Summary of Episode
#38: Alex Song joins Annaka and Ethan to discuss his company Proxima, an AI-powered advertisement targeting software that uses Proxima’s database to help companies find their target audience and ensure that online users receive ads relevant to them. Alex discusses the changing digital landscape and explains how Proxima managed to get on the right side of industry disruption.
About the Guest:
Alex Song is the CEO and founder of Proxima, which helps brands boost their marketing abilities by using big data and Proxima’s AI-powered software. Alex began his career in finance, but eventually he decided to start his own business. He is no stranger to entrepreneurship and has confounded many companies over the years. While Proxima works to help other companies leverage data to improve marketing, Alex initially built Proxima to help solve problems he had been experiencing with his own ventures.
Podcast Episode Notes
Navigating the digital landscape after iOS 14.5 [2:30]
Changes in data collection lead to less efficient targeting towards users [6:05]
How solving Alex’s own problem lead him to a business needed by others [8:50]
Proxima’s solution for improving targeted ads [12:38]
Social platforms allow for cheap interesting content that encourages engagement [17:38]
Landing on the right side of disruption and preparing for the next disruptive change [20:18]
The shift towards focusing on creating content that displaces the traditional advertising [23:40]
The changing advertising landscape and the benefit for creative studios [26:38]
Alex’s journey from working in finance to running his own business [31:01]
What is a buyer persona, and why should digital businesses understand their buyer persona? [35:28]
How changing marketing strategies has shifted the focus towards customer retentions — it’s much cheaper to get an existing customer to spend more rather than find new customers [42:28]
If you are spending money on social media advertising, Proximia can help your business [45:52]
Alex’s advice for other entrepreneurs — “Whether you think you can or you can’t, you’re right … believe in yourself and have the fortitude to keep going” [46: 52]
Think your business can benefit from Proxima’s advertising database? Head on over to Proxima’s website and mention that you heard Alex’s interview on Startup Savant to get started with a free trial today [49:04]
Full Interview Transcript
Annaka: Hey everyone and welcome to Startup Savants, a podcast brought to you by TRUiC. I’m Annaka.
Ethan: And I’m Ethan.
Annaka: If you’re a returning listener, welcome back! And, if you’re new, this podcast is about the stories behind startups, the founders who run them, and the problems they are solving.
This episode we are joined by Alex Song of Proxima. Proxima is a data intelligence technology that is helping digital businesses create targeted ads despite the impact of the iOS 14.5 update.
Annaka: Our conversation was full of insights about changing data privacy landscapes and the future of targeted ads.
Ethan: Speaking of ads, we touched on the types of ads that are working now and why creative agencies may finally get to be creative again. We also discussed another of Alex’s projects: the Innovation Department. And trust me, this is a concept that you’re going to want to steal - for yourself.
Speaking of stealing things for yourself, you should go check our StartupSavant.com! You’re going to find a treasure trove of free tools, guides, and resources that will fit nicely into your swipe file.
But before all this theft takes place, let’s get into today’s episode with Alex Song of Proxima.
Annaka: Hey Alex, welcome to the show. How's your day going?
Alex Song: It's going great. How are you guys?
Annaka: Excellent. We're doing very well. We spent our time before the interview trading dad jokes. So we're all in a great mood.
Alex Song: This is nice. As a new dad, I need to learn more dad jokes. That's definitely on my list of things to do.
Annaka: We will send you the list of what we have so far, and congratulations on fatherhood. I've heard it's fun.
Alex Song: Thank you.
Annaka: But I can't relate. So kick us off. Tell us about Proxima, the problem it's solving and then how it is solving that problem.
Alex Song: Sure thing. So Proxima is a data intelligence technology where we have proprietary access to over 60 million unique personas such that we're able to build customized data sets to then improve the targeting that digital businesses can have on platforms such as Facebook, Instagram, TikTok, et cetera. We've been able to help combat some of the challenges caused by iOS 14.5, arguably the biggest problem in technology over the past 12 months. And we're very proud to be helping now over 50 clients navigate these troubled waters to find more efficient acquisition in a very challenging time.
Annaka: Yeah, the landscape, as far as data goes, it has changed a lot, especially in the last couple years. And Proxima claims a return on advertising spend that's on average 30% to 40% more efficient than standard campaigns. How is this achieved? How do you do it?
Alex Song: Great question. So today, because of the lack of signal that you get, and just as a quick background for maybe some of the audience, what really changed when iOS 14.5 was deployed was that instead of automatically being opted in to an application, receiving your behavior actions, et cetera, when you download an app, you now on an iOS device have to actually opt in physically by clicking a button. And 80% of people are actually opting out of being tracked, which means that social platforms, like Facebook and TikTok, they no longer know what actions you take after you click an ad. That means previously when you would click an ad and you end up purchasing, that would be fed into the targeting algorithm. And it would say, "Hey, people like Alex like buying this. Show this ad to more people like Alex." Now that's not available. And what the platforms have to do is go much more broad.
And you'll hear a lot of people say, "Okay, we're doing broad audience targeting." And really what that is akin to is like putting up a digital billboard in Times Square and then shuffling the ads very quickly and hoping that people at some point will see it at the right moment and then end up purchasing your product. What we do is we actually have a database of over 60 million personas where we have seen what they purchase, how much they spend in various categories. And we could then use that to run targeting off of our audiences. And it's something we call lookalike audiences within the platform, such that people that look like those buyers that are spending the most money on these services and products, we could then target more people that look like them.
Ethan: So iOS 14 has reduced the specificity of targeting that marketers can do. Is that correct?
Alex Song: That's right. It's also hurt the attribution in that it's less clear how much dollars you're spending profitably because the signal of conversion and attribution has been blocked, but it's really those two components, attribution and then targeting.
Ethan: Okay. So that is the outcome for the marketing side and the tracking side, the attribution side. Did I say tracketing?
Ethan: With tracking.
Annaka: We'll let that one go.
Ethan: So the user has essentially been told, "Hey, watch our commercial," where one specific person is having their data sold in an auction-like format. And it's saying, "We are selling this person's text messages. We are selling this person's emails." That sort of thing. You've mentioned what's changed on the marketing side. What's actually the change that's happening on the user side?
Alex Song: On the user side, I think the users definitely experience less efficient and relevant advertising. There is, I'm sure you've probably heard this amongst friends socially, this feeling like Instagram was listening to you, and it's like, "Whoa, how does it know that I want these things?" And really that's a Testament of just the targeting algorithm being amazing and looking at all this behavior and seeing what we're doing within the app. It quickly figures out what kind of advertising we would be most interested in.
Now, I haven't heard anyone say that for a while. And a big part of that is it's just less efficient, right? People are getting serve advertising that is just less relevant to them. And you also hear this movement towards engagement, meaning the social ad platforms today are much more focused on entertaining you, keeping you on the platform as long as possible. And TikTok really led the charge there, right? You think about all the video content versus photo content. That's really why you hear in the news how Instagram was trying to build reels to catch up to TikTok. It's all about minutes and seconds and hours on the app and how long you can keep them engaged.
In order to keep them engaged, you need to keep putting out relevant creative content. And by mixing in advertising that is more relevant, everyone will have a better experience. And the truth is, right now from an advertising perspective, it is less effective, less relevant for the average consumer like us.
Ethan: So the marketers, they have less ability to target the users that they think would buy their products. The users have less specific marketing advertised towards them. And it sounds to me like maybe the platforms would then have less ads clicked over time. I'm not seeing a positive here. I mean, is there something that I'm missing here?
Alex Song: I mean, it is the biggest problem of the last 12 months across technology in the US. And it is a meaningful problem in that, especially going into a downturn, it means that everyone's budgets around acquiring customers, which is very important to achieve the growth expectations of all these startups out there and also more mature businesses, right? Every investor is looking for growth at the end of the day. It becomes much harder to realize those goals when your return on investment is just no longer where it used to be.
And that's where we feel very fortunate that we had the foresight over five years ago to begin creating a network to allow us to get access to this underlying data. And the truth is, I didn't realize how impactful and how challenging iOS 14.5 would've been if not for the fact that I was also a D2C founder of multiple eCommerce businesses. So I was literally feeling the pain myself, trying to solve it for my own businesses, my own brands that we're struggling to acquire those customers. And then when we did a deep dive and started to bring in really smart data scientists and data engineers to then take on this problem, did we start to realize, "Wow, we are actually in a position to solve this, not only for ourselves, but for many of our clients out there."
Ethan: So we've got this change from Apple. And this has been a few years ago, but we've got things like GDPR in the EU. We've got CCPA in California, and we've got a couple of other states that are trying to tack on new privacy laws like the CCPA. I mean, how do you see this trend evolving in the near term? And if anybody needs to be worried, who is it?
Alex Song: So it's a great question. And I want to be really clear. We are very pro data privacy, and I actually believe that our solution being a third party in what previously was a walled garden in terms of the large platforms owning everything is actually very healthy for the long-term of this industry and this ecosystem, because ultimately more players like us taking a part in that digital and data landscape means that we're decentralizing power. And ultimately, when you split up the power into more people and more stakeholders, you then allow yourself to have more market dynamics that are competitive. And therefore, the end user, the consumer will be better protected versus just a few very powerful, large technology companies owning all the data. So I think that's number one.
I think, number two, there will continue to be more trends to protect customers and consumers from their data being used inappropriately. And I think what's happening when you shake things up like this is that you force the larger companies to start thinking more long-term for how you balance privacy with their own business goals. And right now I think that moment is very much upon us. And I think the movements that we're seeing for data privacy will only get better for the consumer. And I think our role within that is to make sure that we secure our position as someone that keeps everything aggregated, anonymized and adheres to all these data privacy requirements and is always going to be standing by the consumer and ultimately helping the consumer have a better experience on these platforms without giving up their data.
Ethan: And I think you said the magic word, and that's anonymized. I want relevant ads, but I also don't want my name and my social security number and my shoe size out there for every everyone to see.
Alex Song: That's right.
Ethan: You mentioned third party companies, and Proxima is one of those third party companies. So y'alls product is based off of a proprietary anonymized database, just like what you said earlier, 60 million data sets. Can you give us an overview of the type of data you're collecting and where you're collecting that data from?
Alex Song: Sure. So we launched a partnership network in 2016 called DojoMojo. And DojoMojo is first a fun name to say, but secondly, a really great place for young digital businesses, brands, media companies to actually create partnerships where they will promote another brand in return for them promoting their products and services as well. And we created this network where now there's over 15,000 businesses on this platform and they're proactively working with each other messaging, connecting almost like a LinkedIn for marketers that want to work together.
Now, the number one question that these businesses ask is, well, which partners are going to be best for us and which ones won't be as good for us? And the way that we answer this question is we said, "Hey, look, give us the information you have about your customers. We'll keep it aggregated, anonymized, encrypted in our database. We'll never share this data to anyone else, but we'll just score everybody and tell you, 'Okay, here's which brands will be good for you and which brands won't be.'" That is the original source. And really, the information they're providing us is engagement stats around, let's say, an email service provider, who's opening this email, how engaged are they, how often are they clicking as an example. An SMS message, for example, of like, "Okay, well, how often are they actually engaging when they receive a text?"
And then also we've also received transactional data like how much have they purchased, how often are they buying? And ultimately, we never share that information with anyone. But what we can do is on an anonymized basis score these individual personas and then sharing hashed emails, very specifically hashed emails, into these platforms. We can then leverage those anonymized and hashed data sets to then provide the improved targeting that you highlighted is consistently 30% better than what a brand is doing on these platforms on their own today.
Ethan: So the information that is shared with Proxima has been shared in a way that the user is okay with and there's no personally identifiable information being shared at all. It sounds like what it's meant to be in the first place.
Alex Song: Yeah, every brand that we work with they have to adhere to CCPA compliance. And that is for us in the US the current standard for data privacy. And that allows them to opt out, any consumer any time opt out of their data being accessed by that business as well as us. So ultimately, I think the balance here is making sure that it is consumer privacy first and then making sure that the business objectives are also met in a way that ultimately makes everyone benefit as a whole.
Annaka: Yeah, I see. And we've had discussions about this before where it was like, "Okay, I'm cool with you having my trends and stuff. No, I don't want ads for cats. I don't own cats, right?" Like, "Yeah, don't have my name and my address and all that kind of stuff." So it just sounds like this is a compromise solution where everybody gets what they need, and y'all work primarily with social media as the main channel. Why is social media the channel you focus on?
Alex Song: Great question. So social media has individual profiles for every user, and that is the channel that most well aligns with the fact that we have individual stats and metrics and trends on a user by user level. We've started to test on YouTube as well in that they have some similar audience type functions, but something like Google AdWords, for example, doesn't have the same profile based targeting available. And therefore, we can't add as much value. So ultimately, that's where there is the biggest opportunity to help improvement.
I also think right now that's where the digital marketing is hurting the most. And that's also why firsthand, as D2C operators and founders first, we knew that was where we had to start, but ultimately I totally would like to expand into all of these other digital marketing channels, but we really went with where the most pain was being felt. And then as we continue to improve that and make that a lot better for our clients, we'd be happy to then transition to these other arenas.
Annaka: And this is my opinion and my thought. Is this also where the next generation of consumers is, is coming up on social media rather than traditional channels?
Alex Song: I think you’re spot on there. As you think about just even the history of going from more traditional media, magazines, billboards, print ads, then we started originally with Facebook, which then was, "Okay, it's your friends." And you want to know what your friends are doing. Then all of a sudden it was, "Okay, well, what are these influencers doing? And what are these brand ambassadors and celebrities doing?" That was Instagram. And then it went to what are the content creators doing, which is most exciting. That was TikTok. Ultimately, I think what is clearly a theme in this is the cost of creating content. The lower it is, the easier it is to have a lot of it and therefore differentiate on a platform. Wherever you can get the most of it that keeps you most entertained is where you're going to go.
So if you look at that trend, I think the answer is in different media formats we'll continue to see the social platforms be where people want to spend the most time, because it's the easiest, most cost efficient way to create a bunch of interesting content. And at the end of the day, that's how we engage with media today. We want to escape. We want something to relax with. So we want something to be fun and kill some time and have some laughs. And I think that, to answer your question, is ultimately where we'll continue to see the most development and innovation in terms of what the next media content is next. I'm not a creative agency expert. I can't tell you what exactly the media will be, but I'll tell you, our friend Mark over at Meta is definitely betting on VR as the format, but we shall see.
Annaka: Yeah. It used to be that TikTok was like that teenage dance app. And now my algorithm knows me better than my mom does. So it's like-
Ethan: That's where I'm going to find my next plumber.
Annaka: But they do have ads built into it, and it's not obtrusive. And it's like, "Oh, I might actually look into that." It's like once you realize what the algorithm is and what it could potentially do, it's like, "Okay, all right, I'm okay with this." But as far as changes across these social media platforms, either algorithmic or privacy related, how do those impact what you do at Proxima and how do you adapt to those changes?
Alex Song: I expect fully that there will be more changes. Our business was created from a very disruptive moment, and it would be foolish for me to think that I'm always going to be on the good side of the disruption. And as a result, we're always thinking about where the second bounce of the ball will be. And right now we are benefiting from that first bounce, but we are looking ahead and trying to understand by speaking to experts on the data privacy side, by talking to the creators and the advertisers and understanding where their needs are going to be met best.
And I'll be honest, I think there are many different ways we are preparing for what's to come, but I couldn't tell you exactly where that's going to go. I just want to make sure that whichever path it goes, I'm ready with a plan to make sure that our business will continue to be able to serve our clients in the ways that they need us to serve them.
Annaka: Yeah. Just having the forecast out there to be like, "Okay, this could happen or that could happen." And the digital world is a little bit, I don't want to say difficult, but it is. I mean, it's hard to figure out who goes where and who does what.
Alex Song: Yeah. I'll offer you a crystal ball attempt. Right? But again, I'm not betting that this happens, but hey, I could see it happening. So if you think about Web3 and how prolific its rise has been over the last, let's call it, three years, but really over the last 12 months in a very meaningful way and putting aside the crypto winter that we all know about, the theme of decentralization and bringing that power back to multiple people across a decentralized system, that makes a lot of sense, especially when the technology and underlying network can actually support that kind of technology.
So I would guess that in the near term, and let's say within the next three years, we will see more and more movement for data to also be decentralized. And whether that's literally bringing it to a level of tokenizing your individual user ID that then maps to all your data on the web, okay, it's going to take a while to get there, but I wouldn't be shocked if people are going to champion for that, because that is a strong theme that we've seen people are excited about. And that marries nicely with this feeling of like, "Hey, I don't want other people to have my data, but if they're going to have it, I want it to be spread across everyone so everyone can keep everyone honest about what's happening."
Annaka: Right. It's a little less Orwellian dystopia, I guess.
Alex Song: That's right. Well said.
Annaka: Thank you.
Ethan: All right. So I want to go back and speak to the marketer out there who they were chugging along, they had these nice campaigns, and here comes iOS 14.5 and slaps them right across the face. What were some of the reactions that you saw? And not Twitter reactions where people lost their minds, but rather the reactions in the movements they were making in the campaigns, in the actions they were taking. What did you see change? And were there any that you saw work better than others?
Alex Song: Sure. The initial reaction I saw was honestly just a lot of frustration and desperation, right? And by the way, I say this with complete empathy and compassion because I was literally at the helm of a D2C company when this went and was rolled out. And we firsthand were suffering because all of a sudden a business that we launched that had so much promise and so much potential was actually the third eCommerce business that we were launching out of our platform called Innovation Department. It literally launched right into the iOS 14 challenges. And in the initial testing, all the unit economics look great, and suddenly everything was wonky and we didn't know what to do.
And as a young startup, your capital is so precious. And when you don't have confidence in how it's being returned to you and how it's being measured, you just can't actually deploy it. And to be honest, we had to literally pause that business until we navigated and sorted out what's what in this new disruptive moment. So the honest response is it was very frustrating. It was a lot of acts of desperation, but where it started to mellow out was when Facebook got a hold of the new existence, and let's call it towards Q3 2021, beginning at Q4 2021. They really just kept pushing this word broad, "Go broad everybody. And then we'll figure it out on our end."
They dropped the cost of advertising to make it more palpable so that you could actually get better CPM rates and cost per clicks, et cetera. And then they started to really invest their massive army of data scientists and data engineers to try to make their algorithm more efficient and more effective. I would say what really changed, the number one action that is prevalent for all good marketers today, and this is adhering to the changes of the algorithm itself. Everyone is super proactive and creating a lot of creative assets very consistently and trying them on a very regular basis because what has also happened in the algorithm, and this is part of what we spoke about earlier in that the social platforms are now becoming entertainment platforms. You'll get just as much credit almost as an ad that you watch all the way through the full 10 seconds, 15 seconds, whatever it is as if someone clicks on it. And that's a big statement because before the ads that would benefit in the auction were the ones that got clicked on because it would result in a sale.
Alex Song: Now it's like, "Oh, your creative is still going to get shown because it's not causing people to bounce off our app." It was fun, it was interesting, which then now means all the creative studios are actually the real beneficiaries of iOS 14.5, because now they're busier than they've ever been spinning up amazing creative, very innovative, engaging type creative assets. And you will start to hear more and more digital businesses. They're talking about bringing studios in-house, video production. It is a part of their marketing team now. And I think to answer your question, that is the biggest change I've seen over the past year.
Ethan: Are these more entertaining ads that people actually watch for the full 10 seconds? Are they leading to as many sales?
Alex Song: I see it as they are much more focused on testimonial and real people based advertising. It's less of the glamorous lifestyle stuff. It's more like, "Hey, this is real. Here's why." I think that's been a trend I've seen in the creative assets. I've also definitely just seen people be more cutting edge or more edgy, so to speak, that they're trying to get you to remember them and then tell your friends. They're trying interesting things that sometimes are off the wall, a little crazy, but it's working, right? And you'll see that videos actually super fun as a content medium because you can do so many layers within it. You can add music to it, you can do all these different things. And I'm sure you guys are seeing in your own TikTok and real feeds.
And I think, look, ultimately that's better for us as consumers because we now have a more interesting form of entertainment and engagement, but for the marketer at home, they need to start thinking, if they're not already, how do I balance the original direct to response very unit economic focused ROI that I was looking for with this more brand awareness engaging type creative content and still make all of that perform in terms of your business needs and objectives?
Ethan: So we're going to start seeing all sorts of commercials that feel more like progressive and Geico. Basically just tertiary related to the business that they're offering, but much more entertaining.
Alex Song: Yeah, you're going to feel less like you're being sold, more like you're being spoken to or engaged with in either a very entertaining way or a very genuine and honest way. And I think those are the most feasible paths to cut through all the other noise that's out there.
Ethan: So is that the direction that you're taking with your companies? And we're going to talk about Innovation Department because we can't just leave on something like that.
Alex Song: My business partners at Innovation Department, who are doing a great job building out our brands, are crushing it on the creative strategy. The business right now that we've been very excited about is a pet nutrition business called Finn. That has just been one of those really fortuitous categories during COVID. Pretty much everyone adopted a dog or had a baby like me. And it's definitely had a lot of great tailwinds, no pun intended. And it's been really interesting to see what kind of creative assets are most engaging. And again, it's favorable. We get to use puppies and cute little dogs in all the videos that we create, but it's amazing because at the end of the day, we're more focused on engaging and educating than selling. And that's paying out in a meaningful way because we're taking a very long-term perspective with the consumer itself.
Ethan: All right. So let's jump into Innovation Department.
Alex Song: Please.
Ethan: What the heck is it?
Alex Song: So my background was, I actually started hardcore finance. I was at Goldman Sachs for six years between private equity and then later on I went to go work for Bill Ackman, a pretty notable hedge fund activist investor. For the first 10 years in my career, I was hardcore finance. And in that financial role, I spent a lot of time with CEOs and management companies effectively telling them what they should be doing with their businesses. And I had this inflated sense of how I could then be a really good manager and CEO of my own businesses. Not true at all. It's much harder to do than tell. And my way of balancing out my finance experience as an investor with the desire to be that entrepreneur that I had mentioned to you before was my childhood dream of one day building my own businesses.
My approach was to build a structure which was part investing and part operating. And we took a platform approach where we would invest in businesses alongside of other investors, like a very nice partner in a VC deal, for example, or we would go find early stage founders and say, "Hey, look, come be a part of our ecosystem. We'll give you some seed capital. We'll give you access to our resources, engineers, project managers, marketers, designers, et cetera. And then we'll all build it together and learn from each other in this really rising tide lifts all ships way." And that became Innovation Department. And that was now what we all have started to call a studio model, but I didn't know what a studio model was then. I just built what worked best for my experience and where I thought I would have the most success.
So that, to answer your question, is what Innovation Department is. And now it's really evolved into being more focused on direct to consumer and eCommerce businesses with a very strong lean towards retail and wholesale as well, because obviously in today's D2C category you have to be omnichannel and very balanced. And we stopped taking flyers and bets on things that we didn't understand. And then we started really focusing on things that we were good at and started to gain more economies of scale by doing things at repeatable to find that success that we're looking for.
Ethan: So you've basically created this scaffolding where every time you sneeze, a new business comes out. Is that what you're doing?
Alex Song: Scaffolding sounds very shaky. I like to say a foundation perhaps, but yes, to some degree. Obviously it's a lot of work that we put into, but yes, everyone thinks about these businesses as an overnight success, right? Really it's overnight success, 15 years in the making, so to speak.
Ethan: So how many companies have come out of Innovation Department so far?
Alex Song: Right now we've had five businesses that we literally started from scratch and are out there in the world and are doing great business and have amazing customers that support us.
Ethan: And over what period of time are we talking?
Alex Song: We launched Innovation Department at end of 2015. So that's about seven years.
Alex Song: Wow, I just felt old right now.
Ethan: It sounds to me like you're a guy who creates a bunch of successful businesses. I mean, that's awesome.
Alex Song: Well, we don't talk about all the business that failed along the way too often, but trust that we've definitely had our fair share of learning opportunities, and our success rate is definitely below 50%, but we're very proud of the ones that have made it through.
Annaka: Yeah. And as far as developing concepts, I mean, it just sounds like you're solid over there.
Alex Song: Thank you.
Annaka: Of course. So coming back into advertising, little fun fact for anyone listening, I always wanted to be in advertising, but definitely not where I am today. I wanted to be the billboard girl that would write all the funny stuff and get people to laugh on the road.
Ethan: The day is young.
Alex Song: Nice.
Annaka: There are posters in Florida that I wrote copy for, and I'm like, "Please laugh at that. Just please."
Alex Song: I love it.
Annaka: Please. So yeah, swinging back, what is a buyer persona and why is it important for digital advertising?
Alex Song: Great question. A buyer persona allows a business to understand who this customer is, what types of behaviors they'll take and really what their likelihood is to continue to want to purchase your services or your product. If you are a digital business today, you need to invest in building out your understanding of your buyer persona, as well as very intelligently organizing your CRM, your customer relationship management database to ensure that you are getting the most out of every single customer. I mean, there's a well-known stat. It's five times cheaper to get an existing customer to spend more than a new customer. So really understanding your buyer persona is super, super important.
I think this is where you're going with your question, but for us, the value we bring is that because we've been providing so much insight and analytics to all of those businesses on the partnership marketing platform so long, we started to get really smart about buyer personas on an individual level. And now in this moment where we see that there is a lack of targeting within these social platforms, our deep understanding and our proprietary database of all these insights around these buyer personas is now super effective to help bridge that lost efficiency from a targeting perspective.
Annaka: Got you. And a buyer persona in my brain is almost equivalent to a user persona when you're talking in web.
Alex Song: That's right.
Annaka: You know your buyer so, so well. You're like, "All right, if Alex is our persona and he pulls up to an intersection, we want to know beyond a shadow of a doubt that he's going to turn right at that intersection." At least working in web, that's how well we want to know our users.
Alex Song: That's right.
Annaka: So important. And you're not going to market to a gen Z the same way that you would market to a boomer.
Alex Song: 100%.
Annaka: Sorry, boomers. I love you. Every time I say boomer, I'm not trying to be mean. It's just whatever. And so the brands that you work with, do they already have personas set and ready to go, or do you help them with that?
Alex Song: Yeah, most of the businesses that we work with are already spending money on these social platforms, so they have a really good baseline understanding. They've probably gone through multiple brand creative exercises and figured out who they think their tribe is. And by the way, we always are very happy to learn and understand, and we don't pretend to know someone's customers better than they do. But what's very interesting about our solution is we are very agnostic to where the insights take us, meaning our data science approach actually launches multiple campaigns using our data sets almost like this game battleship growing up.
And I'm not sure if you remember it, but for those listing at home that don't, it's a game of intelligent guessing, right? You're trying to sink your opponents battleships by guessing on a grid. So what we really do in our calibration period, we call it when we onboard a new client, is we launch a bunch of shots out there from our database where the data sets have unique attributes, different qualities. And we look at where we get hits, where the unit economics, the ROAS, the CPA, the cost of acquisition is really performing the best. And we literally let the machine learning figure out where to guess next.
So sometimes it's very interesting. Where it takes us is very different from where perhaps we initially thought we were going to start and end up at. And I think that's the beauty of now having so much data that we can leverage to then be able to provide those insights and ultimately provide our clients with the performance they're looking for.
Annaka: Got you. So once you know everything there is to know about this buyer persona, how do you then take all of that and be like, "Here is an impactful ad."
Alex Song: Another great question. So what we do is we leverage something called lookalikes, and lookalikes means that if I show you Alex, you're going to show my ad to other people that look like Alex, but not Alex himself, because you already know who Alex is.
Alex Song: And that allows us to really expand our proprietary database of 60 million personas of US base into a much larger ecosystem of people. Additionally, what we've recognized is our customers typically don't have millions of customers in their database. The bigger ones will have maybe a million to two million. A lot of them are below a million still. So to access our data by showing us, "Okay, well, here's who we think we're looking for," and then augmenting those insights with the data that we have gives them an edge in this very challenging moment today.
Annaka: Got you. Man. And well, and 60 million that's huge. What's the population in the US?
Alex Song: It's almost 20% of the US population.
Annaka: Yeah. I mean, I'd say you have a pretty good handle on that. How often do you revisit those?
Alex Song: So what's another interesting advantage for our clients that work with us is the fact that we have live integrations with a lot of our clients so that we are continuously developing and refreshing, right? There's so many advertisers out there that probably have had a bad experience buying a list or trying to target some static thing that was sold to them. And maybe it provides some value for a little bit of time, but eventually those audiences decay. Our unique approach allows us to actually refresh the data on the back end and keep those audiences alive and performing effectively forever by continuously providing more insights and more data into what the model shows.
Annaka: Okay. And this is out of left field. I don't know.
Alex Song: Go for it.
Annaka: I get my idiom switched up every single time. The pot calling the kettle black.
Ethan: It's so endearing.
Annaka: I don't even know. It's frustrating sometimes. Okay. So as far as the marketing side goes, most sales guys grew up with a sales funnel. You start here, you end here. That's the end of the buyer interaction. What I've seen more of is a flywheel coming out where you're keeping users engaged over a long period of time. Do you see that happening more as brands are becoming more personable?
Alex Song: 100%. And I think what you're highlighting is the post sale retention, just continuously expanding that customer lifetime value. You're totally right. And I think that's where a lot of these other channels like text message, like email engagement, like sending loyalty incentives and rewards have been very effective in doing that. Funny enough, we actually are purposely very hard on ourselves in that we don't ask for credit on the retargeting and customer attention side. Even though we do it naturally by providing better targeting, we ask to be measured by first purchase. And that's actually the hardest part. As I mentioned before, five times cheaper to get a customer to buy again that's already purchased with you versus a new customer. And also, that's where our brands are suffering the most because that's the most expensive, most inefficient part of the sales funnel. And ultimately, we like to do the hard work because that also allows us to validate the value we are providing our customers.
Ethan: All right, Alex, what's next for Proxima?
Alex Song: Great question. We are very focused on being the essential acceleration platform for all digital businesses. That is literally that big, hairy, audacious goal that we want to strive for. And it's become especially important to us being that we were solving our own pain points in the very beginning as digital business founders. And now it's taken on this desire to continue to expand anywhere our clients need help growing. And to start our opportunity has really been around the social media platforms because that's where people are hurting the most in terms of inefficiencies.
But we want to go everywhere where our clients need support to grow, whether that's Google advertising, whether that's display networks, whether that's the next big thing after TikTok, whatever that might be. Maybe VR. We'll see. But really just making sure that we are solidifying our data, which is at the core of the foundation that allows us to go anywhere our clients need us. And then from there making sure that we build the software and the technology that allow us to be effective and provide the differentiated value that makes us essential to our clients.
Ethan: All right. So it sounds like your platform, your services could be actually super helpful for probably a lot of the founders that have been on this show and probably a lot of the listeners as well. So who are the people who should be pausing this podcast right now and calling you up? Who are the people you want?
Alex Song: If you are spending money on Facebook, Instagram, and TikTok today, and you're not completely ecstatic about your performance, we can help. It's literally that wide of a market, which is also why we're just so excited by the problem we're solving. Before, when I was building D2C businesses and you know maybe nutritional supplements, health and wellness, yeah it’s a pretty wide market. But, there’s so many options out there today where a lot of people can choose whichever brand they have the most affinity towards, right? We’re literally solving such a big pain point and there’s just no one doing it as well as we are today and that just gets me super excited to continue to help all these clients just reach their goals and objectives in a more effective way. Especially given the downturn we all are feeling is upon us.
All right. What is your number one piece of advice for early stage entrepreneurs?
Alex Song: Best advice that I’ve really adhered to is something that was told to me early on when I became a founder and an entrepreneur. And it goes, “whether you think you can or you can’t, you’re right.” And I didn’t understand how powerful that mentality was in the beginning, I was like “oh yeah sure sure. Positive reinforcement and, you know, believe in yourself and your dreams will come true!” but like literally, when it’s hard and it’s painful and you’re sitting there and every signal, every sign tells you it’s easier just to say, “you know what, i’m throwing in the towel. This isn’t worth it.” But, if you can believe in yourself and have the fortitude to keep going, good things will happen, right? And that’s, for me, now seven plus years into this, that’s been something that’s been so powerful for me that I continue to try to remind myself of, my team of, and all the people I care about that are going through this similar labor of love as well.
Ethan: Well, that's an excellent lesson. It sounds like it served you very well. And I hope that it serves just at least one person who's listening right now. Alex, this has been so much fun. Thank you so much for sharing your stories, your insights. And we just have one more question for you, and that is where can people find you online and how can our listeners support Proxima?
Alex Song: Sure thing. So our URL is www.proxima.ai. It’s funny that I had to say ‘www,’ right? So old school. And, my Twitter handle is @1AlexSong1 if you ever wanna engage and chat, more than happy and I’m pretty responsive on there as well. And you can find me on LinkedIn as well, Alex Song, just the way my name is spelled.
And look, we are very fortunate to have just a very large audience of people that can help right now and for me personally, anyone that says “hey, I heard you on Startup Savants and I’d like to see if our business can benefit from Proxima.” I’m more than happy to give them a free trial, let them kind of dig into our data set and see if it’s effective for them. And again, all they have to do is just mention this is where they heard it and it would be such an honor for me to be able to help your audience.
Ethan: Very generous. Thank you so much. So listeners, you heard it. Head over to Proxima and tell them that you heard about it on Startup Savants.
And we're going to put all of those links and everything else you heard today in the show notes. And that is going to wrap it for this episode of the Startup Savant podcast. Thanks for spending your time with us.
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