At Ryco Capital, we primarily focus on investing in software in Media, Ad Tech, Real Estate and Blockchain. Software for influencers specifically lies near and dear to my heart.
In my last blog post, I shared some concerning indicators in the economy that lead me to surmise that a Stock Market crash is coming in 2020 or 2021. Because capital vanishes as well as big tech exists in a bear market, it’s more difficult to find 100x opportunities. So here is how I see the world.
Imagine a world where the Dow Jones drops 40%. Wall Street panics… a big name investment bank goes down. Crypto and Cannabis take major dives as well as emerging technologies such as AR/VR and 3-D Printing. The FED vows to make historical cuts to interest rates to recessitate and pump up the economy.
How do you invest in a world like this?
Post stock market crashes are typically the best time to buy stocks at a discount. In my working thesis, we’ll invest in distressed manufacturing companies at huge discounts. During times prior to anticipated market uncertainty, I’d prefer to focus on free cash flow. As explained in a prior blog post, it make sense why VCs don’t focus on free cash flow and rather why they take a “winner-take-all” approach in big markets.
Influencers use a tool called a “product launch” (first created by Jeff Walker at Product Launch Formula) to sell their digital products during event-driven launches. An influencer may have different types of opt-in funnels such as a “Waiting List” funnel. For example, you may sign up for the lead magnet on my website, but only the opt-ins for my product launch can be considered for the “launch list.” The calculation of Earnings Per Lead is Launch List / Total Marketing Spend.
Free cash flow is not enough. In addition to free cash flow, you want the Earnings Per Lead to be greater than the Cost Per Lead. Furthermore, you want the Earnings Per Lead to be continually increasing by using an Ascension Model to push up the Customer Lifetime Value (CLTV).
Let’s say you sell a software subscription. Your first ascension model campaign maybe a free content strategy such as a blog and podcast. Next you’ll want a DIY Software Saas. To increase CLTV, you’ll want to add Monthly Workshops to support Certified Ambassadors. Then you’ll want to create an annual Dreamforce type of conference. In addition to free cash flow, you also want an Earnings Per Lead that is ever increasing it’s CLTV. Whatever company has the greatest Earnings Per Lead can pay the highest Cost Per Lead and win the Game Of Thrones (winner-take-all).
In my working thesis, when investor’s panic and the economy collapses into a recession, companies will downsize and cut their marketing budgets. According to INC, influencer marketing has a return on investment of about 11x compared to other forms of paid digital media. During a market correction, I expect distressed companies to increase their influencer-based direct response marketing where their Earnings Per Lead exceeds their Cost Per Lead.
How does influencer marketing work? An example may be helpful if you’re not familiar with this space. Revolve runs an influencer campaign called #revolvearoundtheworld for their millennial customers. It’s been a huge success. For companies targeting millennials, influencer marketing is almost an absolute necessity as 84% of millennials don’t trust traditional advertising according to an article by Brookings. This article also points out that 1 in 3 adults are millennials and that 75% of the workforce will be millennials by 2025.
BI Intellgience predicts that influencer marketing ad spend will reach between $5 billion and $10 billion in 2022, a five-year compound annual growth rate (CAGR) of 38 percent. Companies are already converging their influencer marketing along with their video and social media marketing strategies. The trend is moving towards long term relationships with influencers who share similar values to their company. Interestingly, celebrity marketing is being eaten way by influencer marketing.
Software is making influencer marketing more accessible to smaller companies and individual brands. Influencer marketing differs from Google AdWords or Facebook ads in that they require managing the relationships with influencers (who are people after all lol). Nevertheless, let me dive into some of the predominant influencer software platforms emerging today.
Everflow. Everflow is an affiliate management Saas with more features than Cake, HasOffers, Linktrust and Hitpath but at an extremely low cost of only $200/month (as well as a great interface although some disagree). Everflow’s targeting and blocks allow you to eliminate irrelevant traffic sources and focus on the sources getting your target measurements.
Brand24. This is a social monitoring platform for small and medium size businesses to track “social conversations” about your brand. It’s used to prevent PR crisis, find brand ambassadors, gain consumer insights, and maintain a good online reputation.
BuzzSumo. This is a powerful tool that allows you to research your target audience, get ideas from other content creators and find other influencers to help promote your ideas. By the way, I use BuzzSumo for this blog.
Upfluence. Upfluence is all-in-one influencer marketing platform that allows you to market through influencers including keywords, geolocation, engagement rates, audience demographics & more – influencer outreach through bulk emails – multiple campaign management – analytics & mentions monitoring.
Rocketium. A simple and effective way to create video marketing for influencers.