I spent much of 2022 working with a company called Agora.
(They’re still one of my clients.)
They’re probably the biggest direct response publisher in the world — with revenues of around $1billion a year.
Now, as you can imagine, you don’t get to that size by accident. You need to be doing some really smart stuff.
So I thought I’d share some of my experiences. In particular, how they think about marketing.
Because it’s very different to how most SMEs approach marketing — even SMEs that do 7 figures a year.
So here are 7 differences I noticed…
#1 They understand the most important metric in business
That metric is customer lifetime value.
It tells you how much you earn, on average, per customer…
And, if you know how much you earn per customer, that tells you how much you’re able to spend to get that customer.
And that determines how far you can scale your business.
Because…
#2 How lifetime value affects traffic
There’s a rule in paid advertising — whether it’s Google Ads, Facebook Ads, or any of the other ad networks — that says…
“The relationship between bids and traffic is non-linear.”
Let me explain…
In Google Ads — which has been my speciality since 2006 — if you increase your bids by 10%, you might get 30% more traffic.
Increase them by 25%, maybe 100% more traffic.
Double your bids, and you might be looking at 10x the traffic.
Now, most businesses try to make an immediate profit on their advertising.
So, if their average profit per sale is $50, they’re only willing to spend $30 or $40 to get that customer.
That throttles their bids…which throttles their traffic.
Agora, on the other hand, is happy to lose money — up to around $30 — to get that first sale because they understand lifetime value.
For them, the purpose of their marketing is to buy customers.
Why?
#3 Because it’s all about the back end
Agora’s business model is to get new customers to sign up for $50 newsletter subscriptions…
And then they do two things:
#1: Get the customer to renew that $50 subscription
#2: Upsell them to back end services that range from $1,500 to $5,000/year.
And that’s where they make all their profits.
(Because these are digital services, there’s basically zero fulfilment cost.)
So the front end is really just a loss leader to get paying customers into the sales funnel.
In fact, those initial subscriptions only cover roughly half the cost of the advertising.
So, for every $1,000 they spend on customer acquisition, they get back $500 in front end subscriptions.
But they don’t lose $500 straight away because…
#4 They upsell immediately
The moment a new customer buys a subscription, he’s offered multiple upsells.
So, even though their basic offer is $50, their average cart value ends up being around $70.
Which means, because they’re willing to lose $30, they can spend $100 to get the customer.
Without this upselling, they’d only be able to spend $80.
That might not sound like a big difference, but that 25% difference — from $80 to $100 — means 25% higher bids and a LOT MORE traffic…and a LOT MORE new customers.
And that’s the point.
The ultimate purpose of this upselling isn’t just to make $20 more per customer… it’s to bid higher and get more customers.
#5 The other secret to bidding higher
The other way to bid higher is simple: have a higher conversion rate.
Think about it like this…
If you’ve got a 1% conversion rate and are willing to spend $100 to get a customer, you can bid $1 per click.
If you have a 2% conversion rate, you can bid $2 per click.
And, as I’ve shown, doubling your bids might mean 10x more traffic.
So that’s why…
#6 They hire the best copywriters — and pay them well
Agora is the #1 dream client for copywriters around the world.
Join copywriter discussion groups on Facebook or Discord and you’ll find people asking how to get hired by Agora.
Why?
Because…
It’s like the Real Madrid of direct marketing: you get the opportunity to work with — and learn from — the best direct response copywriters in the world.
They pay top dollar.
That’s different to most companies.
Most companies treat copywriters as an expense. So they hire the cheapest competent person they can.
That’s the dumbest thing you could possibly do.
After all, if doubling your conversion rate means you can double your advertising bids and get 10x more visitors…
And 10x more visitors and 2x the conversion rate equals 20x more sales…
Why on earth would you cheap out on copy?
It’s a false economy that could cost you 95% of your potential sales.
That’s why Agora pays writers very well.
But that’s not all…
#6 They also pay their writers royalties
That’s right, if you write a promotion for Agora, you’ll also get a royalty on the sales it brings in.
The royalty percentage isn’t huge — you’re not going to get 20% or even 10%.
But it’s quite common to see a single promotion bring in $1m or more, so royalties are often tens of thousands of dollars.
(e.g. 5% of $1m is $50,000.)
And if you can get a few successful promotions, those royalty cheques really add up.
So why do they pay royalties?
Partly to attract the best talent.
But there’s another reason…
If you pay a writer a fixed fee to write a salesletter, there’s a conflict of interest.
YOU want the best-converting salesletter possible.
The writer, on the other hand, wants to get this project completed, so he can move on to his next paycheck.
So he’s incentivised to write a good salesletter as quickly as possible.
Good enough to make the client happy. Good enough to get hired again.
But spending an extra few weeks polishing it to absolute perfection doesn’t make sense.
On the other hand, if you pay him a royalty, he’s incentivised to do every single thing he can to make that letter convert as well as possible.
It ceases to be a gig, and becomes an annuity that could keep paying him for years to come.
Especially because…
#7 Agora sends emails every day…lots of emails
As I said, Agora’s model is to get people in on a $50 offer, and then upsell them to high-ticket services costing $1,500 or more.
Well, most of that upselling happens every day via email.
And, because each of Agora’s divisions has multiple email lists, that means writing a LOT of email copy.
(At one point, I was regularly writing 20+ emails/week…and I was just one of their email writers.)
And it’s those emails that do the upselling.
Let’s recap
So let’s recap these 7 points…
#1: Customer lifetime value is the number that limits what’s possible for their business..
#2: Everything Agora does — from their business model, their upsells, their copy, their conversions, their email strategy — is designed to increase customer lifetime value.
This isn’t new to me.
I’ve been singing from this same hymn sheet since I got started in internet marketing back in 2006.
When everyone else was talking about “traffic, traffic, traffic,” I was saying you never have a traffic problem, only conversion problems.
That’s because, if you can turn visitors into money better than your competitors, you can buy all the traffic you want.
And that’s the principle that’s allowed Agora to become this $1bn/year Godzilla
Now, chances are, your business is never going to be turning over that sort of money, but that doesn’t mean you can’t learn from their approach.
All the best,
Steve Gibson
