Happy Monday!
I hope you’re doing well and having a great day. This newsletter is coming to you later than usual because I was sick over the weekend. Actually, this is the first newsletter since my son was born! My wife and I welcomed a baby boy into the world almost a month ago, and he’s doing well. Our daughter loves him, so it’s been a lot of fun. I want to take some time to prioritize family, but I’m back - maybe not every week, but as CEO and dad duties allow, I’ll be coming at you when I have something relevant.
Partner Of The Week - All DTC operators need a place to share insights, ask questions, and vet partners. Workspace6 is the best place to do all of that in my opinion. It's a community of real ecommerce operators and not just the big names from Twitter (but they're in there too). If you're struggling to scale, or just want to be around like minded people who you can learn from who are also scaling, you need to check out Workspace6. It's only $99/month and your first 30 days are just $1. Whether you're looking for tips on media buying, cash converison, or looking for recommendations on a new agency partner, Workspace6 has you covered. Sign up for $1 for the first month here.
Ad Creative: It’s All About Volume
I was bored and did a long tweet the other day about ad creative, and it seemed to be received well, so I wanted to share more context here. Ad creative is everything, and I’m late to understand how much volume is really important. It’s not just volume that is needed, but it’s impossible without it.
Our goal right now is to double the amount of creative velocity we have, maybe even more. Here’s my plan:
The Creative Supply Chain
Everyone talks about volume, but building the systems, processes, and structure to get that volume is what matters most. Operations are really important here:
- Creative strategy is the direction
- Creative operations are the speed
Both are extremely important and don’t really happen without each other. You need to build the systems for creative velocity, production, and testing. Think about it as a supply chain - there’s so much that goes into supply chain management, and all components must work together efficiently.
Ad operations are very similar to a supply chain. You need: Strategy > Production > Assets > Raw footage > Proper editor bandwidth > Uploading > Iterations.
You can’t just flex up on one part of the supply chain without seeing an impact on another. For example, we brought on four editors, but now we have a different bottleneck because editing was previously our constraint. Now we need to bring on another strategist to write briefs to fill them.
Once we have these additional editors in place, we’ll need more footage, and I’m sure there will be another bottleneck after that. If you know what it might be, please tell me and save me from it! Maybe it’s more spend in our ad account or more products. It’s not just a simple increase in one area; it’s a little bit of everything.
Thinking of Ad Creative as CapEx
I am starting to think of ad creative costs as capital expenditure. For large productions, you can realize the revenue over time, but you can’t do that for UGC or actual ads. Even if you’re not formally accounting for it this way, I think it’s important to think about it like this.
We’re going to spend a few million in CapEx for store build-outs, which will hopefully have a good return. I’m allowing a many-month payback period on that. The psychology of the investment is interesting - thinking of it as CapEx allows me to want to invest more money into it, as opposed to being cheaper when considering the OpEx hit.
Don’t Be Cheap With Creative
I’ve heard some people say to never have limits on how much you spend on books or reading. Ramit Sethi talks about having areas where you just spend freely.
We’re going Doge mode a little bit across our P&L, trying to be efficient and smart about spending. The one area I’m not going to cut back on is ad creative. Don’t be wasteful, but don’t be cheap here, even if it’s on people. I don’t want to say unlimited budget, but it’s much less scrutinized than other areas because it’s the lifeblood of our growth.
Performance-Based vs. Flat Fee Creative
I go back and forth on percent of spend versus flat fee for creative partners. From talking to many brands recently, I’ve found that creative costs are pretty linear with scale - there’s not a lot of operating leverage.
Spending 10% of ad spend on creative at seven figures and then dropping to 3% at eight figures is risky. I don’t think you can get that efficient with it. Maybe for a short period, but to continue investing in growth, you have to keep pumping creative.
Everyone is different, but 5-7% of spend seems to be a good sweet spot for many brands. 10% is high, but below 5% is probably underinvested, which is where we’ve been. We’re going to get there, and hopefully, our overall marketing as a percentage of revenue improves.
Mix of Internal and Agency Partners
There are pros and cons to each approach. A combination of percent of spend and flat fee makes sense: - I’m more willing to bring on partners at a percentage of spend because there’s little downside - Some partners have flat fees, while others have flat plus a percent of spend
You can’t really do it with just the few brands that can internally produce ads. You need: 1. A strong internal engine (which can be scalable depending on the budget) 2. Agencies - sometimes four or five specializing in different areas
I don’t want multiple UGC agencies competing with each other. I want agencies that can do: - Funny, creative content - Raw organic TikTok shop style content - Static assets - Influencer work
I’m bullish on whitelisting with larger macro creators. I wish there was a better process or tool to make it easier, but I’m definitely going to test more here.
Publisher funnels will continue to be tested with bigger swings. A lot of this will be percent of spend to limit downside, and we’ll figure out what happens when costs get unruly. But increasing our creative velocity has to happen. I’ll share more soon!
Partner Of The Week - In our efforts to aggressively ramp up creative volume, we found a great design agency for static ads and more called Statiq. They are working with us, Hexclad, and AG1 so that tells you something about their quality. We've really been able to ramp up our static output since bringing them out. My team just sent me the data today for last month; we spent $152k on ads Statiq designed in February and at a much better ROAS than any other agency partners. I've been really impressed with Statiq's quality, speed, and creativity so far. And again, if they're working with us, AG1, and Hexclad you know they're onto something. But they're also shockingly afforable too! If you book a demo now, you can get $500 off the first month as well. But you have to book this week to get it. Book a call here to learn more about Statiq and see for yourself.
Till next time,
Cody