#304 - Joe Shelerud - Co-Founder @ Ad Advance - Creating The Perfect Digital Ads

Chris Powers: I enjoyed meeting you at Capital camp and am interested in all you do. And so, it is a great place to start by telling a little bit about the early parts of your story and how you started this business Ad Advance.

Joe Shelerud: Yeah. So I always need help with how far to go back on this. So I'll give a general overview. Like I've always been a tinkerer, just starting different businesses. Like when I was 12 or 13, I started my first business. It was in the early days of the Internet, and I had this site called a joke; it was @joke-city.com, and I brought in all these jokes, ran banner ads, and I made two or three grand as like a 12-year-old, which was pretty cool and then realized that you have to pay taxes and all that good stuff. So many early life lessons, and now it's funny to fast forward in that my first job revolved around getting revenue from advertising on the Internet, and now I am managing digital ads. 

So I got an introduction to the Amazon ecosystem. I'm a chemical engineer by background, but I started this business on the side and was selling these organic chemistry molecular model kits. They're used for organic chemistry courses.

Super cool product, and so I started selling that. And as I was growing up, that brand Amazon found about this thing where you can advertise your products on Amazon. And this was early on in the Amazon third-party selling ecosystem. So I started building out some tools for myself in advertising.

And then that grew into, Hey, I can help other sellers with their advertising. Fast forward 9, 10 years, we've built up ad advance, and we help e-commerce platforms with their Amazon advertising, but now we're also starting to expand into other channels like Google and Walmart.

We're looking for businesses to help expand and grow their sales through ads. 

Chris Powers:  A couple of things. Was there a moment as you were starting to go down the Amazon ad route where you realized you were onto something there that you were, that it was worth starting a company, or you had gained some edge?

Joe Shelerud: Yeah. So in the early stages, maybe it's just being geared as an engineer. As you go through this initial, like imposter syndrome route, where it's okay, I feel like I'm doing, I know what I'm doing, but I've just built this up for myself. But it clicked when I was helping other sellers and implementing pretty simple strategies. Then, you could see the performance bumps up quickly.

And so, at that point, maybe we're onto something here. So in the early stages, it was that fulfillment from seeing the results that came back, and luckily with digital advertising, you have a quick turnaround time. That was the critical thing where we might be onto something here.

We should invest some more time into it. 

Chris Powers:  What were you doing at that time? Is that strategy that made it work 10, 11 years ago still the strategy today, or what were you doing better than most? 

Joe Shelerud: Yeah, we lucked out when we got into, say, like the Amazon ecosystem, cause it is, it was a lot simpler than it was today, but the core strategies still stay in place.

So in the early days, you would start targeting. You would figure out what works for the broad audience and then fine-tune your advertising. For those who don't know, whenever you search on Amazon, there are sponsored ads that show up. And in the background, advertisers like us are bidding on specific search terms.

And then there's this auction that goes on too. So every time these ads appear, people have submitted a bid, and then certain ads get shown based on relevance and bid. And so, the key strategies remain in place; now, Amazon advertising is the third biggest digital advertiser in the U S, and their advertising platform is expanded immensely, but the basic principles still say that we want to reach the people most interested in these products. We want to set suitable bids and pay the correct amounts where our sellers are getting shown as much as possible. And at the same time, getting a good return on that advertising spend.

So principles stay the same. 

Chris Powers: And is there anything about being a chemical engineer that prepares you for business? You're the first chemical engineer I know who founded and ran a business. Are there any similarities there? 

Joe Shelerud: So, chemical engineer, I returned and got my MBA. So that helped you get a good, like you get an excellent problem-solving ability from engineering and then going back and getting a business degree to give you a different perspective on the problems.

But what sets us up nicely for digital advertising is its numbers and database; you constantly get feedback. And the more you can consider all this information, the better. And especially on the digital advertising side, it's become a very complex game of analyzing numbers and being able to take those and put those into action.

So that's where chemical engineering helped with that problem-solving ability. My co-founder he's a financial guy, and we're not your traditional marketers, but where we've been able to set ourselves apart is by being able to use that data to make well-informed decisions.

Chris Powers: All right. So you got it. You can tell it how you want to say it, but when we were at Capitol Camp, you told me a story. I remembered it. And you got on Amazon's radar. You were this company, and suddenly, the sirens were going off at Amazon at some point in the company. What happened?

Joe Shelerud: Yeah, we were growing up our business and starting to work with more advertisers, and I was putting out different posts on LinkedIn and got on Amazon's radar. They called us to join their partner network, which was pretty cool. And we found that as we continue to gain credibility in the space, many people from Amazon read our posts. Some of our most avid podcast listeners are folks on Amazon, especially with the Amazon advertising team.

So what we're always doing is to make sure that we know that they're listening. And so I'm always throwing in titbits. I've got a podcast deal on things. If there are new features we're looking for, I'm always throwing that in there because I know it will get shared internally with the team.

So yeah, I don't know. It's fun as you grow and gain that notoriety in the space, and you get on the radar quite a bit more. So it's always knowing who your audience is and realizing that it may be more than just those potential clients out there. 

Chris Powers: And what's the benefit to being on their radar?

Like what's the working relationship like with Amazon today? 

Joe Shelerud: Yeah. So what's been fantastic with these channels is that they constantly grow and evolve. And so we get to work with Amazon's development teams for many new features. We get early access to many of these items because what they're looking for is Amazon's very customer-centric organization, which cascades to the outside of their e-commerce too. 

And so if they've got a new idea for a new feature on advertising, they'll run it by us, or if the team is looking to test some different technical items, yeah, new bidding features rolling out, we'll get to test it first before they release it to everybody. And so we've found that by building and maintaining this solid relationship with them.

They love our feedback, and at the same time, we can roll out and test these new features for our clients before they go live. And then when they do go live now, we're ready. We've already had case studies. We've already incorporated it into our software. And so it's a key lesson for us is that, instead of just.

Focusing on our potential clients is looking at all the key stakeholders that significantly influence our business. And Amazon is one, and realizing sometimes people look at it like Amazon is a giant corporation, but every corporation is made up of individuals. And so the more relationships we can make there, our bonds will strengthen.

The stronger we are, the more we can focus on helping each other, the better. And so that's one key piece that has helped us out and helped our clients. Cause we get access to these new features, but we help Amazon develop these new features. 

Chris Powers: For anybody new, how does the bidding work?

Joe Shelerud: Yeah. And so, this was a new piece for me to get into the Amazon advertising side in the early days. So say I was like to go, I'm located in Northern Minnesota. So we were just out camping in the boundary waters, this wilderness where you can take canoes, no motors. And so, as I was preparing for it, I was searching for different products on Amazon.

So I've got three kiddos. Sam is searching for a five-person tent on Amazon. So I go into the search bar and type in the five-person tent. If I'm advertising a tent, I could put in a search term, and if anybody's searching five-person tent, I'm willing to pay a dollar if they click on my ad. And then I could have a competitor who says, I'm willing to pay a dollar ten.

And anytime somebody types in that search term, Amazon will look at the bid, and then they'll look at the relevancy. So say my competitor they don't have a five-person tent. They only have a four-person and a six-person. Amazon may say this tent that's a five-person is more relevant.

So even though they only bid a dollar, I will show that ad first. Because they're more likely to purchase, that will be a better customer experience. And so this combination of this bid auction goes on in the background. And then it's also this combination that Google started where from a relevancy standpoint.

Is this result helpful for the searcher? So that's a critical thing that we're optimizing in the background. 

 Chris Powers: And how many times is the bidding perpetual? Is it going on 24 or seven or once a day? 

Joe Shelerud: Yeah, it's constantly, and we're focusing on Amazon's platform, but what people need to realize is that these major tech companies are major advertisers.

And so Amazon. They're the third largest advertiser in the U S and not only do they have advertisements on their website, but they have them throughout the web. So if you've ever looked at something on Amazon, suddenly you see a little ad that pops up on the weather.Com or your favorite news site.

That's Amazon's display network. And another essential thing is like Amazon just bought all these different content sites. So Twitch, which is a video game streaming service. They bought MGM Studios, have prime video, and have Wondery, which hosts many different podcasts. And this tech company that people look at e-commerce, it's taking, you can take all this consumer shopping, preference data, find the right people.

So Chris, like I could say, all right, I want to target people like Chris. And so I could find people who are in commercial real estate, and then when you're browsing a new site, I can show an ad that says, all right, are you looking to sell your commercial real estate? And so it's using all this consumer shopping preference data and then being able to display it through the web, not just on Amazon, and this is how Google and other platforms like Meta work too. 

Chris Powers: How does it work on the backend where if I'm on Amazon searching tents, and then I bounce over to weather.com, and suddenly, I'm being offered tents? What's happening there? 

Joe Shelerud: Sure. Yeah. So it works in the background: you're logged in under your account within Amazon.

So Amazon knows that you're Chris Powers. It also knows that previously you bought X, Y, and Z, so you went out, you bought a bunch of outdoor equipment. We know that Chris is now interested in going Camping. And so, at that point, now you hop over to weather.com. If you're in, Say, a Chrome browser, they can say, all right, here's the IP address.

 It looks like Chris. It's Chris, and he's interested in Camping and this advertiser wants to find people who are interested in Camping. Let's show this ad on a five-person tent; now you get sent back to Amazon, and then if you purchase, it gets counted as a conversion.

And then there's the whole advertising return on sales that we can calculate and lots of other stuff in the background there. 

Chris Powers: This is a perfect thing for Amazon and the sellers on Amazon; if you were to flip it on its head, and you hear a lot today, like a narrative about privacy, and there are sites like DuckDuckGo or Brave.

Is there anything that worries you that people are trying to limit the ability to track someone across the web? 

Joe Shelerud: Yeah. So on the privacy side, like iOS 14 for Apple, that was one of the major shifts. And so what happened there is. Up to that point, tools like Facebook could track you across different apps.

And so Facebook would try to track you everywhere. And with that, they could get much information to show you better ads. Apple updated their iPhone, so you can't do that anymore. And so that's why you saw Meta Facebook argue against that, and there's a significant concern and push for more privacy on the web.

And I get it. There's definitely, a point where is a creepy factor. And so you want to avoid crossing that. The counterpoint is that the advertising you will see will be much more relevant overall with that extra information. And now, instead of seeing products that you're genuinely interested in, they're just going to be random ads that will look like the general ads you see when you're watching a typical football game or something.

And so the key benefit is that ideally, in an ideal world is advertisers, we can show ads that are so valuable that you click on them, and it adds value to you because you're genuinely interested. In the less-than-ideal world and where marketers have gotten beat up on is you cross that creepy threshold.

And then, at that point, people are concerned about their privacy and data, so I see both sides. The privacy restrictions make it harder to show those targeted relevant ads. So it gets more challenging, but it's also one of the pieces on digital advertising. Things move quickly, but there's a lot of opportunity out there if you can navigate through it. 

Chris Powers: I don't know if you can debunk this or not, or if you're at the liberty to, but it's one thing to click on something and go to the following site and see the camping tent for folks like me, sometimes it's I didn't even click on it, I was talking about it at dinner, and all of a sudden a camping tent came up and there's Oh Alexa's listening to your face when you have the Facebook app open on your phone, it can hear you talking. Is any of that true? 

Joe Shelerud: So what's happening? There's a marketer who's doing their job well. And yeah, I highly doubt that Alexa is listening to you.

Unless it's supposed to be, if that ever came out, all trust would be gone from the platform. Every Alexa would be thrown out, so I don't believe that's happening, but at the same time, there are probably other things that you did that show that you're interested in this product ahead of time, maybe even for you, like specifically thought about it.

So it could be other purchases you previously made, or maybe you're looking at that next fishing trip and browsing the web, but you should have thought about it. Now you're about to; you just talked about it. And all of a sudden, this fly fishing ad comes up; there are probably some pieces that can indicate that, all right, you're interested in it.

And so I always joke that it's a marketer doing an excellent job. If they can predict that you will be interested in this before you say it out loud, then that's cool. 

Chris Powers: Are you all an outsourced ad buyer, or do teams hire you all? Do they also have teams buying ads, or do most companies decide to work with you all?

Are they outsourcing their ad buying to you all? 

Joe Shelerud: We do both. So yeah, most folks we work with sell in e-commerce or digital services. But we work with Say, like insurers and some more traditional agencies or businesses. We also work with other people doing much more of their media buying, then supplementing it with what we're good at.

So we go down both avenues on the media buying and the ad buying side. 

Chris Powers: The benchmark for why you would be considered the best at what you do is that your ads engage with the most customers for the most minor dollars spent. So, you all can get to know people better than other people.

Joe Shelerud: Yeah. I love that. That's as like concise as you can put it. And as an engineer, I like to complicate it more, but I'm noting that, Chris. I love that. 

Chris Powers: I have to speak in fifth-grade terms. That's how my brain works. What does a great client look like when you're starting with them? And what's a client that you'd say we'll need help to help you?

Joe Shelerud: Yeah. So many people we screen out because we feel it needs to be in their best interest or a good financial fit. The biggest thing, if you're looking at expanding into digital advertising and especially looking at more like brand building or awareness-type campaigns, is you've got to have a product that will have a high lifetime value.

So either it's a higher margin product or a hefty purchase price, or you can get repeat buyers. Getting a good return on your advertising is tricky if it's just a one-time buy and you have a few margins. And I've seen so many people burned where they go into advertising. They say we're going to build our brand, and they spend a ton of money, but it's just going to the super broad audience that may be less interested.

And so we like to say, okay, let's get as specific as possible and find the right people who will genuinely be interested. We love to start a little bit slower, and then from there, we can learn what works, and from there, we can start to build upon that and branch out and get broader as we go.

Yeah, I've just as a person who sold their products, I've just heard too many stories of people who get sold by marketing agencies for the big a hundred K budget, and we're going to target everyone in the U S who's interested in outdoors equipment, where you can start with that person who is going on a camping trip pretty soon and start more segmented and then work your way up.

Chris Powers: Okay. And then, after somebody has onboarded with you, what does that look like? Are relationships built, but what are you all trying to achieve from them? Is it doubling their numbers? Tripling? How do you know if you all are doing an excellent job for them from where they've been?

Joe Shelerud: Yeah, it depends on the strategy. And so we'll have digital advertisers that come in, they say, like on Amazon, it's competitive. And so, if we're working with physical products, a 5% margin increase can be huge because margins get squeezed so much. If it's big-ticket items, there are many times when we started from zero on the digital advertising side.

And then we're looking more on a cost-per-acquisition basis. So, for instance, somebody is coming through and saying we are looking for financial services. How much are we paying per lead that's coming in? And so, in each instance, it depends on what the critical goal is and what the market is.

So is it a service? Let's look at the cost per acquisition. And we know, for everybody who fills out the leads, one out of ten becomes a client, and they're worth it. t versus products, it can be, trying to increase my margin by 5% from my advertising, or it can be, let's try to double my sales going into a prime day or Q4.

And so where it starts is what's the strategy. What are you genuinely trying to achieve with your ads? And it can be sales, and it can be margin, it can be led, it depends. And it's dependent on where they're starting and where they want to go. 

Chris Powers: Okay. So most of your sellers are on Amazon.

Are there things they're prioritizing today that's been different over the years? Is it constantly reprioritizing or the same priorities? It's the same. 

Joe Shelerud: Yeah, it's been pretty constant @amazon.com selling products. Offsite advertising is where it's changed and becoming much more of an opportunity.

And so we're seeing many great results where people are advertising off of Amazon, utilizing the shopping preferences we can get from Amazon data if you look at the three biggest digital advertisers: Facebook, there's Google, and there's Amazon. So Facebook takes what you do on Facebook and Instagram and says, all right, Chris will be interested in fly fishing.

I'm making this up, and I have no idea. And then, for Google, it can take your actual search results and say, all right, Chris is interested in fly fishing or not for Amazon. It can take things that you've purchased. So have you purchased fly fishing gear in the past? That is a much better indicator than the stuff you do on Facebook.

And so the power of that information lets us reach more relevant people interested in the fly fishing trip. Or like those who have just completed a move and are looking for home insurance. And so there are a lot of different cases where you can use that information. And so that's where Amazon is growing quite a bit.

Most people hear Amazon and think of the e-commerce giant, but it's also a good data generation facility. And which is why their ads are increasing. 

Chris Powers: So what you said is like on Amazon there, the data is on what you've bought or what you've searched for on Google, it's what you've searched for that they can get data on you and Facebook; maybe it's who you're connecting with, what groups you're in more, how you're socializing around, and all those data sets might say, this person's a fly fisherman, but it's a layer, it's offering that data up in a different way.

Joe Shelerud: Yeah, and it's a little bit more disconnected from that purchase, Amazon's actual purchase behavior, which is probably going to be the strongest indicator versus what I do on Facebook, is probably going to be the least disconnected or the most disconnected. 

Chris Powers: Not to be predictors of the future, but is that an indicator that Amazon might dethrone Facebook one day and become the most prominent online digital advertiser?

Joe Shelerud: They're striving to; if you look at growth rates like Amazon's projected to grow 20% year over year for digital advertising, Meta has been dropping, and they've been maintaining right now. And so, regarding growth rate, it was Google and Facebook. Now, Amazon's a key player, gaining a lot of ground.

And then there are other retailers, too, like Walmart. So Walmart now has advertising; they also have a DSP, a demand side platform where you can start to tie together retail stuff that you purchased in a Walmart store and then say, Hey, this might be an excellent person to show these ads to. So the retailers are getting into it.

And it's like Walmart, target Kroger, all these big ones too. It's called retail media. And so many of these folks are seeing the opportunity in advertising and expanding into it. So it's not just the critical tech titans. 

Chris Powers: And as part of your business growth strategy, have a strategy to work with each of those companies that you just mentioned as retail media takes off.

Joe Shelerud: Yeah. So we're just getting connected with Walmart right now. They've been growing quite a bit, and their team has been great to work with. Google's been another key one that we've been looking to expand to. And so there's a lot of opportunity out there, and all the clients we're working with are trying to figure out, they don't want to spread them too thin on themselves, too thin on focus.

And so everybody starts on the Amazon side, just cause the volume is there. And now it's working on those other channels. And that's what we're trying to do too. Let's dedicate most of our time and efforts to Amazon, but then let's start to branch out and be able to utilize these other platforms too.

Chris Powers: I just thought of this question; you have a unique relationship with Amazon. Amazon's been one of the most significant companies to come out of this generation. Is there anything you've learned just by working with Amazon of how you run your business that you're like, we wouldn't do this if we had never watched how Amazon runs their business?

Joe Shelerud: I've been impressed by their continual focus on the end user, especially for a significant corporate entity like them. And so, on the e-commerce side, it's definitely on the customer browsing on @amazon.com. But within their advertising team, it's who's the end user, and it will be advertisers like us.

And so the willingness to accept feedback from people outside of the organization. And the willingness to pivot and throw ideas out there. And then, if we have lousy feedback like they change course quickly. And so I've thoroughly been impressed working with a company with the scale of Amazon and how well they can keep their teams and initiatives small.

They have their two-pizza rule within Amazon, but that allows them to move quickly. And then it also allows them to continually seek feedback so they can approach it like their giant Amazon. We're just an advertising agency utilizing their platform. And we should be thankful for the privilege.

They view it the other way around. And how can we give these guys the tools where, then it's a win situation where we can grow, and we grow the spend on their platform too. So I've been thoroughly impressed with that, especially with how they could approach it.

Chris Powers: So the two-pizza rule is that no meetings are teams larger than those who could eat two pizzas. 

Joe Shelerud: Yeah, exactly. So there shouldn't be a team that requires more than two pizzas at a meeting.

Chris Powers: And then, have you just seen, some people would say, Oh, if you're getting feedback from everybody, a lot of it's good, some of it isn't good. How do they filter through feedback? Is it just being able to iterate on specific ideas, or is there a process that you've seen that they go through or now that you all go through and understand how to?

Decide what feedback to take action on. 

Joe Shelerud: They take an excellent approach to gaining trust and which voice to listen to the strongest. And just like when you run an organization, you're continually getting feedback, some good and some bad. And over time, you start to see people in your organization who gain your trust a lot more, especially within certain business areas. 

And so, like Matt, my co-founder, he's this technical wizard. So if he's going to challenge me on anything in the software, I will fight him on it, but I'm usually going to lose. And I know that going into it. And over time, you realize who is giving you the best input, maybe not for their specific issue, but what will make the better decision as a whole. And so it's being able to segment, like, who has that knowledge base, and then waiting for those different opinions as they come in versus taking everything at face value.

Chris Powers: All right. I want to go back to the iOS 14 change. Cause that was just a moment just across the Internet and e-commerce. It was like, okay, the rules are changing. And you and I've had other folks on the podcast that said, like D T C isn't a business strategy, it's just a marketing channel.

You can't just build a company; your whole company exists on Facebook ads selling to customers. But I think a lot about it, and you can answer it from your perspective, like these great e-commerce businesses. They have good products that their customers love.

But is what makes them successful these days how they can navigate and get across the Internet? Like, all things being equal, the same companies have the same product to sell. Is the winner really who can advertise the best on the Internet? 

Joe Shelerud: Advertising is one piece of it. But what I see, and you see this all the time as you dig into Amazon, is that there are so many products out there that are all essentially the same.

If I look at the core features and want to put my engineer hat on and look at just the core features of these products, I will see minor differences between the top 10 that come up on Amazon. And so what you find is the people who can navigate. These ecosystems are better, and the people who can advertise, market themselves, and build out other channels better will succeed.

And yes, there is product innovation. And as you get to more specialized products, like that comes into play. But I see the critical success from people who have figured out how to navigate these ecosystems better, but you must continually adapt. And that's where you get some skeptics on the direct-to-consumer route.

You have to change and update constantly, and these platforms change daily. And so you may be on top of the world for a while, but then an algorithm can change. And then, suddenly, your whole business can be upended too. And so the most significant thing is those who can adapt as quickly as possible will be in it long-term.

And I've seen some players who do it so well, and they've navigated so many different changes. And others find a gap or a way to take advantage of a specific algorithm that comes through and suddenly ranks number one on Google. But then that algorithm gets changed, and they're wiped off the map.

And yeah, a big piece is navigating these different digital ecosystems, especially in a direct-to-consumer route. 

Chris Powers: When an algorithm changes, do you ever have a heads-up? Or do you find out at the same time everybody else finds out?

Joe Shelerud: Sometimes we have a heads-up. Other times we're working through it simultaneously as everybody else.

And so that's where, from the start, knowing that we're getting into digital advertising, we've had to structure our business to adapt quickly. And so we're in the same spot as many of these direct-to-consumer businesses that if we can't keep up to date and adapt quickly in the digital advertising space, it moves just as fast.

And from little things like the frequency of all-hands meetings, we meet every week, and the entire team comes together because things are constantly changing and adapting to decide to, instead of going remote and working remotely, we have the whole team in our office here.

And it just helps us to adapt quickly. When we decided to have a tech team in-house, it was so we could put these changes in quickly and didn't have to wait for a third-party software provider to power up to make those changes. So we've structured our business to adapt quickly, knowing that's table stakes at this point to stay on top in the space that we are in.

Chris Powers: Okay. I got a couple of dumb questions real quick. So when iOS 14 happened, did that impact Amazon's ad business, or was it more geared towards Facebook? 

Joe Shelerud: Yeah, it was more geared. Why hit Facebook much harder than the other platforms is that the information that Facebook gets just on its social platform itself doesn't have as strong of indicators.

What you do on Facebook tells me less about your interests or what you want to purchase. In contrast, I'm already logged into the app with Amazon, and making purchases within only impacts those audiences a little. And so that's why Facebook took the biggest hit, and that's why they tried to track you everywhere else.

They could get those indicators that advertisers could use to find the right people to show their ads to. So that's where you saw Facebook stock takes such a hit after those iOS updates and why Facebook, if I remember right, put a full ad out and something like the New York Times, kind of like fighting against the change and everything, because it was a significant hit to their business. And it impacted how they get that data much more than the other platforms. 

Chris Powers: Were their lessons learned, obviously the lesson of don't depend too much on Facebook was learned very quickly, but where other just broad changes across the digital advertising industry were, that people are starting to adopt thinking, who knows where are reliances that could get pulled from us down the road? Like any significant changes you've seen in how sellers and companies think? 

Joe Shelerud: Yeah. So one significant change is the focus on first-party data. And so all these companies have been collecting information on people browsing the web through items like cookies for years.

And this began with the start of the Internet. It came along, and with these privacy protections, there could be all the different cookies and companies collecting information you'd need to learn about. And so you could use that on any of these ad platforms to target people with your ads.

Since these privacy restrictions are coming down, it is much harder to do that. To track information without your consent is a great thing. And so where that's pushing advertisers is to companies that have first-party data. So first-party data would be like Google searches. When logged into Google first, party data would be Amazon purchases.

When you're logged into Amazon, advertisers can never see what Chris bought, but we can target people who are interested in certain items, and that could include you. And so they take a lot of significant steps to make sure that personally identifiable information is never shown, but that first-party data that shift, what's pushed a lot of advertisers to the Amazon ecosystem or to Google those spots where it's not just dependent on third party trackers, which are having a more complex and more challenging time with all these privacy updates.

Chris Powers: I don't know how to ask this question. If I tell you artificial intelligence, which is the flavor of the week as of late, it will significantly change society. Does that impact your business in a positive way, a negative way, any way at all? 

Joe Shelerud: For sure. Yeah. And so this is a crucial piece, and me being a nerd, I love digging into this stuff, and then, one thing that we're trying to do is predict what's coming down the pipe. And so, with instances like Google search, Google is starting to include generative text results that come back when you search.

And what's cool with this is you can get an answer generated quickly, and you don't even have to click into an ad. What's interesting is it's upending the search model that has been there for the last 20 years. For Google, it was always those ten blue links. The ten links always showed up, and you may have had to click through three to get the answer you're looking for.

But now what Google can do is take, and they can squash that answer just into that top bubble. And I can go to a few websites to get the information. And so there's an impact where web traffic could decrease as these results improve.

Cause if I don't have to click on any of these sites, I can get the results at the top, and then traffic will go down for those sites. So that can impact display advertising and the monetary compensation that's made for those people who are creating those blog posts or those news articles. It impacts what the top of the search looks like.

And so the number of ads that show up, hopefully, is more relevant, but there will probably be fewer. Amazon has also hired a team looking to clue some chat GPT, like functionality, into Amazon search. They can take previous purchase behavior, and when you type in a product, they can try to find the best products that will match you better.

These all change how the traditional search model has worked for digital advertising and search in general. So it's going to upend a lot of the different areas. We're all used to that in the digital ad space, so this is one of the areas we're prepping for coming up.

Chris Powers: So what would somehow counterbalance that? What's something that you all might do that changes with the times? 

Joe Shelerud: Yeah. So one thing we're looking at is all right. Say if, in the future, web traffic goes down, and it's not going to go down overnight, and it's going to take many years for the average person to change how they use the Internet and search and everything.

But if web traffic goes down and you don't have to search around as long on the web or web pages to find the content you're looking for, where are you spending more of your time? You may be looking at, and you're watching more videos online, so you've got a little bit more free time. So there are cool things like.

Like Amazon, they bought rights to Thursday night football. So now, instead of watching a football game and having your average bud light commercials or Miller Light or different things targeted toward everyone. Now you can show video ads that will be relevant just to you, Chris.

And so it's looking and seeing, all right. If traffic will move in these different directions and these other directions are still ad-supported, how do we move with our advertisers to set ourselves up for that? So digital streaming could be significant, like Twitch, which is video game streaming.

It's an excellent source for a lot of different folks. And so it's looking at those next steps pushing past linear TV and traditional web advertising for where these advertisements will go. Oh, another fun one, Amazon is testing within their videos where they say they will have original content.

They'll have a bowl on the shelf behind one of the actors. You can bid to have your product in that bowl. And if you watch the video and I watched the video, we could see different products in that bowl. So I don't know if this potential feature is live yet, but they introduced that last year.

And so even in content placements. It could change based on individual preferences. 

Chris Powers: Unbelievable. So when they buy Twitch and these rights to shows and different streaming services, it's an advertising play. 

Joe Shelerud: Yep, exactly. And so what's been interesting, if you look at.

Amazon is a company that focuses on the e-commerce side. And so back in the day, it confused me on Prime video, saying, okay, they're just trying to get another benefit for Prime users. Still, at the same time, now that's another spot where you can show ads same for buying MGM studios or the same for buying Twitch.

It's like they're buying a video game streaming service. Like how does that help their e-commerce? It helps their e-commerce because through their e-commerce, now they've got all this significant advertising data, and now you have another excellent place to show those ads. And that's where you see these big tech companies pulling in content.

Along with the other major platforms that they're known for. So when looking at just the small picture, it's okay, maybe that's just a benefit for prime users, but it makes a lot more sense if you take the e-commerce to the advertising data, to where to show the ads. 

Chris Powers: Yeah. The general rule with Amazon is if they bought something, it's probably not for the reason you initially thought they bought it.

There's been some thought put into these things. Does Netflix have its own media advertising?

Joe Shelerud: Yeah. So Netflix has an ad model. I must remember which supplier they're tied in with, but it's the same model. And so they are another; we call them supply sources or ad inventory.

And so what we want to do is combine that ad inventory. So that ad with a person who will be most interested in it. And so they say, Hey, we can show ads. You make a bid on what you want to show. And if this person falls in with a specific audience, meaning they're interested in outdoor stuff, then let's show them the ad.

And that's where you're getting all these other ad-supported platforms. They tie into the same capability overall. 

Chris Powers: Okay. I didn't take note, but it was on your website earlier. Help me if something on your website says it's an essential feature coming. It was like ADP or an ad displaying something or Amazon.

Do I need to pull it up? 

Do you know what I'm talking about?

Joe Shelerud: Yeah. Is it Amazon, like DSP? I think.

Chris Powers: Yep. What's important about that? What is it, and what's important about it?

Joe Shelerud: Yeah, so DSP means demand side platform. And that's the advertising system that links up the audience. So what are you interested in, where can we show this ad, and how do we bid within it?

And so that's like the module that controls and ties these different things together. So, Chris is interested in this and is on this site. Let's show him this ad, and we'll spend 5 dollars per thousand views on the Internet. 

Chris Powers: Got it. All right. Let's talk about your business.

You recently sold your business to our friends at permanent equity. I first start with why they were the buyer. Many folks could have bought you; what was interesting about selling to them besides that they're great people that we love to hang out with.

Joe Shelerud: Yeah. So I listen to your podcast with Mark Brooks, who I talk with weekly. And that was an awesome podcast; by the way, I loved your questions. And I always love Mark's insights. 

Chris Powers: Thank you. 

Joe Shelerud: So Matt and I are co-founders of the business. So we're 50-50 owners. And as we were growing this, we were bootstrapped from the start.

And so we never had an outside investment. And just with the advertising model, it's always been cash flow positive. And we've just been able to reinvest a lot of our profits to continue to grow, build the software, and build the team. And we had scaled it to a point where I got three kiddos, and I had all of my financial worth tied up in this one asset.

And we got to the point where we were looking to take some chips off the table. And two, what always scares me is what I don't know I should know. And there's one piece, like many business owners, when they come into due diligence, view it as the worst thing in the world. And there's a lot of work that goes into it.

I got excited about it because I wanted to uncover what potentially put us at risk. I didn't even know what to look at as a business owner; there's a lot on your plate. And so we just talked about digital advertising; only a portion of my day is spent on that.

And the rest is spent on HR and insurance, finance and accounting, and all the different other pieces like that, and I'm good at some things. There are many other things where I've had to try to work our way along. And another critical thing is that it would keep me up at night. It's what I don't know that is putting the business at risk.

And we wanted to find a partner who could provide that back office support to make sure that I wouldn't come in and get blindsided by something I should have known about all along and upset the whole business. And so we went through a broker who helped us assemble the initial materials.

To market the business and permanent equity was one of those interests, and I got to talk to Emily on that first call. 

Chris Powers: That's so cool. Okay. Real quick, though, I have some follow-ups, but you started having this idea that looks like we've built something worth something. I have three kids.

We've never de-risked. We're all in on this. I don't know what I don't know, but I should know it. Did you then go, was your partner feeling the same way, or did you have to go to your partner and have that conversation? Or were you both in sync on this from the beginning? 

Joe Shelerud: Yeah, it's been one thing that I'm very blessed about is my partner, Matt.

We will argue about the most minor, dumbest little things, but we always seem in sync regarding crucial business decisions. Matts got a young daughter too. We find ourselves at the same stages, situations, and general goals. And so, for that, we had conversations for quite a while.

And then it was just what's the right timing. And, we got to a point where we're both aligned and say, okay, now it's the right time. Let's seek outside investment and take some chips off the table. And so that's how that came about. 

Chris Powers: What's the cadence that you and your partner have?

I have a partner. We have one formal meeting every Monday morning from 9 to 11, but then we talk; I don't say every day, but we chat whenever necessary. What's your all's cadence for communication? 

Joe Shelerud: Yeah. Looking back early on, it's funny that we were a fully remote team, and Matt and I would get together once a month in person, which was terrific.

We would have all these breakthroughs that should have happened in less than a month. And so it was that point that drove us to, okay, we need to—getting an office together and working together in person all the time. And that was the foundation for hiring everybody in the office. Regarding cadence, we have a meeting where it's just him and me every other week.

We're still a small team. And so we're talking daily about critical items that are coming up. But in terms of structured time, it's an unstructured meeting. Let's talk about whatever's on our minds. I'll put notes on critical items I want to cover with them. It's every other week.

We'd do it more frequently. But we always tend to be on the same page for these essential significant items. And we're also very open and sometimes very blunt with each other. And so we can get to the heart of not being on the same page quickly. So if there are other times when it doesn't feel like we're fully aligned, you can feel that we'll step into the conference room and hash it out.

So personally, for us, it's been every other week, but like the weekly timeframe, that's pretty cool. 

And so you guys do it for two hours. 

Chris Powers: Yeah, we meet Monday mornings from nine to eleven. And then, depending on how that ends, you know, if something was unfinished or needed to be talked about, but like you, I've been partners with my partner for nine years. 

It's almost like you become one per we're always. I'm rarely surprised by something my partner says; it comes out of left field if we disagree. You build this communication that you have this second, this like gut that, when it's time to communicate.

And so some weeks we'll chat. We'll meet on Mondays. We won't chat for the rest of the week. In some weeks, we'll meet on Mondays, talk twice daily for the rest of the week, and feel it out. And, I'm, people say, oh, you don't want to have too many meetings.

Like we have one structured meeting, everything else happens as it happens. And I don't know. There's just been some like the other day I went to lunch with him on a Friday. We weren't supposed to go to lunch, but our lunches were canceled. We said, let's go to lunch. We ended up being a four-hour lunch.

And it was the best time of the year I've had with him. We covered a lot of ground, which was unexpected or uncalled for. And I don't know. To your point, we live in the same city, office together, and see each other daily. It would have never happened if we were across the country and had to do that over Zoom.

Joe Shelerud: And sometimes it's those unstructured meetings too. That's just really for sure. Sit down for lunch, and you don't have anything else on your mind. That's where many good ideas that are slightly off the wall come out too. 

Chris Powers: Yup. Okay. So back just quick.

So you decided to go to the market. Was permanent equity always the obvious choice, or are you talking to many groups? What was the process like? 

Joe Shelerud: Yeah. So we went to the market and got into more advanced talks with about four different individuals. And so they were not, from the start, the obvious choice.

What drove us to them was the cultural aspects. So one key thing that we've had, like Matt and I, we both came from the corporate world, and there were some things we're like, but there were a lot of other things that we didn't like. And so a fundamental rule of thumb is that if I'm spending so much of my time at work, I want to enjoy who I'm working with. So yes, there's the valuation, yes, there's the financials that come with it, but at the end of the day, like culturally, are we going to line up, or am I going to take an investor on that I now get to work with?

In the future, we need to be aligned in how we approach different problems, how we look at the world, what key strategies are, and how fast we want to move. So after talking to Emily initially, they had a lot of content put out. So I read. Brent's book and I listened to every single podcast they had recorded.

And I went through their website and found every article they came in town. And I found one article, like 2017 or 2018, where they're talking negatively about Amazon. And I brought it up, and so throughout that whole process, it was just a gut check on, all right, I like how these folks portray themselves.

But then when you're going through and structuring a deal, you can see from their actions if it lines up to who they say they're going to be, and you were talking with this, like in Mark, they get the same experience on the other side. And so what was so reassuring to me is that they match how they portrayed themselves to be.

So whether it was through interactions with our lawyers, whether it was through the different negotiations that we had, or going through due diligence, all these critical pieces lined up, and that is what got me excited about working with permanent equity. 

Chris Powers: Cool. But part of the conscious decision was you weren't looking to stop running the business.

You wanted to keep moving forward. Do you know how what is the future look like? Most people who sell their business want to check and be out in a few years. What's it like to sell your business but still be enthusiastic about the future?

Joe Shelerud: Yeah. So for us, Matt and I both enjoy what we're doing.

And so we rolled a lot of equity, permanent equity is the majority owners. If they don't like the job that I'm doing, Mark can come in, and he can fire me. But we have a lot of equity still invested and see massive potential. And so there's one key motivation, is there's the equity.

And as we grow the value of the business, that helps. Another thing I should have expected coming into the process is when somebody invests a large sum in you and believes in you. And so a significant weight comes with that, even though I felt zero pressure from the permanent equity side.

Mark is a very genuine, great man. You could also experience that on the podcast, like talking with him in person, even without that pressure. You still feel this internal pressure because you've got people who believe in you and want to ensure you're proving them right.

And so that was one key piece that I didn't expect going into it, but at the same time, it is a substantial motivating factor for the relationship side. You can look strictly at the financials, but there's that personal side too. 

Chris Powers: All right. I have one more question for you. It is a personal one.

It was one of the three exciting things about you. I thought this was cool. You said I've been to all 50 states with my three kids. 

Joe Shelerud: Yeah. My daughter is four, so she's been to all 50 States. 

Chris Powers: Okay. So how does this work? It is awesome. 

Joe Shelerud: So initially, as we were growing business, one of the key drivers, when Matt and I started, we were still working full time at another job.

And we reached the point where I had just had my third kid. And so I've got two boys and a girl. And so, at the time, I had a one-year-old, actually a less than one-year-old, a three-year-old, and a five-year-old. And my wife and I did the math, and we said, all right, our oldest, we have two solid years before we need to get him in school, and we're planning to home-school for kindergarten.

And so it got to a point we had always wanted to travel, and we said it's now or never, and I quit my full-time job. My wife, she's a labor and delivery nurse. She quit her job right after we had our third kid, and we're going all in my business, which was much smaller than it looks today. Yeah, but it was just going through the worst-case scenario and saying, okay, what's the worst case?

And yeah, it was an exciting experience going through; it was scary. But at the same time, we had the time pressure and said, let's go for it. So we spent the next couple of years traveling around in a camper. I still had our house up here. So yeah, working remotely, I would be gone for a month and return, and we traveled all around.

And yeah, my youngest, she hit 48 states by the age of three, and then we just. I got Alaska; we spent a month in Alaska last year, so I hit all 50. And it's those memories and experiences that I wouldn't give away to the world. And it's the, there's the financial aspects of growing a business, but then there's also the freedom aspects that you can experience too.

And so that's been a key driver, a key motivator. It's a grow the business to a point where we have the freedom to let the business run where it doesn't need that direct interaction every day and can experience life because it moves by quickly. 

Chris Powers: Okay. Then I have to ask for one more follow-up of everywhere you went.

That's the most excellent place in America that nobody ever talks about. 

Joe Shelerud: Let's see, so that we would do a lot of remote Camping, so we would find random spots, Bureau of Land Management, land where you can camp for free. Man, Utah is so awesome. It has so many incredible spots to go to, including National parks; if you want to get out in the middle of nowhere in the desert and hang out, it's a great spot to go. 

Chris Powers: Oh, all right, Joe. It has been incredible. Thanks so much for joining me today. 

Joe Shelerud: Yeah. Thank you, Chris. 

Chris Powers: I hope you've enjoyed this episode of The Fort Podcast. Be sure to follow us on your favorite podcast platform or hop over to YouTube to watch full video episodes if that's what you prefer.

For more information, you can check out @thefortpod.com.