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Jun 22, 2016 · 21m · top-founders

EP 333: How Did He Make $15 Million from Managing Ads in 2015?

Warren Jolly · 9m spoken Nathan Latka · 9m spoken
0:00 / 0:00

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Nathan Latka interviews Ad Quadrant CEO Warren Jolly to discuss how his managed performance agency generated $15 million in 2015 and his strategic vision to scale further by incubating direct-to-consumer brands.

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 47.7% of the talking time here. How this is scored →

Nathan as informed peer 4.2 Guest teaching 4.0 Guest disagreement 1.6 Nathan pushing back 3.0
05100:0010:0020:001:27–5:55 · Nathan as informed peer 5/10 Introducing Warren Jolly and the Origins of Ad Quadrant Nathan drills into Ad Quadrant's rapid scaling, immediately probing how the business pulled in 4 million dollars in its first year. Warren explains the thorough pre-planning and performance marketing background that enabled day-one traction.5:55–8:27 · Nathan as informed peer 5/10 Analyzing Fee Structures and the Arbitrage Revenue Stream Nathan attempts to calculate total managed ad spend by dividing revenue by a 20 percent fee, but Warren corrects the assumption by revealing their hybrid arbitrage model. Nathan openly admits he does not understand and asks Warren to break down the mechanics.8:27–11:46 · Nathan as informed peer 5/10 Core Strategic Metrics, Execution, and Churn Management Nathan asks about churn metrics and agency ceilings, questioning whether Ad Quadrant will transition into SaaS. Warren reframes the growth path, explaining why building consumer product brands fits their demand-generation core better than building software.11:46–15:54 · Nathan as informed peer 4/10 Entrepreneurial Wealth Management, Capital Allocation, and Past Exits Nathan shifts to personal finance and asks how Warren extracts cash flow from his company. Warren details his bootstrap philosophy of modest salaries and reinvesting profits, noting his personal wealth stems from previous company exits.15:54–19:06 · Nathan as informed peer 2/10 Sponsor Breaks: FreshBooks and HostGator Segment consists of sponsor ads for FreshBooks and HostGator followed by the standard rapid-fire Famous Five routine and sign-off.1:27–5:55 · Guest teaching 3/10 Introducing Warren Jolly and the Origins of Ad Quadrant Nathan drills into Ad Quadrant's rapid scaling, immediately probing how the business pulled in 4 million dollars in its first year. Warren explains the thorough pre-planning and performance marketing background that enabled day-one traction.5:55–8:27 · Guest teaching 7/10 Analyzing Fee Structures and the Arbitrage Revenue Stream Nathan attempts to calculate total managed ad spend by dividing revenue by a 20 percent fee, but Warren corrects the assumption by revealing their hybrid arbitrage model. Nathan openly admits he does not understand and asks Warren to break down the mechanics.8:27–11:46 · Guest teaching 5/10 Core Strategic Metrics, Execution, and Churn Management Nathan asks about churn metrics and agency ceilings, questioning whether Ad Quadrant will transition into SaaS. Warren reframes the growth path, explaining why building consumer product brands fits their demand-generation core better than building software.11:46–15:54 · Guest teaching 4/10 Entrepreneurial Wealth Management, Capital Allocation, and Past Exits Nathan shifts to personal finance and asks how Warren extracts cash flow from his company. Warren details his bootstrap philosophy of modest salaries and reinvesting profits, noting his personal wealth stems from previous company exits.15:54–19:06 · Guest teaching 1/10 Sponsor Breaks: FreshBooks and HostGator Segment consists of sponsor ads for FreshBooks and HostGator followed by the standard rapid-fire Famous Five routine and sign-off.1:27–5:55 · Guest disagreement 1/10 Introducing Warren Jolly and the Origins of Ad Quadrant Nathan drills into Ad Quadrant's rapid scaling, immediately probing how the business pulled in 4 million dollars in its first year. Warren explains the thorough pre-planning and performance marketing background that enabled day-one traction.5:55–8:27 · Guest disagreement 3/10 Analyzing Fee Structures and the Arbitrage Revenue Stream Nathan attempts to calculate total managed ad spend by dividing revenue by a 20 percent fee, but Warren corrects the assumption by revealing their hybrid arbitrage model. Nathan openly admits he does not understand and asks Warren to break down the mechanics.8:27–11:46 · Guest disagreement 2/10 Core Strategic Metrics, Execution, and Churn Management Nathan asks about churn metrics and agency ceilings, questioning whether Ad Quadrant will transition into SaaS. Warren reframes the growth path, explaining why building consumer product brands fits their demand-generation core better than building software.11:46–15:54 · Guest disagreement 1/10 Entrepreneurial Wealth Management, Capital Allocation, and Past Exits Nathan shifts to personal finance and asks how Warren extracts cash flow from his company. Warren details his bootstrap philosophy of modest salaries and reinvesting profits, noting his personal wealth stems from previous company exits.15:54–19:06 · Guest disagreement 1/10 Sponsor Breaks: FreshBooks and HostGator Segment consists of sponsor ads for FreshBooks and HostGator followed by the standard rapid-fire Famous Five routine and sign-off.1:27–5:55 · Nathan pushing back 4/10 Introducing Warren Jolly and the Origins of Ad Quadrant Nathan drills into Ad Quadrant's rapid scaling, immediately probing how the business pulled in 4 million dollars in its first year. Warren explains the thorough pre-planning and performance marketing background that enabled day-one traction.5:55–8:27 · Nathan pushing back 4/10 Analyzing Fee Structures and the Arbitrage Revenue Stream Nathan attempts to calculate total managed ad spend by dividing revenue by a 20 percent fee, but Warren corrects the assumption by revealing their hybrid arbitrage model. Nathan openly admits he does not understand and asks Warren to break down the mechanics.8:27–11:46 · Nathan pushing back 3/10 Core Strategic Metrics, Execution, and Churn Management Nathan asks about churn metrics and agency ceilings, questioning whether Ad Quadrant will transition into SaaS. Warren reframes the growth path, explaining why building consumer product brands fits their demand-generation core better than building software.11:46–15:54 · Nathan pushing back 3/10 Entrepreneurial Wealth Management, Capital Allocation, and Past Exits Nathan shifts to personal finance and asks how Warren extracts cash flow from his company. Warren details his bootstrap philosophy of modest salaries and reinvesting profits, noting his personal wealth stems from previous company exits.15:54–19:06 · Nathan pushing back 1/10 Sponsor Breaks: FreshBooks and HostGator Segment consists of sponsor ads for FreshBooks and HostGator followed by the standard rapid-fire Famous Five routine and sign-off.

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

0:00 · Nathan 72.6% · guest 27.4%0:00 · Nathan 72.6% · guest 27.4%3:00 · Nathan 35% · guest 65%3:00 · Nathan 35% · guest 65%6:00 · Nathan 34.3% · guest 65.7%6:00 · Nathan 34.3% · guest 65.7%9:00 · Nathan 21.8% · guest 78.2%9:00 · Nathan 21.8% · guest 78.2%12:00 · Nathan 13.6% · guest 86.4%12:00 · Nathan 13.6% · guest 86.4%15:00 · Nathan 75.3% · guest 24.7%15:00 · Nathan 75.3% · guest 24.7%18:00 · Nathan 85% · guest 15%18:00 · Nathan 85% · guest 15%21:00 · Nathan 0% · guest 0%21:00 · Nathan 0% · guest 0%
Sharpest disagreement ▶ 7:10 Rejecting total ad spend math

Warren directly shuts down Nathan's calculated estimate of seventy-five million dollars in managed ad spend by distinguishing fee revenue from arbitrage revenue.

 Hardest push from Nathan ▶ 4:07 Halting the interview to challenge first-year numbers

Nathan interrupts Warren to demand an immediate breakdown of a massive four million dollar first-year revenue figure.

 Biggest teaching moment ▶ 7:10 Educating on performance arbitrage mechanics

Warren explains how taking fixed CPA payouts on high-risk campaigns generates direct top-line revenue rather than standard agency percentage fees.

 Nathan holds their own ▶ 7:00 Reverse-engineering agency gross billings

Nathan demonstrates financial literacy by instantly calculating implied gross ad volume from reported net revenue and take rates.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Introducing Warren Jolly and the Origins of Ad Quadrant 5314 Nathan drills into Ad Quadrant's rapid scaling, immediately probing how the business pulled in 4 million dollars in its first year. Warren explains the thorough pre-planning and performance marketing background that enabled day-one traction.
Analyzing Fee Structures and the Arbitrage Revenue Stream 5734 Nathan attempts to calculate total managed ad spend by dividing revenue by a 20 percent fee, but Warren corrects the assumption by revealing their hybrid arbitrage model. Nathan openly admits he does not understand and asks Warren to break down the mechanics.
Core Strategic Metrics, Execution, and Churn Management 5523 Nathan asks about churn metrics and agency ceilings, questioning whether Ad Quadrant will transition into SaaS. Warren reframes the growth path, explaining why building consumer product brands fits their demand-generation core better than building software.
Entrepreneurial Wealth Management, Capital Allocation, and Past Exits 4413 Nathan shifts to personal finance and asks how Warren extracts cash flow from his company. Warren details his bootstrap philosophy of modest salaries and reinvesting profits, noting his personal wealth stems from previous company exits.
Sponsor Breaks: FreshBooks and HostGator 2111 Segment consists of sponsor ads for FreshBooks and HostGator followed by the standard rapid-fire Famous Five routine and sign-off.

Statements from this episode (12)

Insight
Jolly: Search-focused advertisers struggled to achieve profitable CAC on Facebook
“Companies that may have been really successful advertising on paid search or Other channels just weren't able to crack the code with Facebook and with other channels to really be able to hit their cost per acquisition goals.”
Warren Jolly Jun 22, 2016 ▶ 2:43
Insight
Jolly: Discipline in saying 'no' drove Ad Quadrant's rapid growth
“So we manage our opportunity costs really carefully. And that's one of the things that has helped us be successful and grow rapidly in the last two years is just being great at saying no.”
Warren Jolly Jun 22, 2016 ▶ 3:46
Assertion Not publicly verifiable
Jolly: Ad Quadrant generated around $4M in revenue in 2014
“So first year revenue in 2014 was around four million.”
Warren Jolly Jun 22, 2016 ▶ 4:03
Assertion Not publicly verifiable
Jolly: Ad Quadrant reached $15M in revenue in 2015
“2015 was fifteen million.”
Warren Jolly Jun 22, 2016 ▶ 5:29
Disclosure
Jolly: Ad Quadrant charges an average 20% fee on managed ad spend
“On average, it's about 20%.”
Warren Jolly Jun 22, 2016 ▶ 6:03
Disclosure
Jolly: Ad Quadrant has about 35 active clients
“We have about 35.”
Warren Jolly Jun 22, 2016 ▶ 7:00
Disclosure
Jolly: Ad Quadrant generates 80% of revenue from ad fees, 20% from arbitrage
“It's about 20% of the fixed spend model, and 80% would be outspend.”
Warren Jolly Jun 22, 2016 ▶ 7:59
Disclosure
Jolly: Ad Quadrant will keep software internal rather than selling SaaS
“We're going to pretty much stay focused and double down on those two. We're not, you know, we thought about moving into SaaS and other, other, other sorts of things. That's why I mentioned kind of the hybrid earlier, but those products that we're developing ar…”
Warren Jolly Jun 22, 2016 ▶ 8:13
Assertion Not checkable as stated
Warren Jolly: Ad Quadrant's quarterly client attrition is below 10%
“We measure attrition on a quarterly basis just quarter over quarter, just to see how we're doing. And it's sub 10%.”
Warren Jolly Jun 22, 2016 ▶ 9:41
Opinion
Warren Jolly: Pivoting an ad agency to SaaS is difficult and expensive
“I think the pivot to SaaS in our space is actually really, really hard. It's RGS, RGUS, it's expensive to do, and there's some big key players.”
Warren Jolly Jun 22, 2016 ▶ 10:31
Disclosure
Jolly: Ad Quadrant plans to incubate consumer products long-term
“Our long-term aspirations are actually to develop and incubate consumer products because Social is, is, is the frontier for demand gen.”
Warren Jolly Jun 22, 2016 ▶ 10:40
Disclosure
Ad Quadrant founders take salaries instead of dividends to reinvest profits
“So in the current business, we're just, it's just salaries because we're in reinvestment mode, but I've generated my wealth from prior exits.”
Warren Jolly Jun 22, 2016 ▶ 14:35
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