$100M Leads Audiobook Part 6 – Run Paid Ads Ep 591



In the Game podcast's special edition, Alex Hormozi discusses the power of paid advertising in driving revenue and the intricacies of creating effective ad campaigns. Hormozi emphasizes that despite his reputation for organic content, paid ads have been his most lucrative channel. He shares his personal experiences and strategies for structuring ads, writing compelling copy, and targeting the right audience to maximize efficiency. He also speaks about the initial investment in ads, acknowledging that while there may be losses initially, the focus should be on scaling up successful campaigns for significant returns. Hormozi's approach to paid advertising is analytical, advocating for tracking returns, budgeting based on customer acquisition costs, and aiming for client-financed acquisition, where the first month's profit covers the ad spend. He concludes by encouraging listeners to apply his methods and share the knowledge with others, hinting at the next chapter's focus on amplifying advertising strategies.

Summary Notes

Introduction to Paid Advertising

  • Hermosi shares his extensive experience in running paid ads, which has been the most lucrative channel for him and his portfolio companies.
  • He emphasizes the importance of understanding the nuances of ad creation and monetization.
  • The goal is to provide listeners with the lessons learned from expensive mistakes without having to experience the cost.

"I've run a lot of ads in my day. I would say it's the primary channel that I've made the most money from in my life."

This quote highlights Hermosi's expertise and success in the field of paid advertising, setting the stage for the insights he will share in the podcast.

The Power of Paid Advertising

  • Paid advertising is compared to a casino where skill can make you "the house."
  • Hermosi's personal story begins with skepticism about Facebook ads and leads to a successful ad campaign for a gym.
  • The anecdote demonstrates the potential of well-executed paid ads to drive significant revenue.

"Advertising is the only casino where with enough skill, you become in the house."

This metaphor illustrates the idea that with the right knowledge and strategy, paid advertising can be a highly profitable endeavor.

The Importance of Targeting in Paid Ads

  • Paid ads allow you to reach a cold audience efficiently by trading money for reach.
  • The effectiveness of paid ads depends on targeting the right audience and crafting compelling messages.
  • Efficiency in advertising is about balancing ad spend with returns rather than just maximizing reach.

"Paid ads work by paying another person or business to put your offer in front of their audience."

This quote explains the fundamental concept of paid advertising, highlighting the importance of reaching the right audience to ensure profitability.

Crafting Successful Paid Ads

  • Hermosi outlines a step-by-step approach to creating efficient paid ads by narrowing down the audience.
  • He emphasizes the importance of starting with a broad audience and then refining the targeting to increase the percentage of engaged leads.
  • The strategy involves expanding the audience size gradually while maintaining profitability.

"Narrowing down who sees our ad so we have the highest chance of getting the right type of people to respond."

This quote underscores the critical process of refining the target audience to improve the efficiency of paid ads.

Selecting the Right Platform for Advertising

  • Hermosi provides criteria for choosing an advertising platform, including familiarity, targeting capabilities, ad formatting, and budget considerations.
  • He suggests observing where competitors place ads as a starting point.
  • The key is to start with one platform that meets these criteria and learn by observing ads on that platform.

"Find a platform where these four things are true."

This quote outlines the essential factors to consider when selecting a platform for paid advertising.

Targeting the Right Audience

  • Hermosi explains the importance of targeting in ensuring the right people see your ad.
  • He details how to use platform targeting options and lookalike audiences to refine the audience for more efficient ads.
  • The goal is to achieve the highest number of potential buyers seeing your ad.

"You only have one goal when targeting get the highest number of people you think will buy your stuff to see your ad."

This quote captures the essence of targeting in advertising, highlighting the objective of maximizing the visibility of your ad among likely buyers.

Crafting the Ad Content

  • Hermosi stresses the significance of the ad's call out, value proposition, and call to action.
  • He shares his approach to consuming ads as a learning experience to improve his own advertising skills.
  • The structure of an ad should grab attention, maintain interest, and guide the audience to take action.

"Call out plus value plus call to action."

This quote summarizes the essential components of an effective ad, emphasizing the importance of each element in engaging the audience and prompting a response.

The Importance of Callouts in Advertising

  • Callouts are used to grab the audience's attention amidst a noisy environment, similar to the cocktail party effect.
  • Callouts can range from very specific to broad to capture attention from a targeted individual to a general audience.
  • Effective callouts are tailored to be specific enough to attract the right people while being broad enough to capture a wide audience.
  • Paying attention to advertisers' callouts can provide insights into effective marketing strategies.

"So our goal with callouts is to harness the cocktail party effect and cut through all the noise."

This quote emphasizes the objective of using callouts in advertising, which is to stand out in a crowded and distracting marketplace by leveraging a psychological phenomenon where people can focus on a particular stimulus while ignoring others.

Types of Verbal Callouts

  • Labels: Words or phrases that categorize people based on features, traits, titles, places, or descriptors.
  • Yes Questions: Questions that self-qualify individuals if they answer affirmatively.
  • If-Then Statements: Conditional statements that lead to a decision if the conditions apply to the listener.
  • Ridiculous Results: Claims of extraordinary, unusual, or highly desirable outcomes to pique interest.

"If someone says your name, only you look. But again, they all get attention, and I try to make my callouts specific enough to get the right people and broad enough to get as many of them as I can."

This quote explains the strategy behind crafting callouts that are targeted yet broad enough to attract a substantial audience, using the example of how hearing one's name in a noisy environment prompts an individual response.

Nonverbal Callouts in Advertising

  • Contrast: Utilizing visual or auditory elements that stand out immediately, such as colors, sounds, and movements.
  • Likeness: Using visual representations that resonate with the target audience's identity, such as ethnicity, age, gender, and personality.
  • The Scene: Depicting scenarios or environments that relate to the viewer's experiences or desires.
  • Mascots: Creating a consistent and reliable spokesperson that embodies the brand without the limitations of human actors.

"Attractive people almost always get more attention than plain looking people. Moving stuff always gets more attention than still stuff."

This quote highlights the use of visual contrasts and movement to capture attention in advertising, suggesting that dynamic and aesthetically appealing elements are more likely to engage viewers.

The "What-Who-When" Framework for Creating Interest

  • What: Understanding the value proposition of the product or service and how it addresses the customer's desires and pain points.
  • Who: Considering the status-driven nature of humans and how the product or service affects the customer's social standing.
  • When: Reflecting on the impact of the product or service across different time periods—past, present, and future.

"The what who, when framework. In the words of David Ogilvy, the customer isn't a moron, she's your wife. So you know what that means. Write to her."

This quote introduces the "What-Who-When" framework for creating compelling advertisements, invoking David Ogilvy's famous line to remind advertisers to communicate with respect and understanding of their audience's intelligence and circumstances.

Maximizing Ad Effectiveness Through Continuous Testing

  • Testing numerous variations of callouts and ads to determine the most effective approach.
  • Recording multiple ads and first sentences or questions to see which ones resonate most with the audience.
  • Applying the best callouts across all ads to optimize engagement.

"With 30 callouts and ten main ads, you can make 300 variations in a matter of hours. Once you know the best call out, you apply to all the ads."

This quote advises on the importance of creating a large number of ad variations to test which callouts are most effective, then applying the best performing ones to all ads for maximum impact.

Specificity in Advertising Copy

  • Discusses the importance of being specific in ad copy to increase efficiency.
  • Advises against making the copy too long, as it may decrease efficiency on certain platforms.
  • Recommends using audio and visual elements to add specificity without lengthening the ad.
  • Emphasizes the balance between specificity and ad length for optimal ad performance.

"The more specific your copy, the more efficient it can get, but also the longer it tends to get. And if it gets too long for the platform, it lowers efficiency."

This quote highlights the trade-off between specificity and brevity in advertising copy, suggesting that while detailed ads can be more effective, they must also be concise enough to fit platform constraints.

Value Drivers and Advertising Angles

  • Explains the strategy of combining value drivers and their opposites to create interest in the product.
  • Covers the use of multiple perspectives and timelines to show the benefits of a product.
  • Differentiates between long and short ads based on the number of angles they cover.
  • Encourages using a variety of angles within the constraints of the ad format to engage potential customers.

"When we combine everything we can to get the prospects moving towards the four value drivers while also getting them away from their opposites, the many perspectives we can show them gaining status from, and the timelines for each, this adds up to why they should be interested."

This quote explains the comprehensive approach to creating ad copy that addresses various value drivers, perspectives, and timelines to pique the interest of potential customers.

Inspiration from Existing Ads

  • Suggests using databases of existing ads for inspiration.
  • Recommends analyzing successful ads and their components, such as call-outs, value elements, and CTAs.
  • Advises breaking down numerous ads to gain a better understanding of effective advertising strategies.

"If you search platform ad library in a search engine, in a few clicks, you will find them."

The quote provides a practical tip for finding a database of ads to study, which can help in crafting successful advertising campaigns.

The 'What, Who, When' Framework

  • Details the 'What, Who, When' framework for understanding product value and its impact on customer status.
  • Encourages showing how a product can change a prospect's status in the eyes of others.
  • Highlights the importance of demonstrating the consequences of buying or not buying a product.
  • Notes that copywriting skills are important but should not overshadow entrepreneurial skills.

"Get as many advertising angles with your core offer as you can with the what, who, when framework."

This quote summarizes the strategic approach to advertising, which involves exploring various angles to present a product's value to the customer.

Importance of Clear Calls to Action (CTAs)

  • Stresses the need for clear and easy CTAs in ads.
  • Advises spelling out the exact action the audience should take.
  • Recommends making website addresses short and memorable for easier CTA implementation.
  • Discusses the use of urgency, scarcity, and bonuses to strengthen CTAs.

"Tell them exactly what to do next. Spell it out. Click this button. Call this number reply with yes go to this website scan this QR code."

This quote emphasizes the necessity of direct and unambiguous CTAs to guide the audience towards the desired action.

Landing Page Design

  • Advocates for simplicity in landing page design to facilitate testing.
  • Describes three favorite landing page layouts.
  • Emphasizes consistency between ad copy and landing page content.
  • Discusses leveraging the concept of consistency from Robert Cialdini's "Influence" to encourage further action.

"Make your landing pages match your ads. People click an ad because you promised them some benefit."

This quote underscores the importance of maintaining a consistent message and design from the ad to the landing page to avoid confusing potential customers.

Engaging Leads and Advertising Efficiency

  • Outlines the process of turning interested individuals into engaged leads.
  • Explains the three core elements of every ad: call outs, value elements, and calls to action.
  • Questions the efficiency of the advertising process and how well it turns interest into action.

"All we have to do now is get their contact information. Step four, get permission to contact them after they take action."

The quote delineates the final step in the advertising process, which is obtaining permission to follow up with potential leads, thereby making the ad interaction more meaningful.

Scaling Paid Ads

  • Discusses the three phases of scaling ads: tracking money, losing money, and printing money.
  • Emphasizes the importance of accurate tracking to ensure profitable advertising.
  • Acknowledges that initial losses are part of the investment process in creating a successful ad campaign.
  • Advises on budgeting for ad testing based on the cash collected from a customer in the first 30 days.

"Phase one, track money. Phase two, lose money. Phase three, print money. Let's break them down together."

This quote presents a succinct overview of the stages an advertiser goes through when scaling paid ads, from initial investment to potential profitability.

Building an Advertising Machine

  • Recognizing that other businesses in the same space run profitable ads suggests the potential for one's own business to do the same.
  • Achieving profitability in advertising can recoup previous losses rapidly.
  • The cost of creating an effective advertising system is an investment that should be measured over a long time horizon.
  • The concept of a "machine that prints money" is used as a metaphor for a successful advertising system.

Once they were profitable, they made their year's worth of wasted money back the next month.

This quote emphasizes the rapid return on investment that can be achieved once advertising becomes profitable, highlighting the importance of persistence and long-term measurement of advertising success.

Phase Three: Print Money

  • Upon achieving profitability in advertising, the focus shifts to maximizing investment.
  • The decision on ad spend is based on the desired number of customers and the business's capacity to serve them.
  • Budgeting for ads involves calculating the cost per customer acquisition and adjusting for scalability inefficiencies.

If you're making back more than you spend, the answer is simple, spend as much as you can.

This quote captures the essence of phase three, which is to reinvest in advertising aggressively once it yields a positive return on investment.

Cost and Returns Efficiency Benchmarks

  • Paid ad efficiency is measured by comparing the lifetime gross profit (LTGP) of a customer to the cost to acquire a customer (CAC).
  • LTGP is preferred over lifetime value (LTV) as it accounts for actual deliverable costs.
  • A good LTGP to CAC ratio is observed to be above three to one for scalability.
  • Improving this ratio can be achieved by reducing CAC or increasing LTGP, ideally both.

I compare how much I made against how much I spent.

This quote explains the process of evaluating advertising efficiency, which is crucial for determining the profitability of paid ads.

Client Financed Acquisition

  • The concept of client financed acquisition is introduced to address cash flow issues.
  • Ensuring that customers pay back their acquisition and fulfillment costs within the first 30 days allows for sustainable scaling.
  • Upselling immediately after acquisition can help achieve a breakeven point quickly.

If your customer spends more than it cost you to get and fulfill them in the first 30 days, then you have the funds to scale now and forever.

This quote outlines the strategy of client financed acquisition as a solution to cash flow problems, enabling continuous reinvestment in customer acquisition.

Personal Lessons from Paid Ads

  1. Distinguishing between sales and advertising problems is critical to addressing the correct issue.

    Confusing an advertising problem with a sales problem cost them an estimated $30 million in enterprise value.

    This quote highlights the costly mistake of misidentifying the nature of a business problem, which can lead to significant financial loss.

  2. Successful free content can often be repurposed into effective paid ads.

    Some of the best paid ads I've ever run come from free content.

    This quote suggests leveraging high-performing free content as paid advertisements, which can lead to efficient marketing strategies.

  3. Self-limiting beliefs about one's abilities can hinder success.

    Never say I'm not techie or I hate tech stuff. It just keeps you poorer than you should be.

    This quote encourages a mindset shift to overcome self-imposed barriers to learning new skills, such as running ads.

  4. Starting with paid ads requires a willingness to invest and learn from the experience.

    Spend the gosh darn money. Rip off the band aid as soon as you do, you're no longer an observer. You're in the game.

    This quote advocates for taking action in ad spending to transition from theory to practical experience.

  • Paid ads are characterized as a high risk, high reward method of scaling lead acquisition.
  • Knowledge of metrics and efficiency is key to successful ad campaigns.
  • The skills learned from other marketing methods are transferable to paid ads.
  • Starting with a budget you are willing to lose is part of the learning process.

Paid ads are the fastest way to scale. How many leads you get?

This quote underscores the potential of paid ads to rapidly increase the number of leads, provided that one understands the underlying principles of ad efficiency.

Conclusion of Core Four Advertising Methods

  • The core four methods are the only ways a single person can advertise their offerings.
  • The next chapter will focus on amplifying these methods to scale companies.

This concludes the section of the core four, which is the only four ways that any one person can advertise, meaning the only four ways that any one person can let another person know about their stuff.

This quote summarizes the completion of the discussion on the core four advertising methods and sets the stage for exploring how to enhance these strategies.

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