The New Media Buying Playbook: AI, Performance Models & Agency Profitability

Welcome to how to build an 8-figure ABC. My name is Jordan Ross and I'm your host and over the course of this journey we're going to be interviewing 8-figure ABC owners and going through the systems that I've seen work and we've been implemented into our clients' businesses that have helped our clients add a half a billion dollars in annual recurring revenue over the last handful of years. I myself have already hit the 8-figures in annual recurring revenue and when I got there I wasn't happy, I was stressed, I was disassified and I didn't like the people I was working with. So I clicked the restart button and went from 12 million in annual portfolio revenue back down to the mid-sem figure level to a climb back again. And on this journey I'm going to be documenting my process on how I'm getting back to 8-figures and bringing you expert industry leaders who will tell you everything they did to get there as well. Thanks for tuning in and enjoy the episode. If you are in E-Com or you have a newsletter in this space you've probably heard of pilot house. And on today's conversation we have Jeff Shen, the founder of Pilot House. This guy is a killer, killer strategist, a killer CEO and founder and we're going to be diving into how they hit 8-figures and what some of the most important lessons they are, whether we're talking about the agency or talking about the media signers or business. So Jeff, for everyone that doesn't know you in Pilot House, who's Jeff? What's Pilot House? What do you guys got cooking? Hello. Thank you. Thanks for that great intro. Jordan, appreciate it. Happy to be here. Excited to be here. I'm Jeff. As you said, I'm one of the co-founders of Pilot House. Pilot House is an 8-figure performance digital marketing agency. Folks on the e-commerce and DTC space. We work with everyone from brands like Unilever, Kellogg's, Laurie Al, down to D to C. Darling's, The Force of Maddox, Chamberlain Coffee, that kind of thing. We've also got a company called D to C Media, which is a bit of a sister company to Pilot House, which is a newsletter and podcast focused on that e-commerce and D to C space, marketing growth in that space, which is a, it's become a large part of our business and a large part of how we go on our business. So when I met your co-founder, we were talking about you guys now having an agency community, and he mentioned your newsletter. And I mentioned to one of my friends who his, I believe you guys mutually know each other. He deeply respects you guys, he's like, whoa, you're talking to the founders of Pilot House. They have like the biggest newsletter in the D to C space. Like that's sick. I'm like, oh, damn, I don't service the, I service agency, I don't service the D to C space. So I didn't know that. But I want to start there. I have learned for myself that the newsletter component is one of the highest levers that you could pull, whether it's for yourself, for media, for brand like, there's so many facets of like why is critical yours is very significant. That is compared to like, you know, the marketplace saying like, how big is it? How long do it take to make and like, what is, what's the impact on your ecosystem that you guys have that asset in your, your real house? Yeah, happy to. I mean, I'll start from the beginning a little bit because we come from, you know, we're of failure. It's back in the day. That's where we came from. So we were, you know, we knew nothing about content marketing. We were very focused on like bottom file transactions. Our first company, it was called Heldenka Digital, was purely just like an arbitrage day-to-day media buy house. So lead gen, app installs, et cetera. And so when we started Pilot House, this kind of content-led growth was a very new thing for us. Much about it. Didn't know how to do it. We put a couple thousand bucks into the newsletter, just to see if we can get subscribers. And just to see what would happen. And we wrote some, you know, content with a bit of a, in those days, it was a bit more of like a funny newsletter, very focused on the tactical of what we were doing at Pilot House. Send to our first newsletter and got like, I think we had about a thousand people at that point. We just paid with meta ads. And we got all these people being like, oh my god, I love this newsletter. When's the next one coming out? And we were like, wow. This is working. So we, we just like tripled down out of the gate. We started spending 30, 40 grand a month. This is 2020. So we started Pilot House in 2019. And we were already growing pretty quickly. But the newsletter, we just started dumping cash into it. We had just seen the hustle and morning brew had sold for a ton of money and we were like, okay, there's something. Yeah. So it was very much aligned. So we had this kind of interest in the newsletter business. And we thought like, okay, if we have a newsletter, maybe it'll help us grow Pilot House, but it'll also just be like a good business. Let's see what happens. And we got a great response to start spending into it. I remember Eric sold our first sponsor for it was a thousand bucks and we were just like holy shit. We can make money off ads in this newsletter and it's just been kind of up from from there. So we're about 150,000 subscribers right now. It's a daily newsletter. So it churns, right? It's kind of hard for the course. So we spend every month to bring in new subscribers. Most come either organically or through meta ads. The business effectively gives a negative cap at Pilot House because it makes money with a lot of brands on that list and it turns into a place where we're actually profitable on the clients before they even come into the agency. And that's what my buddy Max, which it's marketing Max, what we're talking about. He was like, he has the same thing. It's like, yeah, I make a lot of money on the newsletter. I promote my own service. I spend, you know, the media asset is very profitable. And then whenever I, we need business for one of my services, I just promote it and we get clients and, you know, the sponsors pay for my clients, right? So negative tax. I think it's one of the biggest lepers to pull if you were thinking about an agency today, would you start it or maybe like I give you a list of call it five to 15,000? Would you do the same exact thing? Because obviously it's, I would assume it's going to cost a lot more today than it did five years ago to start. And is that still the highest lever that like, I imagine that led to a crazy compounding flywheel effect, brand recognition, credibility, all these tertiary and secondary results? Like, would you do the same exact thing in 2025, 2026? Exactly. I mean, I'm a huge, my main co-founder and I call Hitchcock's. We've always had this like multiple legs on the stool mentality, which is, hey, if one thing goes down, something else will kind of boy us back up. And I would say newsletters are, my belief in newsletters, it's like, it's only going to get way more competitive with how easy it is to create content, how many people get newsletters? How many newsletters there are out there? I believe, like, so I probably wouldn't go into a newsletter again. If I just start today, it's easy for us because we've got the foothold right now. We've got a, you know, a relatively big name in the space. But I would be looking at what's a secondary business that can both bring in revenue. But at the same time, also bring clients into pilot house. I'm going to kind of unveil the curtain. I've had a few false starts on my newsletter. We were up to 50K last year. You know, we looked at it, like, weren't getting a lot, like, we had a really good segment. We had like 20,000 readings. So this year, like, let's focus on the 20. We don't run ads. We don't have sponsors in it. But as you're saying this, and I'm thinking, like, it's a super small, we service agencies. So we got a really good audience, like, people been reading it for years, like, our retention is great. Do you think I should be someone like me or someone in my situation should running sponsorship ads, even as small as 5, 10, 15, 20 before a super niche audience to then use that to compound the flywheels. That's still a play that you would do. Because you said, I would start another business, use the word business. So like, I'm hearing to generate, like, capital, like, how do you think about this? And how would you recommend for that specific situation? Like sponsorships for the newsletter, for your newsletter. Yeah. So in the newsletter, like, there's a sponsor, hey, this SaaS, do this SaaS for your agency type of thing. Or wherever the thing is, I'd only recommend it if it makes sense for your business. And what I mean by that is in order to do that, you kind of have to commit and get it big enough that it makes sense. So again, like, we were dumping, we had the benefit of coming out of this affiliate business with a bunch of cash that we then dumped into pilot house and the businesses around pilot house. So again, in the early days, like, once we proved that we can get sponsors, we were going for market share. Like, we were, there were months we were spending 50 grand a month just on, on Yakuza issue. We still spend, you know, low to mid five figures a month on acquisition. Just because it's part of our funnel now, and we can offset that with, with sponsorship revenue. I think, you know, if you're a 15,000 person newsletter, if it's, the more niche it is, the more money you can make, you know, in terms of what you can actually charge sponsors for, and they're like efficacy to them, we've, we've had other new sliders, we, we, we looked at doing the, you know, the morning brew methodology of just like, kale school super bra. We had an AI newsletter, we had another thing, but there's so many. We couldn't, our revenue per user on the AI newsletter was like a 20th, if not less than what it was on the, on the, the DC newsletter. So I think, my point going back to like a business is that I think, this is where it goes down to the legs on the stool. I think you can have your cake and eat it to in a lot of situations. You have to be very, but you have to be very intentional about it. So it might not be a newsletter, but we also have a podcast, you know, we've got podcasts. We could do events, we could do trade shows. Like there's so many things like build a trade show, you know, and that's kind of the stuff that's been on our roadmap. Check Bezos didn't build Amazon by being the smartest guy in the room, he built it by building systems. In his own words, good intentions don't work. Mechanisms do. And that's the whole game. Most NGOs are stuck at some figures because they're running their business on poor and effective or non-existent systems. There's no repeatable way to analyze data, to root cause constraints, to build the correct strategic plans, to source higher onboard train, retain, develop, manage talent and clients. Everything is dependent on the founder showing up every single day and willing their business to success. If you want to hit eight figures in annual revenue, you need my 13 systems. Not 12, not a couple of processes, but all 13. When you plug all of these into your business, when you identify what you don't currently have and build all 13 of these systems so you can truly scale, you will stop firefighting and start compounding. That's the difference between running an agency job and running an agency machine. If you want to learn all about these 13 systems to get your business to the next level, go to link below and get my ebook on the 13 systems so you could finally build a business that works without you and hit eight figures. My assumption, based on how you're talking about this, is you guys had success. You had cash, which a lot of our listeners, they have cash. They have 5, 10, 10, 20, 30, they got cappled to invest in my perspective. Entrepreneurship is all about picking the right strategy and it's all opportunity costs. If you pick the right thing, you scale. You guys did. You guys picked the right strategy. It sounds like in your multiple legs in the stool analogy, you had multiple horses in the race. What would you say were the one, two, three biggest things that compound you to eat figures? If it is the newsletter, and you have the same cash, well, I want to get more granular. Same cash, same scenario. What would you pick onto your head today if you're not doing newsletter, but you have the same cash, but you're like a 5 million type of situation. What were the few legs or the few horses and bets that led you get to eat figures, growth wise, and then what would you do today specifically? I would say the newsletter and podcast in the early days work were at a call and we started a bit of a year in, so we were, I think we did like a million bucks in our first year, and that was just because we knew people. We came from another kind of industry adjacent space, so we kind of like, you know, Kyle, I would just throw a fish in the boat and it would work. So we had momentum, the newsletter was like pouring gasoline on the fire for sure, but the newsletter and podcast, I would say, and the podcast for us was almost a bigger party equation in the early days. I think we got, so Kellogg's came out of the podcast when we had like a hundred listens a month, like we had jack shit for listeners. That's crazy. You had the right like product market fit. We were talking to the right audience, yeah. So I would say, you know, first horse would be the media company, second, and that no one is going to like this answer, but it was COVID, COVID was just rocket fuel. I mean, we had every wind in our back known to man, it was, you know, all of a sudden overnight, everyone's buying everything on the internet. Every e-commerce brand is getting crazy amounts of funding. And I remember when COVID hit, we had a very like distinct conversation of like, do we like, do we like lay people off and just like hurdle a little bit and just see what happens? Or do we just like go harder and we kind of, for whatever reason, we made the like, let's go harder move, which was, you know, the part of that was we went remote first, which was a big move for us because we were very much office people, but that allowed us to hire people everywhere. So like our head of sales at the time was in New York and we wouldn't hire them before because they didn't live in Victoria or we're in a small town in Canada. And that was definitely the biggest thing was going remote. Third, and I just, I don't know, these aren't in the right order, but we were very much all about aligned incentives with our clients. And that was, although it's like, it's always, you know, it's always kind of, some people do it, some people don't. For us, that was the biggest thing. And that was because we came out of the affiliate world, you know, we only knew financial aligned incentives, which is like, we only get paid when we, you know, perform an action they want. So for our clients, it was relatively fresh at the time, which was, you know, I think in the early days, 70% of our revenue was variable. Five years ago, no one was doing that, like every agency now is, they're having some form of upside. Like that's the, that's the leverage point, right? If our clients are spending a million dollars a month with us, you know, they're taking a percentage of that and, you know, that's, you know, instead of doing a thousand customers at five thousand, five thousand dollars a month, right? It's just far more leverage to do the latter earlier. Yeah. And it's a way to get the big guys in the door because it's, it's a little bit novel, you're not charging percent of your spend, they can, you know, you're putting your money where your mouth is and we had a model, we still have a model where, you know, we charge a bit on the upside for the client in the, in the day, back in the day, it was like a lot on the upside and very little on the monthly retainer. And then we took a big chunk of that and paid it directly into the pockets and the people that worked in their account. It was just like aligned aligned aligned, like everyone's fighting for the same thing. They all get paid. Yeah. I've seen this model so much. This is like, there's a really big agency you guys compete against of New York City. They have the best media buying talent I've ever seen and they have the same model but they pay their talent like crazy. We had Cedrant Ali. He's doing multi eight figures. He's got a team of less than 10, but his value prop to their D to C clients is, I will take on literally all the risk. We will spend every media dollar, but I want all the upside, right? So like they get a fatter percent. So he's like, there are months that we eat, whoop, but like the months we do well, like he's like, I'm a batting a thousand percent. I've never what not want to deal because they don't have to spend a single dollar. They only make money and I take up cut. So that model is really cool. So that sounds like the best agencies. I've seen that you guys at the figure level, you're all circulating around that similar concept. Yeah. There's a great podcast. I feel the two bobs. There's another podcast called two bobs is it's a couple, you know, really smart ages you guys have been around for a long time and they talk about a government, I'm saying this because I think a lot of businesses can lean more into that performance, focused billing. They were talking about the, it's the, I'm kidding, so I'm going to fuck up the name here, but it's the website where you book campsites and all outdoorsy stuff, national parks in the US. And that was built by agency on a pure performance basis. So instead of the government having to go and spend $80 million to build this website, they did it for free and charge them a transaction fee on every transaction and they're up to like half a billion dollars in revenue for this agency at this point. For one of this, it's wild and everybody wants government pays less, better website experience than people and the agency makes one money, it's nutty. In the last quarter, in the last 90 days, we've had a bunch of eight figurines. So you owners, and this one thing is like, this is the thing, like all of you guys are, this is like most common variable in the nominator. So obviously the leverage, like, great brand, a separate media company that you're able to, you know, build a compounding flywheel and then leverage. You said something interesting before we went live, you don't have the horror stories of running at agency because you were non-voluntum today, what do you do, like since you've hit eight figures, what do you do with your time now? And what is that look like? I do a lot of shit on Ford, more than I want to be doing right now to be totally honest. So when we started Pilot House, it's funny, we built this business, we incubated it in our other business. So Kyle and I ran the other business, Helmkin Digital, and a guy named Dave Steele. He was our sales guy at Helmkin, so he'd go out and try and line clients. And when we decided to start Pilot House, we basically said, okay, Dave, why don't you go and start this thing? We'll fund it, and but we don't want to be part of the day to day, and let's see what happens. And it was very intentional that we did not want to be part of the day to day. That came from a bunch of different things, that, you know, part of that was conversation with a guy named Andrew Wilkinson, who's a good buddy of mine, and it's just you gotta, you know, we had to get over that hump of us being the bottleneck, which is what we were in that business. So we started this thing. I did some high-level finance stuff, but for the early days, I didn't do much. Where I got involved, was really when D to C started to, like, I was kind of incubating that with a guy named Eric Dick, who's my co-founder and our co-founder in D to C. So I've been running that with him since 2020, so I'm CEO of D to C. I also run our other business called agency, which is a veteran peer network for agency owners, and recently, I've kind of taken the role and growth that pilot us as well, so in charge of sales and marketing and growth strategy, which, you know, I don't plan on doing forever, but it's a good spot to be in right now. So many hats. You have, like, this serial launch for newer energy, like, in the lab, play with the funnels. Yeah, 100%. I've always been an entrepreneur. I've had everything from a women's dress store to a graffiti removal business to a sound for film and TD business. I love doing that. I don't think I'm the world's best operator, though. That's for sure. I think I like to go and start problems and fix problems, but you guys really are. You have the mind map of where to go, and then you have the strength, the creative angles to make it happen. Yeah, but we've got, you know, our other two founders, Dave Steele and Andrew Stern. They're the operators. They're the ones that really run piloted a day, and they're fantastic at it. So I kind of want to to wind down with it a few quick hitters for you. Everyone knows AI is coming. I think it's less than 0.5% of agencies are actually doing things for it. Like, based on what you've seen, like, where do you, how are you guys positioning for AI? Like, what are you doing on a tactical level for, like, 2026 and 2027? Anything anyone says they're going to do is still a bit of a guess because it's changing so quickly. Is it plot toning? Is it not plot toning? You know, there's agencies that are either going and becoming tech businesses, I would say, like they're building their own internal tools, putting a ton of money, raising cash, good to do that. It's not the approach we're going to take. We think that the smart approach right now is to adopt really quickly, get really good at adopting, because there's a ton of optionality out there for tools. Some better, some worse. There's a lot of bullshit out there with, hey, this tool can do X, Y and Z, and it actually does, you know, one eighth of that. And so we're, our focus is really getting good at adopting quickly and integrating well, and see how the next kind of, but it's, you know, to month to month game where we're seeing how it plays out. And as things change, we're adjusting. Yeah. I mean, look, I think every agency business is going to get, if you're not willing to move quickly and adjust what you're actually offering as a service, going up level into where AI is not great and it's not great in a lot of places right now, I think we get left behind very quickly. So we're just, we're focused on moving, moving fast and being able to move fast so that when things change, we can, we can adapt quickly. Amazing. Well, dude, thank you so much for coming on. If someone wants to subscribe to the newsletter, check out your agency, follow you, learn about agency, community, like, where could they go to all the follow. Yeah, all the following, I don't have any one magical website that has all this stuff, but pilotos.co is pilotos website, if you ever want to talk to pilotos or work with pilotos or work at pilot house, direct to consumer.co is our newsletter and media business. We can subscribe to the newsletter and join agency.co because we love the.co's are cheaper and we can get them. Yeah. Hey, it works. Join agency.co is our vetted peer network for established agency owners, just seven figures and above. Brilliant. Jeff, thank you so much for coming on. Guys, I'm, I'm a member of the agency community. So it comes, say, hi, talk to them. And if you're interested, we are, guys, we are doing eight figure agency live in L.A. 414, wedged in between week one and two of Coachella DM me if you're interested in coming. It's an invite only event. You cannot find tickets. Bob will be available. Check. Thank you so much. Thank you for listening to this episode of how to scale an agency. It would mean the world if you could like, subscribe, and comment on this podcast so more people can find it organically or share it with a friend. If you're looking to scale your agency and you need help, you're looking for a true partner. Go to 8figure agency.co/call. My business has been built on becoming fiduciaries for other companies. We are going to be your partner where I will bring in my eight figure talent to help you grow, working side by side. If you need help with that, go to 8figure agency.co/call or like, share, subscribe to the pod. Thank you so much. I'll catch you in the next episode.