Ira Belsky of Artlist on growth, profit and underspending on marketing

Ira Belsky

Hello, how are you?

Ira Belsky

Thanks for having me, excited.

Ira Belsky

I started my professional career actually as a video creator, so I was doing filming, editing, compositing, mainly client work. And the idea for Artlist came as a personal necessity, so I wasn't trying to build a big company or to be an entrepreneur per se. I just sort of saw a gap between what I wanted and what existed in the market before Artlist, and felt like I could do something about it. The space that I wanted to solve was content for video creators. That's where we started, we started with music for video. It was, back then, built for a different industry, wasn't suited for what is now the creator economy. So I wanted to build something that's very high quality but accessible, both in terms of the licensing and the pricing, and teamed up with two good friends who are musicians, one who's a product and R&D person, and shared my idea. They were excited and we just started to work at it without funding or anything like that, it was a bootstrap. And yeah, that's how I came to it.

Ira Belsky

Yeah, so obviously when we started there wasn't any Gen AI, there was some AI but not Gen AI or anything close to being useful. I think over the years we've sort of identified that our unique value is understanding the users and sort of curating the best tools for them.

02:38 Where we started with assets, but when Gen AI came it was pretty obvious to us that we need to offer Gen AI to our users. They need curation for that, they need licensing sorted for that, they need to make sure it fits their workflow and the quality is right for them. So for us, from our perspective, it was another thing we can offer our users, and that's what we did. I think it's still very experimental, if we're talking about what's happening now. Outside of maybe voiceover, most of the use of AI in video is like saying, hey, look what I did with AI, nothing is just using AI to get the job done. I think we're close, specifically with video, images are almost there. It has its limitations, it's another way of creating that will open many doors and is very exciting, but I think we're almost there, not there yet. So I think we could have the whole podcast only on this.

Ira Belsky

Yeah.

Ira Belsky

It's very dynamic, both in terms of the stage of the company and the industry. If we look at the tech industry specifically, the past three or four years were a roller coaster in terms of KPIs. You go back to 2021, everything is growth, no one cares about profitability or efficiency. Flipping to today, or maybe two years ago, everything is efficiency and profitability. Now it's a balance. So I think it's not only determined based on your stage and sort of momentum, it also very much correlates with the broader market, which has its financial reasoning for rewarding different KPIs. That's for the company, so that continuously evolves, and like any other company you always try to optimize towards the most rewarded KPI in the market. I think for us specifically, sharing our journey, starting off as a bootstrap, meaning we didn't have funding, meaning we had to be profitable, otherwise we couldn't pay salaries and we couldn't advertise.

We've been pretty efficient since the beginning. I think only in 2022 was the only year we didn't make money, like we weren't profitable. So with that mindset, I think it was very easy for us to pivot again towards, like, a healthy business is a business that's both growing and making money, or at least not burning money. For us, at least, it's part of our DNA in a way. And when you look at marketing in that sense, it's I think we had the unique opportunity, because most of our revenue is annual subscriptions, [unclear @ 05:46]. No advanced calculations were needed. Before we had, you know, big data teams and analytics, we were able to spend and continue to grow our marketing spend based on very simple KPIs, like ROI, very simple calculations of LTV to CAC.

By the way, the first two years, when you do annual subscriptions, you don't have LTV to CAC because you don't have your LTV if you don't have retention, if you don't have upgrades. And it took us a while to also learn the fact that, if we're looking backwards, it's always the case that we weren't able to actually predict the LTV, because we offered more than we were able to assume when we, let's say we're starting off saying, we have these options for upgrades in the future, so we're building a relative to CAC first-dollar calculation based on that. But then Gen AI voiceover comes along, which we never predicted, and now there's a new reason for people to upgrade, and it turns out that the people we acquired using one LTV to CAC metric are now paying more than we thought. So you have to sort of mature, to have the confidence to believe that's going to happen without actually knowing how before. So that's always changing, and I think it even gets more complex now that we have both B2C and B2B, which is a whole new discussion we could have.

Ira Belsky

The honest response is, we didn't. Just because, so, a funny story we always share is, when we just started off, first marketing person comes in, who's now our CMO, [name unclear], looks at the numbers and gives us, I think, the first or second report of his marketing work, and he's like, "ROI is 500%." And, well, great, keep doing this, great job. He's like, "No, it's not great, we need to spend more." Like, okay, why? Say, because if it's 500% it means we have so much room to grow. So we were that fortunate that we didn't even need to worry about LTV to CAC, because a dollar out comes back five the same month. So you don't have that question, you just spend more. And it took us a while before we were actually comfortable with it, even being break-even on a monthly basis, it was always positive on a monthly basis.

That being said, if I were to now start again and have a new company that I don't have the metrics for and I don't know what's going to happen, I think it's always going to be a challenge of trying to evaluate things like churn, when you don't have the churn numbers. By the way, we have it, in some cases we're launching new categories and then you don't really know how to calculate churn and how much you want to spend and what CAC you're comfortable with, or in B2B, in our case, which was relatively new for us. I think as long as you feel comfortable enough, you're not going to lose money long term, and you want to grow, you want to be a growth company and not just a business, then you should spend on those margins. But again, it's very specific, you need to figure out: are we talking monthly subscription, annual subscription, non-recurring revenue, what's the base case in your market, can you get numbers on an equivalent business or for the same category. That's the work I would do to sort of get some confidence in my LTV spending.

Ira Belsky

I think it's an ongoing work in progress. I think, for us, as an example, when we started B2B it was very hard to predict what's going to happen. Talking about longer sales cycles, we were used to, as mentioned, the first month we can see the results and we can push higher or lower. And then you talk about brand, I think that was a huge shift for us the past year and a half, two years. It was like, you grow to a certain size where you're, okay, we can continue to optimize for shorter-term results, but the magic number is not going to improve over time, LTV to CAC over time is going to stay relatively the same or deteriorate if you want to continue to grow.

And I think just because something is harder to measure, obviously, does not mean it doesn't have the effect. And if you go to anyone and ask, like, what's your favorite brand that you love the most, a hundred percent of those have become their favorite brands because of the branding, the brand work, not performance, a hundred percent. It definitely is the thing that makes loyal, good customers, that's a relationship you want to build. And I think, for us, we knew it, and historically we did a lot of what's called brand performance, which is like making sure you have a lot of branding in your performance activities, so you actually get some of the two. But we had to switch to more hardcore brand. On the one hand, it doesn't fold under the CAC, so LTV to CAC is less impacted by marketing spend, but it is a huge expense.

12:50 I want to feel investments we believe in that we cannot measure. Advertising historically was, you know, they couldn't measure anything, so it's so tempting to go down that route of, like, now we can see where each acquisition comes from, okay, it's how to build the attribution model, but we can actually see some of it. And then you're saying, let's do branding, and we don't see anything, and you're coming to people who are used to short-term results, they are just spending, and you want to spend, [unclear @ 13:04] I think you have to just go back to fundamentals of, like, what do you believe, why are people coming to you, what are your values, why should people care about what we do. And yeah, it's hard work, it doesn't rely only on marketing, because you can do the best work in marketing, but if your support team isn't living up to the brand standards, then everything is ruined. And if the value itself you're bringing, like, for us, the content, the tools, does not live up to that expectation, nothing works. So it's a company, branding is a company effort, that's, the marketing world is just to highlight why should people care, why should they be excited about us specifically.

Ira Belsky

There's many different ways to approach it. As an example, if we want to start doing TV ads, right, streaming TV, targeted, not broad, what we would do is, before starting nationally, like in the entire USA, we would say, okay, let's pick two states, spend a lot there in a month, and see the incremental change versus other states that we haven't spent in. So you always try to do things, and that's like trying to calculate brand with performance. The problem is you can go through all the surveys of sentiment, and what people think and how they view you and how they describe you, these are the deeper things you're trying to get. My example is always, like, when Porsche is building an electric car, you immediately say it's a good car, although they never had an electric car, and it gains all of its credit because of a hundred years of combustion engines and racing and the brand and everything it has in your memory.

In the story of Porsche, now they bring an electric car and just say it's a Porsche, and you're like, this is the best electric, and how they've built this is definitely not through performance, right, it's not through sales, it's a story they've been telling for a hundred years. And when our team were sort of scared, excited about AI, I was like, this is the story, if we're the Porsche of our industry, then when we do AI, everyone says, okay, it's Artlist's AI, it's the best AI, it's the best AI for me. And I think that's why you need to build strong brands. Brands stand the test of time, they go through changes of industries and innovations and still resonate with people, because they have some fundamental core values that stick through all of these changes, and you just need to make sure your audience knows what they are. And that's brand, and that you cannot measure. You can, you know, people run surveys and people do think it's a wider thing. And for me, by the way, it's a lot of the time looking at brands that I love and saying what actually made this brand, me fall in love with this brand, and it could be one salesperson that I've spoken to that got me excited and believed in the value and dream, it could be one collaboration or an ad or a placement I've seen that I was like, okay, I got it, like, I feel something that's more emotional than actionable. And you just have to bet on it.

Ira Belsky

Yep.

Ira Belsky

I'll talk about our specific case, because I only know our specific situation, and by the way, thankfully, it's hard for me to relate to what you just said, I think I'm very happy for you. And when I try to figure out why, while characterizing how it usually happens, I think a couple of things come to mind. First of all, we were B2C for six years before starting B2B, and in those six years we had acquired B2B customers, we just didn't have a dedicated solution for them. So when sales came in, the first thing they did was take 30,000 paid accounts that are B2B qualified, started to go through them and convert them into B2B clients. So by definition, marketing was already giving them good leads, they weren't closing deals that were already closed from the B2C self-service.

Ira Belsky

Yeah, although we might have, maybe we should have started earlier with B2B, but everything is in hindsight. And when I look at how the teams are, it's not like everything was frictionless between sales and marketing when we started. I think sales came in, they weren't reliant at the beginning on marketing leads, because we had a lot of B2B clients already, and more coming in. But then the team grew, and they became more and more reliant on leads, and they were looking at marketing, what are we going to do about leads. And it took a while for us, which is maybe more of an us thing, to say, like, enterprise clients is not the sales team's responsibility, it's everyone's responsibility, it's marketing, product, then sales, everyone is responsible for these clients and what we're getting.

And then, in order to work together, I think it's very fundamental, it's like, no ego and trust, like, fundamental teamwork, because everything you're describing comes off of either lack of trust, meaning, I don't trust you to do a good enough job, we don't have the common respect for each other, that I'm doing my best for the company and you're doing your best for the company. We're sailing the same ship, at the end of the day we have the same goal, my LTV to CAC is reliant on you, and your sales quota is reliant on me, and we're working together, and we need to make sure that we both value each other and the work we do, and we don't point fingers at all, like, no pointing fingers, we have zero tolerance for that. Like, if you're not coming into a conversation assuming the other side is doing their best work and are the best people to do this work in for Artlist, then you're not a part of the conversation, that's fundamental for me, that's how we want to interact, from management to everyone down to the teams.

Obviously friction builds towards, when you go lower down, but I think once we were able to completely stop pointing fingers, to the point where, if you're pointing fingers, you're not going to be a part of Artlist, period, then everything changes. You start looking at the other person saying, he's doing a hell of a good work and he's trying to do his best, how can we improve together. And I honestly, not just as a show, want to say that that's the organization I'm seeing, obviously I'm the CEO, I don't have full visibility into every conversation happening in the team, but any meeting I'm in, that's how they're talking to each other, that's how it's been. And we cannot ever put performance under sales, because we have a huge B2C market still, most of our revenue comes from B2C. So for us, we don't have these questions. There are a lot of conversations on the balance, as an example, we've now shifted some budgets from one search intent to another, that could be worse for B2C but showcases great leads and opportunity, but then we're going into, we've talked about KPIs, the first step of this podcast, and then you're going into B2B, take three months to close, we're hoping, like, when we calculate this, it's a good shift of marketing spend, but we have to trust that we're going to close them. So, but these are not, that's not, this is work, this is not tension, this is like, we need to put our minds together to figure out what's the right thing to do here.

Ira Belsky

I think, from what I'm hearing from other companies, there are many different people who become marketing leaders, some people come from branding or advertising, some come from performance. In our specific case, our CMO is more from a performance background, I think that's the model I believe in, because that's what I know, which is being super analytical. I think, first and foremost, is a deep connection to the mission, what we're trying to do. Like, I don't think there's anything that, when I look at our CMO, he wouldn't do professionally to make sure we're successful, whatever the cost is, within his team, his budget, what he's doing, optimization is only for the greater cost. And you have to have, I think your CMO should be the biggest team player of all, maybe.

So I'd say that, I think when I say analytical, if I even expand on that, I would say, and that's maybe me, I'm very logical and less emotional, try to be, at work, and I really value logical people, especially in marketing, where things can get fuzzy, and when we're talking about brand and things like that, it's very easy to get caught up in fancy words and big ideas. And I think you need to actually have someone extremely logical. Leadership, you'll have people under him that are more focused on brand and creative and other things that they can do, but I like to know that the person in charge of the whole operation and the budget is the person taking a very logical accountability for everything that's happening under him, and that's very much our case. And I think, also, like, someone who can focus on long-term culture within the marketing team, and not just worry about short-term performance, by the way, that's true for marketing and sales, like, you cannot optimize for the quota, for the LTV, for the performance of every given month, at the cost of culture building. You have to make sure you have the right people that are doing what they're doing for the right motivation, that's first priority, second priority is to make sure we're doing the actual right things, but long term, that's key, when you have that it just builds over time.

Ira Belsky

I don't know for other people, trying to look back at some mistake that we've done, I'm sure we have, maybe get too involved with budget allocations and granular marketing things, I think you should have trust in the person you sort of give the reins to, to lead the team. Maybe, again, it wasn't our case, but I think for us, I could say something that did work, that I think other people should make sure they have, is make sure that marketing is very strategic about the broader company future, so make sure that marketing is an integral part of your strategic thinking going forward.

Ira Belsky

That it's having one great idea. I don't think that's the case, I think the case is, you might have a great idea, it could be an okay idea, but success comes from many, many, many small good decisions that you make along the way, hire the right people, and it's small wins, it's never like, we had this, maybe in some cases, but most cases you don't have this amazing idea that just exploded. It's like, even if your idea is great, it's going to come down to you making more great decisions, it's all about execution, execution.

Ira Belsky

To understand that it's all about evolving. Like, there's no, it took me a while to understand, there's no, like, being a CEO is not like, now I know my role as a CEO, I figured it out. Being a CEO is a never-ending question of where I need to bring value and what's needed of me right now from the company. That's just something you have to continuously ask yourself and make sure you're handling.

Ira Belsky

Thank you. Thank you for having me.