Happy Sunday! This is my first newsletter in a while. After sending for over 2 years straight without missing a week, I needed some time off at the end of the year. I have a lot going on, so I don't think I'll be able to do this weekly for the time being. That being said, I'll still do when I can, and more importantly when I feel like I have something I want to share. If you miss me, make sure to subscribe to Marketing Operators and follow me on X.

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Today, I'm gonna do 5 random bullets that are on my mind.

1. I can't stop thinking about this DTC 3.0 model. I'm super inspired by the new brands that are scaling fast with really lean teams like Hollow, Create, Brez, etc. They've realized the fundamental pros and cons of a DTC business model, which necessitates lean OPEX and aggressive marketing. Here are the threee phases as I see it: There are three distinct phases of DTC as I see it:
   1. DTC 1.0 - Raise a lot of money, large teams with big TAMS. Main value prop is DTC with a heavy emphasis on branding. My guess is payroll at 15-20% of revenue with long payback periods. Pure DTC. Growth at all costs. Largely a broken model. Glad we’re past this. 2010-2018 vintage. Glossier, Casper, Allbirds, etc.
   2. DTC 2.0 - Mostly bootstrapped brands, many of which can get to 9 figures. Mostly DTC, with some owned retail, wholesale, and Amazon but probably 80% DTC at least. Either small seed rounds or bootstrapped. Big focus on profitable growth and Contribution Margin. Payroll around 10-12% of revenue. Jones Road, Ridge, Hexclad, etc. 2015-2020 vintage.
   3. DTC 3.0 - Lean teams with high leverage. Likely smaller, 8 figure brands but they are profitable and have very lean opex. The model is aggressive, yet profitable marketing to scale quickly with very low opex. Lean teams, oversees support, and now AI. Many of them will be subscription companies but not all. Profit over everything here. Create, Hollow, etc. Mostly DTC and Amazon, with tiny wholesale but not a ton of nationwide. Payroll around 5-7% of revenue. Low opex allows them to pull back spend when it’s not efficient.

I'm jealous and inspired by all the 3.0 brands.

2. We had our first Youtube partnership ad go live today. We're buying these through Agentio, and I am super excited. So far, it has done solid. We're seeing triple the code redemptions compared to click-based conversions, and post-purchase survey responses tracks a little above codes even. I expect most of the value of these to come outside of the first week as well, so I will follow up. It's incredible we've made it to our size without doing this, but I am really excited about having a new growth lever to push on and think this could be a really effective and scalable channel for us.

3. Most of the Applovin hype has seemingly faded away. There are still brands spending, but it's not as big of a part of the media mix as it was in Q4. I persoanlly think many brands overspent there, but it's hard to know without a holdout. My guess is it will be about 3-5% of most brands media mixes.

4. Youtube shorts ad placements are here. We've been hacking our way to shorts inventory by uploading vertical video and targeting mobile only, but you can now officially run Youtube shorts ads as part of Demand Gen. Depending on how this TikTok thing goes, it could be good timing if more usage goes there.

5. Speaking of TikTok, I have been predicting for a bit that there will be a forced sale. I think it will go to either Apple, Amazon, or who knows maybe even Elon at this point. We're in a really weird timeline, so anything could happen. Outside of all of the creators this affects, I think TikTok going away would be a very small to nothing impact for most brands. I personally always thought Shops was a fad, and I think TikTok ruined some of their product by pushing it too hard. They definitely ruined their standard ad product, so most brands pulled back hard. I personally do think it's a real national security threat, so I support either a full ban or a forced sale.

Well, that's all I got. Hope you enjoy your long weekend and I'll see you when I see you.

-Cody

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