How to Be Successful in Advertising

Sam Altman, ex-president of Y Combinator, investor in AirBNB, Dropbox, Zenefits, Stripe, Reddit, Istacart, Optimizely, Soylent, and founder of OpenAI, wrote an eye-blowing, mind-opening piece last year titled "How to be Successful."

While most of the 13 points gave advice to individuals running businesses, one stood out as highly relevant to businesses as well. In fact, it was the very first point:

Compound Yourself.

Compounding interest is the concept of snowballing returns. You roll a tiny snow clump down a hill and it gets huge fast. So fast, it's exponential.

There are two other important aspects of compound interest:

• Scalability
• Long-Term Thinking

So what does all this have to do with your advertising? Tons.

Since creative makes up nearly 50% of advertising success, I'll use creative as an example. What can you do to compound your creative effectiveness? Your ads are getting purchases for $20. How can you make those ads exponentially more effective through incremental improvements? You want $1 per purchase ads.

In order to get there, you first need to figure out how to improve them by $1 dollar per purchase, a mere 5%, to $19 per purchase.

How can you do that?

You need to develop a system that is scalable and long-term. That means there needs to be some action you can take that is repeatable no matter how many times you do it, and that will consistently get you results years down the line.

For advertising, this system is testing.

When most people are using intuition or 'customer research' or 'competitor research' to determine what their ads look like, you can steadily plug away with real knowledge of what works and what doesn't on your specific audiences. Here's what that process looks like:

1. Hypothesize what creative components will increase performance
2. Design ads with those components and without them
3. Test both on your favorite ad network
4. Analyze results
5. Keep running ads with winning components
6. Use data to predict what will work next
7. Repeat

That's the scientific method re-imagined for ad creative. It's successful because it's:

• Compounding: the more creative data you collect, the better your ads will be
• Scalable: Ads that win your tests get more ad spend, and therefore more purchases at the lower CPR (a.k.a. scaling your ads ;) )
• Long-Term: You can test your ads forever. There are infinite creative components to change, so there are infinite tests to run.

It's as simple as that. Success in advertising is scientific.

As Sam Altman says

"Trust the exponential, be patient, and be pleasantly surprised."