Would you dismantle a $50M Facebook Marketing Agency to build something greater?

The story starts as it did for many Facebook marketing agencies out there. Affiliate offers, from affiliate networks and wheelin’ and dealin’ your traffic source reps for premium traffic.

What might be different is that Jason went on to build a nationally acclaimed 40+ staff performance Facebook marketing agency.

From positioning and branding yourself properly to reframing your efforts in order to reel in those whale advertisers. But, sometimes you get presented with a decision: take apart something you’ve built over X years and restructure for future growth or settle.

The lessons you’ll learn will position you, if you accept, to lift your affiliate marketing to the next level – a big contender as a Facebook marketing agency.

Speech by Jason Kryski | Co-founder & Managing Partner, Strawhouse, Inc.

Jason Kryski Speech Transcript

Hey everybody.

Thanks, Eric for the kind introduction.

I’m Jason Kryski.

And I’m gonna run you through a bit of a deck that I put together about what we’re doing with our company now that we’ve grown into the size that it’s at.

Background

Let’s go through this.

A little brief background on me. Kind of how I came into the industry and what I’ve been doing.

So this is a timeline.

In 2009, I discovered affiliate marketing. I had a friend who was driving a car that was way too nice for him. And I had to know what he was doing.

So I harassed him until he showed me what he was doing and started to learn through that.

In 2010 – 2011, I crushed it.

And 2012, there was a medical condition preventing me from crushing it to my normal standards. So I’d take some time off until 2012 to resume crushing it.

No Silicon Valley fans in the audience apparently.

So I gotta push this button a lot.

Yeah, where are we, here? Alright yeah.

I was actually in high-volume email. So I was a filthy spammer for 3 years and I worked mostly honing my marketing skills, crafting subject lines.

I was writing subject lines that I was going to open, but no one else opens. So I had to learn how that worked.

And then I was doing like deliverability engineering which is pretty technical kind of email shit.

So other than that, kind of moved forward a little bit, and then I founded Strawhouse in 2014 with my business partner Naveed.

That’s basically what this whole deck is about. How that happened and the whole kind of journey there.

And now they asked me to do a keynote. I’m more of a smoky backroom guy, instead of a stage bright lights kind of person. So you guys got to be gentle with me.

Alright, so how are we gonna do this?

This is basically a chronological story on how things have happened.

The mistakes that were made. Lessons that were learned.

Awesome shit is gonna ensure.

Gonna inadvertently curse a bunch.

And we’re gonna get a little bit personal.

2012: Post Initial Learnings

So post initial learnings. I’ve been at Affiliate World for about 3 years.

For me, it wasn’t an easy initial start. I had to kind of really grind away for about a year and a half.

A lot of like family, friends, everybody was telling me that it was not worth it and I shouldn’t be doing it.

But I kind of stuck through it and then found a lot of success.

I was making 1% money in email. And I was working maybe an hour a day. I’m sitting by the pool just hitting refresh, checking those stats.

And I was partying 5 nights a week and doing a lot of like heinous shit.

I wasn’t really planning for my future, I was taking pictures of myself in the mirror that looked like this. I was basic affiliate bro.

So how did I move from that to where we are now is, this whole story.

The Whole Story

Life at that point, it was easy but it was not fulfilling.

All we had was, basically, a high paying job.

I realised that I felt wanted to be able to do something else. I wanted to be able to help other people make more money, I wanted to be able to create a lasting impact and legacy.

I have a son and I wanted to be able to tell him what I did for a living and feel proud of it.

And I wanted to start being able to move forward, take the next step.

I felt like I was kind of stuck in a life that was giving me money but it wasn’t giving me much else in terms of satisfaction.

2013: Met A Guy On The Internet

So in 2013, I met a guy on the internet.

That guy was my business partner. We actually met on STM, on the forum, if you guys are part of that.

And, I realised that what happened is, we were kind of 2 sides of the same equation.

So we coincidentally lived in the same town in Canada, in the same building, like a floor apart.

It was really weird.

And I was selling Facebook infrastructure. And he was helping people lose weight in South America.

So, we kind of horse traded some services together for a while. But. we realised we’re like the yin and the yang.

I was a business guy and a tech guy. And he was a really proficient media buyer.

So we figured let’s start a company together.

What could go wrong?

2014: Strawhouse was born

So 2014, (we) started the business. And we made the name up on the way to the lawyer office.

We thought it was really funny because we were doing black-hat. We thought the business could just blow over.

And we thought we would kind of name it as a bit of a nod to that.

Yeah, we made our first hire. This guy, he would go on to lead our whole media team of about 20 people. He became my best, personal friend.

And I have to fire him like 3 years later, a week before Christmas time for malfeasance.

There’s a whole bunch of interesting things that happened along that journey.

We had no idea what we were doing but we were subject matter experts.

We were grinders. We figured that we could figure this out and we could move forward.

We had a lot of success.

This is our first office. It was green, cash money.

One Year in and $20,000 From Insolvency

So like 1 year in, we’re grinding away, we’re doing a lot of black-hat stuff. We’ve got a ton of infrastructure.

For some reason, it did not click in the way that we were working. We ended up being about 20 grand from insolvency at this point.

We’d done like a pitiful $2 million in revenue in our first year. We had a lot higher expectations than that.

And then we’ve grown the team to about 5 people, but we’re playing this cat-and-mouse game still.

So our overhead on infrastructure was huge. And it just didn’t seem like a sustainable thing.

We weren’t getting the results we wanted. So we wanted to change things.

There needed to be a better way.

So, at this point in time, we changed up our hats.

2015: Changing of the Hats

We said we draw a line in the sand, it’s no more black-hat, and it’s done.

We want to build long-term business value instead. And this point, direct-response e-commerce was just becoming a thing and we took a calculated bet.

We figured this is going to be able to grow and we’re going to double down on this.

So we started to forge great relationships with like-minded people.

So people on the traffic side. People on the on the advertiser side. And we built really strategic relationships.

This is my co-founder Naveed holding up a Giddy Up t-shirt for you guys. You know Giddy Up?

And yeah, so basically we came up with a new vision.

The New Vision

One of my favourite quotes from my days when I was in sales before I was in marketing, is this one from Zig Ziglar.

“You will get all you want in life, if you help enough other people get what they want”

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That’s really the ethos by which I live my whole life, and by which we run the whole company.

The 3 kinds of pillars of the new business we’re that we build relationships or valuable relationships with the best traffic sources, reliable traffic, quality eyeballs.

We build relationships with advertisers on the fringe of the CPA industry.

So not like mainstream offers that everybody’s competing for, but we look to start investigating who was spending but didn’t have representation on a network.

And then we reached out directly to go after those guys.

We experimented with new technology and ad units really aggressively.

Reliable, Quality Eyeballs

So the reliable traffic, quality eyeball part, we went after Facebook as our primary platform.

We would double down on it because we wanted to be able to master it. And we felt there was a lot more value in that, rather than spreading ourselves too thin.

And we just kind of wanted to be able to make it.

We recognised that Facebook was a faster-growing platform that had more data available to it so that was a better place for us to park our time and efforts.

So the biggest thing is that I reached out to Facebook on LinkedIn, when you could still do that, out of their Toronto office.

And then just told them that we were running some e-commerce products and we needed some support and help to get that off the ground.

They reached back out to me.

And I started putting some conversations together.

But what I did is, I made sure that I was talking to them in the language that they understood, that they wanted to hear.

I wasn’t talking in my CPA affiliate language.

I did a little research to understand what do these guys want to talk about? How do they want to hear from me and what are their goals?

Who’s Spending

On the advertiser’s side, it’s a shit ton more work.

I really didn’t have an appreciation for a lot of things that agencies and networks did previously.

I just thought they took a bunch of margins and didn’t do a lot of stuff but there is a lot of things that they do.

So there was a lot of education, a lot of hand-holding. We had to set expectations.

We had to build funnels, we had to do a lot of other things.

But more so, we had to find out what their goals were, what they are trying to achieve.

They’re not just trying to get some sale for some dollar value, they’re trying to get like an LTV.

And what does that even mean? And how do we help them achieve that?

And we felt like if we couldn’t help them achieve those things, we didn’t really have much business helping them at all.

So we would just kind of move on.

First mover advantage

First mover advantage, so this is where we were investing a lot of money in time in innovation.

Testing new ad units doing projects that just weren’t really directly affecting our revenue but were kind of fliers.

So by doing this, we were testing video very early with a lot of just stock video.

But what we found is that Facebook was artificially driving down the cost of video to get adoption from brands and agencies.

And that they never expected it to work for direct response.

We were just able to light it on fire.

So, we actually were Facebook’s largest video advertiser or like 3rd largest video advertiser globally for 3 quarters in a row.

It was just bananas.

So we were testing new ad units. And they always drive new user behaviour, the lower CPM’s, etc.

Critical Mass

So this is really the point that the company really changed.

So by implementing those kind of pillars and driving this forward, we were able to do something that we didn’t think that was gonna happen the way that it worked with white-hat.

Facebook never planned for video to work for DR. And they had to change their whole strategy once we were able to have a success that we were.

They have all this data, all these executives, it didn’t pan out. It was it’s really interesting.

So, we ended up with traffic that had higher intent that was about half the cost. We’re cranking like to 200 to 300 grand a day on ad spend.

At this point, we just had to whole strap in and hold on.

We double down on growth to like a reckless point.

So a lot of people ask me, “Jason how did you guys scale the finance at this point?”

How Did The Finance Scale

And so we did it all on a VISA.

We had to personally guarantee. We were rolling a 100% of profit back into media spend to be able to continue to scale and grow.

I would not recommend that I mean if we would have gotten a non-payment from somebody. we would have been completely fucked.

I lost my house.

But this way we were kind of moving forward.

At one point, it was so fast and furious. I’m looking at the books and I’m like, “I would think we’ve lost a million dollars somewhere”

And if you overpay VISA too fast, like pay them every day over 50 grand, that money ends up in some sort of VISA purgatory.

So, you have to call them and they’re like, “Oh yeah, we have your money.”

So make sure you have a good accountant, that’s a great thing.

I’m a guy that’s not really good transactional-numbers guy. Making a really good hire there was really important for us.

So after all this success, we kind of became the wolf.

Logo: The Wolf

We didn’t have this logo when we started. This was something that we developed after we had this amazing success.

And now the logo doesn’t make a lot of sense, but it is fun.

So basically, the lesson was because we invested in innovation at the rate that we were.

Now, we spend about 10% of all of our profit.

It goes into these different kinds of flyer projects, testing, innovation, different kinds of things.

Transformation

So this was really the point where we had done well. We kind of reached a critical mass.

We’d made a lot of money but we wanted to transform the business even further.

So just as a matter of habit, I take at least 5 random meetings a week. Coffee meetings, phone calls, whoever.

And I ended up having coffee with the guy who I’ve recently put into position as CEO of Strawhouse.

Now I’m Chairman, I run it from a board.

And I go to a lot of networking events. And basically having these conversations with people.

You don’t have to have all the good ideas yourself, you just have to recognise when other good ideas are there.

And how to be able to seize them and move forward with them.

So I talk with people inside our industry, outside of our industry. You never really know what’s gonna spark an epiphany that’s going to drive forward some change.

So the big idea that caused the further transformation of the company was, I was having coffee with the guy who’d become CEO, his name’s Brent.

He’d spent about a year in the valley working on different projects.

And he’s like, “Well this performance marketing that you’re doing why it wouldn’t work with these new emerging, venture-backed companies?”

And I’m like, “Well that’s a really good fucking idea, why wouldn’t it do that?”

So we started looking at that.

We realised that performance marketing really is just growth hacking with a different business model.

2016: Set Up Shop in NYC

So we started to move forward with that. We set up shop in New York at the end of last year.

And we started to just kind of grind out.

I hired Brent as my Director of Corporate Development. And then we started to just build some incredible relationships.

We started walking in the front doors of different venture and private equity companies.

And people asked me, “Well how did you do that? Because that’s seemingly challenging.”

But what we were doing is we were offering value to these guys. We were saying “Hey, look show us your portfolio companies and then we can help grow them for you at no cost.”

And that’s music to their ears.

We were doing that because that’s a really great way to create deal flow. And these private equity venture guys, they keep telling everybody else.

They’ll talk amongst themselves. And we have this huge pipeline that kind of came from it.

Deal Flow Firehose

So we ended up with this Deal Flow Firehose.

So we had a lot of success, we did some market validation around performance for these venture-backed companies.

Now what?

We had to start building the team. Some diversification.

We realised we didn’t actually have all the pieces in place to support what we were selling.

And you know, turns out scaling media teams is actually pretty challenging, everyone knows that.

So, at this point, we’re about 20 people. And we started thinking more about structure, execution, and deliverables.

Growing The Team

We didn’t have a great strategy with growing our team.

We were just doing the whole, “Is this somebody I would have a beer with? Would I spend my time in an airport with this person for 6 hours?”

We live in a really small town, like 120,000 people.

And that wasn’t an amazing set of criteria to start adding people to a growing business with a specific set of skills that you could only learn through mentorship.

So that wasn’t a great idea but what we did have was a great culture.

We had hard-working people who cared what they were doing.

We had like taco emojis for some reason.

I don’t where that started but we have all these kinds of really odd interesting little things that are like inside jokes that make people feel at the time, made it feel like a family.

And that wasn’t really a great idea either.

That was one of the things where I think it was Reed Hastings from Netflix said that, Netflix isn’t a family, it’s a sports team.

And that’s a really important distinction because when you’re growing a company and you’re younger and you don’t have a lot of experience and things are early, there’s a lot of comfort in making it feel like a family.

But it’s tough to scale that kind of culture.

So there was a lot of things like the culture was masking the individual challenges of some people.

We found some really great people. We also invested a lot of money in some people that didn’t work out.

And we adopted a lot of Facebook’s ethos around like, “nothing is someone else’s problem,” those kinds of attitudes.

Agency Tip: Create Functional Teams

So, we started to organise the company into functional teams as we ramped up our hiring process.

We were pretty enamoured with Andy Grove, who was the CEO of Intel for 20 years or whatever, with his book “High Output Management”, which basically just explains how to build an assembly line, like build a factory.

And the challenge with an assembly line or a factory is it’s really only as strong as its weakest part.

So we were finding that there was constantly bottlenecks with inexperienced people or processes or things because we were hiring a couple of people every week.

Our process changed every couple of weeks and it was really a lot of work to be able to maintain communication appropriately.

So another kind of thing that we did that was not ideal is, we created a management layer. A director layer that comprised itself of subject matter experts.

So my CTO was one of the top 15 machine learning guys in the world. That was a bad idea.

My CRO guy was the top CRO guy at HootSuite we recruited. That was a bad idea.

These are super smart guys but they didn’t have any management experience. And they basically took them out of doing the thing that they were amazing at and put them into a place where they were able to create a lot less impact.

So we had to change that out.

2017: Getting Bottom Heavy

By mid-2017, we were getting pretty bottom-heavy. So about at least 30% of our team was fresh out of college.

Not only were we teaching them how our industry worked, but we were teaching them how to be employees.

They’d never worked for anybody before. I don’t know what the appropriate number or the percentages to make that mix of new people but that was way too high.

We’re primarily highlighting them as media buyers, local people, and learning for the basics.

Naveed had put together a really amazing training program to build people into media buyers.

But our kind of output, our quality of work that we were doing, and we consider ourselves the best in the world of doing this.

It started to wane and kind of fall off.

Communication issues started to emerge. Attitudes started to emerge.

There were some challenges. And I was no longer proud of the work that we were turning out.

So about this time when these kinds of team issues started to surface, and this is earlier this year.

Facebook’s Moving Target

Facebook, as we all know with policy, it can be a moving target. It’s one of those things where the way they say it is can be a little bit different.

So we work closely with them. And we try and ensure that we’re on the right side of what they want.

But just because you’re on the right side one month, doesn’t mean you’ll be on the right side the next month.

So, it’s a fuzzy kind of grayish-whitish area.

So a challenge emerged. We have a really significant client which we really enjoyed working with. And unfortunately, Facebook didn’t want us to work with him any longer.

They basically gave us an ultimatum.

They said, “You’re with us or you’re against us.”

And Facebook was such an important part of our business.

We hitched our wagons so tightly to them that

1. It would have been very challenging for us to reorient the business around new traffic; and
2. We didn’t really want to.

So, unfortunately, we let that client go.

And it was tens or hundreds, probably tens of thousands of dollars a day at that point in profit that we were basically turning away.

I’m not sure what most people in this room would have done if they would have kind of gone grey or gone black or move that revenue around.

But we decided this side with Facebook on that. And so that decision to decide with Facebook had really significant implications.

Because when we made that decision, we didn’t know this.

But in the background, Facebook was kind of waiting to stop working with certain kinds of performance marketing companies in that performance marketing vertical.

And so by stopping working with that client, it’d actually saved us to maintain the Facebook relationship that we have now.

Mid-point 2017: The Meeting

Yeah, so this is the midpoint of this year. I end up going down to the US.

And I have the meeting with the CEO of one of the Big Five agencies, the largest digital agency. I just wanted to kick the tires I think.

We built something pretty good.

I was kind of unsure as to how much I wanted to keep building it. And I kind of wanted to know what’s it worth and do they want it.

So I was kicking the tires and they quickly got to some terms. So just the multiple on a performance marketing company like ours is about 5 – 8 times earnings.

And yeah, I didn’t really like the terms that they said. And I wasn’t really excited about it when they said it.

They didn’t really value the technology that we built.

And a big part of our business has always been technology. About 20% of our team has always been development. We’ve built to internal platforms that have to assist in media buying and make us more effective as a company.

Now What?

So I didn’t, at that point, didn’t really know what to do.

Do I sell the company, do I sell my soul to one of the Big Five agencies? Do I just try and keep fucking with the traditional advertising model?

It was a really difficult time.

It was hard to understand if I should realise that all the value in the company or if I should help everybody who’s in the company who has options exit and walk away with some money.

So not just that but the vision that we had for the business we had kind of achieved and we didn’t have a bigger understanding of what we wanted to do.

And in that period of time, I kind of entered a bit of, we could call it a personal spiral, where I was not motivated to go to the office.

I no longer enjoyed my time.

Took Some Time

So I did just that. It’s like I took some time, a lot of time actually.

It was 2 weeks which doesn’t sound like a lot of time but when you’re running a fast-paced 40 person company, just fucking off for 2 weeks is a lot of time.

So I went and hung out with a lot of really smart people at masterminds. I took my son to Italy and we hung out.

And when I got back I knew what I wanted to do, but I didn’t know how.

I knew that I didn’t want to make a scarcity-based decision, I wanted to make a decision from a place of abundance.

I pushed this button a lot.

The Restructuring

So I got back, I knew I want to make a change. We started to do some restructuring.

Mediocrity is not acceptable in the organization.

That was starting to creep in. People were saying this is good enough.

That’s not anything that I’ve ever liked or stood for. And that was a big challenge for me.

So deciding that was something that was not ever going to happen in that business, it was really important.

So at that point in time, I dismissed 20% of the team. And got rid of, I believe it was about 10 people. We only kept the A players.

And the most incredible thing happened.

I knew that we weren’t doing as good a job as we could have done, but within 72 hours, our revenue went up 4 times.

I had no idea that we even had the capacity to drive that based on the deals that we were currently running.

And it was mostly based on the kind of degradation of the attitude amongst a lot of the team.

So at that point, a lot of change occurred. And I decided to break it out.

And, we always had 3 kinds of divisions in the company.

We had performance media which we ran for partners and clients.

We had our internally own consumer packaged good brands. we didn’t really pay attention to those. It was one of those 10% projects.

And then, we had the technology we invested in about 1.5 million dollars.

And those were the kind of areas of focus.

The Three Companies

So we take those and we split them all into three companies.

So we still have Strawhouse Inc, which is the performance media company that we run for partners. We run it like a venture firm where we select the companies we want to work with.

Then we have cpgLABS which take the existing consumer packaged goods companies that we have.

And then additional ones that build out and incubates brands to exit. Think of like, building a toothbrush company that you can sell to Procter & Gamble.

And then we’re SAASifiying our internal media buying technology into a company called UnCoil.io.

Quarter 4: 2017

In Q4 this year, we’ve been able to turn things around to be able to get on track to have the best quarter in the company’s history of higher revenues, better margins.

We have a happier team who’s tighter and more focused than ever.

Regrowing that team through thoughtful and considerate recruiting, where we’re more focused on people who have more experience or more desire, looking at people who have.

One of the best questions that I ask people now, is like “What was your first job? How old were you when you got your first job? What were you doing?”

And usually the younger they are when they had their first job or the more entrepreneurial that job, the better the member of the team they’re gonna be.

So at this point, we needed to come up with a new vision.

We split these companies into 3 pieces.

And it’s basically now at this point I’ve got two additional companies that I want to build.

And then kind of further to that, they’re all gonna function individually, profitably.

So Strawhouse, cpgLab, Uncoil, other 2 new companies, we grow them using the kind of strategies and marketing that we’d use to grow Strawhouse.

And they’re all profitable individually but they all combine to be able to satisfy a larger vision where I’m gonna go and raise a private equity fund that will focus on acquiring just kind of small to medium-sized companies across North America.

And start turning them into direct-to-consumer companies.

So that’s the kind of journey that we went on. And this is that’s the vision that we’re moving forward, and yeah.

Thanks, guys, this is about it for me.