Why 2025 Ecommerce Is a Tale of Two Cities: Winners & Losers

[00:00:00] Taylor Holiday: So now I'm gonna talk at you for 45 minutes. Um, appreciate you all being here. It means a lot. The hope with this event is that we get a chance for, uh, us to share a little bit of what we think is really important as an agency. Partners provide context so we get the benefit of seeing a lot of what's happening across this industry and can help to contextualize the journey that you all are on.

But we also hope that part of the experience is you meeting each other. So Aaron put on an awesome event last night. I think that was super fun. Great way to start in it. Tonight we get to go to Disneyland. Uh, I know some of you have been asking, do you get to ride Space Mountain? We will find out, Josh.

Okay. You can tell your kids later whether or not you got to, but um, uh, please get to know each other. You guys are the value. There's a lot of really, really smart people in here. Uh, and so the relationships that you get outta this are often, um, a lot of the benefit. But I wanna, um, provide a little bit of a journey.

Uh, anybody know who these folks are on the screen? Come on. Who are they? George. Can you name 'em both? Yeah. Woo. Jerome Powell. Jerome Powell. And our friend Mark Zuckerberg. Um, and Jerome obviously looks sad and Mark is, mark is doing well. Uh, but we're gonna talk a little bit about what I see in the market as it relates to our business, your business in the broader context.

And I think there really is a dichotomy playing out, um, that is fascinating. We wanna figure out how to be more like Mark and less like Jerome, even though he might be more Right, right now.

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[00:02:13] Taylor Holiday: You also may have seen today that we made an announcement. So CTC uh, has entered into a strategic growth partnership with the Acacia Group. So Zach over here, Zach Wave. That's my new Boston board member right there, Zach. Um, and uh, I wanna talk a little bit about this in the context of your own journeys because I think it's really important to know a few things.

One, this message is as much for my people that are here that, uh, all have previous experiences or some have previous experiences in companies acquired by PE firms. You all have narratives or some trope in your head about what that might mean for CTC for us. And so I do wanna tell you a little bit about why we've done this.

Um, but before we get to the celebratory part, I think it's important to talk about the road to this moment. And I think it will help to set the table for why the way we've shaped our company, I think relates very closely to how you all are on your journey and what is happening right now. And I was looking back at some photos in my, um, phone, uh, and three years ago on August 6th.

In the 2022 CTC started a process where over the course of 90 days we laid off 100 people. If you've ever done layoffs, um, that is like the worst experience you can possibly imagine. Imagine a hundred humans sitting down with 'em and telling them that you screwed up, you messed it up, and they were gonna have this job that they were excited to start.

And it was over 90 days. 'cause we did the classic mistake where you don't cut deep enough the first time and you mess up and you have to go back and do it again. Um, and it was the worst three months of my business life. And that was just three years ago. It feels, uh, like a thousand years and yesterday at the same time.

And those days were so challenging. I spent that Christmas break, um, on the phone with this woman every single day, uh, through New Years. And if you've ever spoken with a senior credit officer at a bank, it's not 'cause it's a good conversation. Um, it's 'cause you're likely in breach of sub covenants of obligation that you have to them.

And they wanna know where their money is. And they're lacking, they're developing a lack of confidence in your ability to bring it back to them. And so Brian Dunbar is not here and I spent a lot of really painful hours trying to work through solutions to what was an incredibly complex problem as the market had shifted dramatically underneath our feet.

Um, and those cuts and that struggle changed us forever. It changed our internal culture. It also changed our service. Um, and one of the things that you probably don't know 'cause you don't work inside of CTC, is that the service that we offer you is a direct byproduct of how we operate and run our own business.

We've dog footed ourselves and then served it to you as an understanding of what brought us through that moment to where we are, um, today. And the end result of what transformed everything was two very simple ideas. Clarity and leverage. Clarity and leverage over and over and over again. And our entire function of way we think about providing you service is about providing these two things.

And we're gonna talk about more about how Acacia's gonna help us to do that. But specifically, and I'm not gonna spend a ton of time on our journey 'cause this is really about you. But on the clarity side, we win out and we had to solve some real problems into the visibility of our own business. So we did exactly what we do for you.

We built a clear forecast based on new and returning customer revenue. We built a real time view of our p and l performance to plan. We created clarity of our unit economics and greater clarity of our employee output. And all of those things are stuff we're gonna talk about today in terms of how our service informs that for you all.

But we had some like crazy problems that we discovered, like there was a bunch of clients where we were fundamentally making negative margin in the service of that. Like we were, like somebody was paying me and then I was paying other people more money to do the work. It's the worst business deal ever.

Like, uh, and that was showing up all over the place because we had some clients that were paying us way too much money. If you remember back in the days that a lot of the deal structures were percentage of ad spend, right? And so you would have these giant inflated stuff. As COVID happened, things would run up and we had like 95% margin on this client, and negative 30% margin on this client.

And it was a mess all over the place. Additionally, um, to fix that, we had to build leverage into the way that we operated. So we changed our pricing to protect margin. Every customer, you guys now experienced more of a fixed contract model from us. We turn every employee into a revenue generating asset.

This is, uh, probably one of the more controversial things that I've come to believe. So we've eliminated all management layers at CTC, every single employee bills revenue. We're a lot more closer to a law firm than we were that days from, uh, Luke, who's our VP of strategy, who's in and billing client work to even Dane, even our head of hr, VP of employee Development, has built client work.

Um, on behalf of CTC, we scaled up our content output and monetized the effort. We put technology at the center of our workflow and that changed everything about who we are. And the reason I tell this is 'cause our stories are linked. You all are experiencing a version of what we ought we have, whether you know it or not.

Your businesses are in the middle of a very similar process of creating and focusing on into operating leverage for the stake of generating more demand in your business. And there's some unique challenges that are happening. Um, there's this really weird data point, so I Is, is Rashab here? Where are you?

Are you here yet? Doesn't look like it. So he, um, runs Vermont and the other day he started this sort of, this Twitter. Debacle, if you will, about the decline in the utilization of Shopify on BuiltWith. So BuiltWith is a plugin that tracks the utilization of software. And so this started a dialogue about what was happening in the industry.

And of course, we, uh, like to try and sit in the middle as much as we can of both Twitter controversy and aggregate data sets. Those are like the overlap of my passions. Um, and in that Leo from Final Loop, who's a partner of ours that we work with closely, who I, who I trust his data set probably more than anybody's 'cause I, I, I've come to learn from all of you.

I don't believe anything you say until I see the p and l. And so until I actually see the financial reality of the business, I think what anybody says on Twitter or anywhere else is probably a version of the truth, but not the whole truth. Uh, and he dmd me in the middle of what this was going on, and he said, this is a crazy stat.

He said in April, 1% of their entire custom base filed for bankruptcy that was more than the entire previous year in one month. And that this is like people requesting chapter 11 compliant financials. That's what his view of this is. This isn't like he heard four people say he is the accounting platform for all of these brands, and they were requesting chapter 11 compliant books.

Um, that's like really scary, right? And obviously the big, uh, the, the impetus for that was the tariff announcement. But at the same time, he said, and this is where he is, like, it's really confusing, I don't really understand everything that's happening, is he said that the average profit for stores was up a hundred percent.

So at the same time, you have more bankruptcies than the previous year. And Q2 profit was up over a hundred percent on average. Didn't make a lot of sense. And so they've got this message and Jacob, their data guy over there, and I go back and forth a lot and they, they like see this as optimistic. They're like, this is a good sign.

And I'm like, Ooh, I don't know. Let's dig a little deeper. I, I, this, there's something about this that just doesn't smell right. Um, and if we look, I had them pull sort of the four quarter accounting classic view of the breakdown of p and Ls. And this is what I saw. Okay, so this is year over year, Q2 margins across eight figure stores.

There's about 500 of them in their dataset. Uh, and this is what you see, gross profits actually up a point, variable marketing up a little bit, contribution margin, flat and opex representing all of the gain. So what that basically means is that the profit was a realization of people just slashing their opex, which is a normal expected response to the tariff issue, right?

But what's weird, right? Like, wait a second, gross profit is up. How did that happen in the middle of Q2? And this is where I think the realization of what is coming to us is just starting to click. So we see this, we see all of the EBITDA game coming from a reduction in opex. They saw an increase in revenue at the same time.

Um. Um, but this stood out to me. I was like, this doesn't make any sense. This is tariff. This is, everyone's an issue related to this. But then I remembered this other data point. So Final Loop also shared with me the median cost conversion cycle for brands. And from this we're able to sort of derive an expectation of how many months of outstanding inventory brands are you gonna carry, right?

So this is an estimation On median, you're seeing about 11% of your annual value, about 92 days of cash conversion cycle. So that's gonna put about three months of inventory on hand, April, may, June. What does that mean? That how long is it gonna take to work through your existing inventory before that tariff cost shows up about three months.

So that means not $1 on median. Now again, this is different for everybody, and Leo likes to joke that this is the one time that being bad at inventory planning has benefited everybody if you have too much or an excess of inventory. But the reality is, is that this effect isn't even on the p and l yet.

It. So if you look at the expectation of the realization of the impact of tariffs, it's gonna show up starting July, and it's gonna be July forward that we get to see the real impact and the full realization of that probably won't show up until just before Q4. So there were a lot of brands that were looking out and going, I can't get my stuff off the boat.

I have no cash. I'm dead bankruptcy right away. That was when tariff happened, right? They couldn't even get access. They had low inventory accounts, they had a shipment on the way. Suddenly that was subject to a massive tariff. They couldn't get it off the boat. They had to file for bankruptcy. That was group one.

But group two was, we still have some inventory. We still don't know what we're gonna do when the new stuff comes in, but we're alive right now and we're actually gonna try and pull forward a bunch of revenue to try to create cash to be able to pay that future obligation. So the revenue growth that we saw in Q2, in the short term in April and May, not in June, April and May was a sudden pull forward a lot of tariff sales, discounts, promotions, et cetera, to try to offset that growth.

So this is coming. This still hasn't happened yet. Our industry has not absorbed the final tariff rate that's now gonna be broadly applied in every country, including wherever it lands in each given day. But this is still yet to come. Additionally, yard in from Vero jumped in, and if you guys aren't VES users, you should sign up.

It's completely free. It's the largest aggregate data set that's available. Um, and he sent in the, the look of the entirety of the store top line revenue in June. Okay, so look at the median number here and on the left. I've got stores between 50 K and 5 million plus in monthly revenue. So think of that as like bigger stores in June, the first month, the whole year.

So January through May plus 11% annual growth, top line revenue, June down 8% on a median for eight figure stores, seven figure stores. Even worse, total blood bath because all of a sudden the idea of what I can afford to sell at. The prices I have to try and raise at starts to run into itself the underlying reality of the increase of cogs and therefore what I can afford to spend on my cac, my capacity to try to raise price and see what that does, comes and creates a screeching column.

So you see top line revenue dip year over year for the entirety of the data set in June. That almost never happens. We're in a growth sector. The aggregate, if the aggregate drops below a growth factor, that's a huge problem for our industry. And this is showing up all over the place. So this is, um, a survey that we do with no commerce.

You guys know we do D-T-C-C-I, and this is one of the questions that we ask about self-reported online spending habits. And we've got almost two full years of data now in this set that shows customers, respondents to their own plans to spend or save in the future. Oh, sorry. This question is specifically about their plans to spend today versus their plans to spend in the future.

And you can see starting really, um, over the last, these are, uh, weeks of the year. So we get through June here, you see a massive drop following, um, Q4. So everybody stops spending and doesn't wanna spend there, or they wanna spend now, not later, and then it sort of rises back from there. But if you look at the year over year comps, you can see that we are substantially down on the amount of people that plan to spend.

Consumers just have no intention or no obvious desire or impetus and plans to spend in the future. And that's what you get. You get June showing up in the reality of the realization of that revenue. And this is like the reality for us too, is that the efficiency of new customer acquisition, which to me is always the canary in the coal mine for our industry, is that we can all exist and squeeze the sponge on our existing customers for a long time, depending on the size of your business, some of you longer than others.

But the truth is, if we can't profitably acquire new customers, we will grow. And year over year, the capacity to drive new profitable customer acquisition has gotten harder. It's just becoming less and less efficient. Uh, and if we overlay, lemme see if I can go back here. If we overlay this debt, thinking about where we are in February of this year versus February of last year.

Okay, so that's about a 20, like 15 ish percent less likely to spend in that period of time. And you see that's about when it starts, right? We almost all of 2024, we were comping, we were kind of close. And then all of a sudden you get in this January and February is where the largest gap begins to widen.

You get this reduction in the efficiency of acquisition that overlays this. Exactly. And there's no obvious relief on the way. Like my guy Jerome over there is fighting for his life in this slide. Just doing everything he can because he knows. Something that we all are sort of want to admit, but we like the s and p really high and we like Bitcoin super high.

But the reality is that he understands that the cutting rates is not the solution to the present problem that's gonna just drive inflation worse. And so there is no indication in poly market, those of you don't know, it's a betting platform that's sort of a real time view of the market and in indices of what you think might happen.

Currently. This, I pulled this as of yesterday, 94% chance that we're not getting a rate cut anytime soon. So no capital available cogs about to hit the p and l consumer demand softening. That is not a great sign. It's the reality of where we're at today. And I, I, George gets tired of me being the harbinger of doom.

Like, I get it. I don't want to be, it's like, it's not fun. It's not of any use to me to tell you that. It sucks. But the reality is, like the industry right now for e-commerce in particular is in a bad place. It's not great. Um, so, uh, what is happening, right? Like we're, we're in this evolution as a species of brands where we've gone from like this early, uh, primordial ooze of just trying to figure it out pre COVID, and then all of a sudden COVID happened and we got fat and happy and it was easy.

And then all of a sudden, starting this year, we've just started cutting. And the solution to everybody's problems is that opex plan. Let's go from 23% opex to 18% opex to 17% opex. And I get it, that's where I was cut. A hundred people survive, get lean. But I think many of you have already done this, like, who has had an opex reduction in the last 12 months?

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[00:17:53] Speaker 8: Okay? Most of us, right? Almost everybody has gone through some reduction, whether it's in the software stack or the people side, or some version of where we're at, agency services, whatever it might be. We're trying to get as lean as possible, but the problem is this won't solve our problem. You can't just cut your way forever.

And this is like something I've thought a lot about for CTC, I think for the last 18 months we saw the primary problem for brands being like, there is waste, there is inefficiency. There's no relationship between marketing and finance, and we need to help bring clarity to that problem. We need to help you understand that you're got too much opex and too much wasted spend.

And I think we did a great job of bringing realization to the industry to a lot of the customers. But the problem with that as the solution to your business is that doesn't make you grow. Eliminating the waste is great, it's important, but it doesn't make you grow. Just doesn't. And we've had to reconcile without the like, Hey, we're out there saying we're, we're gonna help you with predictable, profitable growth.

And the reality is that cutting doesn't solve that problem. And I've tried to think a lot about this, um, for ourselves and I think right now I experience from a lot of brands in this moment that you're facing this really difficult choice. How do you have the courage to move past cutting and reinvest?

When I went through this, um, when you go through this sort of the trauma of almost dying as a business, all of a sudden every dollar becomes like precious. Um, and that's important. It's, uh, a gift. I was probably too far in the other way. I was negligent or not as attentive as I could have been. But then all of a sudden what it happened is it was like a scarce resource, right?

And I didn't wanna let any dollar out the door. I over scrutinized every decision and hiring was like, you cannot hire anyone. No, never again. And it took me a long time to build the muscle, to be courageous enough to reinvest. I was just afraid of recreating the same trauma for myself, but I had to do it.

And what I've learned, um, is, you know, I try and as much as I can think about. What is the actual right decision relative to what the data would say about the experiences that people have lived through? And one thing about a professional services firm is that, um, there's nothing new under the sun. Like this is the oldest profession in human history.

Uh, but recessions are also aren't abnormal. They've happened a lot and there's a lot of information about how to work through them. And so this is some data that I found useful along the way. Um, so McKinsey and Company undertook a longitudinal study of a thousand companies after the great financial crisis and found that while most companies tightened their belt, those that performed the best over time were those who kept focused on long-term growth.

Those businesses swapped lower short-term profitability for longer term gain and also refocused rather than cut spending. They also found that successful companies actually spend more as a percentage of sales on marketing during the recession and less during growth periods. Similarly, a McGraw-Hill analysis of 600 companies in the early 1980s showed that those who maintained or increased ad spend during the recession saw 275% sales growth over those five years compared to only 19% for the cutters.

Okay. Very self-serving message here. I acknowledge it, put a filter on, but also recognize that I don't charge you on a percentage of ads. We changed that model. I don't believe in that model. It's not what we're here to do. I really do wanna grow your contribution margin, but I think that this takes courage.

If we go back to the opex cutting, the first reaction is just to stop, to pull back on everything to scrutinize it. And I get it. But I think the way that we can empower you to make this decision, the one that I think will actually benefit you in the long term, is these two things. Same two things. We got clarity and leverage.

If we can help you have these, then I think you're gonna be better positioned to make this choice to invest through this moment, to not stop spending, to keep putting your brand in front of people to actually broaden the distribution. But you need confidence. So how do we do it? Well, this is the future that we're committed to continue to help you create.

And part of why the partnership with Acacia Matters is because one of the things that we really believe in is that we want to be able to deepen the technology that we've invested in. I'm not an engineer, um, that's not my core competency. I've learned a lot through making mistakes in the software development process, but our DNA as an organization is not technology, but it is aac and part of their existence is they see tech enablement for services as a path to massive leverage, and they would grade our current platform.

A c plus might be generous. Some of you may feel better or worse about that, but the point is that it needs to be better. And to do that, we need to be able to invest in the resources to make that happen. So part of what Aisha's here to do, and Chris on their team, Chris Smith, who's their engineering lead, is gonna take over engineering for CTC to provide direction and support on the product roadmap and ensure that we get to higher levels of in integrity, that we can release features faster, the product better serves the needs of our customers.

And so that's a big piece of it. And then the other is the opportunity to expand the service profile into new things that are gonna help you grow. And m and a is something that when you're an individual bootstrap founder, it's always sort of like an idea, but it doesn't ever feel possible because you don't really understand the mechanics of financial engineering.

You just look in your checking in account and I go, I can't buy that much stuff with that. That probably couldn't be that good of a solution. But when you have a partner like this, it all of a sudden opens up the possibility that we can look at other world class service providers in areas of needs for your business and we can go out and explore those possibilities.

So if you have agencies that you work with right now that you love, and part of the benefit is that because we have your p and ls, we know who some of those folks are. We know where you spend your money, and we wanna find ways that we can add those kinds of competencies in a way that's gonna help deliver more growth.

So please share that with us. We wanna know that's what this is here for. Um, but I, I wanna talk about how we're gonna help you with these two problems, data or clarity and leverage, because I think both of them are the key to you getting the courage you need to spend through this moment. Um, and data clarity.

I wanna talk a little bit about what we've done because I don't, I don't know that we do a great job on the product marketing side in terms of being clear about the releases and the platform that we're building, why we're doing it, how it's happening. This is an area where we have a lot of room to improve in terms of bringing you all through that journey.

But I wanna play something. Um, this is an audio clip from, uh, Chris O' Down. So the win reality team. Uh, Dave's here. Where are you? There you are. Um, awesome. I'm a baseball nerd. If, if, like, if you could even understand the dream of getting to work with Win Reality and blast motion as a baseball guy with kids that are, you know, trying to train and develop, I, it's, I love it.

It's like my dream. Um, and this is something that Chris sent me, uh, voice, text hate, voice text. But this one was cool. Um, and I think it perfectly encapsulates what I want our service to be. And I'm gonna explain, so Aaron will replay it and then I'm gonna explain what I, Taylor. 

[00:24:32] Speaker 9: This is Chris. You have to be, uh, my thumbs don't work after seven years.

Text extra for a wall. So, uh, if you with note, I just wanted to quickly say thank you. Like, sent out our confidentials to our, for today, April, and everyone was just ecstatic. This is the first time that we. Really feel good about old consumer side. I know it's not always to be roses. Things are going well right now, but I think what my biggest takeaway is important that you guys, things are going good.

I don't know why not fully Well, we'll also know why. So man, once you feel awesome, might love to be an advocate for you guys and any way I can be and continue to partner to keep pushing your business forward along my daughter. So I, it was a Friday night, but uh, it's just, uh, I feel like I would, would thank you and, and want, um, just tell you I for business.

So, uh, take again, happy up. Congratulations for you all. 

[00:25:38] Speaker 8: Thanks. Bye. Feel free to voice text ade on Friday night. Anytime. Um, okay. So the phrase in there that mattered to me, if we're winning, we'll know why. If we're losing, we'll know why. That's the take. He said, the biggest takeaway is if we're winning, we'll know why.

If we're losing, we'll know why. That's actually what we do. Here's the truth. This is gonna kill me. We aren't responsible for your growth. We didn't make born primitive launch shoes and create a D-Day collection and go shoot all that amazing stuff and do all the incredible things that made their business grow.

They did it. We didn't do it. We don't make George's business grow. George is responsible for that. He is not me. Our job along the way is to be disciplined with your money, to give you clarity of the impact of the results so that you feel confident in the decisions that you need to make. That's what we do.

Now, I, we are, and I'm Grant and I are wrestling with the term growth. It's what everybody wants. It's kinda like an SEO type search for an agency. But here's the truth. It's you. I don't design the products. I don't get to do that. But what we can do is help you feel really confident that the decision that you're making about why you're doing what you're doing and where the gaps are and what the opportunity is, and whether it's a new customer problem, a returning customer problem, a gross margin problem, LTV issue, what is the problem and how do we as an organization make good decisions for it?

If you're winning, you'll know why. If you're losing, you'll know why. That's what we do. And when we think about this, what have we done to try to make this true? First, we put contribution margin front and center. I like, we have led the industry in a lot of ways, and I believe this is one of them. This is our dashboard.

The first metric right at the top. It's not in your Shopify dashboard, it's on the triple oil dashboard. Ours, contribution margin. This is the metric of defining success. We are after profit together, and many of you have built organizations that then reflect that it's spread broader beyond CTC in many ways.

This idea that our job is to generate money that flows through to the bottom line, and that's what we're after together every day. And so that was the first step. Then from there we figured out how can we give you more detailed use of all these things? And recently we've launched hourly trackers to where we can actually break down contribution, ex contribution margin expectations on big days down to the hour launch days, black Friday, cyber Monday.

Where are we at relative to that expectation all the time? The only data set in the world that actually provides an entire contextual expectation of your target on an hourly basis at a contribution margin level. In addition, we've integrated your marketing calendar because one of the things that we believe is I'm sitting here telling you going, Hey, the growth story is actually on your marketing plan and product plan and everything, and we're a support and amplification of that effort.

But we have to understand what and be able to provide to you. When you do a marketing moment, what is the impact? And so this idea of us aligning the qualitative data with the quantitative data is a big agenda for us into the future to continually absorb the context of what are you doing? And so this calendar report is something that I've dreamed about.

Did you guys, did anybody, was anybody an obsessive ga annotator back in the day? Like every time you did a moment, you would go in and create a little annotation. So you could go back and look at your GA and see like, oh, why did we spike traffic that day? Oh, we did that thing. Okay. Maybe not, maybe I'm the only weird one.

But, um, I loved it. And when we would get a client who's, uh, like GA was annotated, it was like being let into the library of Alexandria. I knew their whole history, everything they had ever done and why and what happened, right? That's what this is, is that we're basically automating the annotation of the history of the performance of your business.

What emails went out, what Facebook campaigns were launched. Well, sale moments existed and you can go back and pull up any month of the year. And every one of those little icons represents an action that took, was taken on the marketing basis. That allows us to set up an idea that is about how we can model the potential impact of every one of those actions.

And this is the next step that we took, is we began to say, okay, we want to help you accurately forecast. So we started building different models. We have the spend and a MER model, something that allows you to think about the relationship between your spending power and the degradation of your efficiency retention models.

Looking at how we can expect the anticipation of your returning customers as we go. And now we've moved to where we're updating those models every quarter. So we're using some machine learning and other elements to bring those and improve them constantly so that we can get better and better and better at setting the expectation of where we're trying to go together.

We say all the time that our job is to tell you what is likely to occur. Your job is to say what you would like to occur, and our job is to bridge the gap. But a lot of time is spent in that gap arguing with each other between what you would like to occur and what we think is likely to occur. But the reality is the likely piece is important.

It anchors you in your present state. It's getting on the scale, got some work to. Right. But then that awareness allows you then to make clear actions. It allows you to understand what to do next. And then this is the newest thing. We haven't talked a lot about this 'cause we're still working through a lot of the inputs and it still requires a lot of manual effort.

I don't know if you guys know this, but every time your clients start, we absorb two years of your marketing calendar. So they go in and manually tag every day of every action that you take. And then we absorb all the automated endpoints from email sent campaign, started to build out a log of all of your marketing actions over time to build what we call the event effect model.

So what this does is it shows us every time you do some kind of action, and we now tag I think like how many different labels do we have? 20 different labels of different marketing actions, from influencer moments to PR hits, to product launches, to sales, to different promotions. And we can go back and understand, okay, on that day, what happened to new customer revenue on that day?

What happened to returning customer revenue? Because what that sets up is the understanding that if we want to improve the revenue in the future. You do it with an action, and if we add this action to the calendar, what's its effect on future revenue? And so that idea, the idea that the building block of your future revenue, our marketing actions, is something we want to continue to embed in your own understanding as your team, so that when your CFO comes and says, we want 3 million more dollars next year, we can say, great, what are we gonna do?

Here's what each action's worth. If we add these seven actions, we can get there. Do we feel capable of delivering against that? Awesome. Fantastic. So this idea is something we're spending a lot of energy on is how do we get clearer and clearer on the qualitative actions that drive quantitative results?

Last year we launched incrementality. So we now embedded in sas have the ability to set up geo holdout. Many of you are using this product, but this gives us clarity of the effect of your media dollars at the most scientific and experimental way available to us. Now, the frustrating part when you go down this path, and I know many of you experience, is that.

The end result is not always clear. I just listened to these two argue about an output of an incrementality test and what it meant and how to interpret it, and why I thought, why am I not more confident? Why am I not clear? But the point is, this process allows us at the most detailed level to understand the true effect of your marketing dollars, and it unlocks for us.

Historically, when we thought about channels like YouTube or Snapchat or Pinterest, it was default. No. No, because if I were to look at a probabilistic set of outcomes and I were to say, okay, there's an 80% likelihood that this channel fails, and I don't have any way to determine if you are outside of that 80% or not.

My generalized recommendation would be to not do it, but the EV on it would be too low and you should stop. Because we can't actually determine clearly enough, even if you do run it, whether or not the attribution that's being displayed by the platform or by GA or by whatever MTA solution you're using is actually indicative of the causal effect of the media.

So if I know that most of the time the dollars are wasted and I have no mechanism for assessing it, then my answer is don't do it because we won't know if it worked. But what on incrementality unlocks is we're free from that. I tell my team all the time, I was joking, where's Max? Like Max was uh, looking at some account, somebody who's running a traffic campaign on retargeting, right?

Like, and this was like a classic old school tactic that for years we would've been like, no way. Never do it. And now it's like you got a hypothesis, set up a test, design it and find out. Now we're gonna aggregate those results and still try to provide you the best hierarchy view of what you should test and why and where the biggest opportunity is.

And Luke's gonna talk more about that in a little bit. But the point is now YouTube absolutely set up a test design, the holdout. Measure the impact across every point of distribution, amazon.com, wherever. If you have your own retail, let's pull in every imaginable source of revenue and let's understand the true impact of the channel.

Pinterest, Snapchat. Let's do it. Let's find out and test if we can expand into those channels. Seven day clicks, seven day click, one day view, one day click one day click one day view whatever you want. We can set up and design an appropriate assessment of the impact. Now, it doesn't mean we will get to a clear result every time, and that's frustrating.

It's slower than acting on instinct, but it does unlock a huge opportunity for us to expand with confidence and we're building on this. So some of you, this is the study section inside of status. You can see all the models that are there, and you'll see at the top that we are very close. In Q3, we're gonna be releasing an incrementality informed MMM that will help with the allocation of the monthly budget across different channels that exist for you with the tests that you are deploying and platform informed.

And this is where we're gonna keep going. So the product roadmap for us, one is we're gonna, in Q3, we're launching your mentality informed MMM in Q4. One of the core things that Acacia has come and pressed on is, is said that if you want your technology to be the center point of trust with your clients about producing profit, you need better data on the cost and financial side.

How many of you have had trouble getting to contribution margin clarity with status? Josh, go ahead. Way high. Yeah, all my people are all raising their hands. Yeah, and, and it's hard because the reality is, is that one, many of you suck at uploading your data at a unit level into the platforms that we integrate with.

You do it sort of sometimes and it changes, that's fine because your job isn't to create data clarity for us. But the reality is that data on a programmatic endpoint, API basis, doesn't really exist cleanly in many cases. Same thing with shipping. Shipping is the hardest one because many of you work with a three pl, you receive a monthly invoice for the reconciliation of the actual cost of your media.

You don't get it at an order level. So we're always estimating return rates. Always estimating. Some of you accrue them, some of you do it on a cash basis. Some of you batch them like every four weeks randomly without telling us. There's all sorts of ways that we deal with these different financial realities.

But we have to go deeper into getting access to the source of truth so that we know your cog, so we know your shipping. We have clarity of the expectations so that we can provide you a more trustworthy view of contribution margin. 'cause it's only useful if it's right. It's only useful if it's at least within some very small margin of error that you can trust and action against.

So if we're gonna build confidence in decision making, we have to build confidence in the data. And then finally, we're working on an Amazon integration. This is an area where m and a is at the top of mind for us. We, I really believe that right now, one of the, the issues that many of you larger brands in particular are running into is just functionally a TAM problem.

I know that sounds crazy 'cause we're not talking about billion dollar enterprises here, but we have to remember that e-commerce is about 18% of retail and 50% of that is Amazon. So when people reference that number, the truth is, is that 9% of retail happens. On a.com website, and Walmart's a big chunk of that.

And target's a big chunk of that. It's your, the actual D two C percentage of retail is tiny. The amount of people actually buying luxury sheets through a.com website is a smaller TAM than most people realize. So from a growth standpoint, we really believe that distribution expansion is going to be the reality for most of your larger businesses as you look to put up 20, 30, 40% growth into the future.

Whether that's your own owned retail, whether that's marketplaces, and we think that especially on the media front, if you've watched my one of my drawing videos, you know that the thing that I see repeatedly is that as you guys expand distribution, especially into Amazon, all of the present forms of measurement through your.com become obsolete.

You can no longer use a MER as a measure of the efficacy of your media. If you also sell on Amazon the same product, you are creating demand that is being satiated in both places. And if you allow your Amazon channel owner to go, like, look how great my margin is. I have no ad dollars, and I just got all this demand.

And meanwhile, your.com team's over here going, I, I am bleeding to death. I can't get this efficiency going. You've created an organizational infrastructure problem, not a marketing problem. And we see this all the time. We have to be able to measure the efficacy of your media at as many points of distribution as possible because the demand shows up everywhere.

Especially as you move higher funnel, as you move into YouTube, as you move into connected tv, as you move into podcasts, as you get into what do you trucks, what do else do you trucks, podcasts, out of home, whatever, then we, we have to be able to assess the realization that demand more broadly. And Amazon I think is a huge piece of that, especially for everything that we wanna control.

So this is all what's coming for clarity. We recognize this is the foundation to make great decisions. You all are very willing to spend. If you are sure that the result is gonna drive incremental contribution to margin to your business, I've never met one of you. Well, that's not true. There are some of you who get stuck on a fixed budget and won't spend regardless.

But most of you, if we can say, Hey, if we spend X more, you'll get two x more contribution margin. Sign me up, let's go. But we have to build confidence in that, and this is a huge piece of how we're going after it. Um, next operating leverage. Okay, this one's gonna be a little bit, uh, obscure because in reality, uh, we don't control your headcount.

We don't get to decide how you spend your money, but we do think about. Going after creating leverage for you on the pin. And as a fractional service provider, I think this should be the core value proposition for where we're at. This is Cody. Cody and I are friends. He works at Jones Road. We do some creative work for them.

Um, and he has this reflection. So he recently went from CMO to CEO, which I always love people getting to have that experience. And suddenly his mindset shifted from like, I love building an internal team to no internal employees at all. I wanna outsource everything. Because you begin to understand that the reality is, is that you should never, ever, ever be able to hire and execute a service cheaper than we could provide it for you.

It doesn't make any sense. The idea that you could have a full-time employee doing Facebook media buying cheaper than we could deliver it for you makes no sense. It shouldn't be possible. And that's the reality and that's the obligation that we have. So many times agencies think about, um, that our job is to increase our prices all the time.

And we've, we've fallen into this trap at various moments. And the, the Isha team may hate that I say this, but the reality is that I want to service to you to be cheaper all the time. Cheaper all the time because the value calculation that you do is strictly about the amount of impact that I make relative to the service that I provide and the cost to do it.

And the lower I can get the cost, the easier it is for that calculation to pencil. Um, and we've done this, actually, we've actually made real progress on this. Our average contract value has declined for three straight years. This is not a slide that my investment bank wanted me to put in the deck, but I'm very proud of this.

This is actually what I'm after. And not only have we declined, decreased the price that we're charging to you all as clients, we've actually done it while paying our people more. So our average salary per employee has increased every year, where while our, um, billable to you as clients has decreased and our operating margin as a company has increased at the same time.

How is that possible? How do you pay people more, have better talent, smarter, more experienced people, charge the customer less, and as a business make more money. Well, the answer's very simple. It's like it, it's technology. It sits at the center of it right now when you guys get an SOW view from it. I talked earlier about how we changed our pricing model from a percentage of spend to a fixed price model.

And basically what I did is like very basic cost plus pricing. We went through and we looked at the entire underlying cost of every one of our employees. We understood how much fractional work they could provide at the quality level that we wanted, and we marked that up at the margin expectation. We needed to make money as a business.

And I said, every customer gets this price. Aaron, you're allowed to discount this percentage and go get 'em. That's how we're gonna do this. That's the deal. Flat period every time. And what it did is it brought immense clarity to where every customer was now delivering margin at the profile that we needed.

There were no, uh, like giant winners and giant losers, but what you end up with is a p and l that looks like this. The other reason I wanted to break it apart is 'cause I want you to see the line item. I want you to go, okay, could I replace this cost with a full-time employee? I want that to be a consideration for you.

'cause our biggest competition is actually. It's what? It's, it's not other agencies. It's in housing. And I recognize that, and I think it's a choice that you should consider all the time. You should always be considering if it's a better option for you to go to the market, hire somebody and have them sit right next to you all day long or whatever zoom box you play on, and have them work exclusively on your business.

But what I'll tell you is for a media buyer, agree, the worst decision in the world, um, there's not an eight hours of work to do in a day for a media buyer on an individual ad account. There's just not anybody who's ever media buying. If they tell you there is, they're making it up. Um, but also the talent that this person represents in terms of their compensation is much higher than that line item to you.

But here's the thing. I recognize that it's not enough of a delta, that for some of you, you freaking love employees. Some of you just love having employees. You love the idea that someone's heart, soul, and mind is connected to your thing only all day. I get that. I get that. So I have to go further. We have to make this even better.

And so when I think about what we're trying to accomplish in the future of our SOW, I'm trying to compress the price of everything we do down and down and down and down so that you can begin to think about where you would reallocate those dollars. So we go back opex down variable ad spend up. And so the future of where we're headed is, uh, something that looks like this is where we're gonna see how growth strategy paid social paid search can be automated in a way that an individual we're calling them, a growth engineer is going to be able to deliver a large suite of services across everything that you're currently paying for in sort of an Iron Man esque models.

The metaphor that we use, we wanna take really, really talented humans and we want to give them the best tech enablement in the world to be able to deliver services that you couldn't get anywhere else at a price you can't get anywhere else. That's how we're going to defeat the market is because small agencies and mid-market agencies can't compete with the pricing and quality of service.

We'll be able to offer incrementality. Some of you are like using providers like House or Measured. They're charging you 10,000 plus dollars a month to deliver a thing we're gonna give you for free. That's what's gonna happen. And the quality's not gonna be different because you know who the smartest data analyst in the entire universe is.

Any guesses? It's chat. GBT. It's chat, GBT. It's better than every PhD out there. They're, it's gonna win every exam, and it's only, it's on an exponential curve like this. The human development curve, like even that PhD, they're not in school anymore, but the exponential curve is like this. And so the commoditization of those functions are gonna just drive these prices down and down and down, down.

Media buying, decision allocations, budgeting, all these things are going down and down and down and down, over and over again. Um, so I wanna give you an example of how we're doing this. 'cause this is a journey. It doesn't just happen overnight, but you're gonna reap one of the immense benefits today and tomorrow in your QBR.

So I'll give you an example of how we go after this. Okay? This is a MetaMedia buyer, and if we take their job inside of CTC and we break it down into its component parts, this is like an oversimplification of an idea. But's stay with me. Um, the reality is that the bulk of their work, about 40% of it goes into building in the ad account, okay?

Building in the ad account. Anybody who's ever run meta ads, raise your hand if you've like been in the ads manager, okay? Is there a worse thing in the world than building in ads manager all day? It is like, let's be honest, it is data entry. Click this box, click that conversion optimization, seven day click.

Broad targeting, here's my exclusion set, here's my URL upload assets, copy paste, copy button, go. 40% of their time is that activity all day, every day. That's insanity. That's insanity. In a world where we have tech enablement and you can push to an API, this information on top of that, they do something called one map notes.

We wanna make sure that we are present and communicating with you every day. But there's a challenge here. You always all live on different, uh, time zones, and we try and match people to them. So sometimes people are getting up at 6:00 AM to write notes. Some of you are having to get up like it's, it's difficult.

But every morning there's an expectation that they provide you progress to expectation every single day. We call it one map. Then there's client map meetings, and then there's something called media planning where they go in every day and they adjust the expected spend and forecast for every campaign in their entire media plan to make sure that they're on plan to get to your target.

This is the role of a media buyer. So we looked at this and we said, okay, well what could we eliminate? What can we get rid of? And so we've been working on the first thing that LLMs enable and a really simple way, is to eliminate the idea that a human would write a one not note. So think about what a one map note is.

I go in, I wake up in the morning, I go look in the ad account. What was the RO ask, how did it do? What do I think about this? Where was I headed or behind target? And I write you a message. And this takes them probably like 20 to 30 minutes per client, per day to just write a message in Slack that most of you don't even look at.

Candidly, that's like an insane behavioral pattern and LMS can completely admit it. So we've built our friendly, uh, uh, Panda Bear here, scout. So for those of you who don't know Qua, our c our VP of engineering, he was initially a contractor. He ran, uh, a dev shop called the Kicking Panda. And so this is our little ode to him.

So we have scout our panda that's been providing internally. We have internal Slack channels for all of you. One map notes every day, and we're refining them and we're making it. So it's an LLM you can converse with. So when you get the note, the other problem is if you guys ask a question in response, our response time might be within a few hours, somebody sees it, we forward it around and get maybe responded to.

But what scout's gonna give you is one knob notes at the exact time that you wake up every single day and it'll be conversive. And so this is gonna be released into Slack, and you'll be able to de interact with it. It doesn't mean we're going, we're still being in the channel. We'll provide context, but we've been running this, you can see we launched it in April of 22.

Some examples of the visuals we're working through just how many emojis we want, what all that information is. But one of the things that we have in architectural dataset that doesn't exist if you were to connect this into Triple Whale or anything else, is that we have the data of expectation of yesterday's spec.

So the context of the expectation of every day's result and your performance relative to that data is novel to CTC in a way that we think is really interesting. Um, additionally, we built this, this is, uh, what we call our tracker tab. Okay, so, um, some of you may have been in the growth map. Uh, the spreadsheet that hangs behind me in my Zoom calls, it's an ode to both my insanity and, and countless hours of attempting to turn spreadsheets into software.

But, uh, we've killed it. It's almost gone. It'll be gone soon. But one of the main areas that people worked in, we worked these tracker taps. And what you see here is that media buyer would have every campaign. So at the top you'll see every box is a different meta campaign that every day has an expectation of spend and efficiency to determine if you're going to reach your overall spend target.

Okay? And their job was to come in tomorrow morning and go, how much did I spend yesterday? How much did I think I was gonna spend? What adjustments do I need to make to make sure that I'm on plan? And their job was, they weren't allowed to leave the day until their projected spend matched their target spend.

And this was a rhythm. Every morning, go through every single campaign. What did I spend? What do I project to spend tomorrow? Manual adjustments to every seller, the spreadsheet. Like we're maniacal about this. Like it's really, it's kind of crazy if you know the detail of execution of this system and like Claire, how many Facebook campaigns are live and born primitive?

[00:48:49] Speaker 12: How bad is 

[00:48:50] Speaker 8: like probably a couple hundred. So imagine a media buyer going through every campaign and going, how much spend tomorrow? How much spend tomorrow? Scrolling, right on a spreadsheet for like 35, 40 minutes to update every saw. And the expectation was you do it or you're in detention Friday morning with Ali.

Like that was the expectation. Like, and, and that's really insane. But that was, we wanted people to be aware of where they were at relative to the thing that they promised that they were gonna do. But as a way to eliminate that work. We've now automated the projections. So they show up in their tracker tabs and we now see that.

You'll see that there's actually an AI that models and forecast the expected spend in every campaign, every day relative to the previous performance. And it's a system that's constantly learning and improving and against expectation. The other thing we get to see is how many changes they made to the A account when the changes were made, and then we can in the backend begin to model the efficacy of changes.

Okay. I have a secret for you. This is the God's honest truth. Not one person on earth. Not one mother effing person actually knows if their media buying strategy works. Not freaking one. No one has ever analyzed the relationship between the actions that they made and the future impact on outcomes. On a large scale level, it just does not exist.

Not cost controls as a strategy, not say day surfing or channel. No, nothing. Nobody's, we all have a feeling about an experience that we've had over a large period of time that we represent to be as true as we can, but we're unsure, and I, I'll put my hand up. I am unsure that it's the right thing to do.

The strategy that we recommend, I cannot definitively tell you. That it is 100% causal to the effective improving contribution merchant. I think it helps to eliminate waste. But is it too restrictive? I don't know, maybe. But we're going after this answer. And the way to do it is to log the changes, is to be able to actually index every action that you take and determine its impact on the future.

And so that's what's happening. Every dot budget up, new ad launched, cap adjusted, we're categorizing all of them and being able to analyze what they happens as a result of that change. And I think either one of the two things is true. Either we're touching ad accounts way too much or way too little. The likelihood that we're touching them the right amount is very low.

And because we all behave differently. Here's the other dirty truth. Every one of us at CDC would behave differently when presented with different sets of information. Should I increase the budget? Should I lower the budget? Should I increase the cap? Should I lower the cap? And the other thing that they respond to all the time, you know what it is, pressure from you.

Pressure from you is the number one reason that they change things our spends behind. What are you doing about it? Uh uh. I'm gonna lower the cap. We'll get more spend tomorrow. That's not what you want. That doesn't actually solve the problem, but action is perceived to be a value to you. It looks like we're trying, and that's an at least an indication that like, okay, c, d, C cares, they're at least doing things.

Like we'll go in and if we had zero changes in an ad account, you guys would freak out. You would think it was like gross negligence. You might try and sue me, but literally, that's what I would prefer everybody do right now. Touch nothing, make no budget changes, no optimization changes. Set your campaign at the target and don't touch it.

So the conflict there is hard. And my people sit in this McKay's like, dude, I got people freaking screaming at me. What do you want me to do? I'm like, don't touch it. Send them to me. I'll tell him. Because McKay's ability to open up Ads Manager, he doesn't even pull out a calculator. He just looks at it and goes, oh yeah, last seven days.

Uh, yeah, that looks bad down. That's like literally what most people do. That is so that far from an actual thoughtful ability to interact and predict future causal impact of decisions. That's just not how you want things happening. So we're gonna go after this and you can see the next step is then the system begins to make the recommendations.

So now we're already trying this, okay. System in light of what you see, tell us what you would do in the ad account. And we're going to be going to a batch of customers and saying, Hey, we want to unleash Scout to manage your ad account, to make the decisions on the recommendations. Are you interested in that?

And we're gonna remove our human decision making from the process and we're gonna redirect it into other places. It's gonna happen small, it's gonna happen. Little bits at the time, we're gonna make sure, but what we're gonna have at the end of it is the ability to tell you when this is running. Here's the outcome versus when a human's doing it, here's the outcome.

And if you think about like the way that a hedge fund sells you on investing your money, um, our returns are X versus the index of Y. That's why you should trust us. There's no agency on earth. They can actually show you that. Nobody, they can't actually tell you definitively the causal actions that they've taken and a system that's gonna behave the same, borrow as whatever case study they showed you.

It does not exist because that case study for re or whoever it was, was somebody else at a different moment in time with a completely different pattern of behavior than the one that the next person's going to deliver. They're just not the same. It's the number one problem in human services is to create consistency of deployment of action.

And the way to do that is to index and charge, to allow the program to understand the effect of the actions. And I think there's a really good chance that we should be making way more changes all the time. I think it's possible, but that could be the case or maybe it's none. But we're gonna find out and we're gonna let you know.

Um, and so what that does is right away, we've already taken away two big chunks from your media buyers. We've taken the 40 hour work week, we've still got building, they're still hanging out with you all in client meetings, and we're growing that deep thinking box a little bit. And they've got about 30 hours of work.

So what does that translate to? Why do you care? Like this all happens in the background? We never showed you any of this because it doesn't matter to you. The end result that matters to you is the service gets cheaper. I can now charge you less money for Facebook media buying than I could yesterday because my margin and my capacity of an individual is greater because I've taken some of this rote work that was monotonous and slow and I've improved it.

I've actually made the quality better while making it faster. And so the reality is, in your qbr, all of you are gonna be presented with a reduction in price to your media buy. We're just gonna bring it to you. You're just gonna have it because I want that money spent somewhere else. Because the key is we're not just trying, it's cut costs.

We're actually trying to deliver. And this is what we're after. So this is Luke wave. Luke, look at Luke, look at him up there. That's, that's Ironman, Luke. But this is what we're building. We're gonna have the smartest people in e-commerce that we're gonna pay the most money more than any other agency to work here.

And they're going to have the best technology to do things that they can't do anywhere else on your behalf. And the end result of that is you're gonna get the most talented people at the best price. That's the promise. That's what we're building. That's what a case is here to help me create. And that's what we're gonna do at CTC to your benefit.

And so, uh, you can imagine, right? It's like Luke can do forecasting, MMM, audience insights, reporting, incrementality, audio, automated media management, image generation, all of these things inside of stats as an individual to being able to deliver this, we can imagine this world, right? This is that future of the agentic provider, right?

We still think very much, it sits with a human at the center of it for a long time. We think we're a long ways from you just handing it to an individualized agent and may come, maybe Luke one day gets replaced by. Uh, AI version of Luke, who knows? But for now, we're gonna take the smartest people, pay them the most money to deliver incredible service.

But this is the key. You aren't gonna win just by cutting the cost of the media buyer. It's not, that's not actually the game, but that is me supporting your operational labor leverage so that you can actually spend more on the things that matter, that we can create the confidence to actually go back to what we talked about, which is that in recession, the brands that spent the most money were the winners in the future.

So we wanna create labor leverage for you to redeploy that into what we call units of growth, more ads in more places. Um, you guys hate me for this. I, I know you're exhausted by it. Like, you love to tell me that you've tried making a lot of ads like you do. You tell me like, we've, we've Taylor, two weeks ago we made 50 ads and our ad account didn't change.

Like George told me that in Q1. What did you say? Tell me how many ads you were like, we made so many ads and nothing happened. 277 active adss 4,561 Active adss. You don't get it. You don't get it. The scale of what I'm talking about, we don't understand yet. Like it is orders of magnitude of repeated, endless delivery of optionality and creative, like endlessly.

My kids, um, I'm trying to teach them baseball and the idea of like telling, teaching a kid that practice makes them better is like actually really hard to get them to believe. Like my son will go and he'll like swing on the tee for a week and then he'll go to his game and he'll be, he'll strike out and he'll be like, I didn't get any better.

The tee thing is stupid. Like that's literally, and, and like, it's actually a very logical conclusion. I did a thing, I went and tried to do the thing and it didn't work, 

[00:57:51] Speaker 7: but I, 

[00:57:52] Speaker 8: but that's not how it works. We're talking about hundreds of thousands of reps off the T jet, like that's what we're talking about.

But does he get, is there a way for me to make him intrinsically actually absorb that and believe it? I don't know. I'm trying, I keep telling him, I'm gonna keep showing him Mike Trout talking about it and Mookie bets talking about it and showing them, ju doing some math for him of like, okay, Mike Trout's 33 years old.

Imagine he took a hundred swings every day for these 15 years. How many swings would that be? Where are you? Okay, let's like draw a graph and we'll work towards becoming Mike Trout. How can I illustrate Hip forum as much as possible? It's this fricking thing. Guys. Loop is the best Facebook marketing business I've ever seen in my life.

There's nobody better. And they make way more ads than you. Way more. And this is why for bots here, it's 'cause it's not just about ads, it's about funnels. It's about could we create an exponential effect by taking a hundred ads, multiplying it by a hundred variations of a landing page. All of a sudden you have 10,000 funnels.

Is one of those the one that unlocks another tranche of spend? Maybe. I don't know for sure. Maybe it's the 10,057. I don. But the point is, this is a muscle, it's a muscle you develop, not for the sake of trying for a week to make more ads or for a quarter to make more ads. It's to believe meta when they tell you, Hey, everyone, I, I don't know if you saw today, uh, so meta has been like, um, hiring all these AI engineers at like a hundred million dollars.

And I saw graphic today that Mark Zuckerberg was like, Hey, the media thinks we're just paying them more money. But like, actually what I did is I built a GPU center the size of Manhattan. He's calling it like Prometheus or something. Like we were just like literally watching the apocalypse happen. Like, and we're all like, yeah, like high fiving about it.

But he is like, Prometheus the size of a Manhattan, five car billion bytes of ai, GPUs. And those guys are like, cool. The most GPUs. That's where I go to work. I don't care about a hundred million. We're building God. Like what? Your money's useless to me. Like, where are the most GPUs? So, so meta's like, Hey, you got this thing called the eda.

It can take all your creative and it's gonna go find the best match. If you gimme all the options and you turn these like creative AI enhancements on, and you don't worry if it plays rock and roll music one time, one impression to you guys that hate that or like it, it's been a delivery in IG stories and it was like cropped wrong and you're like, fuck, the world's falling fire.

The media buyers the worst thing I've ever seen. Like, and the gate just becomes like this wide for creative to pass through. And meanwhile meta's like, just please give us some freaking more ads. And the best brands in the world are like, cool, we'll make 5,000 of them live right now. And of those 1200 of them are videos, distinct video assets for Rise superfoods.

There's just a level to, to, if this is the distribution channel, like again, if, if you're gonna sell other ways, like cool, like there's lots of mechanisms. I'm just telling you this is the mechanism for the game. Um, so we, I I also recognize that, like I've shouted this at you guys for years and I've actually never provided you a solution.

Um, our creative was like insanely, stupidly expensive. I, there's nothing I hated more than the price that we were charging for. The development of creative and it's 'cause of creative production supply chain is like one of the hardest problems to solve, to do it at a level when that gate is really small at the other end, where like you guys will only let certain stuff pass through.

Like it's, I have to be really careful and it's really slow and time consuming and it becomes really expensive. But we've um, realized that one of the ways, for whatever reason, a lot of this is like cultural sort of, uh, Overton window stuff, is that like creator content is this place where you guys feel a lot of freedom to sort of like release the idea that it's you speaking.

And so it opens up your willingness to allow someone to speak on your behalf and to say things that maybe you wouldn't say them exactly that way. And maybe you'd do it a little different, but it's them, it's their expression. And so there's space for that. And so creator content is the fastest growing thing we've ever had at CTC.

You guys love it and we're able to do it. And because Adrian, who's gonna speak later today, was a growth strategist at CTC for five years. She gets it, she gets it and she knows how to source it and script it and edit it and position it and deploy it. And so we're continuing to invest in then scale this to the program.

Um, and you can see that like very repeatedly, it becomes the best performing ad in the ad account. Constantly we see this where these individual assets delivered at scale, generate incremental return that become an unlock additional raw. And then beyond that, we are getting closer to cracking AI creative that you all will accept.

Um, and this is hard because you are very picky and it still requires a designer to polish it, but every one of the ads I'm gonna click through real fast are live in ad accounts on behalf of brands and they're AI generated. So every one of these we're getting to a place. Where we're able to, with a combination of a designer who's building systems in partnership with AI, to be able to deliver ad creative, to be able to constantly reduce the price at which we can get to brand approved assets for you all.

So again, I recognize that you get to draw the quality barrier. I submit it's yours, you get to decide where it is. I would encourage you to consider it, but for now it is what it is. And so we're gonna work within the context of it. And so we've driven all of these prices down farther. So creator videos, net due assets, $300, a video creator statics, where we're amplifying that same creation of the video and generating a bunch of static images off of it.

150. And the AI images are down to $50 an ad. I'm telling you, these are gonna keep getting lower. We are gonna drive them lower, not the market we are every day. I'm pressing on Adrian and she's gonna hate me saying this. The AI team, they're gonna hate me saying this. The price has to go down. The price has to go down.

The price has to go down because I need you to deploy more and more and more and more and more of them all the time. I want more of your SOW getting out of opex for my people and into the units of growth that are gonna drive success for your business. That's the transition that we wanna make. So when I look at this and I go, this is what's happening, it has to happen because gross margin is gonna go up.

Like you're gonna, it's going down. Excuse me. If your cogs are going up, this is not going to be like this. So 19% is not the number. I'm just gonna tell you right now. It's not the number. The number's 15. The number's 15, and from there it's gonna go to 10. It's gonna happen. So as you think about this, OPEX is gonna go to 15, OPEX is eventually gonna go to 10.

And marketing is gonna keep pushing up. It's gonna keep pushing up into 30, it's gonna keep pushing up to 40. And wherever you can create leverage against that opportunity, that's who's gonna win. And in this moment of recession, there's gonna be some brands that keep the opex and they cut the ad spend and they're gonna lose.

They're gonna lose because somebody won't. There's gonna be some brands that cut a little bit of iex, a little bit of marketing spend, and they slow everything down and they take more profit and they're gonna lose. And then there's gonna be brands that get really lean. They get leveraged as best as they can, and they output and they win the moment they go when others won't fearful, when others are greedy.

Greedy, when others are fearful, it's no different. This is investing 1 0 1. It's the same thing for building a business right now. Everybody's afraid there's a good reason to be afraid. Tariffs are scary. It's impactful. The market's not good. Fear. Fear, fear, opportunity. You decide, you get to choose which one you wanna do.

Um, n. So our story, right? We started with C, D, C has a hundred less people today than we did three years ago. They never made it back. Those a hundred peoples never bought 'em back. We have 64 people today, Dan, 64 people today. We do more revenue than we've ever done by a lot. They never came back. We figured out ways constantly to improve and iterate with technology at the center of it.

And that's what we're gonna do for you. Same story, clarity, leverage. That's the future of what we're gonna build. It's what we're spending all of our energy on. It's what Zach's here to do. I'm not going anywhere. This isn't a play for us to exit. It's a play for us to accelerate. It's what this team's excited to build.

It's what you're gonna hear from us for the rest of the day, is at the center of this clarity and leverage. That's what we're gonna help to deliver. Uh, and that way when it gets to the tale of two cities, we don't have to be like Jerome. We can be more like Zuck. Cool. Appreciate it.