A Marketing Arbitrage Opportunity

When marketing our businesses, we look for arbitrage opportunities—platforms, channels and mediums that overperform and under cost.

Micro-influencers (<5,000 followers) are one of those opportunities.

They have a tight audience fit and receive little attention from brands. So, getting your brand in front of their highly engaged audiences makes for good business.

Take these numbers for example.

Our IG profile at Compound Gym, with <2,000 followers, gets:

 1,000+ profile visits per month.

~100 external link clicks per month.

1000+ views per reel.

250 views per story.

And we're a brand. Personal audiences perform far better.

Now, extrapolate those numbers out to 5 - 10 - 20 influencers… By working with a group of micro-influencers, we can get our small business (World Fitness) in front of everyone in our target market for a criminally low cost.

We give them free access to our gym, and they mention us in their profile + post about us once a week. It works to be about $8 per CPM.

Win/Win.

Notes:

The real kicker here is not the low CPM. You can buy banner ad CPM’s for $1 and see zero return. It’s the audience/product fit that makes this work so well over time.

Three Questions That Improve My Vision

The questions we ask ourselves as entrepreneurs can lead us to wildly different outcomes from the same starting point.

Life punishes the vague ask and rewards the specific question ~ Tim Ferriss.

Or, to paraphrase Elon Must - So then I read Hitchhiker's Guide to the Galaxy, which is quite positive, and it highlighted an important point, which is that the question is often harder than the answer. And if you can properly phrase the question, then the answer is the easy part.

Here are three that have helped me produce outlier results:

What am I giving up? 

When looking at opportunities, we sometimes forget that with limited resources, saying yes to one opportunity is, in effect, saying no to others.

I like to understand what we are saying no to before moving forward. Economists call this opportunity cost.

For example, at Rugby Bricks, we recently decided To pursue a new sales channel, but to do so, we had to put aside $30,000 to fund the product manufacturing before customers paid for their orders.

That meant we couldn't do other activities like a buyer's trip to our manufacturers' factories. We proceeded anyway, but it's always good to be clear on what you're giving up.

What are the second-order consequences of this path of action? 

The easiest result to see is the immediate one. But considering what might happen next is where the skill of those with good judgment lies.

You can observe this in children who are yet to understand the 2nd order consequences of throwing a ball inside or squirting Mum with a water gun.

Generally, the longer the time horizon the 2nd order effects will be observable, the harder they are to truly consider.

In 2006, Netflix announced the Netflix Challenge.

They offered a $1 million prize to the first team that could improve their movie recommendation algorithms by 10%.

They released some of their movie ratings data as part of the contest and anonymised it so no personal information was compromised.

The contest dramatically improved Netflix's bottom line and started their team's machine learning progression.

But in 2009, they were sued for releasing personal information after two researchers wrote a paper showing how linking the anonymous data to people's real identities was possible.

What would I do if I could only work on my business for 2 hours per week? 

This question is a prioritisation-forcing function that makes me look at my to-do list differently.

All the email so and so's and fix this bug become irrelevant and I dial in on only what matters.