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Nov 23, 2020 · 19m · top-founders

$0 to $12m: The most successful SaaS Paid Ads Story of All Time?

Nathan Latka · 7m spoken Paris Childress · 7m spoken Eric Yuan · 4s spoken Vivek Bhaskaran · 2s spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

Nathan Latka interviews Hop Online founder Paris Childress to explore the paid acquisition strategies, unit economics, and funnel optimizations that propelled music software company Output.com from zero to over 100,000 paying SaaS subscribers and a $45 million funding round.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 48.4% of the talking time here. How this is scored →

Nathan as informed peer 6.8 Guest teaching 3.2 Guest disagreement 1.4 Nathan pushing back 4.4
05100:0010:004:04–6:39 · Nathan as informed peer 7/10 Paid Search Strategy and Keyword Targeting for Output Arcade Latka cites live Ahrefs keyword rankings and Output Arcade's specific search volume to probe Childress on how they mapped search intent for a net-new SaaS category.6:39–9:31 · Nathan as informed peer 6/10 Funnel Mechanics, CPA Optimization, and Cohort Retention Childress corrects Latka's confusion between cost per click (CPC) and cost per acquisition (CPA), prompting Latka to recalculate the funnel unit economics and payback period on the fly.9:31–12:00 · Nathan as informed peer 8/10 Investor Due Diligence and Overcoming Scaling Limits Latka pushes back against Childress's claims of infinite scaling by comparing Output's strategy to Monday.com's keyword saturation and citing strict monthly search caps.12:00–14:56 · Nathan as informed peer 6/10 Expanding into Programmatic Ads and SaaS vs Hardware Synergy Latka probes the hardware versus SaaS synergy, briefly getting confused over whether Childress meant perpetual desktop plugins or the monthly Arcade subscription.14:56–17:34 · Nathan as informed peer 7/10 Agency Compensation Model, China Expansion, and Target ROAS Bidding Latka immediately calculates MRR and backing valuations from subscriber numbers, while Childress explains transitioning from target CPA to target ROAS bidding.4:04–6:39 · Guest teaching 2/10 Paid Search Strategy and Keyword Targeting for Output Arcade Latka cites live Ahrefs keyword rankings and Output Arcade's specific search volume to probe Childress on how they mapped search intent for a net-new SaaS category.6:39–9:31 · Guest teaching 5/10 Funnel Mechanics, CPA Optimization, and Cohort Retention Childress corrects Latka's confusion between cost per click (CPC) and cost per acquisition (CPA), prompting Latka to recalculate the funnel unit economics and payback period on the fly.9:31–12:00 · Guest teaching 2/10 Investor Due Diligence and Overcoming Scaling Limits Latka pushes back against Childress's claims of infinite scaling by comparing Output's strategy to Monday.com's keyword saturation and citing strict monthly search caps.12:00–14:56 · Guest teaching 4/10 Expanding into Programmatic Ads and SaaS vs Hardware Synergy Latka probes the hardware versus SaaS synergy, briefly getting confused over whether Childress meant perpetual desktop plugins or the monthly Arcade subscription.14:56–17:34 · Guest teaching 3/10 Agency Compensation Model, China Expansion, and Target ROAS Bidding Latka immediately calculates MRR and backing valuations from subscriber numbers, while Childress explains transitioning from target CPA to target ROAS bidding.4:04–6:39 · Guest disagreement 1/10 Paid Search Strategy and Keyword Targeting for Output Arcade Latka cites live Ahrefs keyword rankings and Output Arcade's specific search volume to probe Childress on how they mapped search intent for a net-new SaaS category.6:39–9:31 · Guest disagreement 2/10 Funnel Mechanics, CPA Optimization, and Cohort Retention Childress corrects Latka's confusion between cost per click (CPC) and cost per acquisition (CPA), prompting Latka to recalculate the funnel unit economics and payback period on the fly.9:31–12:00 · Guest disagreement 1/10 Investor Due Diligence and Overcoming Scaling Limits Latka pushes back against Childress's claims of infinite scaling by comparing Output's strategy to Monday.com's keyword saturation and citing strict monthly search caps.12:00–14:56 · Guest disagreement 2/10 Expanding into Programmatic Ads and SaaS vs Hardware Synergy Latka probes the hardware versus SaaS synergy, briefly getting confused over whether Childress meant perpetual desktop plugins or the monthly Arcade subscription.14:56–17:34 · Guest disagreement 1/10 Agency Compensation Model, China Expansion, and Target ROAS Bidding Latka immediately calculates MRR and backing valuations from subscriber numbers, while Childress explains transitioning from target CPA to target ROAS bidding.4:04–6:39 · Nathan pushing back 3/10 Paid Search Strategy and Keyword Targeting for Output Arcade Latka cites live Ahrefs keyword rankings and Output Arcade's specific search volume to probe Childress on how they mapped search intent for a net-new SaaS category.6:39–9:31 · Nathan pushing back 4/10 Funnel Mechanics, CPA Optimization, and Cohort Retention Childress corrects Latka's confusion between cost per click (CPC) and cost per acquisition (CPA), prompting Latka to recalculate the funnel unit economics and payback period on the fly.9:31–12:00 · Nathan pushing back 7/10 Investor Due Diligence and Overcoming Scaling Limits Latka pushes back against Childress's claims of infinite scaling by comparing Output's strategy to Monday.com's keyword saturation and citing strict monthly search caps.12:00–14:56 · Nathan pushing back 4/10 Expanding into Programmatic Ads and SaaS vs Hardware Synergy Latka probes the hardware versus SaaS synergy, briefly getting confused over whether Childress meant perpetual desktop plugins or the monthly Arcade subscription.14:56–17:34 · Nathan pushing back 4/10 Agency Compensation Model, China Expansion, and Target ROAS Bidding Latka immediately calculates MRR and backing valuations from subscriber numbers, while Childress explains transitioning from target CPA to target ROAS bidding.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 69.3% · guest 30.7%0:00 · Nathan 69.3% · guest 30.7%3:00 · Nathan 27.8% · guest 72.2%3:00 · Nathan 27.8% · guest 72.2%6:00 · Nathan 67.3% · guest 32.7%6:00 · Nathan 67.3% · guest 32.7%9:00 · Nathan 41.9% · guest 58.1%9:00 · Nathan 41.9% · guest 58.1%12:00 · Nathan 34.3% · guest 65.7%12:00 · Nathan 34.3% · guest 65.7%15:00 · Nathan 41.3% · guest 58.7%15:00 · Nathan 41.3% · guest 58.7%18:00 · Nathan 66.4% · guest 33.6%18:00 · Nathan 66.4% · guest 33.6%
Sharpest disagreement ▶ 8:11 CPA metric correction

Childress interrupts Latka's funnel breakdown to firmly correct that the $28 figure represents cost per trial acquisition, not cost per click.

 Hardest push from Nathan ▶ 11:14 Latka challenges paid channel scaling ceiling

Latka rejects the premise that Output can easily triple paid search volume without degrading economics, citing strict keyword search volumes.

 Biggest teaching moment ▶ 8:11 Educating host on trial conversion funnel metrics

Childress sets Latka straight after Latka misconstrues the $28 acquisition cost as a click price, forcing Latka to redo his entire math model.

 Nathan holds their own ▶ 11:14 Latka cites Monday.com historical precedent

Latka demonstrates deep domain expertise by recalling historical SaaS marketing data from Monday.com to challenge the agency's growth projections.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Paid Search Strategy and Keyword Targeting for Output Arcade 7213 Latka cites live Ahrefs keyword rankings and Output Arcade's specific search volume to probe Childress on how they mapped search intent for a net-new SaaS category.
Funnel Mechanics, CPA Optimization, and Cohort Retention 6524 Childress corrects Latka's confusion between cost per click (CPC) and cost per acquisition (CPA), prompting Latka to recalculate the funnel unit economics and payback period on the fly.
Investor Due Diligence and Overcoming Scaling Limits 8217 Latka pushes back against Childress's claims of infinite scaling by comparing Output's strategy to Monday.com's keyword saturation and citing strict monthly search caps.
Expanding into Programmatic Ads and SaaS vs Hardware Synergy 6424 Latka probes the hardware versus SaaS synergy, briefly getting confused over whether Childress meant perpetual desktop plugins or the monthly Arcade subscription.
Agency Compensation Model, China Expansion, and Target ROAS Bidding 7314 Latka immediately calculates MRR and backing valuations from subscriber numbers, while Childress explains transitioning from target CPA to target ROAS bidding.

Statements from this episode (14)

Assertion Not checkable as stated
Childress says 70% of Output's revenue comes from SaaS subscriptions
“Right now, I'd say probably 70% of their revenue is SaaS.”
Paris Childress Nov 23, 2020 ▶ 3:34
Assertion Not checkable as stated
Output scaled from zero to 100,000 SaaS customers in 16 months
“When we started working with Output.com, they were only traditional software, and we were, we helped them pivot and launch their SaaS product about 18 months ago, and basically got them from zero to a 100,000 customers in about 16 months.”
Paris Childress Nov 23, 2020 ▶ 3:46
Assertion Not checkable as stated
Output acquired its first 100 SaaS customers through paid search
“Well, the first hundred customers was through paid search.”
Paris Childress Nov 23, 2020 ▶ 4:23
Disclosure
Output spends high six figures monthly on paid customer acquisition
“High six figures.”
Paris Childress Nov 23, 2020 ▶ 4:59
Disclosure
Hop Online manages hundreds of thousands of ad keywords for Output
“Hundreds of thousands.”
Paris Childress Nov 23, 2020 ▶ 5:05
Assertion Not checkable as stated
Output's Arcade software converts 60% of free trials to paid
“And the trial conversion rate is about 60%.”
Paris Childress Nov 23, 2020 ▶ 7:03
Assertion Not checkable as stated
Output's paid ad clicks convert to free trials at 5-7%
“Oh, the conversion rates are about between five to seven percent from click.”
Paris Childress Nov 23, 2020 ▶ 7:41
Assertion Not checkable as stated
Output's subscriber cohorts shed 30% initially before retention stabilizes
“What we see is that the cohorts Once people make that first payment, there's about. 60% of that starting cohort that will stick for many, many months. So there's a big drop off in the first few months. So the cohort sheds about 30% and then it flattens out and…”
Paris Childress Nov 23, 2020 ▶ 8:52
Assertion Not checkable as stated
Output generates 1,000 new software trials per day
“So right now we're doing a thousand new trials a day.”
Paris Childress Nov 23, 2020 ▶ 10:01
Insight
Latka: Unlimited paid ad spend inevitably degrades unit economics
“Ultimately with unlimited money, the economics will get worse because you're plowing more money.”
Nathan Latka Nov 23, 2020 ▶ 11:25
Assertion Not checkable as stated
Output had up to 20,000 customers before transitioning to SaaS
“Their customer base was only Maybe 15, 20,000 before they went SaaS. So this got us started, but it wasn't really, at some point we had already cross sold to all of the current customers.”
Paris Childress Nov 23, 2020 ▶ 13:06
Opinion
Childress: 99% of Output's enterprise value is in its SaaS model
“Oh, it's definitely going to be software. That's the entry point. I mean, the hardware business is really a very niche business for them. They have a desk, and they have speakers but this is, the, 99% of the value of this company is in the SAS model.”
Paris Childress Nov 23, 2020 ▶ 14:36
Assertion Supported
Output raised $45 million while its founder retained majority ownership
“I believe, no, I don't think they did that, but they raised forty-five million, and the owner still maintained a majority, so you can,”
Paris Childress Nov 23, 2020 ▶ 15:02
Insight
Bidding for target ROAS instead of CPA cuts churned trial waste
“This might get a little technical, but we'd like to move from what's called target CPA bidding to target ROAS bidding. So we want to train the algorithms to bid for a return on ad spend like an e-commerce product as opposed to bidding on a target cost per acqu…”
Paris Childress Nov 23, 2020 ▶ 17:01
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