Casper and the CAC Catastrophe

Remember 1999? If not, don’t worry about it. We are reliving the joy and heartache of the ‘90’s now. That version of the internet bubble was famous for allowing hopelessly unprofitable companies to exit via successful IPO. Not to be outdone, 2021 is giving 1999 a run for its money. But here’s the question: was this week’s layoffs at Casper the start of the bubble popping? Will Allbirds and Warby Parker get out alive before the party ends?

My belief is that Apple’s ‘privacy’ decisions are what rang the closing bell. When Apple ended our ability to track users across websites, it became much harder to justify (or prove value in) huge marketing spend outside of Google. That decision, combined with the out-of-control acquisition costs on Google and Facebook, is making companies rethink their approach to digital marketing. And not in a good way.

If you haven’t heard, Casper laid off their CMO, CTO, and COO this week. And it seems related to the massive customer acquisition costs that Casper has shouldered since inception. When you’re changing consumer behavior (making customers comfortable with buying a mattress online), it takes a lot of money. And the first person through the door gets bloodied up the most. Casper reinvented the market and has exceptional consumer awareness. But that has not translated (yet) to profitability. And it sounds like investors and the board are tired of losing money (we all get there).

I’m preaching the gospel of content marketing and alternate forms of exposure. What can we learn from this? A 50% or 100% customer acquisition cost is completely unsustainable for any business. We have to find ways to attract customers without massive spending. Digital is hard and not for consensus thinkers. If you generally just default to PPC or Paid Social as the basis for marketing, it is time to pause. Rethink everything and figure out a way to attract customers organically. Or you’ll end up like the Casper CMO, who frankly probably didn’t have many options. Being public means hitting your numbers every quarter – there’s no appetite for the hard changes needed at that stage. So change now while you’re not yet on the hotseat. Long term thinking is the luxury of private companies and should be one of their greatest assets.