The marketing industrial complex
Three kinds of business make most of the money helping companies grow. None of them gets paid on whether the company actually grows.
That’s not a conspiracy. It’s just the arrangement.
Let’s get into it.
The ad agency: a company you pay every month to run your advertising for you. They buy the ads, write them, decide who sees them, and send you a report.
The coach, guru or course seller: somebody who sells you a method. Videos, a weekly call, a group chat where people ask each other what’s working.
The promoter, or influencer: somebody with an audience who gets paid for sending you to the other two. They’re paid the day you sign, and nothing they earn depends on what happens to you after that.
All three are legal. None of them is on your side.
The numbers your agency gets judged on are the wrong ones.
A lead is a person who filled in a form on your website. Cost per lead is what your advertising paid to get one of them, and it’s the number your agency gets judged on.
Leads get cheaper the more people the ads are shown to. So the agency shows them to more people. Quality drops, the number on the report goes down, and it looks like a win.
The report shows you the price of a lead. It says nothing about whether that lead was worth having.
Say cost per lead drops from $60 to $14. The report calls that a win. What the report doesn’t show is your sales team spending the morning on the phone with people who have no project, no budget, and no intention of buying.
Ads are much harder to measure than they look.
In 2012 eBay ran an experiment almost nobody has ever been willing to run. They switched off their own ads in 68 of the 210 advertising regions in the United States, left them running in the other 142, and watched what happened to sales in both for two months.1
The ads lost money. For every dollar eBay put into them, they got back well under a dollar.
The reason is simple once you see it. Almost everybody clicking those ads was already on their way to eBay. They typed eBay into a search box, an ad for eBay appeared above the free results, and they clicked the ad instead of the link sitting right underneath it. eBay was paying for visits it was going to get for nothing.
Then the researchers checked what the normal way of measuring would have said about the very same ads, using the very same data. It said those ads had returned about fourteen dollars for every dollar spent.
That method counts every person who clicked an ad and then bought something, and it credits the ad. It has no way of telling which of those people were coming anyway. Your report has the same blind spot, and so does everyone selling against it.
The standard report said the advertising was printing money. The experiment said it was losing money. Same ads, same period, same company.
This isn’t just an eBay problem. Facebook’s own researchers later ran 15 separate advertising experiments and compared them against the usual method for working out which ads caused which sales. Even with 500 million observations and every control they could think of, the usual method could not reproduce what the experiments actually found.2
So when your agency shows you what your advertising returned, they are not lying to you. They’re reading out a number that the best research available says falls apart under a real test.
If you push on any of this, agencies typically have one of the following answers ready.
You need to spend more. The one you’ll hear most, and sometimes it’s fair, because a budget can genuinely be too small to buy enough attention to learn anything from. But money multiplies whatever is already happening. If the leads you’re getting now aren’t turning into customers, a bigger budget buys more leads that don’t turn into customers. Ask what they would actually do differently with the larger number.
We got your cost per lead down. Ask what a lead has to do before it counts as a real prospect, and what one of those costs.
Impressions are up. An impression just means your ad appeared on somebody’s screen. Ask which number on that report would go down if the campaign were failing.
That’s a sales problem, the leads are there. Maybe. But who the ads are shown to, what they say, what you’re offering and what the form asks all decide who fills it in, and every one of those is set by the agency.
We handle marketing, sales is on your side. Ask who calls a new enquiry back, how fast, and what happens to somebody who doesn’t decide this month.
It’s easier if we run it through our ad account. It’s easier for them. Ask whose name the account is in, and what you keep if you walk away.
Look at what most of those answers do. They move the problem to your side of the table.
The advertising is fine, your sales team is slow, your offer is weak, your market is hard this year. That isn’t clumsiness. An agency that can put the failure somewhere it doesn’t control is an agency that never has to be accountable for anything, and the arrangement is built to make that easy. They own every lever that decides who fills in the form. They own none of what happens next.
If ad agencies don’t work, why do they exist?
Sometimes they work. If you sell a cheap product, a $40 gadget or a $10 a month subscription, a stranger can see the ad and buy it on the spot. Nobody has to call them. Nobody has to convince them of anything. The ad did all of the work, and the report on that ad is accurate.
If you sell something expensive, the buyer will not do that. They’ll want a conversation first, usually more than one, and the ad is only the first step in a chain that runs through your website and your follow-up before it ever reaches your sales team. Running ads alone for a complex sale is exactly where you risk losing money. Ads as part of a greater, well-run machine is where they become profitable over time.
You’re free to ignore this and just brute force it with ads and an agency. Some businesses do.
But if there’s one thing to take away, it’s this. Say you need $50,000 in revenue this quarter and a sale is worth $10,000, so you need 5 sales. If every person who saw the ad was ready to buy, getting those 5 might cost you $2,500 in ads, but at any given moment about 95 percent of the buyers in a market are not buying anything at all,5 so you multiply that by 20. That’s roughly $50,000 in ad spend to make $50,000. It’s also why the firms running ads alone on a complex sale spend six figures a month.
The other two sell you the same escape in a different wrapper.
The coach or course seller shows you the people the method worked for. You will never be shown the ones it didn’t, because nobody films those, and there is no way for you to find out how many of them there were.
The promoter recommends whoever is paying them. Sometimes that’s the best option available. You have no way of telling from the recommendation itself, and neither does anyone else in their audience.
People spend four figures a month on coaching, sometimes six figures a year.
Very little inside a course is secret. Most of what’s in one you could find free in a weekend of looking, a fair amount of it you already know, and none of that is really the point of the purchase.
What the money actually buys is a room. Running a business is lonely in a specific way. Most owners have nobody around them doing the same thing at the same size, and two hundred people in the same position is worth something real. So is a weekly call with a man whose numbers are on the slide behind him. Sitting close to somebody you believe has already won changes how you feel about your own chances.
You feel better straight away. Results take months, and sometimes they never come at all. That feeling is what you’re paying for, whether or not anybody in the room would say so.
And the room isn’t there for you. Those members are the audience for whatever gets launched next, the testimonials on the next sales page, and the proof that the method works. The community is the coach’s distribution, and you paid to be in it.
If you get a straight answer out of any of them, stay. But none of those answers is where your money actually went.
Here’s where it went.
Between the ad and the signed contract, six things have to happen. Somebody sees the ad and clicks it. They stay on your website instead of leaving. They fill in the form. Somebody calls them back. They agree to a real conversation. They sign.
You lose people at every one of those six, and every single product these three businesses sell you is a fix for exactly one of them while the other five carry on leaking exactly as before.
That’s the whole problem. A better website doesn’t touch the other five. Neither does a better ad, a better sales script, or a course about any of it.
Put numbers on it and it gets stark. Say each of those six steps works four times out of five, which is a good rate. Start with 100 people who see the ad and 26 of them sign.
Make one step perfect and you get 33. Seven more, for the full price of whatever you just bought.
Now leave every step alone and just make each one a little better. Not perfect. A tenth better.
Same 100 people, same advertising budget, same month, and you’ve doubled the business without buying a single new tactic.
That’s why none of the three has this on a price list. It isn’t one purchase.4
And the things that actually move those six steps are boring. A study of 2,241 companies found that 23 percent never called their own enquiries back at all, and the ones who called within the hour were far likelier to get a real conversation than the ones who called later.3
Nobody sells a course on answering the phone, because there is no way to charge four figures a month for telling somebody to call people back the same day.
Which is where 505 Research comes in.
No proprietary method. Everything 505 Research builds comes out of published research, and where the research doesn’t exist, the work says so and shows you what it rests on instead of dressing a guess up as a finding.
Not a coaching business. No course, no community, no mastermind, no tier above the one you’re on.
No deal being pitched. 505 Research takes no percentage of your advertising budget, earns nothing extra when you spend more, and has no partner whose software it quietly steers you toward.
Execution is everything. No playbook handed over for somebody else to work out. 505 Research builds the thing end to end and then stays on it. Somebody watches the numbers, tells you what they say, and fixes what needs fixing while the campaign is still running.
Everything in your name. Your accounts, your data and your list of customers stay in your name from day one. Nothing gets handed back at the end.
A real prospect, defined in writing. Written down before you spend anything on ads, in words two people would read the same way, and every number you get back is checked against that definition.
That’s the whole difference.
Which brings up the fair objection.
If 505 Research is so sure about all this, where’s the guarantee? Where’s the number of customers by a date, the promised cost per sale, the money back if it doesn’t work?
There isn’t one. The reason is the entire piece you just read.
You can make an educated guess about what advertising will return. Build it out of your own numbers, what the research says about buyers like yours, and what happened the last three times you tried something. That’s a forecast, and a good one is worth a great deal.
What nobody can do is guarantee it. The companies with the largest datasets on the planet ran the experiment on themselves and still couldn’t reproduce the answer with their own standard methods afterwards. If measuring it backwards is that hard, promising a specific result forwards isn’t confidence in the work. It’s a sales device, and selling it as confidence is dishonest whether or not the person selling it has worked that out yet.
So there’s no guaranteed number of customers here. No promised cost per sale. No claim about what your revenue looks like in 90 days.
There’s no secret formula either, because there isn’t one to have. Anybody offering you one is selling the thing this whole piece is about.
What’s on offer instead is unglamorous and it’s the only thing that has ever worked. Do all six steps properly rather than one of them brilliantly. Measure what can genuinely be measured, say plainly what can’t, and keep doing it in month seven when it has stopped being interesting and nobody is excited about it any more.
Consistency, across a lot of small things, none of which is a secret.
There’s an enormous amount of noise in this market, most of it produced by people who make money from your next purchase rather than from your next customer, and almost none of it will tell you when the honest answer is that nobody knows. The gap is somebody reading the actual research and telling you what it says.
That’s the job.
The practice areas are paid acquisition, content and sales and forecasting. To have it scoped against your own numbers and priced before anything starts, use the contact page.
How your buyer decides whether to spend serious money with you. Eighteen pages on what some of the biggest companies in the world do to win buyers, built on more than fifty primary sources: SEC filings, shareholder letters and peer-reviewed studies. Every lesson in it is one you can apply to your own business this week.
1Blake, Nosko and Tadelis, “Consumer Heterogeneity and Paid Search Effectiveness: A Large-Scale Field Experiment,” Econometrica 83(1), 2015. 68 test markets against 142 controls across 210 US regions, 60 days. Measured return −63 percent (95 percent confidence interval −124 to −3); the same data under standard observational methods returned over 1,400 percent.
2Gordon, Zettelmeyer, Bhargava and Chapsky, “A Comparison of Approaches to Advertising Measurement: Evidence from Big Field Experiments at Facebook,” Marketing Science, 2019. 15 US advertising experiments, roughly 500 million user-experiment observations. Observational methods failed to recover experimental lift even after conditioning on extensive demographics and behaviour.
3Oldroyd, McElheran and Elkington, “The Short Life of Online Sales Leads,” Harvard Business Review, 2011. Audit of 2,241 US companies: 37 percent responded within an hour, 23 percent never responded, and the average among those answering inside 30 days was 42 hours.
4The six-step walk-through is math rather than a research finding. Run it on your own numbers: multiply your six step rates together, then do it again with ten points added to each.
5Dawes, Ehrenberg-Bass Institute for Marketing Science with the LinkedIn B2B Institute, 2021. The 95:5 rule, derived from interpurchase intervals in business categories. The $50,000 example is an illustration of that rule: the $2,500 base and the flat multiplier are assumptions, and real costs do not scale in a straight line.