The Power of AI: Discovering Its True Capabilities

Last updated: Jun 5, 2023

This video by Neil Patel discusses the true capabilities of AI and how it affects marketing strategies for large corporations.

The video titled 'The Power of AI: Discovering Its True Capabilities' features a conversation between Neil Patel and Eric Siu, where they discuss the impact of AI on marketing and the true capabilities of AI.

They talk about how big corporations generate most of their revenue from their brand and a combination of all channels, rather than just one channel like SEO or paid ads.

They also discuss controversial marketing tactics, such as giving away tools for free and not paying for email signatures.

Overall, the video explores the potential of AI in marketing and how it can be used to improve customer experiences.

  • The video discusses the true capabilities of AI and how it affects marketing strategies for large corporations.
  • Large corporations generate most of their revenue from their brand and take an omni-channel approach to marketing.
  • Controversial marketing tactics, such as giving away tools for free, can be effective for large corporations.
  • The big cost for companies is to acquire customers, but there are ways to make it more efficient and affordable.
  • Acquiring Answer the Public and UberSuggest was a risk, but it was profitable as a standalone tool.
  • The agency's goal was never to generate a ton of money from software, but to keep enough of it free to generate leads.
  • The agency struggled to get funding from investors because most of its revenue came from services, not software.
  • The agency believes that they can build a more efficient business by giving away software for free or close to free and charging for services.
  • The agency uses AI and tools to automate as much of the services as possible.

The Power of AI: Discovering Its True Capabilities - YouTube

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Introduction

  • The video discusses the true capabilities of AI and how it affects marketing strategies for large corporations.
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Large Corporations and Search

  • Large corporations are not worried about SEO being a moat.
  • Most large corporations generate most of their revenue from their brand.
  • Revenue comes from a combination of channels, including search, paid ads, social media, email marketing, and word of mouth.
  • Large corporations take an omni-channel approach to marketing.
  • When large corporations embrace everything, the CPAs for all their channels go down by more than 10%.
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Controversial Marketing Tactics

  • Software is a race to the bottom, and a great way to market is to give away tools for free.
  • Email signature is free, and a small fraction of users can end up using your product.
  • Most companies don't need to pay for Zapier, and a lot of it can be done for free.
  • Large corporations don't worry about SEO being a moat.
  • Large corporations generate most of their revenue from their brand.
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The Power of AI: Discovering Its True Capabilities - YouTube

Marketing Strategies for Large Corporations

  • Large corporations should focus on their brand and take an omni-channel approach to marketing.
  • Large corporations should embrace everything and give away tools for free.
  • Large corporations should not worry about SEO being a moat.
  • Large corporations should generate most of their revenue from their brand.
  • Large corporations should not be afraid to try controversial marketing tactics.
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Cost of Customer Acquisition

  • The big cost for companies is to acquire customers.
  • Emailing systems to send out emails are not that expensive.
  • The cost per click for payroll software words can be high.
  • There are ways to make payroll super efficient and affordable.
  • Give away software for free and make money from other services.
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Example of Paychecks

  • Paychecks is a payroll solution with a market cap of 39.43 billion dollars.
  • United Healthcare is a health insurance company with a market cap of 485 billion dollars.
  • It doesn't cost that much to send out payroll and just send people money.
  • Give away the software for free and make money from other services.
  • Eventually, offer health insurance and make a commission.
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Buying UberSuggest and Answer the Public

  • Neil Patel bought UberSuggest for 120 and Answer the Public for 8.6 million.
  • They overpaid for Answer the Public, but it had a big user base.
  • 70% of Fortune 1000 brands were using Answer the Public.
  • They started calling up those customers and pitching them on services.
  • They closed deals with Fortune 1000 companies that have a few hundred thousand employees.
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Land and Expand Strategy

  • Land and expand strategy: start with one division and expand to more.
  • Customers from using Answer the Public can pay millions of dollars a year.
  • Enterprise clients should last at least seven years.
  • One deal with a customer can more than pay for the cost of buying a company.
  • Bad economy makes churn go up in marketing for pretty much any segment.
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Acquiring Answer the Public and UberSuggest

  • The acquisition of Answer the Public was a risk, but it was profitable as a standalone tool.
  • Most companies won't take the risk of buying or building assets, but owning assets is crucial in today's world.
  • UberSuggest was expensive to build and maintain, but it accounts for more than 40% of the agency's revenue.
  • Word of mouth and good work are the sources of the rest of the agency's revenue.
  • The agency struggled to get funding from investors because most of its revenue came from services, not software.
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Monetizing the Tools

  • The agency's goal was never to generate a ton of money from software, but to keep enough of it free to generate leads.
  • Both UberSuggest and Answer the Public are monetized enough to be profitable.
  • Answer the Public doesn't make up much of the agency's revenue, but it's going in the right direction.
  • The agency thinks there's a quick roadmap to getting to half a billion a year in revenue just from all the leads that they're generating.
  • The agency needs to add headcount and expand regionally to achieve this goal.
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Getting Funding

  • The agency struggled to get funding from investors because most of its revenue came from services, not software.
  • The agency talked to Sequoia and other investors, but they were struggling to get funding.
  • Bezos Expedition Melinda suggested that the agency could go to banks to float their AR because they were highly profitable.
  • The banks would fund the agency's AR on ad spend all day long as long as there was a marquee account like Microsoft.
  • The agency realized that they didn't need to raise any venture capital.
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Software vs. Services

  • Most of the money spent in marketing is on services, not software.
  • HubSpot has a majority of the market cap, but Omnicom has the same market cap with an ebitda that's the same as HubSpot's revenue.
  • The agency believes that they can build a more efficient business by giving away software for free or close to free and charging for services.
  • The agency uses AI and tools to automate as much of the services as possible.
  • The agency believes that this model will be more profitable than the traditional model of charging for software and services separately.
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Automation and Word of Mouth

  • Automating services can make businesses more efficient.
  • Good results from automation can lead to word of mouth marketing.
  • Revenue from word of mouth is expected to increase in the future.
  • Large companies recommend each other, leading to more word of mouth marketing.
  • Buying tools for services can lead to rapid growth.
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Disrupting Service Providers

  • Marketing dollars are mostly spent on services, not software.
  • Disrupting software players is difficult, so old school service providers are a better target.
  • Large service providers like WPP and Omnicom need disruption.
  • Word of mouth marketing is effective for service providers.
  • Land and expand is a classic enterprise strategy.
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The Importance of Creativity

  • Creativity is a major leverage point in marketing.
  • AI struggles to produce creative content.
  • Copy, landing pages, and scripts can all benefit from creativity.
  • Optimizing for conversions is key to success.
  • HubSpot and Zapier cannot give away tools for free like smaller companies can.
  • Creativity can also be applied to problem solving and business strategy.
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The Underrated Parts of Marketing

  • Creativity is underrated in marketing.
  • A/B testing is also underrated.
  • Optimizing for conversions is more important than reducing ad costs.
  • Disrupting archaic models requires creativity.
  • AI models can only give more of what already exists, true creativity brings something new.

Watch the video on YouTube:
The Power of AI: Discovering Its True Capabilities - YouTube

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