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The Andrew Faris Podcast · @andrewfarispodcast
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This is a fantastic conversation with Connor McDonald, CMO of Ridge. Needs no introduction. You have heard Connor for a long time in a bunch of different places, including, of course, the Marketing Operators podcast. And today on the show, we're talking about channel diversification, ad channel diversification. Connor had express what I think is one of the smartest approaches to channel diversification I've ever seen. And so, I brought him on the show to ask him a bunch of questions about that to say, "When should you go beyond meta ads? When should you be investing in YouTube? When should you be investing in app? when should you be investing in
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This is a fantastic conversation with Connor McDonald, CMO of Ridge. Needs no introduction. You have heard Connor for a long time in a bunch of different places, including, of course, the Marketing Operators podcast. And today on the show, we're talking about channel diversification, ad channel diversification. Connor had express what I think is one of the smartest approaches to channel diversification I've ever seen.
And so, I brought him on the show to ask him a bunch of questions about that to say, "When should you go beyond meta ads? When should you be investing in YouTube? When should you be investing in app? when should you be investing in all these other channels and what are the barriers to entry? This is a really practical guide to thinking through when and how you should be investing in additional channels beyond meta and when you shouldn't be when you should just be going deeper on meta.
I'm not going to delay it anymore. Let's get into it with Connor McDonald from Ridge talking ad channel diversification. Hey, thanks thanks for doing this. You already you already live a podcast full life. So, thanks for taking time to do another podcast, >> dude. Of course. You know what's so funny? Okay. So, podcast today. I got to record one in the morning tomorrow. I got uh live marketing operators event. >> All right.
When is it? Let's go. >> Oh, tomorrow. It's too late. I'm not >> Yeah, it'll be too late to promote it, but that comes out tomorrow. And then I got to do I I'm doing my first keynote presentation at a Google event on Friday. And it's like, yeah, at some point I got to get back to like the marketing off the chief marketing officer tasks, you know, >> to run to running to actually doing the work. Yeah. All right. Well, then let's let's not let's not delay it too too much.
I mean, I appreciate it, though. I think this is a side note, but pe people like I just am astounded at how much information is free in our space. Yeah. And like and it's part of why I'm optimistic about it is people like you like I know you make money from it and everything. It's not like you're being it's not you're doing it totally altruistically, but >> yeah, I I also know I mean you're not making money for this, you know?
It's like I just appreciate it, man. It's cool. It's it's cool for you to do it. >> So, thanks. Um >> Connor, let's let's go straight into this main thing. We can get to anything else that's just sort of top of your mind that you want to get to at some point as well. But the place I want to start is channel diversity. Um, you posted something and I'm going to actually do I'm going to quickly screen share this. I loved this post a lot is in the operator's newsletter.
Um, and so and there is a link to this in the show notes. So if you're listening uh on a pod feed or if you're watching on YouTube or listening on YouTube, whatever. Um, the link the link for this is in the is to see Connor's full explanation is in the show notes. Go grab that. Um, but I want to look at this chart that you showed. And if you are not watching this, if you're just listening, it's okay. I'm going to explain it.
Okay. Um but uh but here here's here's the here's the picture. Okay. Um you said basically that I think this is um during uh Q3 specifically of last year. Um and uh what you see here is a a mix of spend in three different categories of yours. What you consider mature, maturing, and immature categories. The mature category is wallets. The maturing category is rings. The immature category is travel. three different product categories that Ridge is in.
Okay. And the basic point here is that in the mature uh or maturing and immature categories, the two less mature ones. Meta is making up about 75% of your budget. Okay. In the mature category, it's about 44% of the budget over this time period. In that mature category, it's wallets. Okay. So, we'll just call them that. Wallets, rings, travel. Okay. In wallets, uh it's uh a lot uh meta is still almost half the mix, but much lower.
Then it's YouTube 21%, YouTube partnerships 10%, Google 9% outside of YouTube presumably CTV 6% and so on. But for your but for your maturing and immature categories, rings and travel, okay, for those um you're looking at basically um you know more standard mixes that people would probably be used to a little bit more heavy Facebook threequarters of the spend with uh Google and YouTube making up kind of the next large portions and then a smattering of stuff in in other places as well.
All right. So, there's that. First of all, before I say anything more, this is Q3 of last year. Any material changes to this that are material that are important for the conversation, before I before I ask you questions about this, Connor? No. >> No, nothing material materially different at this point. Um, cool. >> I I I still think it's a pretty good uh progression of how our categories typically look at Ridge. >> Yeah.
Cool. Um, okay, great. So, if that's the case, then what I want to do is ask you about why. Uh, and this is like the way I want to talk about the channel diversity question. So, so maybe let's start on the wallets category. Okay. Um, actually no, let let's yeah, let's start on wallets. So, so here's my question. Why presumably over the lifetime of Ridge, okay, the the unit economic profile of wallets has not changed that dramatically.
Like I bet it's cheaper for you guys to make wallets now than it used to be because you probably make a lot more wallets than you used to. But I bet it didn't change the calculus to the tune of 20% or something like that. You know, maybe maybe I'm wrong about that, but that's my guess is that at the at that kind of level unit economic model hasn't changed that much. So So when you're spending 21% of your budget on you on wallets today on YouTubes on YouTube, I just said YouTubes on the YouTubes.
Okay. [laughter] uh if you're spending 20% of your of your budget there, how come you can do that today when you could not do that at a previous time like in rings you're spending 7% of your budget. So do do you see what I'm saying? Why is it possible that that can be profitable for you today unless something about the unit economic or LTV profile of the product itself changed? Does that question make sense? >> Yeah.
No, it makes total sense. And I think there's like so many different ways that we could dive into it. And I guess that's a purpose of the pod. Um, you know, the the first one is that in order to get live on any given ad channel, I think there is some amount of like underlying fixed cost and infrastructure, right? Like the the main thing, why are we able to spend 20% on YouTube in Q3 and we weren't the previous year or two much less two, three, four, five, six years before that?
Really comes down to our ability to create. This is um some of that is is short form vertical video and like the the the YouTube shorts ad inventory, but a lot of it comes down to like 16 by9 longer 40 60-second ads are getting significantly longer watch times. Most of it's showing up on TV. There's a there's a content creation piece of that. There's a measurement piece of that that requires time and energy for our team to even figure out not only what works, but how well is it working and how well can it work at scale that just it's not as if we could have turned it on.
Our wallet business is, you know, over 10 years old at this point. We couldn't have done that 10 years ago. We didn't have the the the >> the wherewithal to do that. Um, and then this kind of leads to a question that I know you're gonna ask after this, but there is also a matter of given given the constraints and the time and energy that you have available to like develop content and launch across channels, I think it's best to start with something like a meta, you scale on meta and you have some sort of CAC and then as you scale, I think CAC increases.
It's like the the idea of diminishing returns. Um, so at some point it becomes advantageous to be introducing new channels. So it's not as if >> like the big difference is not that our unit economics have changed. It's that we went from selling one wallet day one to our 10 millionth and one wallet this year. And that just requires a different set of channels in order to do that. >> So those are those are the two that I would say this component of time and this component of of energy that we have to to you know deploy. >> Yeah.
Okay. Fantastic. That's those are actually very clear answers and I want to dig into both of them because they're both interesting to me and they both fit with things I've sort of seen other people say. Um and so the uh the the the first one you're saying, let me just repeat it back. Tell me tell me if I have this right. >> Okay. You're saying one of the costs like so YouTube shorts right uh is available for anybody running meta ads right now the way app is or something like that, right?
You can actually take your vertical video from Meta and just be like, I know this is not going to be the highest performing YouTube ad I'm ever going to run. It's probably not going to be the highest performing app ad I'm ever going to run, but I can with a couple clicks of buttons take that ad and go drop it into a different channel and, you know, put a target cost on it. And if I'm getting close to that target cost, it's worth investing a little more. and not.
So essentially the barrier to entry on vertical video from from ad channel to ad channel is very low as long as you're doing vertical video sound on that kind of thing first. Is that does that sound right to you? >> Uh yeah, absolutely. And I've talked about that quite a bit. That's like you have YouTube shorts, you have you know Instagram reels, you've got Facebook stories, you've got Snapchat, you've got Tik Tok, you've got apploven.
There's a lot of short form vertical video. There's a couple small caveats which aren't barriers to entry, but you know I uh this is discussed all the time. Apploven has far more non-s skippable inventory. You five non-s skippable seconds in one of their ad placements, the other one you get like 30 second non-s skippable placements. So you have the opportunity to over time specialize the content >> depending on slight differences in the inventory in the platform.
But by and large, the way that we've approached it at Ridge is if we can find winning short form vertical video content, there's more ad inventory for us to place that on. And after a certain dollar amount spent on Facebook, it all of a sudden becomes it makes economic sense for us to do that on a Snapchat or a Tik Tok or something like that. >> So this makes sense to me. So that the idea is like at some point this barrier to entry problem and and barrier to entry I mean as a as a as a way of saying essentially production costs, right?
Like and potentially some early distribution costs as well. Like like that is basically eliminated when you can do this. I've actually you ever get these consulting call conversations uh people reaching out to you asking for your time like investors saying like you know uh right >> should we do should we should we spend should we invest in app lo 11 or not or whatever it is like one of the things I've tried to communicate to some of those kinds of people whenever I've taken I've taken like two of those uh whenever I've tried to have that conversation the thing I've always said to them is like you don't understand from my perspective every day one of the reasons that app level was so appealing initially is because it was so freaking easy to take my ads and I know that it's not going to be the best app ad we ever make because of the thing you just said.
There's non-s skippable inventory that's longer. I'm well aware that like me just porting over a meta ad into app is probably not really maximizing the channel around. But if there's an extra 3 to 5% of budget there and I'm reaching people, they're still humans looking at playing video games like and so I might as well if I and if I know the message converts, then probably the message, you know, there's nothing uniquely social media about it.
So So yeah. So um so that makes sense. So what so is that when you talk about travel and rings and when I see 7 to 14% of your budget going to YouTube ads on those two you know less mature categories is it fair to say that the most of that is that same thing where you're taking vertical video from meta over to those uh initially >> okay yeah so that's a great question and I wish I knew the answer off the top of my head like what is the percentage budget split between shorts and uh inream ads it is probably more shorts we are spending nearly as much develop developing longer form horizontal video for the mature and maturing categories. >> Okay. >> Or sorry the immature and maturing categories. >> Yeah.
Yeah. So yeah travel rings. Yeah. So okay so for so for wallets then uh at some point you do decide to make the leap and say okay we are now going to cross a production cost threshold where we're going to go invest dollars into creating horizontal video now um for YouTube built for that uh you decide you guys decided to do that on wallets at some point. Yeah. >> Yeah. And the way that looked for us was it was in towards the end of 2024, we started setting up bi-weekly calls between our our YouTube media buying team and our performance creative team to make sure that we had like a creative process in place for testing new content.
And then along with that is the measurement piece, which is super tricky. There's all sorts of ways to buy media on YouTube instream ads and I've heard all sorts of different suggestions from different people. Just totally you just you bid on CPVs, you bid on CPMs, you don't need to do purchase optimize, you do action sets, the whole thing. So like it was a long process to get to the point where we were seeing the success and measured the success um to the degree that we were confident in spending 20% of our budget. >> Yeah.
Okay. Um that long process represents cost. Yeah. Between people's time and also like spending ad dollars that you're not sure if it's working and all of that kind of stuff. >> Totally. Um I don't know if you could say numbers or something like that but uh so just uh say anything else you want to say about this I guess is the question. Uh so what I hear then is the thing that is stopping you from doing that same thing on your on rings and luggage or at least that was in Q by Q3 of last year is that you have to go invest a bunch of money into making new ads specific for that channel that are different than meta that require probably different muscles.
I'm assuming there's like a learning process there where you're like you start by exercising your meta muscles and then you realize actually the storytelling in YouTube works differently or something like that. >> Um and then you also have to figure out how to bid it and how to measure it and all those things and all of those things represent cost. Yes, >> 100%. >> Okay. So, so can you talk through that process a little bit more because I I'm curious to hear sort of like how you guys actually approached that.
What were the mistakes that you made and what were the things you learned in the process of doing that? in the process of of getting YouTube to work for EDC for instance. >> Correct. >> Okay. So, I'll actually let me backtrack slightly because I think Ridge has a Ridge has a somewhat unique >> experience with channel diversification because when I first joined Ridge 2017, our strategy was almost initially like as diverse as possible from a media perspective.
We would buy any place we could buy media and that's what led us to getting into YouTube creators early and um we've got that on the list. It was it was beneath the YouTube instream ads, but just sponsoring creators. Yeah. Yeah. Significant percentage. That gets us into sponsoring newsletters, which we were really early, too. All sorts of weird display ad space. I I'm sure you've run ads on live intent, things like that.
We went really wide really early. Uh we were on we were one of the first advertisers on Snapchat back in 2018. We were mentioning the earnings call. It's like it was like all of our early wins were basically not getting good at ads. We had a good product. We had a good offer. We had good margins. We had good distribution. everything that or good uh you know fulfillment cost things like that. Our entire success was just dependent on getting this hey you can go from a bulky wall to a slim wallet in front of as many new people as possible and what we did was was massively expand channels extremely quickly early on.
Now the problem with that is not all those channels work forever. um a lot of them will drop off in efficiency over time. And then also if you expand that quickly and especially into all sorts of the like the weird crevices of ad inventory space like all of a sudden you have far more channels taking up two three four five six% of spend and it's impossible to like optimally allocate across that. And I wouldn't argue we're currently optimally allocating but it's a lot easier when we are far more confident in six channels than not that confident and we have 14 channels.
Yeah. Right. Yeah. Yeah. >> So that's like that's a bit of the backtory of like where we're coming from as a brand as it relates to channel expansion. >> So you guys had you guys had some intellectual capital already on the sort of like team on on the institutional knowledge balance sheet there, right? Like like you had gone you'd gone down this road a little bit, seen some things that work, seen some things that didn't work before you ever tried to like reexpand because I think what you're about to say if I'm anticipating correctly is that then you guys like shrunk back down some, right?
Like Yeah. And but but you but you did already have some banked experience there. >> Yes, exactly. So banked experience in expanding channels also like some extremely compelling examples of how channel expansion can really work. Launching on Snapchat in 2018 >> was gamechanging for the business. We ended up having this massive August which is like there's no reason why we should have a big August. Um yeah, so we've seen the like we've seen the potential success of channel expansion and I think that's what's given us some conviction around continuing to try to unlock these.
So now when we decide hey what does how do we want to approach channel expansion? How do we want to prioritize it? We want to be focusing we know it takes time to unlock it from a measurement and content perspective and a and a team and energy perspective and with all the categories that we have there's also just direct trade-offs. If we're unlocking rings YouTube then we're spending a little bit less time on EDC someplace else. like it is zero sum in that way.
Um so what we're looking for now is highly scalable channels. Um like we we want to be spending on places like YouTube instream where it can be 10 15 20% of the budget. Um >> and ideally something that we can do with the current team. There's like there's a different scenario of Ridge where our partnership team is 15 20 people because we figured sponsoring every Tik Tocker and Instagrammer on the planet is the best thing for us to do.
But what we're focused on right now is like given our current team build, how can we get more leverage out of it? And that's just leaning more on paid channels like a YouTube. Conor McDonald is on the show and that's a great reason for me to be telling you about Rich Panel. Rich Panel is used by Ridge uh as their customer service help desk software. They've talked about this a lot publicly. Rich Panel is great software for customer service and right out the gate they guarantee you 30% savings if you switch from Gorgeous or Zenesk over to Rich Panel, which is awesome.
And it's not just that it is less expensive, more affordable than those other customer service pieces of software. It's also that Rich Panel is great software. It's built from the ground up with AI. They generally see on average a 30% reduction in customer service tickets when people switch from Gorgeous or Zenesk as well when brands switch from those. And that's a lot powered by a really excellent customer service self-help portal that customers can get access to [music] uh on your website so they get answers to their questions faster. also has an incredible AI integration where Rich Panel will go and interact with your customers for you on social comments.
So, they can go monitor social comments, answer people's questions, do that really fast, really easy, and they do that at an extremely low error rate. And that means that customers get answers to their questions quickly, and also people seeing your ads can do that while also going around the management nightmare that is managing social comments. If you've run Facebook ads for any amount of time, you know it's just a mess to stay up on top of those.
So, AI is the perfect tool for doing that. Rich Panel is just really great software. It can go with you from $0 up through, like I said, Ridge is using it. Huge nine figure brand and everything in between. Go check it out today. If you are in the middle of your brand, if you're on one of those other pieces of software, go check out Rich Panel. Richpanel.com is the place to go. Richpanel.com. Get on a call. See what they can do.
They promise you that it's only a twoe transition as well. I know you don't have time to waste transitioning customer service help desk software. They've got it dialed so you can get up to speed with your agents using Rich Panel really quickly and easily. So, go check it out today. richpanel.com. >> Yeah. Okay, that makes sense. So, so then there's a decision to allocate team towards where the biggest opportunity is both in terms of the product mix and the inventory, right?
So, you you're thinking a lot harder about how to do this on YouTube and directing creative efforts towards it than on X. Uh even though X works, it's just never going to have that kind of scale. >> 100%. It ends up falling like more into the >> it's just like downstream of winning static ads on meta. Yeah. Where it's like >> you just drop them in there and >> and frankly Yeah. Yeah. Exactly. We can just kind of drop them in and if the and if CPMs are good and the ad platform's functional and you know there are people on X who are looking for gifts for their husbands then like okay then that can kind of work and we'll like take advantage of that when we can.
Um, there's really only a handful of channels like a meta or YouTube. I guess I'd put YouTube partnerships in that bucket, like the native integrations where you can truly scale it year round. Um, so that's where we try to spend more of our time and energy. And then these other ones are just kind of downstream from that. >> Yeah, makes sense. Okay, so let's talk about the Well, I want to talk a little bit more about that first barrier to entry, the cost of getting up on the channel.
Uh I think this is a mistake that particularly gets made on on YouTube for people um because because I think it's so com the idea of going on YouTube is very compelling in a couple ways. One of them being that that like you like like you just pointed to the inventory is virtually limitless, you know, on YouTube. Like it's just there's there's so much available volume on YouTube. And so it's a really compelling channel.
And also I think >> it just makes sense, right? Like if you've got video ads working on meta, you look and go like, well, why shouldn't they be able to work on YouTube or whatever, right? Now, there's one problem, which is that a lot of YouTube conversion happens unrelated to a click, and that creates a measurement challenge. Uh, you can disagree with Matt if you think that's wrong, but >> no, what I'll even add on top of that is, you know, for a really long time, and I think they've addressed some of these issues, but it wasn't even if they'd clicked through, if someone would go on to click a shopping or search ad, you'd lose all attribution, >> right?
Not only was there like an attribution gap and a lot of the value you're creating is just going to be view through because you're getting 20 30 second views. Um but even when people click it's you're going to lose all the like a lot of credit to people then searching for your brand later on. So just like all sorts of measurement issues. >> Yeah. Right. Um but it's still compelling. But what I remember talking having this conversation with Jack Rubin from Pretty and Fig. uh you know, Jack talking about when they first launched on YouTube, uh and I think he did, I think he said this on my podcast at some point, but just that like it just took them, I don't know, some tens or hundreds of thousands of dollars worth of creative production before they could sort of make the creative work.
Even though they had a huge and awesome meta ads creative team spending millions of dollars, you know, whatever it was, it just was such a different set of muscles than to in terms of the way the storytelling unfolded and the way that they accomplished it. again, even just down to the aspect ratio, uh, which which actually is a pretty big barrier. It's like a really different thing, including at the level of how you pick up a camera and shoot.
Um, have you guys found that to be true as well, that the the kind of ads you make on YouTube are materially different in terms of, I don't know, fill in whatever you want uh in ter in terms of anything for YouTube versus these other channels. And if so, did it cost you a bunch of money to figure that out? >> Yeah, totally. Um, one, we have gone down the path of like big expensive hero videos and those didn't work for us.
So, from like a true like >> Yeah, I don't even necessarily mean that, by the way. Like, I know they're not expensive, but yeah, sorry. Go ahead. >> No. Yeah, I was just going to make that distinction though. Like, cuz some people are like, "Oh, I need to do YouTube. I need to go spend $150,000 on a two-minute hero video." And like that's not the case. So, that's not necessarily where the money's going. The storytelling is significantly different.
You have five non-s skippable seconds. The way people consume content on YouTube is way different. Like, you don't >> Right. I mean, in Instagram feed, it's like people are swiping through, they're consuming dozens of pieces of content every minute. YouTube, someone's used to sitting there consuming content. And I think that's more or less true of the ads as well. And that's why we're getting 20 25% viewthrough rates on a 20 second view.
Um, so all of a sudden, we're just racking up way more views. There's more time and real estate for us to develop those those stories. And that's where we find like I mean, we have some really good founder content that's worked in the past. we can like elaborate on that story further for sweep stakes where we give away like Lamborghinis and cars and cash and things like that. We have more time and energy to develop why we do this, who's won in the past, things like that.
So that is really what we've found to work and that has taken time and energy. Yeah, to your point. So not not necessarily from the content production, but just the editing, the testing, and it's really just the ad dollars that go into the platform without it working is the true cost of it. >> That makes sense. The distribution dollars more than the production dollars. >> Totally. Um, okay. So, before I say, well, let's actually do the next one because at the end of this, I want you to make a recommendation to people about what they should do, which you've kind of did in the in the newsletter as well.
But, um, but let's go to let's go to point number two. The other the other reason that this is the case for your more maturing stuff. Um the other the other point you made about what the barrier to entry to diversification was. The other point you made was uh that you guys are 10 million wallets into this or whatever it is, right? Um, so let me again repeat this back a different way and you tell me if I'm accurately articulating what your point was that the reason to not diversify channels in the early stages is because for a very long time your next most profitable dollar is still spent on meta and therefore you ought to go spend your next most profitable dollar where you can, right?
Like just get the highest return on your money and so go that for a long time that highest return is meta. Go do that. Uh, so there's that. But actually at some point that flips and so at some point you your next most profitable dollar is not on meta. Your next most profitable dollar is on whatever other channel. Uh in your case you know you guys spending on YouTube and at that point you should go spend there instead.
So so the the logic doesn't change of where to spend the money. It's just that the actual answer to the question changes uh once your business is big enough or or whatever it is. Uh so is that right? Did I say >> I would I would totally agree with that. Um, I guess the the few other things that I would add in this like hypothetical scenario is like could we have launched day one at Ridge with as diverse of a media mix as we have today, >> right? >> Um, >> you know, if you launch if we launch Ridge Day, we're on meta.
Our the the next the first million dollars we're going to spend are probably best spent on meta. While we are doing that, we're also improving content, right? So, it's like as we as we pass through time in this in this example, uh, as we're at month nine and we say, "Okay, and this is just theoretical because I also wouldn't suggest anybody uh begin diversifying month nine of a of a new brand." Um, but just like in the scenario, we we are through, you know, $750,000 in spend.
We've tested content. We found more and more winners. All of a sudden, those winners are going to perform better on Snapchat than whatever we launched with day one, right? Like if you were launching um AppLoving in Q4 of 2024, we're doing it with the absolute best content we've ever had. And that just it would have looked meaningfully different if it had been 2017 and we're just running static ads in in in vertical ad inventory.
Like it just wouldn't have made any sense. Snapchat worked at that point, but I don't think Appven does in 2024. So you have to take into this this uh you have to take into consideration the quality of the content and how it improves over time and how that changes how well it will perform on these new channels. >> Yeah. And that that then allows because sort of essentially creative content like good quality creative is the thing that drives CAC down or you know volume up at the same CAC as the case may be.
And therefore, finding more content like that is the thing that turns it that it's almost like it's almost like saying the idea of a good or bad channel is a misnomer. And it's not really a good or bad channel. It's like like everybody's conversion optimization at least kind of works. You know, it's like you have creative that's good enough >> to make it so that uh so that you can actually tap into that machine. And if you don't, then maybe maybe just each channel has a different barrier to entry for what good creative means or something. 100%.
So like one of the things as I was thinking about coming on the pod I was like really what we've also done in that time going from >> and this is true across our different like levels of of maturation of the different categories is an effort of conversion rate optimization how are we driving average order value up in that time how are we how are we extending LTV so we can tolerate higher C things like that like all of those underlying it's not the the necessarily the unit economics of the product but the the unit econ economics of the order can improve over time and that just gives you more leverage to deploy on what frankly I think are less effective channels and meta like all the other ones that we're mentioning. >> Right.
Right. Right. Right. Yeah. Um that's okay. That that I think does make sense. So you just aren't there yet in the same way for travel and rings because this is the question I keep coming back to as I sort of look at your chart is like you guys have already you did it you did it on on EDC. So, how come how come you aren't there yet? And and I I don't mean this in a critical way or or in an argumentative way at all. I mean I mean it in a real way like so why aren't you there yet for the less mature categories?
What what is it about those categories that has that has blocked you from those things? Uh and you you referenced one thing already in the conversation which was essentially time is limited, team size is limited, and you're just going to put your energy towards where the biggest upside is. That seems like a reasonable answer to the question to me. Is there anything else about sort of the way you laid out maybe that second criteria in particular? >> Yeah, that that that is is part of it. >> Well, one thing that I'll say is our different categories have different opportunities across channels.
Like one thing I mentioned in the newsletter is that we spend a larger percentage of our budget on rings on Google search than we do travel. It's just a it's a higher intent category. There are more men's wedding band queries that we want to be showing up on versus uh luggage. like that is a more like top offunnel sort of demand generation category. So there's things like that where it's just like oh yeah it does um app really works for us during gifting periods like Father's Day and Q4 because it's a great gifting product and it's like people don't really gift $350 carry-on.
So like so there's just all sorts of factors by cate I mean they're they're we run them with different P&Ls. We run them basically a separate brand. So it's like we have to be uh we have to be taking into account like what are the attributes of this category, the margins, the who's buying and for what reasons and what content is required for us to get across what channels and it just ends up looking way different than it does for wallets. >> Yeah. >> Um I do think it probably happens quicker within Ridge because we have indicators from other categories. >> Yeah. >> So that would be one.
And then this I don't know, you know, there's a question around we've been hitting our ring forecast without a super diversified budget. Like I think there's a lot of meat on the bone to continue unlocking meta. Whether it's like we had some big I talked about this on our podcast, but we we had a great win last year identifying that targeting women showed a lower row in platform and in North Beam, but a higher incremental return. and and we have a number of theories for that, but just the fact that targeting women was more incremental for our business in a way that Meta wasn't measuring otherwise is a big unlock.
And it's like, oh, I'd actually rather be spending our time trying to find wins like that versus the spray and prey of let's try to figure out how, you know, whatever YouTube partnerships works or something that's just like far less proven. Um, so those are things that we're trying to take into account as we diversify. >> Can I guess the answer? I didn't hear you say this on the podcast. kind of guess what you think the theory is.
My guess is the women are telling the men about it and then they're buying >> for sure. That's exact. Yeah. Yeah. That was that's one of the big ones. Um we also see interesting behavior where like a lot of the buying is concentrated on the weekends >> and it just seems like oh yeah I think I think couples are sitting down together and like checking things off their to-do list and the woman's like, >> "You should buy your Ridge wedding band because they'll replace it twice if you lose it and you're a forgetful guy." You know, stuff like that.
Yeah. Um, >> even aside from even aside from the purchase behavior in North Beam or in in the >> you're saying the incremental buying is happening on the weekends even even if it's not showing up in your quote unquote rorowass or is it actually showing up as rorowass in the weekend too? >> Um, it's I mean it's a little bit of both, but we see the buying concentrated on the weekends from people who we presumably prospected earlier that week.
There's a little bit of a delay. It's more just around the idea that uh the time that people are buying feels way more day of week dependent than any other category that we have. >> I have I have had one client that has >> really disproportionately especially because we are of course running manual bids with them. Uh like it it feels the the daily spend drastically disproportionately is in the afternoon and the evening relative to other parts of the day.
So they'll spend like twothirds of their budget from like >> like 3 p.m. to 7 p.m. or something like that. um and it's in a food and beverage category and I'm just convinced it's like people at the end of the day near dinner time something like that they're home from work and there's like a really particular buying behavior around that particular thing maybe you know anyway so um there are funny little things like that that it makes sense to me with rings where it's like yeah people are couple sitting together and like she says hey look at this babe you know like and it's like shows the phone you know makes sense um yeah uh yeah okay interesting um all right and then let's let's do measurement for a second Uh and then I and then I have some other questions about this.
So um how hard is measurement when you add channels like this and what have you done to solve it? I this is we don't have to spend a lot of time here. There's like plenty of plenty of I think good content about this issue out there. But it does seem to me to be a real challenge as you do channel diversification type stuff that it really muddies the waters and it and uh and so uh any any like key insights that has have helped you guys the most uh you know besides runningity tests maybe that's the extent of it but like any key insights that have helped you guys think about this problem the most? >> It's yeah I mean I don't I'm not gonna have any like novel nor like silver bullet solutions here.
Uh we run a ton of incrementality tests. We ran the most incrementality test of any house customer last year. I I I say that very proudly because we we do it by >> we measure EDC uh we we measure wallet ring and carry-on travel revenue differently. So we're running concurrent incrementality tests because the buyer is just so much different um that we're able to do that. So like again another example of like us running these brands basically in parallel.
Um >> so we run a ton of those. we set up we're either getting directional reads so that we can allocate budgets accordingly and not optimally but like directionally correct that we are we just got a test readout this is for wallets uh Twitter which I think we talked about X was far more incremental than Snapchat last couple weeks and it was like and that basically lined up with what we were seeing on an MTA basis so we allocate our budgets a little bit differently did we perfectly allocate them across like the cost curve conceptually probably not but really just focused on directional reads that are moving us towards more incremental outcomes.
Um, so we're constantly doing that and then we have when appropriate like our our benchmarks, our goals and if we're below those and we're really aggressive about pulling those channels back. Um, because it is extremely easy and we found ourselves in this position like 2022 where you're across all these channels, you don't have a great understanding of what success looks like. Things start to win in terms of performance and then you're not exactly sure where to cut it. >> Yeah.
Right. That creates a real problem because now it's hard to know where to get the money back because maybe you actually are cutting the one that's giving you the money, you know, like yeah, that's that's really it's really challenging. It's like there there's an increased risk profile as you diversify channels. That's sort of like a knowledge risk or something like that to the business. And that that is a reason to not do it unless you have a little bit of financial flexibility.
And you know, almost almost what I hear you saying, and again, tell I don't want to put words in your mouth, so tell me if you think this is wrong, is like you have to be ready to lose some money to make some of this stuff work. Like totally uh and and if you if you are not ready to do that you are going to be >> you are going to not be able to do it basically. >> Yeah 100%. No it is like we are we are operating under the assumption that plenty of our ad dollars are not working right and and the reason we run more incrementality tests than anybody else is because we are as aggressively as possible identifying where is that happening and how do we move away from it and we weren't there in 2022.
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Your sort of your Amazon presence and some of that kind of stuff like uh how does sort of sales channel distribution play into your um consideration of of media channel diversification? >> It's a great question. um we are extremely like Shopify driven, >> right? >> And historically that's what that's been. And when we do incrementality tests, we're measuring Amazon lift there. Um but for something like Rings where we are like far higher price than any other tungsten band alternative and for Ridge Wallet where it's like the same sort of deal versus knockoffs, like those are really just bottom of funnel demand capture channels for us.
So it says, so we've operated under the assumption if things are working via Shopify, they're also likely working via Amazon. Now, where that will change, it hasn't yet, but as we expand in Best Buy and we'll get into AT&Ts and the Verizons and we'll have products that work from a more non-branded perspective on Amazon, we will try to move upfunnel. And I think this is me like speculating a little bit. Um, but I think things like YouTube, like TV, like out of home will just end up playing a larger factor when the place that people can purchase is far more distributed and we just want to be remaining top of mind.
And when we do serve impressions, we want to make them memorable and impactful, right? Um, so if I want to grow my Best Buy business, we can set up geo level holdouts and look at lift in store. But like before we would do that, I would just want to make sure that we are serving high quality impressions to more people just because we have that much more opportunity to capture that demand across channels. >> Yeah, I think people sometimes don't understand that's what's happening in the world. people who have sort of pure DTOCDR backgrounds just don't realize how different that is to the the idea of getting somebody to click on an ad or or go direct to your website and type in ridge ridge.com or whatever and like it's just really different than somebody is standing around waiting for their phone to be serviced at AT&T and they see a Ridge wallet on the shelf and they're like, "Oh, I've seen that." That's like it's a very different buying process, you know, or walking to Best Buy or whatever.
And uh and so therefore the the advertising goal relative to each of those uh is just not the same. Uh the example I always think of as I think a a helpful way of illustrating this point um is uh is like Geico and all of the auto insurance companies because if you think about the buying cycle for auto insurance, right? It's like you only need auto insurance at a couple specific times and >> um and while I'm sure they got some people literally, you know, calling them up and changing their insurance providers at times and and for all I know that's a large part of their business.
Uh >> really what you want is to have it be the case that when you go buy a new car or something, uh that you Geico is the last company somebody thought of. And so they're going to have huge [snorts] campaigns with a bunch of funny cute little uh you know uh uh characters in them that just make you think good positive thoughts about Geico and a snappy tagline about how they save you money. And that way when the time comes you're the last you're the last insurance company that they thought of, right?
Um it's what you're describing is a lot more like that where it's like okay now I'm in Best Buy and I'm looking around and like oh I've seen that and or the AT whatever you know and it's that's a different ad unit that you have to buy. It's a different story to tell. It's a different it's a different goal in it. So that makes sense to me >> and I think that's where we'll move now. this this I'm curious your perspective on um because this feels somewhat related to like signal engineering like one thing it's almost a form of diversification we've been investing in at ridge is like we don't need every dollar to be optimized for purchase as far as meta is concerned like I I our job as marketers at ridge is to get people in market interested in ridge because that will I think there will be a lot of latent value attached to that over time there's there's all sorts of I also think there's attribution breaks there where people are buying in a way that meta is able to measure and therefore not serving to these people when you optimize for purchases etc etc.
But like where do you land on that? Do you think purchase optimize is like good most of the time and you just be increasing bids to serve more people or should be playing around with like what is the event that I actually want to be you know generating here? Uh my answer to that question is that it is theoretically right for a lot of brands especially for brands in your stage and and not not even as large as you guys a little little smarter than you guys but that it is practically wrong for lots of much smaller brands and that the danger I always feel is that they're going to is that >> is that you know like our our ideal client profile at AF growth right is like brands that are between five and 25 trying to get to 25 to 50 right that's like the that's the part of the journey that we're great at and the truth is like, let's say Ridge fired everybody and was like, "Hey, we want AJF Growth to manage our ad spend." I'd probably tell you to go somewhere else.
Like, we're just not we're just not well set up for for um for the kind of stuff that you guys are doing. Um and so I so I always think of those clients when I answer questions like this, like this is who I'm dealing with every day. And my answer is that in most cases, nobody has showed me convincingly yet that those brands the next best use of their time and money is to go spend money on video view campaigns or whatever it is. you know, um, as a way to generate additional value for the brand and get sort of people into the funnel.
Um, what I think that most of those brands need to do up to, like I said, 25 to 50, depending on the brand or something like that, is probably more to think about if they're not quite where they need to be yet. It's not because they've they've tapped out all the available conversion optimized volume of their brand. Like, it's just like there's just meta is just a big place, man. And there's just a lot of stuff like probably it's about your marketing calendar, your product mix, your promotional calendar, you know, creator, influencer, things like that before I'm ready to go and say like go buy up the funnel a little bit more.
That's that's my take. I don't know. I'm curious how you answer the question. Like uh obviously you have your position from Ridge, but you're also talking to lots of other people and hearing feedback from folks. >> No, no. I I I could not agree more that if I'm doing $20 million a year, optimizing for >> non-purchase optimized events is not high on my list um of things to do. That's not where Yeah, you're not going to go from 20 to 50 because you started optimizing for view content.
I bring it up as an example of like it it's a form of diversification. Like I could have broken out sure >> in the same way that we had the pie charts. It's like we could break it out by channel. We got optimized by uh purchase and non-purchase optimized events because this it'd be the first year where it was you know probably 7% of our total budget went to like non- conversion optimized campaigns which has never happened before and that's really just because we are so much later in that stage of maturation.
It it's not really happening on rings. It's not happening on travel. It's really exclusively happening in wallets. And that is just it's because we're in more sales channels. It's because we are 10 million wallets sold into this. it's because we're going for, you know, more than $200 million in revenue this year versus 25. Um, so it's just another just to go back to like the original premise of like when does diversification happen over time.
It's a perfect example of I couldn't have done that day one. It didn't make any sense. It only makes sense 10 years in, >> you know, $800 million in sales later. >> Taylor and I used to talk about this a lot um that that the every customer in the world exists on a spectrum from easiest to convert to hardest to convert. like all seven billion people in the world, they all are on that spectrum somewhere, right? The hardest person to convert in the world is somebody who is um who is like uh the rural poor in a third world country, you know?
Uh and there's all of these barriers to reaching that person. The easiest person to convert in the world do there's actually an answer to the question. Do you know who it is? >> Uh your mom. >> Yeah, that's exactly right. It's your own mother. Yes, your own mother is the easiest person to convert in the world. she's in and um and uh and so like that's the that's that's the that's the spectrum and on that spectrum right just like this along that spectrum what that spectrum represents is cost uh your mom uh actually pay you know pays you and probably pays you more than the product costs right uh so it's negative CAC probably for your mom right something like that right then this other person you have to actually like beam internet to them before you can convert them okay um and and develop their economy which is something that people are doing it's just for the record like um but uh but So, um, so yeah, that that's where everybody everybody is.
And the and the way I would think about some of this stuff and the way I hear you sort of framing one of these barriers to entries to diversification is essentially that you guys are just much further along that spectrum than many many people. You've just gone a lot further because if all of that represents cost, um, you know, it's easy to think about that at the sort of like individual CPA that you get on some day, right?
Whatever our CPA is 50 bucks or something like that, but that's just not true. What you actually have is billions of ad impressions across a whole bunch of channels and a whole bunch of years that all all are represented in Ridg's past marketing efforts and growth stage. And now you're willing to put even more money into that kind of feeding that same timeline with things like, you know, video view optimization or again whatever sort of non-conversion optimized stuff you're buying.
Um, and I just think brands ought to think about it that way that that this is this is the the natural maturation thing to some degree is that you're just sort of traveling further and further down that spectrum over time and you can travel as fast or as slow as essentially some combination of your unit unit economics and your creative skills and your media buying skills and all those things LTV allow you to do. Um, so when I hear you talk about that thing, I'm just like, well, yeah, you guys are just a lot further down the spectrum than others and probably not that as far down it quite yet for rings and for and for luggage.
Uh but you'll get there, you know, it's just a matter of time and dollars and and all that stuff. But there is hundreds of millions of dollars invested at this point in ads probably from just from Ridge alone into uh into into traveling that way. So, you know, that's what I >> And you know, just on that point, because a lot of people will talk about, you know, basically everybody's on meta, right? Like like like uh you can reach and we if we look at a rolling reach report for a ridge over the last uh you know, 10 years or whatever.
We have seemingly reached every adult man and [laughter] woman in America. Yeah. >> Congratulations, by the way. You did it. >> Yeah. So, it's not a matter of of like you had this in your tweet originally. It's like can are we not reaching these people. It's like we can for sure reach these people. we have reached these people. >> Um there's two things that we've talked about. If I'm if I'm if the only tool that I have is on meta, then I'm I guess I'm going to try to reach those people in new ways.
That's why I would group like partnership ads is a form of diversification, like just new creative concepts. All of that becomes more and more important as you need to reach the same person you reached before, but in a way that will get them to convert. Like that's kind of the process. Um, but what I also always think about is like if I can reach that person on Snapchat for literally 80% less, then I'll try to do that, right?
Like, [laughter] >> of course. >> Yeah. Because because sometimes it's like not even >> no matter when you you reach this person that's like super far on the the maturation curve that's extremely costly and hard to convert. It's like they still might not be ready to buy right now. So, I need to be serving as them. I need to be staying top of mind with them all the time. And that's where channel diversification becomes helpful if only for the cost savings.
YouTube shorts when we launch air 80 cent CPMs. I'm like my job's way easier if if I'm serving ads at 90% lower than than a meta. So I'd like to keep that in mind as well. It's like the cost to acquire that incremental person or just the cost to reach them I think is like such an important part of determining when you need to be diversifying. >> That comes back to your point too which is like that that you you know let's say you've got these super low CPMs.
Well, the low CPM is reflective of the value usually, right? The reason the CPM is low is because the is because the reach is not as valuable to advertisers at least as things are currently constitute. These are all auctions, right? So, they reflect some rational marketplace existing in some way or another. But what you have what you if you sort of pair this with the thing you said earlier, >> the thing that you also have is all the hundreds of million dollars spent on what messages work uh for these products.
So now you can walk into that lower value reach quote unquote but with really high value creative in there and you could sort of like I mean arbitrage is probably the wrong word but you can actually go win in that scenario because of those things. Okay. So let's let's just for sake of time let's let's let's take this back then to your recommendation to brands uh in terms terms of what you see and I I was going to ask you like $5 million brand $25 million 50 whatever but let's not do that because instead let me just ask you give me your way of thinking about this for a brand like is there a lens through which a brand ought to think about okay I've listened to your conversation Andrew and Connor about channel diversification help me think about how to apply this in my business what do I what what's the what's lens through which they should look at this. >> Okay.
So, we'll have hit a lot of these points, so I'm going to try to summarize them in like a somewhat coherent way here. Um, I say in the newsletter that you're referencing, if you think you need to diversify channels, the next thing you need to do is figure out how to spend more on meta like that. You should be in that headsp space all the time at almost at most stages of the business. I think >> um >> I I let's let's put an exclamation point on that really fast.
Yeah, >> I think it's really important. People, my experience with people is they're especially on the agency side, they really fear the idea of like, oh, I'm on one channel. I'm overexposed there. I hate it or whatever. And I'm like, I guess, but like I don't know. Like I I'm like, if it's the next best dollar, and it is for a long time, it just it just is the most valuable place to spend your money. And that the actual way to increase your risk the most is to spend unprofitable dollars in your business.
If you want to if you want to reduce your risk, be more profitable. Like that's the actual best way. Like cash in your bank account is the is the way. So spending money on less profitable channels as a way to reduce risk strikes me as like a really bad way to think about that problem as a general rule. Um and instead it's like just keep getting better there for a long time. So I really like that way of saying it. If you think you need if you think you need to diversify, get better at Meta.
Like it's just like it's a good it's a good, you know, smack across the face for people. That's too strong of language, but you know what I'm saying. But yeah, yeah, 100%. And um and and so you know that comes down to creative ideation, that comes down to partnership ads, that that that comes down to like using the the whole buffalo as it relates to meta. Also, not to overlook, and I because I hit this one earlier, like improving the unit economics of the order, driving up average order values, driving up prices, driving up margins, actually improving the economics, improving LTV, all those things are like offer testing, that whole thing.
You need to be like battle testing while you spend dollars on meta. And this is where that first you you should not have to diversify as you like build those muscles. Um and then what I say is if you've done that well then you're maximizing meta. You should have a pretty big business. Depending on your TAM etc. There's like some some sort of uh inherent constraints depending on what sort of business you're running. But at that point, I like the short form vertical video expansion where I say, "Hey, if you've gotten extremely good at this, which you must have if you're if you're crushing it on Instagram, then you've got Tik Tok, you've got Shorts, you've got Snap, you've got uh Apploving to expand to." And that would be the first thing that I would do because success on those channels should look somewhat similar.
You're not reinventing the wheel at all. Um it's less risky. You're not producing new content. There's not a ton of questions around editing and things like that. There's not a ton of questions around measurement. you should be thoughtful about it. But like that is that is probably it's significantly less risky expanding to those channels versus sitting down and saying, "Hey, we're actually going to go figure out how to run linear TV or YouTube instream or some other weird thing.
I don't know." Um those I would put that as the third form of of diversification where that is going to be a big unlock require a lot more time, a lot more energy around measurement, but also probably the most scalable. Like I don't think I've heard different but I don't expect app 111 to ever be over 20% of our budget again. Um it was when we launched in Q4 2024. I don't expect to get back there. I could see in the future YouTube being I mean right now it's at 20%.
I could see it being bigger in the future. So there's only a handful of those channels that have that sort of upside. Um but I think they're typically the hardest to unlock as well. >> Yeah. Yeah. Um I love that. Uh really good stuff. I have one last question for you. It's totally unrelated to our well, it might be totally unrelated to our previous conversation to this point and it's just a question I like to ask smart DTC people when they come on.
Um, what is there any one thing that's just like you're most hot on right now in DTOC ecom? Just one thing you've been thinking about that's like you just you know what I'm saying? Just just I just find this is the case. You're talking to people out there. You're working on your brand, whatever it is, and there's just like some little thought out there that you're just thinking about the most. So it may not be a revolutionary thought, maybe something somebody else has thought about, but what's what's on top of Conor McDonald's mind right now for for DTOC stuff?
Yeah, I I had this conversation with someone. They asked what did I see working? Neither of these super novel. Both of which were trying to like further sort of embrace it ridge. Uh two is [clears throat] Tik Tok shop, which everybody's super excited about. But what I'll say here is like I actually think people way overindex on the Tik Tok shop portion of it. And really, it's just unlocking creator content at scale. How can we at Ridge, instead of going from, let's call it like 15 new video concepts a week to getting like 500 a month or something.
And that just happens >> the comfort playbook. >> The comfort playbook, which is like, yeah, I always say that every all the all the new hot DTOC strategies like comfort coded in some way. But >> so true. >> But yeah, so they've done that. And then the other thing is like um just these like hyper optimized brands. You look at a hollow socks comfort isn't it's underappreciated but what they're doing with price and their dynamic pricing and their um optimized uh >> cash flow with like the pre-ordering of hoodies things like that like they have their DTOC experience is so dialed in and the best brands are just doing that in really creative ways now um with bundling and gifts with purchase and things like that.
We're we're really trying to like embrace that and really it's unsexy like grinding it out with like new PDP elements to drive up average order value a couple bucks. Um but that's what that's what we're spending a lot of time on at Ridge. >> I like that a lot. I think it's really good. Uh one of the sponsors of this episode is Intell Gems. And uh >> big fan >> big fan. And uh and I I always try to say this to people just like just be doing it all the time.
Like it just like there's just there's these things that are real needle movers in your performance and some of them are going to make a large difference, some of them are going to make a small difference, but you get a couple percentage points here and there over a whole bunch of years. It really makes a difference, man. And uh and occasionally you'll hit a 10% winner or something like that, you know, and it's like that's just it's just revolutionary for your business a lot of times.
So, >> yeah. >> Yeah. And look, and the way that ties back to everything we just discussed is you have to be finding all those wins >> in order to at some point have the leverage to unlock those new channels, right? Like I don't think you're going to find anything more efficient than meta. So you have to make your business far more efficient to make these other channels work. >> That's a it's a good way to end it. Connor, thanks for your time, man.
I appreciate it. Um yeah. Yeah. Uh go Connor, follow Connor X. Uh I'm the link for that's in the show notes uh as well. And of course, go listen to Marketing Operators podcast. I'm not even going to say the the name. C U O R. Okay. Is that right? C Co C U O R. There we go. But links in the show notes to go follow Conor X. You probably don't need me to tell you this. Go listen to Marketing Operators. Sign up for the newsletter.
Get all that good content. Um, yeah. Appreciate it a lot, man. >> Awesome. Yeah. Thank you for having me. >> Huge thanks to [music] Connor for jumping on the podcast today. You should subscribe wherever you're watching or listening to this uh if you like this episode. got other great episodes coming up with other big leaders in the space who are working on big brands doing awesome stuff. Sharina Bear coming soon, another person with a huge incredible resume of working on DTOC brands in our space.
She's going to talk about offers soon. Uh a whole bunch of other great folks like that. Got Drew Marone coming from Intelligjams actually to talk about how to run good testing which I think is a really underrated underconsidered thing. If you liked the conversation that Connor and I were having about that, you'll not want to miss that episode. He's the CEO of Intelligjs, founder of that. um people do testing wrong a lot and they actually get negative results and don't understand what they're doing and it creates a problem.
So, so subscribe wherever you're watching listening. Don't forget to reach out to me as well if you're interested in working with AF Growth at some point. Uh if you want to tell me a little bit about your business and then I can tell you if we're a good fit for you, you can go to afgrowth.com, tell me a little bit, like I said, about your business by filling out the intake form there. Send me that. That'll give me an email and then I'll reach back out to you.
Even if we are not the right fit for you, I may have a recommendation for somebody who is for somebody I trust. So, so go to afgrowth.com, fill out the intake form, tell me about it, or email me podcastfgrowth.com. Would love to hear any thoughts you have on this episode. And you should also leave a comment, by the way, because I read all of them and interact with as many of them as I possibly can. So, wherever you're watching or listening to this, do that as well.
Big thanks to Rich Panel. Big thanks to Intel for sponsoring this episode. Go check both of those out. The links are in the show notes. I'll see you next time.
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