Market Rate Reduces Profits

Noah Kagan shares insights about finding opportunities in undervalued or overlooked market spaces, particularly warning against competing in established markets where you'll have to pay premium rates. He emphasizes finding creative ways to acquire customers and assets below market rates.

Key Points:

• Market Rate Philosophy:

  • When playing in established markets, you'll pay market rate
  • Paying market rate makes it harder to succeed or profit
  • Need to look for opportunities others aren't paying attention to

• Historical Success Examples:

  • Facebook Newsfeed Ads:
    • Early adoption when few were using it
    • Got much cheaper rates due to low competition
    • Became huge growth driver for AppSumo
  • WordPress Plugin Acquisition:
    • Bought millions of plugin installs
    • Targeted neglected plugins with large install bases
    • Paid below market rate ($100k for 1M installs)

• Current Marketing Strategy Suggestions:

  • Target micro-influencers:
    • Focus on creators with under 10,000 subscribers
    • They have engaged audiences but don't know their worth
    • Can get better rates than established influencers
  • Look for emerging platforms or channels
  • Find areas "savvy people haven't gotten into"

• Cost Evolution Example:

  • Email subscriber acquisition costs:
    • Started at $1.50
    • Increased to $4
    • Now potentially $6-8
  • Customer acquisition costs:
    • AppSumo now pays around $60 per paying customer

The core message is to actively seek out and capitalize on opportunities before they become mainstream and expensive.