosystem and decided to build a small SWOT team to help the companies I knew needed help – a bunch of people each with their own expertise, like Facebook marketer, email marketer, web designer, fractional CMO, etc. I just created this a la carte, month to month really simple model where we go into a business, identify holes in their marketing, and then spin up those people. The whole idea is making great marketing accessible.
ROB: A la carte, month to month is a little bit unusual. A lot of people aspire, especially as they grow and build their business, to get deeper into retainers, to get deeper into packages. How do you handle that degree of flexibility?
ERIK: It’s a few things. At scale, it’s a lot easier because averages play out. We know on average, we’re going to keep this many clients, sign this many clients, lose this many clients, etc., so that we can actually staff accordingly. Again, the percentage variability gets a little more evened out. Our people work on multiple companies. Our biggest clients are 2% of our revenue. It allows for a lot of spread-out, so it allows us to actually build a business that is sustainable around doing that.
What’s nice is our clients actually get the benefit of the efficiency of our employees working on multiple companies, so it allows us to charge less, make it easy, but then we get the benefit of the averages playing out and being able to ebb and flow as companies come and go when they need us.
ROB: I feel like I hear a layer of systems-thinking underneath what you’re sharing here. You’re talking about thinking about average duration, and even when you’re talking about sharing staff and clients and being able to spread the work around, there’s some knowledge transfer that has to happen. Have you had a natural dispensation towards process? How did you come to the ability to build and hand off a client? A lot of agencies really can’t handle that.
ERIK: This is my fifth business, so I’ve done a lot of operations. I wouldn’t say I’m necessarily an ops guy. I’m an operator in terms of the traditional sense of the word, but I’m not – honestly, it’s 7 years of doing this, almost. Now I know the numbers cold. I manage my business, I care about it, I love it, so all these things have become very clear. In the beginning, it was a lot simpler. When I hired seven people, it was more just “How do I create something sustainable and profitable?”
Then you start to see these benefits and you start to be able to scale off these benefits. It’s the hindsight thing, where looking backwards, I can tell you why our company succeeded, but in the beginning I was like “This makes sense intuitively,” and it came from me running businesses and hating the way our agencies worked and continuing to have to make changes, and building off of that knowledge. But then a lot of the unforeseen benefits came in too.
ROB: What were some of those prior businesses, if I dare ask? What was your journey?
ERIK: There was a whole entrepreneurial journey of selling stuff door to door. Got into Beanie Babies when I was 8 years old and made a few thousand bucks. So, there’s a lot of history there being an entrepreneur. But the real first business was actually filtering storm drains in California. California passed a law in 2006 that you legally had to filter your storm drain. If you were caught not doing it, you would end up getting I think a $75,000 curb drain fine. It was big.
I had a friend that pursued solving that problem and being the one that would actually handle that. I came in as his partner and handled sales and marketing, and we started to scale it. There’s a very long story here, but it was that. Then I went into real estate the week before the entire banking industry collapsed, made $350 that year and went, “I’ve got to figure out something else,” because that’s a really rough sustainability in terms of salary, to live in LA on $350 a year. There’s no arrows pointing there.
So, I started an online music company, built it for 2 years, hired a CEO to take over. We got it to profitability and then I realized it wasn’t going to be that big. Then I built and sold two consecutive fashion subscription ecommerce companies. Scaled them really fast, did really well.
ROB: I imagine in that ecommerce you had some agency partners that maybe didn’t function the way you were hoping they would?
ERIK: Yeah. The number one thing, which is why we’re so keen on month to month, was the idea of signing a year contract with someone I just met. Like, “Let’s get married even though we’ve never dated.”
ROB: In the early days of Hawke Media, how did you even come to the name? What’s the significance behind it? What did the early days look like?
ERIK: I wish I had a good story for the name. It really was as simple as I was originally going to call it Growth Hacker Group, and I mentioned it to a friend that was a partner of mine, helping me do some media buying, and he’s like, “Erik, I just signed with Walmart. You think they’d ever put their name on a contract that says ‘Growth Hacker Group’? Just keep it simple.”
I grew up in a small town called Ojai; I loved red-tailed hawks as a kid. Basically, I started looking on GoDaddy at 9 p.m. at night. I still remember sitting there, and I found that Hawk Media without the “e” was taken, but with the “e” wasn’t. I was like, “That sounds good. I like that.” Made the website, and we were off to the races. It was that simple.
ROB: And now, at least when we actually do go to conferences, your logo, that name – those are things that you see at conferences commonly. Hawke’s a meaningful name out in the business world, so congratulations.
ERIK: Thank you. And that’s something to learn about all names and all brands. It’s what you make of them. It doesn’t really matter. I’ve really learned, especially in B2B, just make a name that isn’t going to turn anyone off. It should be pretty simple. And then what it turns into is based on how you build your business – your reputation, your consistency.
ROB: Did you ever have an inclination to pursue the rebrand, or was that an idea you had disabused yourself of in prior businesses?
ERIK: Say that again, sorry?
ROB: The name. Did you ever, over the course of the journey, have an inclination towards changing it? Or is it an inclination you shook yourself of in prior businesses and learned that lesson earlier?
ERIK: The only thing we’ve talked about with Hawke Media is dropping the “Media” at times. But no, again, at this point we’ve made the name what it is and we’re happy with what it is, so there’s no reason to change it.
ROB: Early on, were there any particular lines of business you were deep into? Were you deep into ecommerce from Day 1? Any particular things you said you wouldn’t do? Were you not doing SEO or paid social? Or has it been the full board?
ERIK: We definitely have scaled our services. We bought an affiliate agency last year; we didn’t do it before that. We didn’t do much content creation for clients for a while. We didn’t do production work. In the very beginning we didn’t do web design. That came in pretty quickly. So that’s definitely evolved over time.
Ecommerce was a big core of our business because that was my background, and in the beginning, it was all arm’s reach. Anyone I knew that needed help is who hired us. So, it was mostly the ecommerce community that built us. We’re still probably 70% ecommerce because those clients begot other clients, etc., etc., and it just scaled from there. But we’re agnostic in what we want to take; just our reputation is massive in ecom.
ROB: Certainly, and that probably drives some of where you show up, where you speak, where you market. Not entirely, but a good amount.
ERIK: Yeah. That is the core. Again, it’s 70%, which I like. I’m happy that we still have the 30% that isn’t, and we do a lot of cool stuff in SaaS and brick-and-mortar stuff and even restaurants and gyms and all sorts of stuff that was more affected during this. But a lot of it has been – it’s nice to have that diversification, but we’ve doubled down on e-com, too. We’re hosting Ecommerce Week LA with the city of LA as a partner September 28th.
ROB: Interesting. Have you done that before? Is this the first year of that event?
ERIK: This is the first year. We’ve done a summit every year for brand owners called Hawkefest and had about 600 brand owners every year at that, and then we wanted to parlay it into something bigger. I’m the guy that, when we accomplish something, I’m like “Great, what’s next?” Hawkefest has gone really well. It’s been awesome. We’ve done it for 3 years, and it was like “What’s next?”
So, we got the city of LA to sign off on doing a full week of events. We were trying to push it for last year, but we couldn’t get it done with the city on time, so now it’s this year. Now with what’s happening with COVID, we’re going virtual with it. But the nice thing about virtual – and we’ve already thrown some virtual events – is we can have way larger headcount and way bigger pipeline, which means for next year, it becomes a great audience and community to make next year that much bigger.
ROB: Right. At that point we may be able to travel, we may be a little bit itchy to travel and maybe come on out to the LA area.
ERIK: Exactly.
ROB: Especially in the fall. Some of us are looking to get away from where it’s getting cold.
ERIK: LA’s a beautiful place.
ROB: Absolutely. As long as you have more than $350 a year to make a living.
ERIK: Or at that point a really good max on my credit card. That helps. [laughs]
ROB: [laughs] You mentioned it was the third year of Hawkefest. What did the first year of Hawkefest look like that you punched up to get to 600 people? What made you feel like it was something that you needed to pursue?
ERIK: It was pretty big the first year. I think it was 300 the first year. It wasn’t like some massive jump. We could afford more, so we spent more to give more room for people. We capped it out. That was 3 years into business, the first one. We knew we had a community around us, I had connections, etc., that we could pull it off.
It was something I wanted to do from the beginning. We’ve hosted Ecommerce Happy Hours since before I started Hawke Media, and now we’re hosting what we call NightHawke, which is biweekly Zoom fun events. Tomorrow night we’re doing a trivia night. So, we do stuff like that. Build community is one of our core values. That has always been a big part of what we’re doing. Once I started to see the momentum, I realized basically at the end of Year 2, “Hey, now we’re at a point where financially we can take the risk. We have enough partners and sponsors we could probably bring in. I feel confident I can bring in the speakers people want to see and we can get it out to an audience. Let’s go for throwing our big summit.”
It was something I had in mind for a long time and then pulled it off. And then once we did and felt comfortable with it, then we started making it an annual thing, so then we had it for 3 years. We were going to have a fourth one this year; the idea was it was going to be the capstone of Ecommerce Week. But with COVID, we decided to literally just not have that piece. We don’t need to have a virtual Hawkefest. We can just have Ecom Week.
ROB: Seems like you’re always thinking one step of what’s been done and one step of what’s next. What are we looking to see in Hawke Media in the next couple of years? I get the impression you might know where you’re driving with it.
ERIK: Oh yeah, 100%. It’s shifted, and it’s still shifting because of, again, the change in the world. But we wanted to expand into three to five new territories this year. We have a list, which is Dallas, Miami, Chicago, San Francisco, and Boise. They’re places we wanted to open up this year. We already have New York, Boston, and LA.
Originally it was, “Let’s look at maybe acquiring a couple agencies or opening offices in those places.” Acquiring is harder because it’s harder to meet these agencies. Opening offices makes no sense. But hiring in those places now really does, so we’ve actually made hires in Atlanta, Miami, Dallas, and Chicago already, and we’re interviewing someone in Boise right now. San Francisco we haven’t touched yet, but the rest are starting to move. We’re just doing it backwards. We’re actually making the hires first, and then when things start to open up, we can assess what kind of space we want, if we want any in those territories. So, we’ve started to execute on that.
Our M&A is ramping back up. Just got off a call before this with a company we’re looking to maybe acquire. So, we have quite a pipeline there. Hired someone new to build out that corporate development arm of our business. Our venture fund has performed incredibly well because we’re invested mostly in marketing and ecommerce technology along with ecommerce brands – which if anyone’s paying attention, doubled in Q2 this year because that’s where the most benefit came from with this. And that includes Shopify doubling, not just Amazon. Small businesses doubled too. We’re just seeing a lot of success on that side too.
So that’s the gist, along with I’d say the biggest new challenge, which is: how do you create nuance and camaraderie amongst a team when they don’t get to hang out by the coffee machine or in the lunchroom? That’s something we’re working through. We’re going to be hiring a new Head of People and HR and trying to think through how to build a really tightknit remote team.
ROB: It seems like some of the things you’re doing for fun with the NightHawke sort of events – it seems like there’s almost a virtuous cycle between the stuff you’re going to do to build a good remote team and the stuff that’s going to be good for a broader community. You could do a trivia internally or externally, and it probably transfers well.
ERIK: That’s 100% right. We include our own employees in our events, so there is overlap. Community is community. Our internal people, external, etc., we try to open it up to everyone. But yeah, exactly. That’s part of it, but the one thing that’s hardest to replicate that we’re still thinking through is, how do I create that nuance where two random people that don’t work on the same team meet each other at lunch and then end up going out for drinks, being friends? The amount of people that become best friends or roommates, etc., through Hawke Media – even couples – is something I value.
The fact that people can actually meet – if you survey our team – and we just did this, and I got a lot of the feedback yesterday. We asked all the good and bad, like “Be blunt with us; what do you love, what do you hate?” Number one thing everyone says is they love the people around them. We’ve got to keep that. That is critical for our business.
ROB: Yeah. What do you do?
ERIK: I work on it. [laughs] That’s the fun thing. I’m interviewing for Heads of HR. It’s my main question to them. It’s a hard one. I’ve talked to people with 15-20 years of solid HR experience at great companies, and it’s like, “Uh, happy hours on Zoom on Fridays?” Like, sorry, no. I mean, it’s fun to have now and then, but that doesn’t really do it. That gets the 15 people that like to drink and like each other already to hang out. That doesn’t get the people that would’ve never met each other to actually do it.
So, creating that – we have something called Donuts that automatically pairs two people a week to grab coffee. Someone random every week, or someone you already know. A lot of times it’s people you already know. That’s been fun, but we’ve made it optional. I’m almost ready to make it mandatory so that people just have to meet someone every week. Those are the kinds of things we’re – again, it’s not easy.
ROB: You had to already be thinking about this, though, because you were looking at these new markets. You already were operating on a predicate of being even more distributed than you already were. I’m curious, though; what was your process in selecting the new cities that you’re going into?
ERIK: It was mostly market opportunity. Five of them out of the six new ones are basically the Top 5 cities where we already have business. They have the highest concentration of ecommerce brands, SMBs, startup community, etc. Most opportunity, along with – it’s also measured against the agency saturation. There were a lot of cities that had similar opportunities, like Denver, that may have a lot of marketing agencies. It’s just going to be too competitive for the market share.
We did a whole analysis over a bunch of different – and also we were looking at cost of living. Like, are these places where we can actually build teams in a little more cost-effective way? And then Boise came up because actually my COO moved to Boise 2 years ago – I think it’s been a little over 2 years – and has been commuting in to the office from Boise every week, in LA. Obviously with COVID, is not, and we’re probably not going to be asking that again in terms of full-time. So that’s always been a desire.
Boise is a much cheaper place to hire, it’s got great talent and probably a lot more loyalty. LA and New York are tough because our employees literally get emailed every day to get poached. So, we have to work really, really, really hard to keep them, and still it’s almost a futile effort a lot of the times because you’ve got Google and Facebook offering four times their salary sometimes.
So yeah, part of it is just diversifying. That’s really good too. But mostly it was the market opportunity. We know that our clients like working with a local partner.
ROB: Right. It is clever with places like Boise, where you’re college-adjacent but you’re not a college town, so you can make really high quality talent hires and keep them somewhere they like to be, but it’s not just a stone-cold college town where there’s no business there to be earned.
ERIK: Yep.
ROB: Makes a ton of sense. Erik, when we look back at the journey so far, 6 years or so with Hawke Media, what are some lessons you’ve learned along the way you might do differently if you were starting over today?
ERIK: I’d say probably the most mistakes I made had to do around a few things. One is we learned hiring ahead of growth and investing ahead of growth, assuming growth is coming, is always a mistake. Things happen, things change. It’s never what you predicted. So being more reactive than proactive in all the ways we build out our business has always been a much more sustainable way.
It causes little pain points because sometimes you grow too fast and you’ve got to deal with a lot of stress, but that’s better than not growing fast enough and being overstaffed, overleveraged, etc. That’s been a big lesson that thankfully we got through, but that caused a lot of stress at times when we tried to double and we only grew 60%. That becomes a problem. Funny enough, growing 60% is still a huge win, unless you spent money like you were going to grow 100%. That’s one thing I learned.
Also, when hiring executives and building out executive teams, a lot of people think it’s going to be – and including I used to – when you hire an executive, they take that thing off your plate. So, if I’m going to hire a Head of HR, now HR is handled. That takes a year plus, and you’ve got to be hyper-collaborative and working very directly with it during that time. That’s been the other thing that’s really helped at this point scale: spending a lot of time with our executives on how I want to see the business run so that they get up to speed and start to think similarly so they really, truly can run that piece the way we want it run.
ROB: You’re typically probably hiring people you have measured to be fairly capable. If someone’s expecting, does it take longer to get an executive performing the way you want or a staff?
ERIK: Oh, executive by far. There’s just so much more nuance. People are the same. I get that there’s people that are smarter and dumber, etc., but we hire smart people across the board. So, it’s not an aptitude thing. A lot of times experience helps them do certain things, but there’s so many moving parts for an executive that they have to pull into and understand all the nuances of the business.
It just takes a lot longer to get those nuances so that in their quick decision-making, it starts to take account of the nuances they’ve been now accustomed to. It takes time because there isn’t – our business in a lot of ways is unique. We do things differently. Most businesses do certain things differently, so they have to get ingrained with that nuance before they can really be productive.
ROB: It’s interesting what you say there. I think we all get happy hiring hands sometimes when we’re excited about growth. We see it coming, but it’s not quite there. But how do you know – it sounds like you hire at that point where it’s almost too late, and I mean that in the best way.
ERIK: That’s correct, yeah. And every once in a while it is too late, in a sense, and it causes our team to work harder than they really want to or should. I’ve been very clear with our team that that’s going to happen sometimes. That is part of the job. There will be times, like most agencies and consultancies and service businesses and any business, where you have to put in 60-hour weeks. That exists. Then we’ll right-size and we’ll get you back to normal hours, and then it’ll happen again. It’s kind of an ebb and flow. Unlike investment banking, we’re not making people work 100+ hours a week all the time. But we definitely have ebbs and flows where there’s some hard periods.
ROB: Is there a measurable you’re able to use to figure that out? Is it a number of hours billable? Is it a utilization rate?
ERIK: Exactly. We look at utilization and we look at our people, and how many clients they’re managing and what the average time spent on a client is overall. At this point we’ve been doing this long enough, we have a lot of averages, so we can give an idea of like, “That person’s fully loaded, that person’s way overloaded,” etc. Again, we have enough size now that we should be able to never overload someone more than 10%, meaning going from 40 to 45 hours a week. When it gets more than that, it’s usually either a perfect storm of a ton of sales and maybe someone leaving or something that is painful. But generally we’re okay there.
ROB: That definitely makes sense. I think it’s hard sometimes for people to imagine – when you are at let’s say 10 people, they’re not even all interchangeable functionally, so you may have some roles that are overlapped only by two or three people. So, you’re trying to figure out these huge step functions of “How do I increase my capacity here by 50% and when do I pull the trigger on that one?” Although I imagine in a lot of those cases, and maybe for you, that’s also the founders eating some of the pain.
ERIK: Exactly. Everybody has to jump in sometimes, so the pain gets spread out too. [laughs]
ROB: Interesting. Of the different marketing channels that you’re involved in, what has been bumping up as a good opportunity? What’s been attenuating? And maybe an upcoming opportunity that we don’t realize yet?
ERIK: I’d say SNS marketing is a massive one. We’re seeing crazy performance there, and I think that’ll continue, especially as things open back up, because getting people on their cellphone and texting when they’re out and about is a great way to reach people versus email. Email’s still powerful, to be clear, but I think SNS will also be a great platform.
I think TikTok, if you can get through the political stuff, is still – it’s one of the first things since Facebook and Instagram that looks like a very viable advertising platform. I hope Snapchat figures it out, but it’s still not as great. Twitter is not really great, YouTube is not really great. But I think TikTok will end up being a great platform.
ROB: Do you think Microsoft can manage to not mess it up if they do buy it?
ERIK: They did a great job with LinkedIn. They did a terrible job with Skype. [laughs] It just depends on how they manage it. If they keep it separate and let it go – I know a lot of the senior team at TikTok in the U.S. I think there’s a great team there. There’s an opportunity there, and I think Microsoft’s way of M&A has gotten better.
ROB: Sure. They’ve done a good job with GitHub as well. They really have chilled out on a lot of things they maybe used to goof up. TikTok, I imagine, has pretty strong alignment with where you are geographically.
ERIK: Yeah. They also have offices in New York, but yeah. I think they’ve created something that’s a very passive user experience. Once they build out their advertising platform better – again, ignoring the political side of this – I think the way people use it is going to be a really powerful ad platform. We’re one of the first official partners to TikTok, agency-wise.
ROB: What does that mean?
ERIK: We’ve got a full-time team there that’s working with us on everything we need to do to make the platform better and utilize it correctly, and if we have any needs to perform, basically. Same thing we have with Facebook and Google. We have full-time teams, we’re on the Slack, etc., so we can make sure campaigns are run with best practices. We can have them double down with us. It’s a true partnership in that sense.
ROB: That’s a real asset. What is your engagement with legacy media? You’ve got “Media” in your name, and some folks with media, it means very, very new media; some people, it only means very, very old media. What’s your engagement with out-of-home and video?
ERIK: We utilize it all. TV, radio, out-of-home. We usually start with digital because it’s a lot more iterative and we can actually test a lot better, but as our clients scale, we start leveraging all those other things too. We have great teams around more traditional media channels. And it works. It’s different, and there’s different ways to use all of them in a full marketing sense.
ROB: I think what I heard in there is one of the things you may do is actually iterate on messaging in digital formats before amplifying it out to more analog. What’s an example of maybe a campaign you can talk about where you figured that out? Maybe something a little bit unexpected in the digital domain.
ERIK: Honestly, off the cuff, I have a hard time trying to think of where there was an “aha” moment. It’s not like “Oh my God,” this epiphany like “That works way better. We should do that.” It was more like “Let’s test these 10 messages. Okay, that’s the message that’s working really well on Facebook, but scale that a little bit. Okay, this value proposition has always performed the best. Let’s use that value proposition on the billboards we’re going to go buy.”
ROB: You’re a tremendously sensible yet ambitious man. It’s a fun thing to hear. It’s all very matter-of-fact, “Yeah, we do it this way.” It’s not so clever; it’s just you almost seem to get out of your way by not trying to be too clever.
ERIK: Yeah. We’ve had problems trying to work with big creative agencies that have these robust creative ideas. We’re like, “Cool, but in practicality that means absolutely nothing and it’s not going to drive any business. But it looks really pretty.” [laughs] We care about growth. We care about the company’s goal, which is usually revenue and profit growth. That’s what we’re driving towards.
ROB: On the ecommerce side, are you able to get everything dialed in enough to actually be able to tell them return on ad spend metrics and that sort of thing?
ERIK: Oh yeah. We even like to talk more CAC to LTV because return on ad spend is super misleading if you have any kind of recurring business, and if you don’t, that’s a really hard digital business anyways. So yeah, we like to really give guidance into the real numbers versus – ROA ads is a very deep metric, and a lot of times it’s misreported because they’re not tracking long enough because the purchase cycle of a company, usually people forget. So, they’ll spend ads today and look at ROA ads tomorrow. They completely forget that people take time to buy something from seeing an ad. It isn’t instant. 95% of the time, it’s not an instant purchase, so you’re missing out on most of your returns if you look at marketing that way. That’s the issue. That’s not the way to look at it.
ROB: It’s interesting to hear that CAC to LTV mention, this customer acquisition cost to lifetime value. That kind of bleeds over into the startup and SaaS world. I know you’re in the startup world as well with your venture arm. I think I saw you had somebody from Upfront speaking maybe last year at Hawkefest. Did that metric start more in the ecommerce side or more in the software side? How did it bleed over?
ERIK: That comes from the ecommerce company I ran before. We were always CAC to LTV. That’s a ratio that’s mattered for a long time. Thankfully it’s getting more and more prominent. Dollar Shave Club is a good example of this. Again, I worked at the incubator with them, and from what I’ve heard, their CAC was like $20 bucks and their average order value was $5. If you looked at their ROA ads, it was 25%. Like, that’s terrible. But their lifetime value – I don’t know what it was, but let’s say it was 18 months. That would actually turn that $5 into $90. 20 to 90 is decent as long as you have the working capital to get through that.
It’s those kind of things – and it does matter. Also, knowing that payback period is super important too because you have to finance through it. So, there’s all sorts of nuance there. Yeah, running a business is more complicated than just a return on ad spend, which is why you see all these guys that are posting on Facebook about their 50x return on ad spend that they’re driving for companies and never seem to actually make any money. Because it’s B.S. [laughs]
ROB: [laughs] Perfect. That makes a ton of sense, especially with the subscription model. But I imagine as we go deeper and deeper into ecommerce, a lot of non-subscription businesses have become significantly more predictable and recurring. Have you seen something like let’s say a Columbia Sportswear become almost like a subscription, even though it’s not?
ERIK: Not subscription in the sense that they’re forcing people to buy on a certain regular cadence. It’s more thinking about lifetime value, like “How do I get them to come back and buy more?” Managing your existing customer base and getting them to upsell and buy more is much cheaper than getting new customers and much more lucrative. Assuming you have a decent product that people like, it’s way easier to get those customers to continue to buy.
ROB: Perfectly sensible. Erik, when people want to find you and Hawke Media, where should they go to find you?
ERIK: Any social media platform, @ or /ErikHuberman. Even TikTok. [laughs]
ROB: [laughs] And what we will we find on your TikTok?
ERIK: One video, I was sent a sweat suit by – what’s Josh’s last name? One of the biggest TikTokers. He just moved to Triller, too, because of all this stuff. Josh Richards, I think is his name. He’s got like 20 million followers. He sent me a sweat suit. I had to wear it and make a TikTok video because it just felt like the right thing to do. It’s me sliding in with the sweat suit on. It’s important. [laughs]
ROB: [laughs] Perfect. Erik Huberman of Hawke Media, thank you for coming on the podcast. Congratulations on everything you’ve done and everything you’re doing. We’ll look for your people in all these new American cities.
ERIK: I appreciate it. Thank you for having me.
ROB: Be well.
ERIK: You too.
ROB: Thank you for listening. The Marketing Agency Leadership Podcast is presented by Converge. Converge helps digital marketing agencies and brands automate their reporting so they can be more profitable, accurate, and responsive. To learn more about how Converge can automate your marketing reporting, email info@convergehq.com, or visit us on the web at convergehq.com.