GE 221: How Larry Kim Started WordStream Out of a Bakery and Grew It to Over 10K Users (podcast) With Larry Kim

Larry Kim - WordStream

Hey everyone! Today I share the mic with Larry Kim, founder of WordStream, the world’s biggest PPC management software company.

Tune in to hear Larry discuss why you need to focus your energy on creating original content, the mistakes that people make when it comes to content marketing, the strategies he employs to produce the best content out there, and why it’s not necessary to test the same idea across different channels.

Download podcast transcript [PDF] here: How Larry Kim Started WordStream Out of a Bakery and Grew It to Over 10K Users – TRANSCRIPT

Time-Stamped Show Notes:

  • 00:40 – Please leave us a review and rating and subscribe to the Growth Everywhere Podcast
  • 00:57 – Eric introduces Larry Kim
  • 01:30 – Larry started WordStream in 2008 literally out of a bakery
  • 02:20 – His background is in software engineering
  • 03:34 – WordStream’s target market are the people who are not full-time marketers, like entrepreneurs and small business owners
  • 04:01 – WordStream does the work for you for search marketing and social marketing
    • 04:22 – The software costs on average $299 to $500 per month
    • 04:58 – They have over 10,000 users
    • 05:03 – WordStream offers free online tools for millions of marketers
  • 06:22 – Being top of mind for people as a marketer is a lot of work – commitment to originating content is important
  • 07:04 – The mistake people make is delegating or starting to curate other people’s content
  • 07:57 – Two to three hours of Larry’s day is dedicated to learning new things that will inspire his original content
  • 09:30 – The first thing Larry wants to express is that there is a lack of understanding of what constitutes quality content
  • 10:35 – Quality content should be defined in terms of outcomes and results
    • 12:11 – “We should define quality based on numbers”
    • 12:40 – Larry wrote 300 pieces of content last year and only 6 or 7 of them went viral getting millions of views – 98% went nowhere
    • 13:05 – High user engagement rates was a commonality in the ones that had success
    • 13:52 – Today, metrics are being used by the algorithms of social and search platforms
  • 15:50 – The notion of content marketing has shifted and so you have to change your strategy
  • 16:16 – Changing your strategy is like a betting strategy in poker – you have to know when to fold and when to go all-in
    • 17:28 – When you come across unusual stories that go viral, ones Larry calls unicorns, you have to go all-in
    • 18:38 – Drop all the other marketing projects that you have going on and direct all your time and attention on your unicorn
    • 19:14 – “A catchy idea tends to be catchy on social media”
    • 19:33 – Another channel you should look into is paid advertising
    • 21:27 – Keep rolling over your budget for marketing until you find a unicorn
    • 22:44 – It’s not necessary to test the same idea across different channels
    • 24:02 – In poker, you don’t play all your hands the same way
  • 24:38 – Targeting matters! Think about who your target audience is for the content you produce
  • 27:32 – They key to getting into social media is unusually high engagement rates
  • 28:05 – People don’t randomly click on ads – they have a tendency to click on things they’ve heard of before
  • 29:00 – The hack is going back to how marketing used to be – building a brand that people have heard of or are familiar with
  • 31:25 – What’s one new tool that you’ve added in the last year that’s added a lot of value? – Facebook Audience Manager
  • 32:35 – What’s one must-read book you recommend to everyone? – “I don’t read books so I’m going to pass”
  • 33:06 – Connect with Larry on Twitter or LinkedIn
  • 33:27 – End of today’s episode

3 Key Points:

  1. The quality of one’s content should be measured by outcomes or results.
  2. Be willing to change your strategy if your initial plan doesn’t work out.
  3. Targeting matters – produce the content your audience wants to consume.

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Full Transcript of The Episode

Show transcript
Larry Kim: Yeah. Sure. Basically the target market is for people who aren't full-time marketers like business owners, that kind of stuff. You know, there's millions and millions of advertisers, like four million online advertisers. 95% of them are just these little small businesses spending a few dollars a month and don't know as much about PPC as you do. This is kind of like a Turbo Tax thing for search marketing and social marketing. It just kind of does the work for you, as opposed to you having to figure out what to do.

Eric Sui: Got it. How does the pricing work? How do you guys make money?

Larry Kim: You still own your Facebook account and your Google accounts but the software is on average. It varies by your spend, but on average it's around 2.99 to 400 or maybe $500 a month. That's a lot cheaper than hiring a dedicated search marketing consultant, or hiring an in-house person to do this kind of work for you. You know what I mean?

Eric Sui: Yeah, that's cheap. Cool. Great. You mentioned you guys managed 2% of Google's spend overall, which is huge. Now what other numbers can you share out of this? I know you said 200 employees too, but how do revenues look today? Or how many customers do you guys have?

Larry Kim: Well, it's over 10,000 users of the product. We also offer free tools, free online marketing tools, like the AdWords grader, and the free keyword research suite. Those have been used by millions of marketers worldwide over the last decade. I do a lot of blogging and this kind of stuff. My contact on PPC marketing and other related topics get millions of views every month.

Eric Sui: Yeah. I actually want to talk about that because I think I want to dive into a lot of the gold that you shared at the GrowthHackers Conference. You're everywhere right? Usually in the marketing world there's only a couple of people that are everywhere. I actually see you everywhere. What is your strategy? What are you doing? Can you tell people?

Larry Kim: Well, is there a way to narrow this down a little bit?

Eric Sui: Yeah, sure. Let's say when I'm reading marketing stuff right? I always open my feed lead, there's always something from Larry Kim. Whether it's on some popular search engine blogs, whatever it is exactly. Your blog posts are out there. Or I see some kind of interview that you're doing. It seems like you're perpetually top of mind, which is what a lot of marketers want to do. How do you go about doing that?

Larry Kim: It's a lot of work. You have to have a commitment to originating content. A lot of the ideas for the research that I publish is because I'm still a practitioner. I still regularly manage Facebook accounts, and Google accounts, and Google AdWords accounts, and do a lot of blogging and stuff, and link building. As a result of still being pretty in the leads on a lot of this stuff. As well as my background in computer programming.
I'm able to do data analysis and publish interesting studies every week. I think the mistake people make is they delegate this stuff. Maybe they'll just start curating other peoples content. They'll come up with list of 10 tips from different people. That kind of curation as opposed to origination. That's really been the key here. If you can actually come up with new ideas and new strategies, not rather than just parroting stuff. I've noticed you get a lot more mileage out of that.

Eric Sui: Got it. Again, some people are probably thinking the conventional entrepreneurial wisdom is that eventually you shouldn't be creating the content on your own. You shouldn't be practicing and stuff. You should be delegating it out, you're actually going it. How do you find the time to actually continue to learn and get better at this stuff? I'm sure you have to have some kind of sequence or time blocked out right?

Larry Kim: Yeah. It's like two or three hours a day. Basically it's true that most C-level execs don't spend time mucking around in Facebook accounts, and Twitter accounts, and Google Analytics or whatever. It depends on the type of business here. In the case of my businesses the online marketing is actually so strategic, and so important for the survival of the business that it actually does make sense for a C-level person to be doing that.
It's a paramount of importance, you see what I'm saying? It might not be the same for Subway sandwiches or something like this. Probably the CMO is not having to originating new strategies for PPC marketing, or for eating sandwiches. It's just kind of the nature for this particular niche that we're in.

Eric Sui: Got it. Yeah. A lot of people are thinking, "Oh, you know, I can do this content marketing stuff, and publish blog posts, things like that." You talked about your content promotion strategy at GrowthHackers Conference and it's very specific. Can you share what you're doing around that so people can maybe get a template to work off of?

Larry Kim: Sure. It's a little bit of an usual strategy, but I can tell you what I do. Basically the first thing I want to express is that there's this fundamental lack of understanding of what constitutes quality content. You ask all these experts what's the secret to success in content marketing and they just say these dumb platitudes like create quality content. The problem with that is that it's just so ridiculous, because how people define "quality content" as content that they helped produce.
Because just like any other, they worked on it so it must be quality. The other half of people that I talked to they describe quality content as based on having certain attributes like 3,000 words, long form, short form, multimedia content, video content, infographics. As if you could just check the boxes on 10 attributes then suddenly that becomes quality. My first point today is just merely to say Eric, I think we should be defining quality in terms of the outcomes, the results that the content generated.
If it did what it was intended to do, like generate a crap ton of links. Or if it converts like crazy, or it got shared millions of times on social media. Whatever the intent for the content you're producing, we have to be honest with ourselves and figure out whether or not we hit our goals or not. Otherwise, these notions of "quality content" are nonsense. Just an analogy, it's kind of like that movie Moneyball where people were trying to pick players based on their girlfriend's looks.
Or the shape of their jaw. Just like how all these dumb content marketing metrics ... They're misleading. The thing that you need to care about is the actual results like RBI's, or on-base percentages, those types of things. I'm saying in terms of content the quality should be defined on the outcomes, like how many conversions did it generate? How many links did it generate? Et cetera. As opposed to just checking the box off of certain characteristics. Any questions on that first of all?

Eric Sui: Yeah, so are you saying you might go into like Google Analytics and look at the conversion rate for it? Or are you looking at other things like engagement rate? What numbers are you looking at the find the ...

Larry Kim: If you're with me and you're saying yeah, we should define quality based on numbers of outcomes, rather than just sticking your finger in the air and coming up with random crap. If you're with me then the next point I would make is two fold. One is that 99.7% of the content that you produce goes nowhere. Basically, I'll give you an example. Last year I wrote 300 pieces, only six or seven of them actually went crazy viral getting millions of views.
The remaining 98% of those piece's kind of went nowhere. What I wanted to do was just kind of analyze the top two or 3% of those pieces, the ones that went crazy viral, and really did accomplish their objectives. The one thing that they had in common was unusually high user engagement rates. User engagement rates are things like click through rates, or time on site. Did the people actually consume the content and engage with it in an enthusiastic way?
Or did they just ignore it completely or bounce off the page type of thing? If you're still with me here, the reason why I believe that those two metrics, this notion of engagement rates like click through rates and conversion rates, why this is so critical for content marketing is because they are now, today more than ever. This is different, this wasn't the case even like a year and a half ago.
Today, more than ever, these metrics are being used by the algorithms of the social and search platforms, like Facebook newsfeed, or Facebook ads, Google Search organic, or Google Search ads. Those algorithms, which determine whether or not your content is actually visible or invisible, they are increasingly being tuned based on the engagement rates of the content that you're sharing, or that you're publishing.
You follow what I'm saying? Meaning, the reason why these six or seven pieces went bonkers last year did well was because they had such high click through rates and such high stick rates. Then Google notices this, so it ranks it like very, very prominently like this is a new change to the search algorithms. Similarly, the Facebook algorithms, it notices that these six pieces have unusually high share rates, and comments, and engagement rates.
It just gets shown to more and more people as a reward. It wasn't always that way. Facebook used to be a little bit more democratic where every time you post something you'd have a shot of getting a small number of clicks and views, but now it's like winner take all. It's like only these really, really, really unusually high engagement articles do really well.
Stuff that has like seven, eight, nine, 10% engagement rates, those are the things that are gonna actually be spread across the network. Whereas, if you're just publishing a bunch of donkeys, like one or 2% engagement rates, those things tend to just die. You see what I'm saying?

Eric Sui: Yeah. Totally. I know at the conference I think you mentioned you allocate a small budget for each of these. Then you're going to look at the numbers and decide if you want to put more money right? Is that what you do?

Larry Kim: If you're with me that the notion of content marketing has shifted from being where you get points for just showing up, like just publish once or twice a week, and keep doing that forever. Versus now, it's like winner take all. One post out of 100 will get all the views. Do you see what I'm saying? If that's the shift you actually have to change your strategy. The way that you do it it's kind of like a betting strategy in poker.
You're not just going to bet the same amount for every single hand. If you get dealt a royal flush, or a full house, some kind of unbeatable or very, very strong hand you're not going to want to just play the betting strategy the same way as if you had off-suited low digit cards. You know what I mean? You're gonna want to vary the betting strategy to extract the most you can from the winners that you have.
Conversely, you want to throw away the donkey hands as fast as possible. It's just a waste of money and time. What I do here is when I produce content I addition it. I'll spend 20 or $50 in promoting it on Facebook or Twitter just to see how it does. Is it like a 1% engagement rate or is it like a 20% engagement rate? You know what I mean? If it's like a one, or two, or 3% it's like folding. You just gotta fold these crappy poker hands.
No amount of money is gonna make this into a great winning hand. You just gotta dump the donkeys. Then when you do come across these unusual stories, everyone has them in your portfolio of content that you produce Eric, I'm sure there's one or two that's gone crazy. When you do come across one of those outliers, I call them unicorns, what you need to do is you gotta go all in on these unicorns and do something called making unicorn babies. Any questions about this?

Eric Sui: Yes. You're starting with 20 to 50 bucks or so, but when decide to make a unicorn baby, when you go all in, how much do you crank it up to?

Larry Kim: First of all, when you have a unicorn ... By the way, if you don't know me I call these remarkable pieces of content unicorns because they're not just a little bit better, they're like five times better than average. You know what I mean? It's not just like a 2% click through rate. It's like a 15% click through rate, or something like this. The first thing is when you have one of these unicorns you really have to go all in and sound what I call the unicorn alert.
What that means is you have to kind of drop all the other marketing projects that you have going on and direct all the time and attention towards squeezing or extracting the most possible value out of this piece of content or this idea that you have. If something has a very, very high engagement rate that means that it's resonating with people, it's sticking. It stands to reason that if it was like a blog post or something like that, that same idea ought to do well in a video content, or in an infographic, or in a conference presentation, or in a webinar, or in an email blast.
You see what I'm saying? A catchy idea tends to be catchy across social media. There's something timely or catchy about it, you know what I mean? The first thing you need to do is sound the unicorn alert and go nuts replicating this idea across as many channels as you can. The second thing, one of the channels you also need to do is actually paid advertising. Like I was saying, all those algorithms of paid search and paid social are now leveraging engagement metrics more than ever to determine cost for click and impression share.
It stands to reason if you're promoting something that has like a promoted ad for something that has like a 10% click through rate, your cost per click is gonna be like two or three cents. You know what I mean? As opposed to if you're pushing garbage. If the sponsored content that you're pushing is half of a percent engagement rate then you're gonna be spending three, four, $5.00 a click.
Basically what I'm telling you is that we have all these crazy concepts in marketing like the monthly advertising budget, maybe it's like $10,000 a month okay? That is so dumb. What that says is oh, we have $10,000 a month to spend and we've got 10 posts this month, let's equally divide the budget $1,000 for every post. That's so stupid, because nine out of those 10 are gonna go nowhere until you're just pissing away that $9,000.
It's like going all in on like off-suited four and nine or something. You know what I mean? It's like you did what? What you should have done is just folded them and spent little or nothing at all on those donkey pieces and conserved the budget, conserved the bandwidth. Then when you do have the great pieces, the great hand, whatever you want to call it, you go all in on this and just spend the entire monthly budget.
In fact, on that one piece there should be rollover. This notion of use it or lose it is crazy. You should not spend anything in January, February, March, April, May if you haven't found the unicorn yet. You should just keep rolling over that budget and when you find the thing that's like doing great you go all in retroactively. Take all the years budget, even next month's budget, and put it into this thing. You see what I'm saying? Because it's all about maximizing the value because you have something so rare and remarkable here.

Eric Sui: Yeah. I love that. I don't want to get too granular into this, but some people are probably wondering well if you're promoting posts is it only on your own stuff? But Larry Kim, you write on so many different things right? Is it just anything that you're putting out there that you're testing?

Larry Kim: Yeah. I think the channel does not matter so much as the idea does. If you have a catchy idea, I'll just give you a stupid idea. It's like this video of this girl will make you cry and question the meaning of life. You know those dopey things that go viral? If you have something that's so amazing and so engaging, it will probably do well in a guest post. It'll probably do well in an email blast. You know what I'm saying?
What I'm saying is it's not necessary to test out the same idea across different channels. You can test it once, the idea. Promote it once on any channel, whether it's your blog, one of your contributed article sites or whatever, you audition the idea and see how it does. If it does remarkably well, as in like three, or four, or five times better than average for that channel, then you should sound that unicorn alert and transplant that idea across all of your different channels, your different outlets. You see what I'm saying?

Eric Sui: Yeah. I love the analogy, this is basically why content promotion is like poker. That would be a good title.

Larry Kim: Or blackjack. It's like there's certain hands that you're supposed to double down to maximize your bet because there's a much higher probability of winning you know? Like 11 versus a dealers six, you double on that because there's a very strong possibility that you'll win that hand. You know what I'm saying?

Eric Sui: Yeah, actually blackjack's a better analogy because you're forced, because poker you can fold but blackjack your bet's already out there. You decide what you want to do there.

Larry Kim: The analogy for poker is that you wouldn't play your hands, you wouldn't bet the same way. You would bury the bet. That doesn't necessarily mean that you're gonna put more in or less in, but you would vary your betting in order to extract more value out of these unbeatable hands.

Eric Sui: Right. Cool. Before we move on from this part people are probably wondering Larry this all sounds good, what about targeting? Do I boost a post? Do I target something else? What do I do there?

Larry Kim: Basically, targeting matters obviously. Usually what I find is if you have a pretty good idea like, I don't know, I wrote a post once about meet Google's new CEO, surprise CEO Sunara Patchai, or whatever his name is. I wrote this post and I promoted it and it got like a 10% engagement rate because it was a pretty cool topic. Then when I changed the targeting to only target people who used the hashtag alphabet, the engagement rate went from 10% to 30%.
You see what I'm saying? You're taking this upper middle class donkey, it's not terrible but not the greatest thing in the world. Then by just layering in some very, very granular targeting you triple the engagement rates and suddenly you have a unicorn on your hands. The targeting, you think about who the targeted audience is for the content that you produce and have that in mind when you actually promote it.
The flip side of this is the worst thing you can do is just producing content that you think will resonate with everybody, all of your followers. Everybody isn't a target market, that's like the opposite of being targeted. That's like un-targeted. You know what I mean? The stuff that's actually doing really well right now is, I'll give you an example, and I don't mean to political or anything.
But fake news actually does remarkably well in these algorithms because there's a really defined set of people who would go for this, consuming this fake news. Whether it's on the left or the right. It's a specific enough topic that you can promote to, I don't know, fans of Hillary Clinton, or fans of Donald Trump. You know that they're gonna eat this stuff up. Even better, you can exclude the other side you know what I mean?
To just keep getting those engagement rates higher and higher. Basically, the key here is when you're thinking about the content you're producing ideally you have also some kind of a target market in mind in terms of what are the addressable interest behaviors and demographics that you can include or exclude in order to cast a very, very narrow net and maximize the engagement rates within that net that you're casting.

Eric Sui: Love it. Great. I know we can nerd out on this all day. I mentioned on the panel that Larry is a machine gun of knowledge, but what's one more thing that you can share that's working in terms of customer acquisition today?

Larry Kim: Well, I think what I've been saying so far Eric is that the key to killing it in social media clicks, and shares, and social media ads, and paid and organic search. These are kind of the major channels that drive traffic to your site. You know what I mean? The key to killing these things is unusually high engagement rates. The killer hack to increase those engagement rates, click through rates, is to have a brand that people have heard of before.
Believe it or not people don't randomly click on things in search results, or randomly click on ads, they have a tendency like a two or three to one tendency to click on the things they've heard of before, as opposed to the things they haven't heard of before. To the extent that you can bias people before they start searching for stuff, or seeing your stuff in the newsfeed, if you can kind of get ahead of them.
Basically what I'm talking about here is just broadcast advertising, like brand advertising believe it or not. If you can get your brand in front of these people before they search for it, when they do search for the stuff that you're selling they'll be like, "Oh, I've heard of those guys." That makes them like two or three times more likely to click on your listing than other listings.
Then Google will notice that you have this unusually high click through rate and you'll be rewarded with even more visibility. You see what I'm saying? The hack here is going back to marketing used to be, which was just to build a brand that people have heard of and are familiar with you know?

Eric Sui: Great, and in this context I think you're talking about people perhaps seeing your stuff. I think you run a lot of stuff around getting people to your site first, maybe via Facebook clicks are cheap, then maybe using RLSA?

Larry Kim: Oh yeah, yeah. That's kind of like a one two combo punch kind of thing. One of the challenges with search advertising right now is that these costs are enormous. It's like five, ten, $20 a click. It's like if you only have a 2% conversion rate on these clicks it's going to be very difficult to build a case for this to be long term sustainable. You know what I mean? Just building on what I just said, people are not only two or three times more likely to click on your stuff if they've heard of you, they're also two or three times more likely to buy if they've heard of you before.
You know what I mean? Meaning the biggest conversion rate hack here isn't tweaking your stupid lending page to have bigger buy buttons okay? It's actually to get people familiar and comfortable with buying from your brand in the first place by exposing them to brand advertising that in a memorable way describes what it is you are all about and what your value is. You see what I'm saying? Basically what RLSA does, remarketing list for search ads, it's a way of doing remarketing on search advertising in AdWords.
Bing also has something similar, it's called search for marketing. It's like say you're trying to sell office supplies or whatever, you can target people. Not everybody in the world who's searching for office supplies, but you can target the people who've recently visited your site like in the last 30 or 90 days. It's kind of like an electromagnet, planting the needle in the haystack. It's a way of finding the people who are searching for the keywords that you're interested who are two to three times more likely to convert. It's kind of a really great hack to connect your advertising efforts.

Eric Sui: Great. Awesome. Off more towards wrapping up here, and I know I mentioned it earlier, we can go all day on this. What's one new tool that you've added in the last year that's added a lot of value like Evernote?

Larry Kim: The most important tool that you have to use is something called Facebook audience manager. I know a lot of marketers use something called Google keyword tool to get kind of the volumes of the people of how many times this word has been searched on. An even more valuable tool is Facebook's audience manager, it's in Facebook Ads. Basically what you can do is you can type in things like how many people have the job title CMO? Or how many people are between certain ages?
It's basically a way to really figure out who the target market is and how big it is so that you can inform your marketing decisions and your campaigns based on actual demographic data. It's like a user survey of all the people on Facebook that you can use to perfectly figure out what you should be targeting and to who. This has never been available before.

Eric Sui: Yeah. Not many people talk about that but that's good. What's one must read book you recommend to everyone?

Larry Kim: You know what? I don't read books, so I'm gonna pass.

Eric Sui: That's fair. How about podcasts, or maybe a publication?

Larry Kim: You know what? Sean Ellis, a great guy, he just wrote a GrowthHacking book. I haven't read it yet but I'm sure it's great because he does great stuff.

Eric Sui: Cool. Great. That's fair enough. The book is called HackingGrowth, you guys can pick it up. Larry, this has been awesome. There's so much more to learn from you. What's the best way for our people to find you online?

Larry Kim: Just Twitter or LinkedIn, just connect with me there. Shoot me a note. I usually check those periodically. Just don't DM me on Twitter. My DM box is just a complete cesspool of dumping ground crap. They need a spam filter on that thing really. Yeah, Twitter or LinkedIn is pretty great.

Eric Sui: Incredible man. Larry, thanks so much for doing this.

Larry Kim: Awesome. Thanks Eric, and I'll talk to you soon.

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