Dream Big, Grow Bigger — AdEspresso’s Secret Formula and How Your Business Can Win More Too
This story was originally published as GuestPost on AdEspresso, Nov 24th 2016.
On Oct 22nd we were invited to give a keynote speech at the Mashable Social Media Day 2016 in Milan. While the speech was in Italian, it definitely has a worldwide view and is intended for a global audience. We received lots of requests for an English transcript, so here it is. Hope you enjoy it.
First of all: who am I and why should you read this and believe a single word of what I’m going to tell you? Well, I’m just a regular guy that moved from Italy to San Francisco five years ago. I co-founded 6 companies (both tech and non-tech), the last of which is AdEspresso.
What is AdEspresso? Technically it’s a SaaS Solution for Facebook Advertising Optimization, but the easy way to describe it is this: it’s a company created to help small and medium businesses get more out of their advertising dollars on Facebook, faster. If you are spending between $3,000 and $100,000 per month in Facebook Ads, you should probably check out what we do.
We have almost 5,000 customers in more than 100 countries all over the world, last month our blog generated 325,000 unique visits while we processed more than $20M of Facebook Advertising budget. Basically 1% of the entire Ad spend on Facebook, worldwide, goes through AdEspresso.
We doubled our team every year in the last 3 years, closing 2014 at 11 people in the group, which became 22 at the end of last year and will be little less than 45 by the end of December 2016. BTW we’re a distributed team, with people working in 4 of the 5 Continents.
We also raised external capital for around $1.8M coming from Italian, European, Asian and American investors, both angels and institutional funds, including 500Startups, one of the Top 3 Accelerators worldwide together with YCombinator and TechStars.
Besides co-founding and nurturing AdEspresso as COO I’m also an Angel Investor, having invested in something like 45 startups in 3 years. This likely makes me one of the Top 5 Italian Angels for number of investments and puts me amongst the first 100 European Angels too. Finally, I’m a Guest Contributor for VentureBeat, BusinessInsider, FastCompany, and Entrepreneur.com.
The smart founder formula: startup = growth
As a startup founder, your life can be summarized in a simple formula: startup = growth. Nothing is more exciting and fulfilling than creating something from scratch and growing it to the point that it becomes important and relevant to the entire world.
But, at the same time, the concept of growth is one of the most counter-intuitive ones for the human brain. We tend to overestimate what can be accomplished in one day, and underestimate what can be done in one year. We tend to forget that everything we see around us has been imagined and created by people like us. Let me give you an example.
How many of you here in the audience are over 25? Well, a couple of months ago, on August 28th to be precise, the internet as we know it turned 25. Something we take totally for granted today, because it has become such a critical part of our everyday life, only 25 years ago was not here.
And 25 years it’s not that much time if you think about it. 25 years ago I was 13 years old, and I spent most of my time (too much, actually) playing role-games with Dungeon&Dragons. Because back then there was no 3D movies or Oculus Rift, allowing you to experience extraordinary worlds, you had to use our imagination for that.
Mobile phones didn’t exist just yet, either. You had to memorize your landline phone number, same thing for the landline phone number of your girlfriend or boyfriend. And there were weird boxes in the streets, called Phone Booths, which were the only way to speak to somebody not at home. Otherwise, it was impossible to know where somebody was.
There was also a movie with Colin Farrell called in the same way. Surprisingly, it was not even that bad as a thriller. Thinking about it, the vast majority of the movies of the time, should have mobile phone existed, would have been 25 seconds long… instead of going on for 9 seasons, like in the X-files’ case. The X-files’ plot in 2016?
Molder: “The truth is out there Scully.”
Scully: “Molder, please. There are 2 billions of smartphones out there; each has a hi-resolution camera. Still, we have zero pictures of aliens”.
Molder: “Good point, Scully. Let’s get drunk”.
From Zero to +∞
If you are over 30, there are thousands of examples like this. Another one: mixtape cassettes. They held 10 songs at most, 13 if you chose really short ones. Nowadays instead, any song ever created is available to you, just one click away. How can you compare 1o songs to infinite songs? It’s not 10 times better, it’s not even 100 times better, it’s simply two non-compatible measures.
What about Encyclopedias? Everyone had one at home… made of 30 volumes of 1,000 pages each. We tend to remove these things, but back then you had to “browse” one of these volumes for several minutes to find what you were looking for. Then you’d read it, only to realize that it wasn’t exactly what you were looking for, so you had to start over.
The golden standard was the Encyclopedia Britannica. Fun fact: it’s still for sales on Amazon.com. Funnier fact: it has only 8 reviews. While nowadays on Google/Wikipedia you need only 0.4 seconds, to get thousands of results. From several minutes to get one result to a fraction of a second to get thousands of them: it’s a real miracle to which we get used to, so much so that we take it for granted.
Now, these examples aren’t extraordinarily original, but they help underline a key point that is actually counter-intuitive. If 25 years is a relatively short period of time, and in this little time we were able to go from zero to infinite, how likely is it that the speed of this progress will not only continue but accelerate?
If you ask me, I’m 100% confident it will. Any probability greater than zero, given a sufficiently large number of cases and/or a long enough time, will materialize itself for sure.
Don’t ask when. Ask why
The vast majority of people think that everything has been invented already, but if you could go back in time, bring your 25-years-younger self, and ask him the same thing, I’m sure he’d give a different answer. Because 25 years isn’t really a lot of time.
Take a look at this graph. It shows the speed at which new technologies have been adopted and reached 100M of active users, starting from the landline phone, moving forward. Can you see the trend? How much would you bet that the next big technological breakthrough will be even quicker?
The real question here is not “if” or “when” but “why” and how these new paradigms can be used in a business context to generate growth. The reality is that there are several macro-trends, happening in synchronicity for the first time in the human history, creating business conditions simply not comparable with the ones of 25 years ago. In specific:
- The cheapest entry cost ever. Not too long ago, to start a business you needed millions of dollars, just to start out. Today, with services like Amazon Web Service, the only real cost is the time you put into it.
- The highest availability of capital ever. Because everybody is an angel investor. And technology went from a niche industry incomprehensible to the vast majority, to being the most important driver of growth.
- We have a new hardware platform. The shift from desktop to mobile is complete now, and the real Personal Computer is our smartphone. 98% of the people keep it within arm’s reach at any given time, night included.
- We also interact with technology in new ways. We started out by typing stuff on a keyboard and evolved from that into touch screens. The new model of interaction? Voice control. We speak to our devices.
- Social Networks shortened the distances. It used to be that there were 6 degrees of separation to connect each of us to any other human being on the planet. Now that’s down to less than 4.
- Distribution channels are the most efficient ever. This, thanks to the combination of Social and Mobile. One simple example, from just a few weeks ago: PokemonGo, from 0 to 50M users in 19 days!
- We have the highest number of online users (and growing). There are more than 3B people online these days, each of them has a mobile device and a credit card connected to it. Only 20 years ago it was just 50M. 1/60 of that.
Riders on the Storm
Factor in together these 7 mega-trends, and you’ll have the Perfect Storm which started to generate the fundamental shift of these past 10 years and will continue to produce even more changes in the next 15 years!
Except that it doesn’t feel like such a dramatic change, right? Who cares about a 2% change per month, after all? But if you sum it up over a 25 years period, it becomes something 186 times bigger. We’re really talking of a horizon of change like never before was possible.
It really is an epic level of change we’re talking about, which -because of this “progressive adaptation”- evolves unnoticed to most people. Those who can see that change, and ride it, and leverage it, are the visionary entrepreneur we read about every day online in the dedicated blogs.
The question is also what’s next?
Well, robotics and artificial intelligence, virtual and augmented reality, bioengineering… just to name a few. These are some of the areas where the big Silicon Valley funds are putting their money now. Rest assured they will be a big part of our lives 10–15 years from now.
Keep in mind tho that those are areas where you either are hyper-specialized, or it’s a bit too soon to build a business on top of them. After all, only 2% of the venture-backed companies reach the ‘$10M/year revenue’ milestone, and 33% of the companies that go IPO doesn’t last 5 years.
By the way, it’s always worth remembering that not all the startups need to be Billion Dollar Companies. “Success” can mean lots of different things for different founders and companies. But there’s something the vast majority of the most successful companies have in common: more often than not their success does not depend on technology.
Ok, ok… I know it can sound like a contradiction, but bear with me. Because, technology, at the end of the day, is just the most efficient way to scale an interaction’s model connected with a business’ model that solves a problem crucial to a particular category of customers. Period.
The Age of Everything
Let’s cut it to the bone. Today anybody can create an App and put it online. In fact, the Apple store now has 2 million apps and counting. The few that win, win on distribution; and the ones that do win, win big. The top 1% of publishers generates today 94% of the total sales… and we are talking about more than $20B in 2015, not exactly peanuts.
Let it sink for a second, because it really is the secret formula to create a successful startup. In a world where technology is a commodity, and money is a commodity, and the distribution channels are super-efficient, and everyone is online, wins who has the most efficient combination of:
- best value generated for
- the specific vertical of customers
- with the most efficient distribution
- and the lowest cost of acquisition
- on the most aggressive business model
These are the ingredients that contribute to create the success story of that company. Keyword: “story.” Technology is not even there, if you think about it, because technology is how you scale this combination from one customer to 10, and then 1,000 and then 10,000… in 3 years and instead of 15.
And the ones who have breakthrough successes, usually leverage a new emerging behavior in one or more of these areas. Or, some rare times, they even create them. These are generational changes, that usually happen every 5–15 years, so timing is also a critical part.
When these changes happen, the result is mind-blowing. The key to this, the secret formula, is to combine each and every one of these areas in a way that every element minimizes the downsides of the system while maximizing the upsides. The result? A real competitive advantage
The Secret Formula
Every big success story can be broken down into a different combination of those elements, a version of that secret recipe. And there are dozens of examples out there. AdEspresso too, which -regardless of the impressive numbers- we still consider a *small* success story, can be used as one.
In our case basically, the problems we solve (a.k.a. the value that we create) are on two sides. The first one: to make the most out of your advertising dollars on Facebook you constantly need to tweak things, and after a certain threshold it becomes totally inefficient to do it manually. When testing multiple elements, things can quickly get out of hand.
Just consider that testing 5 pictures, 5 titles, and 5 demographic targets would generate 125 combinations. While on Facebook you should insert each and every one of them by hand, with AdEspresso you just add the elements you want to test, and AdEspresso creates the 125 combinations for you. Minutes of work instead of hours. Plus, you get to access more granular metrics, to better understand what’s working or not working.
The second problem we solve is usability. The more Facebook grows as an AdTech platform, the more complicated it becomes. Think of Google Adwords and imagine Facebook Ads 5–10 years down the road. But small/medium business owners hate complexity. They want a simple yet powerful tool, with a friendly easy-to-use interface and a strong focus on automation.
The AdEspresso’s Recipe
Our sweet spot in term of customers is people spending $3k-$100k/month, the most representative categories are: startups, e-commerce, agencies, and brands. The typical use-case (which brings me to the distribution piece) is related to the fact that these guys are making $1–5M/yr revenue online, with an advertising budget in that range but little or no expertise and/or time.
Many of them, with the goal of doing a better job, search online for things like: “How to Improve Your Facebook Ad CTR”, which we write. They get value out of the content, discover that there’s an actual product behind it, and sign up. Which takes me to the acquisition’s cost.
Since we have an automated conversion funnel, we don’t have Sales Reps. Zero. And because we don’t depend on Facebook or Google Ads thanks to the Content Strategy, we can have an aggressive Business Model. In fact, when we started, we were the less expensive solution on the market. Last but not least: the piece on emerging behaviors and timing.
The emerging behavior is mostly related to the fact that mobile is changing how people interact online. First: the vast majority of consumers today access the Internet through their smartphones. And, second: within that context their first (and for some of them only) online experience happens through Facebook.
This means two things:
- We don’t search anymore. Only 10 years ago the first thing you did as soon as you were online was searching for something in your browser. Now there’s an app for that.
- We are less intentional than 10 years ago. We are in constant information overload and we expect our Social Network to screen the interesting content showing us only what’s relevant to us.
Facebook is leveraging these emerging behaviors and, partially, it’s also creating them. As a result, it is generating incredible results regarding growth and revenue. +63% growth year-over-year and shy of $18B of annual revenue, in specific, which is frankly mind-blowing. We owe part of our growth too, to the whole growth’s rate of the Facebook “ecosystem.”
The Secret Revealed
And, finally, let’s talk about timing. Someone might call it just luck, but I do firmly believe that luck is the result of two factors: a) having a chance, and b) having the know-how to capitalize on the opportunity.
Starting from scratch today would not make sense. Because there is plenty of players already in the space, and because today FacebookAds API have higher access requirements. API’s complexity is 100X bigger too, because the Ads platform in itself is more articulated.
For all these reasons, it would be much more difficult to find investors. Because the other players in the space have had years to work on their products and millions of dollars to invest. Unless there’s a sudden and unexpected shift of platform, the cards are on the table.
To wrap it up, the bottom line is that influencing emerging behaviors or timing is hard, if not impossible. But where you can achieve a lot is focusing on growth, on generating small but consistent progress.
A +1% daily improvement becomes a +5% weekly, which turns into a +20% monthly, which generates a 10X yearly, which is equal to 10,000X in four years. Let’s say you start at Day One with $1k/mo. A daily +1% means that you will make $10M/mo in 4 years. That’s not a lot of time.
Don’t expect it to be easier tho, on the contrary. It becomes more and more challenging. You, at the same time, become better and better. Which brings me back to the title of this: “Dream big, Grow bigger.”
While you have been reading this, 48M searches have been performed on Google, 14m people logged in Facebook; Amazon has sold $4M in products, and 56M videos have been played on YouTube.
So the problem is not the scarcity of online users, or that reaching them is complicated, or that building technology is expensive. The real issue is: how can you be relevant and interesting and entertaining? And why should people spend 60 seconds of their time with you, instead of looking a cats’ videos? And how can they be better persons because of this?
This is the secret.
The original version of this blog post is a speech given by Armando Biondi, COO at AdEspresso, in Milan (Italy) during Mashable Social Media Day: one of the most important worldwide events which celebrates the digital revolution, the dynamics, the potential of social networks and the impacts they generates on our lives and on business. The event #SMDAYIT Italy is an official event @Mashable and consists of two days of training and networking which sees innovation being told through the sharing of concrete strategies and successful case studies presented by the best industry professionals.