Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Greg Stewart
[00:00:00] S0: What did you find in the book? [00:00:00] S1: Not trying to be all things to all people, especially early on. You can go after a big market problem, but you don't have to start there. We were trying to tell a story to everyone. The world was upside down. Consumers were up for grabs because your gym folks were at home. Everything was a mess. All these other companies are launching and we're saying, we're weights, we're body weight, we're gym, we're home. It was all things to all people. And it wasn't working. Like we weren't getting to the right person. Crossing the Chasm just helped me zone in on who is the most important person that we're talking to right now and who's finding success. And how do we speak specifically to that person and not go try to tell a story that's relevant to a Peloton user? It just helped me move away all the noise and narrow in on what mattered for this person. [00:00:00] S0: You have unlimited time right now to talk to us about solving this problem. How you cracked the code of growing through something like TikTok, the more detailed, the better. I just think obviously it was an A or the critical moment for the business early on once you had figured out the product. Just riff on the experience, literally what you did and what you learned.
· Greg Stewart
[00:00:00] S1: I had a whiteboard meeting. We're like, what are the growth loops that we think are available to us, that we think we have an advantage on, that we think we can do within our own team, that we can learn fast enough to get proof points and to dive in on, go all in on. And TikTok came out of that as the winner. What we started to do was make content and we knew nothing. I had this breakfast meeting with Edsel, who leads Branding Creative. And I was like, hey, man, do you want to work on TikTok with me? And he was like, sure. This guy is building all of our amazing campaigns. Like he's shooting for Nike and all these things. I need you to make TikToks with me. And it's just going to be me and you. He's got the creative mind. And we grabbed a coach and we said, hey, we're going to start an account from scratch. You're not on TikTok. We want to go learn. Give us all your video that you have on your iPhone. So you have this inventory of video. You have a smart, creative person. We started handles in the coach's names. Then we started to create content. And very, very quickly, we started to learn what was the content that worked. And we were dissecting every inch of it. What worked multiple times in a row? Why? What are the commonalities? How is this product used? It's not Instagram. It's like TV. People are consuming content for entertainment. And it's not a social platform. It's a media company. And so you have to think about what is the right content that is educational, provides value, that gets to the right person. Because unlike Instagram, where you have an audience that you're creating content for, you have to create content that the algorithm knows who to put in front of the right person. So it's all about the content. But the advantage for us at that moment was it didn't matter how many followers you had. You can start from scratch. Nobody knew how to go do this. But that first account that we started, I remember being on the playground with my kids. And Edsel was like, dude, one's ripping. And it was like a million views. And we're like, holy shit, that's amazing. That video took you two seconds to make. And it was like, do it again. We did it again. We took that account from zero to 20,000 people in 45 days. And we weren't thinking about paid at all.
· Greg Stewart
We were thinking about what is TikTok as a product? How is it being consumed? And what content wins? How do we create that content? So we got views. We had proof points of traction. And then we said, all right, we have Blink and Bio. Can we get somebody into the app? And we did very quickly. And we're getting the right people into the app. And all these things were like starting to compound. We started another account, did the same things. We're like, we can do this organically. It was three months. And then we said, let's start putting some money behind this. And see how it goes. We had no performance marketing team. We had no agency. I was absolutely against hiring anybody outside the company. And I just committed to learning how to be a performance marketer on TikTok. Because we didn't come from performance marketing or Facebook, we had no preconceived notions of how things should go. And when you talk to Facebook marketers who are moving to TikTok, they were applying all these rules and heuristics of Facebook and Instagram to TikTok. But these are two separate platforms. You have this Chinese app and a different algorithm. Why would those rules matter over here? I spoke at an all-hands for TikTok. And I was talking about some of our strategy. And I had conviction in what we were doing. And I was like, yeah, I make budget changes seven to ten times a day. And if you talk to the TikTok group, they're like, you shouldn't touch it for two weeks. It's the learning phase and all these things. Well, all those people came from Facebook. And all the rules they were telling me were Facebook rules. And at the end of the meeting, this woman comes up to me and she was like, that was really interesting because the things you had most conviction in are the opposite of what we're telling our clients to do. I realized pretty quickly that everybody is taking this mental model over here and applying it and not trying to figure it out from scratch. If it works, do it again. Who cares what they tell me? It worked. Do it again. That was an important piece of just thinking on our own on how this should go. I launched my first ad. Okay, we can do this. Very quickly, it was getting people into the app and then it just became a drug addiction. I mean, it's like trading. I'm bad at mental math, but I'm also fascinated by traders.
· Greg Stewart, Patrick O'Shaughnessy
And when I was at Goldman, I would interact with traders. It was just magic to me. All the screens and the attention span. Just like, how does this happen? But it felt like that for me, like I'm moving money around, driving growth for the business. And it became a video game. It's like, how do we beat the video game today? And I had this amazing creative partner in Edsel. I can figure out the ugly of how to be an ads manager person as my job. And those two things together unlocked that channel to just keep going, keep pushing on. [00:00:00] S0: I feel like the rewards for doing this in a consumer business are extremely high. And so lots have probably tried, but not lots have succeeded. What do you think it was that let you start to win the video game? Was it the knowledge of how to cut a video together? Was it topics? [00:00:00] S1: No, the creative side, what we learned is the For You page is making a decision on your content of who your content is for, and then shoving it to that person. So the first game on the creative side was, can we create content that gets to the right person for this coach? This is a CrossFit modality. Can we get to CrossFit people using content? And that was just iteration. We would do something. [00:00:00] S0: And so you'd say like, what does a CrossFit person care about?
· Patrick O'Shaughnessy, Greg Stewart
[00:00:00] S0: And so you'd say like, what does a CrossFit person care about? [00:00:00] S1: What do they care about? What's their problem solution statement? What should a coach say to get you in? We learned about hooks, what you say in the beginning, the first three sentences. It matters. What should a hook look like? What do I need to say? It gets a billboard that I need to get your attention very quickly. And we had a lot of bad content that didn't work. And then we had stuff that started to work. And we have these whiteboards where we dissect every inch. It's like, what is she wearing? What word was first? What was the setting of the gym? What was the movement? What did we say? And all of the insights of that come from knowing your customer. It's not, hey, we magically figured out TikTok. We did, but our edge was we know our customer inside and out. I had dissected these App Store reviews so deeply that we knew the words that were coming out of the mouth for people in CrossFit coming into the app. And we use that as our ammunition on how to speak to them and create compelling content, hooks that got to that person and told the story very fast that got them to keep going to follow it and come into the app. [00:00:00] S0: And just to orient in the history of the business, how much revenue or whatever was there at the start of this S-curve? And how quickly did it accelerate?
· Patrick O'Shaughnessy, Greg Stewart
[00:00:00] S0: And just to orient in the history of the business, how much revenue or whatever was there at the start of this S-curve? And how quickly did it accelerate? [00:00:00] S1: $4 or $5 million of ARR. We were getting some success, but like the beginning of the TikTok journey, it started at $3 million, but $5 when we started to put money into the machine. [00:00:00] S0: And it sort of exploded since there. [00:00:00] S1: It exploded. But one of the things we learned that was critical to TikTok is you have to own the creative. And this was like not typical for brands in our space. They would hire an agency. The agency would make creative. But we're learning all this stuff on the organic. And we're learning the iteration cycles are so fast. You can't just hand it off to an agency and hope that it comes back correctly. So we started investing in creators full-time. We had JDs on the website in 2023. It said full-time TikTok creator. People were like, what the hell is this job? But it's no different than social media jobs 10 years ago. That's not a job. Well, it is a job. It just wasn't a job yet. And it was the same dynamic. So complete control over the creative. We had these coaches on our team give us this edge on compounding learnings, this mini agency that was figuring it out across all of these different creators that we controlled, that we weren't just waiting and hoping that somebody on the other side of the fence would throw us the right thing. [00:00:00] S0: If that was the frontier then, what is the frontier now?