When a Media Buy is pure Madness

Have you ever watched that show Mad Men? With all of the drinking smoking suits? I watched up to season 4 then I lost interest but I did learn one important thing from that show:

Advertising Agencies make their money on the Media Buys.

What is a media buy?

Lets say an agency convinces you that they should produce a commercial. Chances are they will give you a really great deal on producing the commercial, they might even give it to you at cost. This way you think your getting a great deal. Why would they give you such a great deal? Its not like they are running a charity.

Lets say they only charge you $10,000 to produce an ad. This is because they are going to buy $50,000 worth of ad space and mark it up another $50,000 of pure profit for themselves. In addition to that next year around this time they right after they pitch you on a new idea that you may or may not like(irrelevant) they are going to ask you if you want to re run this ad for another $100,000 at a cost of $0 production cost to them this time.

Its a beautiful system of recurring revenue they have set up, and they have become extremely efficient at selling it. I saw this firsthand during my tenure building high profile Facebook Apps for big brands. Agencies would hire me and pay me a couple thousand dollars to build the app. Then the agency would run an ad campaign costing couple of hundred of thousand dollars to funnel users to the app marking up those costs 100% and passing them onto the customer. Then next quarter they would flip the switch and run it again for the same mark up and so on.

When it works:

The big brands I worked with would pay these outrageous sums because it worked. It worked because their business model and their message had been battle tested through years of organic growth. The business knew that if a dollar bought X views which would convert Y customers for a total profit of Z. This is Funnel Marketing and its done all of the time all over. It works... but only if you know the following:

  • Your product will sell
  • Your customers will buy via the means the path your ad is directing them to
  • The message you are sending via the media buy will grab new customers
  • You know the cost of attracting a customer this way
  • You know the lifetime value of one of these customers(and its more than the aforementioned cost by a good margin)

If you know all of these things then by all means dive right in to a massive media buy campaign. But lets examine when a media buy isn't for you.

When media buys don't work:

The answer:

If you don't know 100% the answers to the above assumptions.


This pretty much means YOU! Lets face it, if you haven't validated and gotten your first sale or first 1,000 sales then you are taking some serious risks doing big media buys with your ads.

The good news for Startups:

Your young, broke, and no one knows who you are. No offence but the average sales executive aiming at a six figure bonus this year will look right past you to the 30 year old car dealership with 100 employees and a good credit history. Don't fret, in the end it is to your benefit.

The name of the game is feedback, fast and furious. The only way to figure out what variables to plug in to X,Y, and Z is to start plugging in variables and testing them on a small scale with a very, very short feedback loop. Lets face it, I don't know, you don't know, hell Mark freaking Zuckerberg doesn't know what those numbers are. Not until we get something out there and get feedback on it. The sooner the better.

"But I like the ideas of putting out ads. No one can throw thing at me or make nasty comments"

I could go on for hours about how you are playing the wrong game if you don't have the stomach to take a swift tongue lashing from haters on a daily basis. I have a sticky note on my wall that reads "If you are not PISSING SOMEONE OFF you are not doing it right". Deal with it or get a day job, sorry.

If not a media buy then what?

The good news for you is that the best ways to get feedback are cheap(if not free). They require a ton of hustle and tough skin.

Face to Face sales:

No, not your mother. Not your best friend, not your neighbor, not your professor or your dad's golf buddies. These people were all good when you were selling girl scout cookies. If you are trying to play in the big leagues you need to be able to share your idea with complete strangers, people at the bus stop, the manager at the local quickie mart, and guys in suits with big fancy sounding titles. Some might ignore you, some might laugh at you, some might even scream at you for wasting their precious time(probably otherwise spent watching cat videos on Youtube) but in the end there is something to be learned from it and I'd be you will learn more from each of these experiences than the radio silence that will come from that one way media buy campaign.

Conferences and presentations:

This is the next step up from Face to Face. Giving a presentation or speaking in front of a crowd has the added benefit of getting lots of feedback at once. You can feel the audience respond. Sometimes bad such as hecklers in the crowd, people walking out in the back, and the lights of cell phones as people text away ignoring your message. Or you can feel the good when you catch someones eye in the crowd and they nod or the silence when you pause for dramatic effect or of course a legit applause when you conclude your point. There is nothing like getting feedback on your message by pitching in front of a crowd.


Public Relations is great, but even here I am not really talking about 'just a magazine article'. This is where blogs have the advantage, or anywhere people can comment. I love negative feedback in the comments. One of my most popular articles got 75% negative feedback. 25% of the feedback was on the verge of being illiterate (haters), but 50% of the feedback was legit. I could answer and had prepared arguments for 45% of the 50%. The other 5% was enlightening. But had I run a one way ad via a massive media buy I never would have gotten any feedback.

Little Media Buys:

Okay, okay you got me. I kinda framed media buys as these big bad beasts. There are smaller media buys. Technically Tim Ferris's method of testing muses with a small Google Adwards campaign could be considered a media buy. This is a good way to test a message and a target audience

The bad news for In-Trepenures(Startups inside of a larger orginization):

Here is the big risk. If you have been following my work recently I have made a lot of progress helping larger companies with in-trepenureship, or building a startup inside of a larger organization. This has a lot of benefits for the larger organization and slightly different rules for the internal startup then those startups out in the wild. An advantage to the startup is that they can use the parent organization's name to open doors that otherwise wouldn't be open to them.

An unanticipated effect of this advantage is that vendors treat the startup like the parent. The established parent has x, y, and z all figured out, the startup does not. Selling an internal startup a package designed for the parent is a sure way to blow a years budget on a single ad, thus dooming the startup.

The problem is unless it is your responsibility to help with marketing and you are very clear with the agency they will assume you have x,y, and z figured out and you don't. You trust them to drive eyes to your ad, but no one bothers to ask "Is our message the optimal message to drive traffic to our sales page?" or "Is the channels and mediums we are buying space on targeted at the right audiences to get the best bang for our buck?"

(FYI: that is a trick statement, if you're involved with a startup everything is your responsibility)


This article may have sounded like I have something against advertising agencies but that is not true. I have something against anyone that sells snake oil. There are good agencies out there. As a matter a fact I believe there is lots of room in the Advertising Market for niche agencies that specialize in helping early stage companies get feedback quickly and find product market/message fit. If you know of any send them my way, I would love to talk to them.

In the mean time the name of the game is Feedback. Maybe its bad, maybe its good but whatever it is I would rather get it before gamble several $100,000 of my runway into on a big marketing play like a media buy with no idea how it is going to turn out.


Business , Tech

About the author