Confidence, Cash Flow, and the Advertising Auction

Is it possible you’re literally sitting on a fortune without knowing it?

In the past few months I put out a very weird offer to help market people’s businesses using my own money.

Turned out I couldn’t quite find one which matched my criteria, but I learned something fascinating in the process…

Something which highlighted a major opportunity for virtually all marketers in a very concrete way…

And gave me an even greater “gut level” feeling for the natural ceiling of most advertising auctions (including but not limited to AdWords)

Here’s the deal…

There are MANY, many people floating around out there who could double, triple, or even 10x their businesses if they only had two things: CONFIDENCE AND CASH FLOW!

You see, when I dug into the finances of many marketers’ systems I found myself scratching my head at their very conservative bidding position…

For example, many of them were making back 6 to 10 times their investment in advertising over the course of a year.

So why then, weren’t they opening the flood gates?

I mean, sure, acquiring a higher volume of traffic usually means bidding more and increasing your cost per sale…

But 10,000 sales x $10 profit leaves a LOT more money in your bank account than 1,000 sales at $20 profit  ($100,000 vs.  $20,000)

See what I mean?

When I asked these marketers why they weren’t just “letting loose” and buying up the traffic they stumbled and couldn’t quite answer me…

Until I eventually learned the reasons:

1) LACK OF CONFIDENCE IN LONGER TERM CUSTOMER VALUE: They only had a rough sense of customer value over the course of the year.  They hadn’t bothered to set up the tracking and reporting systems to map it out with statistical reliability.  Simply put, they only THOUGHT the customers were worth what they were telling me, but they hadn’t seen the evidence in black and white, staring them in the face.

2) LACK OF CASH FLOW:  Even amongst those who really WERE confident in their numbers, there were few who were willing to open up the flood gates and go into the red for a few months in order to acquire the customers.  When I asked why they said something like “because I’d be bankrupt before I made the profits back”.  In other words, they simply didn’t have the cash flow to fund the roll-out, even though they knew it would come back to them in spades.

And then it hit me…

These two forces are omnipresent…

And they’re creating a kind of hard ceiling on the bidding price for any advertising auction…

Because they lack confidence and cash flow, the vast majority of advertisers are simply unwilling to bid more than they can make back before their credit card statement comes due.

And this creates a MAJOR opportunity…

Not just a market gap, but a GREAT BIG GAPING HOLE in most markets…

IF you’re willing to do the research, track your systems, and develop confidence in your LONGER TERM customer value…

And IF you’re able to develop the spreadsheets that predict with reasonable precision exactly how much money you’ll need to ride out the early period when you MUST GO NEGATIVE to buy customers in volume…

And you raise the cash (and the nerve) to carry this out…

Then 99% of your competitors will sit and watch, trembling to their cores while you proceed to dominate the market.

How could it be otherwise?

Now here’s the main point…

At SOME point in all of our marketing futures, if you’re going to achieve hyper-success, every marketer MUST face this wall of fear with courage…

At some point if you want to dominate your market, you’ll HAVE TO develop the confidence and the cash flow to brazenly go negative for several months while everyone around you looks on with amazement…

Confucius once said “Faced with what is right, to leave it undone shows a lack of courage”.. and I couldn’t agree more.

Of course, there’s also a fine line between bravery and foolishness…

I think that line is drawn on a spreadsheet with statistically reliable customer data, and in a bank account with money you can afford to lose…

But it’s a line we all owe it to ourselves to paint brightly, lest we wind up cowering in a corner while the fortune deserved us passes by.

What do you all think?

Let me know,

Dr. G 🙂

PS – In month #8 of the hyper-responsive club I provide a very detailed spreadsheet for developing confidence in the cash flow of your whole advertising system over time.


Comments

comments