Adam Lovallo is founder and CEO of Thesis Testing. Adam tells us why he hates account managers but loves reading the TikTok API documentation, how he happily pays out more than one million dollars a year of referral fees, why he shares 100% of his financial information with his entire team, why the most popular metric digital agencies share with their clients is deceptive, and why your agency should be profitable from day one of the business.
Adam Lovallo is founder and CEO of Thesis Testing. Adam tells us why he hates account managers but loves reading the TikTok API documentation, how he happily pays out more than one million dollars a year of referral fees, why he shares 100% of his financial information with his entire team, why the most popular metric digital agencies share with their clients is deceptive, and why your agency should be profitable from day one of the business.
Adam Lovallo LinkedIn - https://www.linkedin.com/in/adamlovallo/
Thesis Testing - https://www.thesistesting.com/
Nik Sharma - https://www.linkedin.com/in/mrniksharma
The No Asshole Rule a book by Robert I. Sutton
The Great Game of Business a book by Bo Burlingham and Jack Stack
Don't Make Me Think a book by Steve Krug
David Rodnitzky (David) (00:00): This episode of Agentic Shift, we talk to Adam Lovallo, founder and CEO of Thesis Testing. Adam tells us why he hates account managers but loves reading the TikTok API documentation, how he happily pays out more than $1 million a year of referral fees, why he shares a 100% of his financial information with his entire team, why the most popular metric digital agencies share with their clients is deceptive, and why your agency should be profitable from day one of the business.
Adam, thanks for joining us today.
Adam Lovallo (Adam) (00:36): It's my great pleasure.
David (00:37): Awesome. Well, I've always been impressed by Thesis Testing. Let's start out by maybe, could you tell us your founder story? How did you end up starting this agency?
Adam (00:47): Sure. So I, in a prior business with another partner, had a conference company, an events company focused on basically growth marketing, app install marketing, performance marketing stuff. So I had a lot of category exposure, and I was looking at the performance marketing ecosystem, now known as growth marketing ecosystem on the agency side. And I found it odd that very few of the agencies really did much of anything on the conversion rate optimization part of the equation. I say this with the utmost respect, but even the likes of the venerable freaky digital, I was like, they don't really do CRO. What's the deal. Most of these people have no developers, they don't have designers. They do media buying and creative. It's weird because internal growth teams, like the one that I part of, are by definition cross-functional and inclusive of engineers and designers and so on.
And so it was strange to me that there was this whole ecosystem of, quote/unquote, growth agencies who were encapsulating a subset of what internal growth teams did for forward thinking Silicon valley style companies. So I thought, right, well, I'll be really good at conversion rate optimization, which is like a pseudo-technical thing with engineers and so on, and I'll pair that with the more bread-and-butter growth marketing services. That should work because on paper, I should be differentiated from the average guy who like logs into Facebook because I'm doing this other stuff. There was really nothing more thoughtful than that when I started.
David (02:35): And how many years ago was that, that you started?
Adam (02:38): That was approximately three-and-a-half years ago. I’ve always done this in my career before I started working on it full time. For maybe 6 or 12 months, that was for me a side project. I hired a couple of people. When I joined full time, that's what I considered to be the inception. We were in the process of selling our conference business simultaneously. So I knew I could roll off the one into the other, but yeah roughly three-and-a-half years ago,
David (03:04): That conference business was, was that MAU?
Adam (03:06): MAU Vegas returning June 2022 after a two year hiatus thanks to the coronavirus, but yeah, mau.com.
David (03:16): Last week our guest was Daniel Pearson from Bamboo, and we mentioned MAU and you and Jay on the show. So I promised listeners that we're not going to mention Jay and Adam every week. This is just a coincidence. It’s the first two weeks.
Adam (03:28): I don't know. We’ll see. I've got deep reach. You never know.
David (03:32): You do. Okay. So you started a couple years ago. I love that story of what you were trying to do. What's your elevator pitch when you talk to a potential client? That sounds like a lot of what you just said is part of the pitch, which is like, Hey, your agency isn’t doing this stuff. But tell me the pitch.
Adam (03:49): My pitch is it's deliberately a somewhat contrarian pitch, and it's what I also believe, which is convenient. One, media buying in these channels is getting automated or is already automated. And you can't hold on to the notion that internal team agency, proprietary bidder, no. The algorithms are doing it right now and they probably can do it better if they're not. Therefore, if you want help, you need to get help on the parts of the equation, the puzzle, where there’s still leverage, creative. That's a big point of leverage and that's a very broad and all-encompassing thing, but nonetheless, creative.
So we work on performance creative, conversion rate optimization often in the form of landing pages, which is sort of my bread and butter. Then my fourth pillar is the underlying offer itself, which I always encourage people to experiment, which may be pricing or subscription only or whatever. And so as a growth agency, I say, Hey, don't pay me to just run the Google, Facebook, TikTok, Snapchat. Like I can do it and I can do it well, but I could also tell you how to do it in about five minutes if you give me the time, pay me to do all this other stuff, and to wrap it into the media buying. That is the pitch in a nutshell.
David (05:07): I would say, I don't entirely disagree with you. The way I would describe the media buying today is that 10 years ago, a great media buying agency could have maybe an 80% impact boost on your campaigns today with the automation that you mentioned, maybe it's 30%.
Adam (05:26): Yeah, or you would say that. I certainly agree with the trend of the curve that you just described, and to be clear, it is extremely easy to still do this stuff very poorly, even by big fancy agencies. Even big fancy, quote/unquote, growth agencies. So I'm not trying to say that there's no value in the stuff that we do or you guys do at 3Q or Daniel at Bamboo, not at all, but I'm saying it doesn't require 10,000 hours to realize you should have a consolidated Facebook account. You could go read a couple of blog posts and, boom, you're in the game.
David (06:06): Everything in life is easy to do but hard to do well.
Adam (06:08): That's right.
David (06:10): How many people do you have now on staff?
Adam (06:15): We're in the low 80s of full time?
David (06:19): So in the early days, what were some of the challenges that you experienced trying to scale this thing?
Adam (06:23): Well, my strength has always been, I know the industry really well, and I mean I know the subject matter and executional stuff, but more so really, I think I understand how these heads of growth people perceive things and what they might be interested in and whatnot. That's the role of event organizer. I pick topics and the speakers. That’s the job that I had. And so I’m always been really strong at giving that pitch, having people be like, oh, he seems at least kind of smart and very different from all of the other agencies that I just talked to. I always wanted to make sure, and everything I've ever done in my career, can I sell it convincingly? And is it different? And then okay, then I'll actually go do it. That’s always been our strength. I didn’t know how to run an agency. Still not totally sure that I do. And so over time, we’ve gotten better at operations and better at communication and servicing and so on, but I had no clue of what I was doing and we paid the price. We paid the price in the form of retention rates or satisfaction or missed opportunities or whatever.
If I were to do it again, I would take a different approach and maybe have made sure I had a more retentive machine before I really started to crank the thing up. We're in much better shape now in that regard than we were even a year or two ago, but had I done that from day zero, we would mathematically be like three times the size or something like that. It probably would have been worth it. Frankly, if I had a co-founder person who had run WPP for the last decade, that probably would've been a useful advisor or even colleague. So instead we figured it out on own.
David (08:12): What were some of the things that would make you more retentive? What were of the specific mistakes that you made early on? Was it staffing?
Adam (08:21): I was too much of a point solution like Harvard Business School case study 101 service company observation is do more stuff for people then you're more integrated with them. That's true. Like we were far too often a point solution, often a point solution sitting alongside other agencies. The last thing a growth agency wants to hear is, oh yeah, we hired these Thesis guys. They're going to help with conversion rate optimization. It's going to be a lift all boat situation. They're like fuck that. No way.
So we were not always, but most of the times, coming in as a point solution provider and the second the Head of Growth switched roles or the CMO got fired or the budget got tight or whatever, we were nuked, vaporized. Over time I realized, presumably as every services business in human history, I need to do more stuff to give myself more opportunities to add value for our clients and to get myself more integrated with our clients, and both of those things, very virtuous combination, we're adding more value and we're more integrated means presumably a longer-term relationship. So that was the number one mistake which we've sort of remedied over the years by adding other services, by doing more.
David (09:49): It's funny when I was a small agency and all I did was search engine marketing, I used to always pitch clients and say everything is an expert at nothing. And as you became a larger client, your agency, you’d say, well, you work with that small client. It's a single point of failure. You have too many cooks in the kitchen. You don't have throat to choke.
Adam (10:07): To this day, people say, well, do you do this? You do that. But I recommend some specialists to you that could take care X, Y, Z, rest assured if one bag is big enough, I'm going to be that very same specialist.
David (10:21): It sounds like you have added services, obviously, beyond conversion optimization. You said you have creative, you have maybe some product strategy, you have media buying. How do you think about when it's time to add a service?
Adam (10:34): The creative and media buying was out of necessity. Those two things are so synonymous at this point that I don't think we really can do them in isolation, practically speaking. And so really that's the one major service we have added over time. So pure CRL and then plus media buying and creative. There are a lot of things that I think our clients would love for us to do for them that we haven't launched or I would like to, but it's just a focus and staffing and funding, like trying to acquire other agencies to bring in people faster.
So we've actually been pretty reticent about adding stuff. Even though there are things that I personally have experienced within my career that I think I could help sell and position and help clients with, but yeah, I've been pretty cautious about that. I look at other agencies maybe younger than us or smaller in size that do list 15 different things that they do. And I'm like, wow. Like if they're pulling that off, like respect. That must be challenging. But that in the next phase of this, like that's very much on my radar. Channels like TV and OTT and radio. I think in the longer term, you have to do those things to remain competitive as a performance agency.
David (11:47): You have to scratch where it itches, basically.
Adam (11:51): Yeah. Like why do five calls if I can do one? It’s not much more to it than that really.
David (11:58): One other thing I failed to mention is before you had an agency, you had this conference business. Before that you were at LivingSocial and you ran marketing there. Did you hire agencies when you were there?
Adam (12:10): Yeah. We had tons of agencies. We worked with our mutual friend Ampush. We worked with my friend, Rob Jewell. We worked with a lot of agencies. At that time, Facebook media buying at scale was starting to be a thing. And so we hired many specialty Facebook agencies. We worked with YellowHammer, no longer an agency. Business was sold off, but to do a lot of programmatic display because programmatic display was a great thing for performance, not nearly so much anymore.
LivingSocial in the end didn't really work out. And so maybe a lot of the decisions in hindsight were foolish, but high growth startup, just trying to do the best we can as quickly as possible. And so from my perspective as a Head of Growth, an X percent of spend fee didn't really bother me if it meant we were doing the best we possibly could on a growing channel like Facebook. So I’ve always been pretty pro-services and agencies. I know it's like a pejorative to be an agency at this point. You're supposed to build an internal team, but I always just thought, we were managing campaigns in 15 to 20 countries with local teams, lots of channels. Like we would've had to hire an insane number of people to manage it and that the agency path was faster.
David (13:38): So a lot of those agencies you mentioned are great agencies or former agencies. Did those agency relationships inform how you wanted to build your agency? Did you say stuff like, oh, I really want to do what this agency did or I really don't want to do what this agency did?
Adam (13:53): Honestly, no. My memory is horrific. I can't even remember like how those working relationships were. I'm still friends with people from each of those. So it's not that the relationships are gone, but like what we did, I literally have no idea. What really informed how I wanted to be different were the interactions I would have on the conference because I would see both agencies and ad networks who are not that far apart, practically speaking, actually, how they spoke to prospective clients, how they described their own services, how they presented in a public setting. I certainly took some aspects of those things that I liked. I took a lot aspects that I thought were fuckin’ dumb. For instance, this may be a mistake. So I'm not saying this is a good thing, but I detest account management as a functional role if those account managers don't know how to do the stuff that they're describing.
So there's often this bifurcation of people who do stuff and then people who describe it. I totally understand why you might want that, but I just personally hate. I found it so annoying. And when I was Head of Growth, I would always be like, can I just talk to the actual person doing the thing because this is dumb. I don't need this. So when we did Thesis, we said we're not going to have that. The people who do this stuff also have to talk to clients, which creates its own challenges, but that's one very specific thing that I saw that I wanted to learn from and incorporate.
David (15:30): When you about being a small point solution agency versus a large agency, I remember many years ago that I talked to someone at, I want to say it was GM. I'm probably mistaking the company, but I said, ‘How much are you spending on your online advertising?’ They said, ‘Oh, we're spending $2 million a month.’ I said, ‘How many people at the agency support that account?’ ‘Twenty-five.’ I said, ‘What are they doing?’ ‘Well, we have the Buick LeSabra. They have an account manager. And then we have the Chevy Vault. They have an account manager.’ Basically every car had someone who was just dedicated to not sure what, sending a report, sending flowers. That's how a lot of big relationships work.
Adam (16:13): To be fair, I have learned a lot of the people who are good at doing this work are not the best communicators. I thought that was an intuitive and universal skill. I don't mean to apply that I'm some amazing communicator, but I know how to talk to people and describe things. It’s not that hard, and I tend to describe things in a very simple way. That's just my default setting. So I've hired a lot of people like, wow, these people are super smart, often super experienced growth people. And then I put them in front of clients and the client's perception is this person is an idiot. Like he doesn't know anything. And I'm like, no, maybe he doesn't present that well.
So to everyone out there who's an account manager or has an account management function, I get why it could be valuable. I personally just find it so intolerable that, to this date, I refuse to incorporate it. And as a consequence, we don't do a lot of the reporting and slides and things that maybe we even ought to, frankly, but it’s part of our culture as an agency to not want to do that stuff because we think it's mostly bullshit, and that may come back to bite us as we get bigger. I don’t know. Anyway, that was very much inspired by what I saw from companies in the industry.
David (17:28): I agree with you a great relationship and bad results is better from a client retention perspective than a bad relationship and great results.
Adam (17:36): You’re totally right. I'm a performance and numbers guy, but we've lost real deals or whatever where they thought we weren't doing X or they thought we weren't doing X well or whatever. That is a major learning for me in any services business where I had to keep going or to do it again.
David (17:58): Clients get the agency they deserve. And so you can say that somewhat cynically, but I think what you're really saying is right now, the clients who love you are the ones who are like, I don't need 80-page CARO report. I just need the results and to know that you're best of class. Now, there's other clients who really need a lot of handholding.
Adam (18:20): The people that choose to work with are sub-selecting based on our pitch. And it's not even just a pitch delivered by me. They're people who don't want that stuff in general. And in the rare instances that were hired by somebody, then they later add a new point of contact who does expect all of that stuff. We always try. Oh yeah, we could do these slides or this thing. And we get nuked every time. Doesn't matter if we're doing a great job. Happened recently actually with a major client. Like we're doing an awesome job, client hired some CMO person with external CMO. Absolutely no idea what he was talking about. And then lo and behold, 60 days later, they replaced us with some agency that sucks probably that was going to do the handholding that this dude wanted. I'm like, given where we are and what we do, that's unwinnable.
David (19:17): I think as an agency leader, you have to have a bit of a thick skin. You have to quickly realize that life is not fair.
Adam (19:23): Yeah. I still take a lot of this stuff too personally when it doesn't go right, to be honest, especially if we've made a genuine mistake or done something wrong, but yeah. I've definitely become more callous over time in a good way just to not react to everything. It's just too many of those you could lose your mind, especially if I try to like run back in my head how we could have made it work and that's lost and just like wasted brain cells.
David (19:57): I agree with you. I get very upset when you make a mistake, and we talk about preventable losses inside the company. Like someone makes a mistake and the client fires us. That is really painful. We had a business many years ago where the CEO came to me and said, ‘We can't make this stuff work. We can't make this performance marketing work. We're going to quit. We're just going to stop.’ And I said, ‘Give us a chance,’ and we scaled it and I'm not going to say the name of the company, but I will say to this company today is probably a $50 billion company, approximately. We were a very, very small percentage of their success, but nonetheless, we scaled it to the point where they were able to bring in a CMO who is then able to say, oh, I'll just hire someone else to do this. So that's another frustration.
Adam (20:45): In percentage of spend economics, I don’t know if that's the case in your particular scenario, does kind of point to that outcome when you're very successful. Not always. That is one of my, but I, yeah, I certainly can share or relate to that.
David (21:02): So speaking of the economics, you mentioned a little bit earlier about sometimes you have a client who will bring stuff in-house. What's your opinion of in-house versus agency? Do you ever recommend to a client like, Hey, that makes sense bring it in-house or where do you stand on that?
Adam (21:16): My bias where I had to go back to being a Head of Growth or CMO person is to have a small internal team and largely leverage services, which is just convenient since I run an agency, but I've just always thought that the areas where growth people can add the most value or get the most leverage are really not the executional stuff that agencies are able to do. And okay, maybe you pay a premium to have agencies do that executional stuff, but you know it's not going to get up fucked up, and it's going to be reasonably best-in-class versus you build a big internal team and you run this risk always that you're actually doing it wrong and you just don't know it because you don't have access to additional data points.
And for me as a Head of Growth, I was like, well, let me work on things that only I'm equipped to work on or we, the company, are equipped to work on, referral programs, the funnel, the actual product, customer experience. Like we have to do those, whether or not I have two guys who upload Facebook ads or I pay somebody else to have two guys who upload Facebook ads is doesn't really matter one way or the other. So that's always been my bias, certainly from a pure cost perspective.
A friend of mine has an agency and he's made up some number. He's like, well, a full internal team that's probably staffed with this level of budget is effectively 4% of spend anyways. I don't know how he's come up with that calculation. Something like that. May be true, I don’t know. But I do think it's reasonable to say that at scale, an internal team will be significantly less expensive than using an agency. That's just life. But yeah, my bias on the top end is tight team, best-in-class agency solutions as needed, that's what I would do if I was hiring on the tiny businesses, too small even for Thesis to work with, definitely too small for 3Q, I actually think people should use contractors and just do it themselves.
I talk to companies all the time. We're like, ‘Yeah, we spend 30K a month.’ ‘We pay this agency $5,000 a month and they suck.’ And I'm like, ‘Okay, let me just put myself in their shoes for a second. So they run a business, they have to make money. You pay $5,000. They probably have to have what, 50% margins so they can afford to spend a $2,500 a month to do all the stuff you want them to do. So obviously they're going to hire people who have absolutely no experience who cost nothing or they're going to spend no time on it or both. Like what did you expect? That is the incentive scheme you created and this is the result you deserve.’
And so instead, what are the things that actually matter at your size, maybe it's creative or something else. Okay. Well, plug the five hours a month of paid search help you actually need, since you just buy your branded terms and run smart shopping. So that's fine. And then you can run the Facebook and create your own ads or hire a freelancer to do it or something. So that's the advice I generally give, but I would say certainly the industry preference is to build an internal team. And quite frankly, it sounds cooler. A lot of this is ego driven in terms of Heads of Growth and people speaking at my conference, which sounds better. We have this agency that handles this, this agency that handles this, or this agency that handles this, or I have a team of 40.
So that is also pretty significant variable. That's how I've always approached it because some of these performance channels are so scalable that you don't need a lot of person power to manage a TV campaign that spends a hundred million a year. You could have a couple people doing different roles, data science plus an agency and you can do that. I'd rather have those people be like killer than like build out all infrastructure of people to handle that stuff. That's somewhat of a contrarian opinion, I think, but that's been my preference.
David (25:16): Those are great points. I wrote an article many years ago that was called we test everything and other lies CMOs tell. One of my points in that article was that a CMO will say, oh, we're data driven. And then they'll say, and by the way, we're firing the agency and hiring in-house team. Well, what's your metric for determining if the in-house team is better. Just feels like the right thing to do.
Adam (25:36): And to be honest, if you take a CMO job or a Head of Growth job and you don't fire the agencies at least to replace them or maybe to build an internal team, if you don't do that, you will look like an idiot. Maybe the agencies are great, but like if you don't swap them and you're ironed in at that level, everybody else is going to wonder like, what does this person do? So I totally get it.
David (26:01): You have to make a change.
Adam (26:03): Yeah, and I don't even have a problem. You got to put your own stamp on the thing and have it be your decision. Fair enough, like respect. But that specific scenario drives so many of these decisions, just like people swapping in and out these companies then deciding that the agency suck, and like every agency that I've ever spoken to or interacted with, I've had someone tell me they're amazing and someone else tell me they're horrible. Doesn’t matter who they are, everybody is both amazing and horrible. So I think that's part of why.
David (26:32): Let me ask you about your involvement with these accounts. You've talked about how you have these people who are doing both the strategy and the client relationship. But that's now that you're 80 people, have you had to evolve your role from being that guy for all the accounts to now are you being that guy for none of the accounts?
Adam (26:58): Yeah. I'm maybe still that guy for like one or two. Sometimes I will pair with a team member that I'm trying to upskill. We'll often take people with no experience in this particular field but an adjacent field and then try to cross them over and you can do that quickly. I'll pair with someone for a couple months. And after that, like they could be a pretty credible good person. I still do that on occasions, more of a training thing, but otherwise, no. I've changed a lot of the pitch and the way I present to be like, Hey, this is our point of view as an agency. It is largely consistent with my point of view, frankly, as a industry person, but the actual teams are going to do everything. And so yeah, they're going to be intellectually consistent with what we've talked about, but they've got their own approach and you should meet them and talk to them and you can call me anytime and email me anytime and text me anytime.
Like they're better positioned to do this work than I am, but they're going to ask you about whether or not you want to run branded search. They're going to talk to you about incrementality. They're going to hit the same notes. So yeah, my role has evolved quite dramatically. And the next evolution is for me potentially to be less of a frontline salesperson, which is still basically day job, and I don't know exactly what else I'm supposed to do other than that, but that's where we are now. But yeah, I was uploading stuff and excluding audiences and doing the keyword, still doing it. And it's in part because like I'm a bit of an egomaniac, but I really like knowing how this stuff works.
I have a newsletter and I read all the articles and I read the API releases and I know how to do the UI. Like I take pride in actually still being able to do this stuff, but I appreciate that that becomes like less and less and less and less valuable to my job. So that is the role evolution that I do next.
David (29:06): Is there a new API feature you're particularly excited about? Just kidding.
Adam (29:10): I was writing a blog post about all of the methods by which you can do attribution via TikTok because they have two different methods through which you can do server to server attribution. I’m in the weeds of this bullshit and I always have been my whole career. That's maybe useful, but probably not the best use of time for, at least on paper, a CEO of an 80-person company.
David (29:36): I think you need to start a podcast around TikTok attribution, API calls.
Adam (29:40): Yeah. Believe it or not, I have an MAU podcast, although I must admit I’m sort of in protest of stop recording it the last six months, but it’s there. So, yeah.
David (29:46): Well, that can be your next episode, TikTok API. So you mentioned that you're still doing the sales basically for the business
Adam (29:57): Basically, yes.
David (30:00): How have clients found you or have you in some way found clients?
Adam (30:03): Great question. Number one, over the years, I built a large personal network of a really combination of venture people, private equity investor people, and then consultants who do growth marketing consulting, interim CMO consulting, etc. I would also add agency owners as a fourth bucket. You're on that list. So you know I haven't done it in a while, but I was very actively engaging with this list of people, most of whom I would consider to be friends or at least friendly, that I knew would potentially one day refer me clients. I was deliberate in that, and I also did a referral scheme such that I pay out referral fees to people who refer us clients, and this calendar year we’ll pay out definitely seven figures in referral fees. It’s pretty significant for an agency of my size. I think it’s a good deal for everybody. That has been by far the number one, quote/unquote, source of my inbound conversations.
Number two, over the course of the last year, this calendar year 2021, I started doing more content marketing, writing my own blog posts. I’m uniquely advantaged in that I can promote them in my own newsletter, newsletter being a sort of a vestigial part of the conference business, and I can promote them on LinkedIn and I've connected with 4,000 or 5,000 people or something over the years because in the conference business, I was just trying to talk as many people as possible. So right now the personal network list of people plus this content marketing stuff are the sources of all of the conversations and, of course, customer referrals that goes for everyone, I'm sure. It's not a good thing. I've never successfully really done any outbound or gone after an account and won it because I knew I could do a great job. Like I want to learn, figure out how to do that. I have not, but that's how I've gotten to this point.
Like I said, I've never had a problem having those conversations, I've never had a problem closing those deals and creating services that would close those deals. The challenge has been doing the work. So we're getting better, but that's probably organizationally one of our better strengths honestly.
David (32:24): I think you're a very dynamic personality.
Adam (32:29): I've thought that for a long time myself, I must admit.
David (32:34): I don't want this to go your head.
Adam (32:37): Yeah. God forbid.
David (32:39): What are your aspirations for a Thesis Testing?
Adam (32:42): Well, I want to get to the point where we do a great job in all of the major customer acquisition channels because the conversion rate optimization work that we're good at will provide leverage in support of all of that stuff. It just makes sense. So I want to be in paid influencers. I want to be in affiliates. I want to be in SEO and TV and OTT. I just think that it makes sense, and we've got a good coverage on the digital channels for sure, pretty much everything minus programmatic display, which I think is mostly bullshit anyways, but that's next phase for me. And I want to figure out the verticals, like client verticals, business verticals, where we actually are most value additive because essentially, we’re just falling into the type of work that we do. We’re not actively seeking out these customers. They just find us and talk to me and let's give it a shot. So we have a random mix of clients, some we maybe do a better job on than others and so on. And so I want to have more point of view on who we can help with the best so that we can focus more on those verticals over time. That seems like a natural evolution for anything really. So that’s what I’m like trying to move towards
David (34:05): Let me go back to today and talk about your culture at Thesis. Do you have a set of core values or core promises that you have?
Adam (34:14): Somewhat reluctantly I did, on my behalf, they were enshrined, but there are things I do believe in. I have a lot of respect for you guys, you specifically, David, because you were always really good about that and did it in a sincere and genuine way. I am a hyper cynic based on my career experiences about company value, kind of mission type stuff. Because in many cases, not all companies, but in many cases, I think the mission of the company is just some other way to get people to work harder, to just generate money for the owners. And it’s like we're revolutionizing the healthcare experience for our consumer. It's like, no. You're like an evil insurance company and that's okay. That's my general opinion about a lot of this stuff. So I was like, I don't want to really engage with this, but when we put them down, we came up with things that I actually cared about and that were important to me.
I think they’ve been imbued into both internally and also how we work with clients. I think were I to do another company, I think there's more to it than I maybe realized that point, but yeah. It has become a thing. Maybe about a year and a half in, I made that an actual thing.
David (35:34): So what are they?
Adam (35:37): So my biggest one, which I tell everybody. I had interview this morning with some prospective team member and it was the biggest thing for me is that everybody here and externally will be respected equally irrespective of their functional role, levels of experience, title, age. I worked at a place where it was tolerated for the really smart engineers or data scientists or whatever, not all of them, but a couple of them to just be me. And I had no tolerance for it, for the record. So I would just be like, “What is your problem?” But everybody else would be terrified of these guys. And I was like, listen, they might be really smart, whatever. We can all be replaced. You shouldn't have no license to just be unpleasant because he's the grumpy developer guy. And I don’t mean to pick on developers. That’s just what’s in my head. That was my number one thing. I don’t care how junior, how senior, external or internal, be treated with respect and that comes back, too.
So if one of our clients who considered him or herself to be a big deal is just going to flex on my team because they maybe are more junior or whatever, we're just going to fire you as a client. I had no patience for that. There’s just no reason. Just be nice. What are we doing? We’re uploading ads to the internet. Just be pleasant about it. That was my number one thing.
My second most important one was transparency. I share all of our financials, I show everybody the numbers, we do profit sharing, there’s no secrets or anything like that, and as part of that, it’s an extension of the transparency for me just like this is a no-bullshit- we’re not trying to spin our clients. You will never hear one of my guys say, yeah, digital marketing realized it was X, because they’re going to caveat it. They’ll say, well, branded search reported Y. Retargeting reported Z. We’re seeing this on prospecting because it’s so easy to roll all this shit together and tell any story you want to tell. And agencies and internal teams do that every day of the week, where basically branded search is subsidizing the rest of the entire thing, which sucks. Those, for me, were the most important. We’ve talked on a couple of others over time, but those were the two things that when I talked to people, I empathize.
David (38:05): I feel like whenever I talk to financial advisors, they always play that game. They're like, well, my return has been three times the industry average. Well, what's the industry average. Well, it's the end goal and peanut.
Well, two books that I thought about that I'll just link to in the notes when you were talking, one was The No Asshole Rule. It is a great book about how assholes cost you money.
Adam (38:29): I love that. Never heard of it.
David (38:30): Then the other one was The Great Game of Business, which is this book about complete transparency in how you run your business.
Adam (38:38): The Great Game of Business is how I run business. So everybody in the company, they get an offer when they join. If you read this book, I'll give you some stock options in the business. So that's the trade, and they have to have a video call five minutes with me and say, tell me what they thought of the book. And some people have said, this is stupid. I hate it. I'm like, yeah, it's fine. Yeah, I just came across it. I don’t know how, who knows? Maybe one day you had recommended it to me years ago. That one really resonated with me. I know like traction and the whole seems like that's a more popular flavor of the same thing. But yeah, I love The Great Game of Business. It's awesome. We don't quite live up to every aspect of how they suggest you might run things, but I try to incorporate it as much of it as I could. I’ve even though about going- we have like an annual conference.I thought about going to that. That’s how into it I am.
David (39:35): I was at an event where the writer spoke about it. I've never actually read the book, but it's an inspiring concept.
Adam (39:39): Of all the business books I've read, I have internalized that one by far the most in my career.
David (39:45): What are the characteristics you look for in a hire?
Adam (39:51): This is an area we're fortunate now that we have a one-man team, but he handles a lot of the recruiting and he's really great. I've always been a horrible interviewer, horrible recruiter because my bias, I'm sure I'm about, but I stumbled into this field as a 19-year old with no knowledge of it, no nothing. And I think if you would've interviewed me at that time, you probably said, no, we're not going to hire this guy. Pass. It’s worked out for me. It’s worked out being in customer acquisition. And so I have a pretty forgiving standard for people and just basically like try to lay out, this is what we’re looking for, these are the characteristics or attributes that we think will lead you to be the most successful. And if you think you can do it, let’s find out. That’s my general attitude. I’m extremely permissive.
Our team over time has gotten more rigorous, and that’s probably to our benefit. For me the biggest thing, I only have one data point. For me, I would go to conferences. I read LinkedIn posts. I listen to podcasts like this on a subject matter. I try to stay in the ecosystem to learn. That’s why I like being in the sales role because I get to audit all of these different companies and see their numbers and I make these benchmarks. And I’m like, okay, I kind of understand. And when we hire people who similarly want to learn stuff, they tend to do better because the whole point of being a growth marketer is for you to have a cross-functional skill set. The best way to get a cross-functional skill set is to learn stuff. It’s like I learned how to code in a basic way. I’ve read basic UX books. I’m not an expert on data science. I’ve read basic stuff because that’s the point of having this cross-disciplinary skill set. So the people that do that, I see them in our own Slack channel, our own team members. Like one dude this morning wrote this whole thing, did this whole metanalysis of this search account on what he saw and whatever, and I was like, in two or three years, he’s going to be Head of Growth of some massive company because his attention for this role, he’s just going to make himself so much better so quickly with that kind of attitude. So that’s the most important thing to me, but honestly, I’m like a terrible, terrible interviewer. It’s not my strength, frankly.
David (42:30): That sounds like you hiring people who have a spirit of discovery.
Adam (42:35): Yeah. I think that's right. I personally have a bias. I always hated school. Learning on your own, I'll always tell the professors to give me the homework. I don't even want to come, and I'll do it. Trust me to be fine. I like people that are like that.
David (42:58): What about if I took some of your team members and took them to an abandoned warehouse in New Jersey and said, describe Adam's leadership style to me and held a gun to their head. What would they?
Adam (43:08): I think they'd say I'm very direct. I think they'd say I'm pretty kind, like I'm never mad at anybody. I established that this is a work-to-live culture, not a live-to-work culture. And so even in the most dire circumstances, life goes on. Maybe we made a mistake and lost a client. That happens and that's okay. I take pride in this. I'm not necessarily saying this is right or wrong, but like this is a dude, a motherfucker who knows what he's talking about. I know this subject matter. I don't know necessarily how to run an agency, but I know this stuff that we do for clients. I think our team members appreciate that. Not that it happens often, but if they want me to get on a call with somebody and it gets tactical, I'm not going to be like, oh, let me bring in Steve to talk about the search account structure. I'll talk about right now if you want.
I think people have appreciated The Great Game of Business thing. I think people appreciate the transparency. I don't know that everybody fully understands when I show the P&L and balance sheet and stuff. I'm not totally convinced everyone gets it, but they know it's good, it's okay, or it's bad. And that's a lot more, a lot more insight than I had into the operations of the business. When I was the Head of Growth, I had no clue. I had to read between the lines, and I was not the most senior employee, but probably among the top 15 or 20 or something. I had no idea. And I loved the guys who run that business. They’ll, of course, never hear this, but that was their style. And so my experience then as a relatively young guy is directly in inverse to that experience. So I just want to show everybody everything because why not?
David (45:04): What's the future of agencies? And is there anything you're worried about in the future?
Adam (45:08): There seems to be no evidence to me that agencies are going away. I think the macro trend, which has been the case forever, has been there's been this historical dichotomy between, quote/unquote, direct response marketing and, quote/unquote, brand marketing. And there have been agencies that have specialized in both areas, and quite frankly, some of the shit that some of these brand marketing agencies get away with is just like unbelievable to me. To be fair, some of the stuff direct response agencies get away with is unbelievable to me. See branded search results blending in. So it's not only one side the coin. I think all of the above very clearly is rolling in the direction of just all being performance marketing, different tactics, different channels, different impacts, like latent impacts. But at the end of the day, the idea that you have this line item that is brand that has no KPIs associated with it and then this line item that is performance that KPIs associated with, that doesn't make any sense. It's insane.
So I just think that those come together more and more over time. You could still go call an agency, pay him 15% his spend, and have them run a display campaign optimizing for clicks or something, you could pay millions a year to do it. Like that could not happen or will happen less and less and less over time.
Meanwhile, I don't think you can be a paid search agency on a standalone basis and be really successful like you could have 10 years ago today. People will be like, ‘Well, you don't do this. You don't do creative. You don't do landing pages. You can't help me with my TV. What do you do?’ Like, what are you doing? This is weird. That's the evolution that I see. I think there'll be shitload of marketing service providers in the future, just like there were 10 years ago just like there are now. I don't, even with this whole rise of in-housing, almost everybody I talked to who only has an in-house team also hires agencies, but they just describe them in a different way. They’re like, oh, that's our creative partner. I'm like, oh, so it's like a business of people who makes all of your creative. That's my high-level outlook.
David (47:28): There are some agencies out there that say they offer in-housing support. And as far as I can tell, they just have people work full-time in the company.
Adam (47:35): I talked to an in-housing agency. I’m just like, ‘You sit in the same room and do the same work?’ He’s like, ‘Yeah.’ That’s cool. Sounds like an interesting model, but what’s in-house about it? It’s only occasionally that I cross into that kind of world of like buy programmatic impressions on a CPM basis and then talk about it to people. And I just am so enamored with it because I have to imagine it's really straightforward. Meanwhile, we’re killing ourselves to squeak out 2% improvements on landing pages desperately. But yeah, that's a world I do not understand for sure.
David (48:14): We talked about one book, The Great Game of Business. Are there other marketing or leadership books that you really love that are in your cannon?
Adam (48:22): Great Game of Business is definitely up there. There's a book called Traction, not the Traction Business Management book, but like Traction about growth tactics, just coincidentally the same name, which I think was really, really good. It's a little dated. It's a couple years old. You'll be able to find it, though. It's like Traction: Startup Playbook to Growth or something like that. I've always been a huge fan. There's this author who wrote these books a long time ago. They're UX books. His name is Steve Krug.
David (48:50): Like Waiting for Your Cat to Bark, I think is one of his?
Adam (48:51): Yeah, like Don’t Make Your Website Dumb or something like plain English titles. Those were, I found, the UX he's describing is no longer in use, but I just found them super useful because it's so easy to get so caught up in all the marketing stuff, and the main insight there is, does the webpage makes sense to the person who's reading it?
David (49:13): He actually might have written Don't Make Me Think.
Adam (49:14): Yeah, that's it. He's got an updated version. So those are great ones that I always recommend to people. Similarly, there's this guy, I'm going to mess up his name, but I think he's [Arvin Raj Kashe] who’s a Google evangelist guy. But his analytics book is super dated. It’s like 10 years old, but I still recommend it to people. It’s like a really good foundational understanding of how web analytics stuff actually works. I really like that one, too.
David (49:43): What about, since you're a conference guy, other than MAU and Grow.co, any conferences that you particularly like?
Adam (49:51): Part of the reason we started conferences was because I think conferences are so terrible. Like honestly not really. I think Shoptalk in Las Vegas is a really great event if you're in the eCommerce space for networking. Most of the content at most conferences is so vapid and like just pointless that I'm not really too into them, honestly. Leadscon for many years, also a great place for meetings. That was founded by my partner.
I personally detest virtual events, hate virtual events. So especially over the last two years, I’ve fallen off the conference circuit. When I started Thesis, I was like, oh, I know how to do conferences. That's going to be the way I acquire customers. I'm going to go to every conference. I'm going to nail the presentations. I'm going to crush it. And I believe I could have, and then COVID. Just when I started to have enough budget that I could actually go do it, conferences got annihilated. I've never really gotten a chance to flex that. But I could tell you, I had sponsors at my own events who gave excellent presentations and were very clear and had great data and they would sell so many deals right off the stage. So that is a channel, if you will, that for sure can work, but is often executed very poorly by the sponsors. But yeah, I've never gotten a chance to do that with Thesis.
David (51:21): I think conferences are going to come back with a gusto.
Adam (51:24): Not only are conferences coming back with a gusto, MAUVegas.com is coming back June 2022.
David (51:39): Two more questions just. First of all, do you have any influence, marketing influencer, Twitter accounts that you love that we should know about.
Adam (51:46): The only one I could recommend is, he's a friend of mine, Nik Sharma. He's both an excellent performance marketer, especially around DTC, but he's also an excellent personal brand builder. So his advice and the stuff he says is great. And he’s super smart, and he really knows his stuff, and he's masterfully built his own personal brand to disseminate that information. So on both sides of the coin, I have a ton of respect for him. He's pretty much my only proper influencer person that I would hire.
David (52:25): And last, what advice would you give to someone who's starting an agency today?
Adam (52:32): The biggest point of advice, you gave me this advice once, in terms of creating value, the only thing that matters is EBITDA, period. If you’re doing something that is not inherently EBITDA generative or soon to be in a business like ours, it’s probably not worth doing. That’s a grand statement. I’m sure you could find many carveouts for that, but I really believe that in hindsight. I deliberately aim to be break even for the first two years of operation. So I’m only three-and-a-half years in. I deliberately aim to be break even. I thought, oh, well, I’ll build the business up. I’ll build some of our internal technologies, I’ll get bigger, then I’ll focus on profitability. That was my plan, but that was a lot more painful than it needed to be. I needed to undo a lot of stuff to get our cost structure and our pricing in a place that we could be a profitable business, like a viable existing company.
So had I taken that approach from day zero, I think it would have been a lot smarter, and I think I would have gotten to where we have gotten a lot faster. For me, that’s my number one. It’s so stupid simple, but I feel like I wasted the first two years in what I was doing just because I didn’t have the right focus.
David (53:51): If you were a SaaS business, you were doing it exactly right. You probably weren't losing enough money to be valuable.
Adam (53:59): Yeah. I needed to make a dollar for every 10 and then get a 50x revenue multiple.
David (54:04): Exactly. That's great advice. I always tell clients and my team that partnership needs profit on both sides.
Adam (54:11): That’s right.
David (54:13): Well Adam, thank you so much for joining us. Really appreciate it. And congrats on all the success you've had with Thesis.
Adam (54:20): No problem. My pleasure.
Links
Adam Lovallo LinkedIn - https://www.linkedin.com/in/adamlovallo/