Reddit wiped out of ChatGPT, what agencies are really worth, & the new services playbook

Growth Newsletter: https://levelingup.beehiiv.com/subscribe Need marketing help? Visit: https://www.singlegrain.com/ and https://npdigital.com/ Want to recruit great marketers? Find them here: https://marketingschool.io/hire Reddit's citations in ChatGPT have collapsed to almost nothing, and so have the review sites. Eric pulls up the PromptWatch data live and Neil reads what it means for anyone who built a strategy on those placements. Then they turn to the money side: how to underwrite a deal, what a creative agency is really worth, and what Sequoia's 'services are the new software' thesis does to agency valuations. Key takeaways◾Reddit and the big review sites have been almost entirely cut out of ChatGPT's citations.◾The marketer's job is shifting from ranking pages to being the source an AI quotes.◾Founder retention is not one structure. Name which model each founder is actually in before you buy. Chapters00:00 Reddit’s Decline01:57 The Marketer’s Shift04:14 Deal Underwriting Logic07:36 Valuing Creative Agencies12:56 M&A Patience Pays18:01 Eric's Agency M&A Thesis

• 0:00Speaker 00

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• 0:37Speaker 01

  Yes, it's pretty much almost zero. So did G2 and a lot of the other review sites as well.

• 0:43Speaker 00

  So this is a graph from Promptwatch that I have pulled up right now. And so Neil, do you want to describe what you're seeing?

• 0:48Speaker 01

  Yeah, so Promptwatch is talking about how often ChatGPT is citing Reddit. And if you can look on August 14th, it pretty much dropped down all the way. Now, this is nothing new. I still love this data in chart from Promptwatch. But ChatGPT was cited really heavily early on in the Reddit days. Reddit went public. Sam Altman also has stock in Reddit. I believe it benefited him to do a deal. And then Reddit kept getting cited less and less over time. And you and I called this on previous podcasts. We also said we don't think Reddit is going to be cited that often in the long run, as well as G2 crowd and a lot of these review sites. For ChatGPT to do really well, they got to look at proper industry websites

• 1:34Speaker 01

  and see what they say about businesses within that industry versus people who can sign up anonymously on Reddit and say whatever they want.

• 1:41Speaker 00

  Mm hmm. It's too easy to game.

• 1:43Speaker 01

  In a bad way, in a negative way, yes. And actually in a positive way, too.

• 1:47Speaker 00

  Yeah. Well, everything, but actually, when you think about, I was talking about with our mutual friends this week. Everything is a game, right? Like, the way you behave in a company, the way you serve your customers, all these things. But anyway, so I thought that was interesting that Promptwatch called that out. And these algorithms are always shifting, right? But I was also, I was looking at this tweet over here. So this guy, Matt Swolinski, he works for Victor now. He used to work at Growth. He used to do growth for Whisperflow and Superhuman. So he said, Meta quietly ended the media buyer job and most SaaS teams have not noticed. So creative is a targeting now. A 100K a month, K account per month spend needs 400 to 500 new creatives a month to feed the algorithm. Two static ads on a look-alike audience is not a strategy.

• 2:31Speaker 00

  So we should talk about how we think about this because we're doing this for clients right now as well. But my opinion on this is that the, really, whether you're an SEO or paid media, what we're hiring now, Neil, is what we call four deployed marketers, okay? So four deployed marketer needs to be a T-shaped marketer that is deep in one area. So it could be SEO or it could be paid media. But then they're actually very broad across other categories. So they know how to do analytics. They know how to do organic social. They know how to at least talk about this stuff, right? And so you can't, I believe in today's age, in 2026, you can't just be a media buyer. Like, it's unfathomable to me, Neil, that people today, they're like, if you think back to where we're like 24, 25 years old, did we know how to do analytics?

• 3:14Speaker 00

  Like, yeah, we did. But now it's considered like a different job. And I do believe we should go deeper in it. But to be a well-rounded marketer, like I think, I look at you, I look at me, it's like, sure, we might have started in SEO, but we know affiliate well, we know SEO, sorry, we know paid media well, we know all these things, we know email well, we know copywriting well. And that's what I think it is. So this is not even the end of the media buyer job. I think this is the end of the we're going to see less specialist marketing jobs. I'm going to want more generalists that are just strong strategists at the end of the day.

• 3:45Speaker 01

  Yeah, and I look at, this is the same thing as engineering. If you look at a lot of the engineers now, I know there's more job openings for engineers, but the ones who are adapting and leveraging the latest technology are doing really well. The ones who are slow to adapt are getting fired and replaced. The same thing with marketers, whether it's media buyers or anything else, you have to adapt. And I think that's a big problem in which a lot of people just get stuck in their ways in marketing. But they don't realize that the number of changes these platforms make just through their algorithm is ridiculous. Like Google's at over 10 algorithm changes a day based on the last posting they did. It was around their nine point something. If you're not adapting, you're kind of screwed. And platforms change so often, technology change so often.

• 4:28Speaker 01

  Don't get into a field that requires a lot of adaptation if that's not you. You want the same old thing over and over again? Fixed roofs. It's a great job. Pays extremely well. HVAC is another one. There's not as much change. If you're going to feel that requires change, either buckle up and adapt or don't get into it at all.

• 4:48Speaker 00

  I think one thing I'll speak for both of us is Neil and I, we're both looking to continue to hire. And we're looking to continue to hire people who have a great relationship to change and are very they are self-starters and they're learners, right? If you love learning and you have a great relationship to change, that's how you're going to succeed in this, in this new world for a very, you know, a fast-changing environment. Again, if you're in HVAC, maybe not so much, right? If you're building buildings right now, maybe like I'm looking at the Aman that they're building over there right now. Maybe not so much for the next, you know, little while before the robots take over. You know, Neil, I want to talk about something in terms of how we're thinking about marketing, mergers and acquisitions, just mergers and acquisitions in deal in, in, in general.

• 5:28Speaker 00

  Because earlier, let's just say earlier, this, this month, I sent you something on something that you might want to consider, but there's a reason you didn't want to consider that, that deal. So, yeah, what can you say about your, your deal underwriting process in your head?

• 5:48Speaker 01

  For that deal specifically or any deal?

• 5:51Speaker 00

  We can go with that one. Yeah.

• 5:53Speaker 01

  Uh, so

• 5:55Speaker 00

  You can make numbers up.

• 5:56Speaker 01

  I can make numbers up. People aren't going to know the company. I can actually even say the real numbers because it's so generic, right? This person was in a pickle. They needed $350,000.

• 6:08Speaker 01

  And when they were needing $350,000, Eric messaged me and said, if you do deal with this company and they can't pay you back, you can just take over the company and the company is worth a lot more. They have investors, they raise eight figures. It's not that easy to take over a company when someone doesn't pay you back the money right away. That's number one. Two, I believe the company is going to have mass AI disruption. They already are facing it and I believe it's already affecting their numbers. So I don't know if I even want to own a company like that. And then the third one is if I give them $350,000 and they only needed the money for three months, even if it was for a year,

• 6:53Speaker 01

  how much interest am I really going to collect on that money? Let's say they want to give me 50% and then I had to pay 50% taxes of that money. Is it really worth doing all the legal paperwork and everything for, call it a profit of, you know, 75, $80,000 after taxes?

• 7:09Speaker 00

  Also, how many more times are they going to need to do that?

• 7:12Speaker 01

  That company?

• 7:13Speaker 00

  That 350, that 300, the 350.

• 7:15Speaker 01

  Oh, I think they're going to keep needing more and more money. But I'm not in that business of trying to make, you know, 10 cents on a dollar. There's a lot of people out there, they're in that business, they're in the lending business, and it can be a great opportunity. I'd rather go invest that money and buy companies that have long-term potential. Dude, yesterday I looked at a company. I won't reveal the name. They work with most of the big tech organizations. So if you look at them, you'd see a massive agency. They do 30 million plus in revenue. They claim 11 and change in profit in EBITDA. I see 9.8, 9.5, somewhere around there in EBITDA.

• 7:59Speaker 01

  I don't think they're in, at 11 either way. But they have heavy client concentration. They'll only grow 6% this year over last year. Their margins used to be 14%.

• 8:11Speaker 00

  What kind of agency?

• 8:12Speaker 01

  A creative shop.

• 8:13Speaker 00

  Okay.

• 8:14Speaker 01

  Their margins used to be 14% max. They all of a sudden jumped up because of AI. And their revenue jumped up. So if you look at the last three years, three years ago,

• 8:28Speaker 01

  they were doing, okay, call it in the 20s. Then two years ago, they declined from the third year. So did profit. Then a year ago, they grew rapidly because they got one or two big contracts, which made up the majority of their revenue. And they use AI to cut costs, so the profit shot up. This year, they'll grow 5, 6% similar margins as last year because they use AI to cut costs and they have a lot less headcount.

• 8:53Speaker 01

  And I told the banker, I love this business. I would have bought it three years ago if they were reasonable. The guy told me when I talked to him in 2024, at that time, call it they were doing, I don't know, three, four million bucks in profit and just rounding, but let's call it, I know it was more than three, but less than four. He wanted 12 times his profit for a non-recurring business. I'm like, no, I was going to give you 12 times. He's like, yeah, I'm going to get an offer soon. Someone wants to buy it. So I'm like, no, they're not. I didn't tell them that, but I was like, I'll just wait until they don't buy you and then I'll come back. Because everyone knows what things trade for. It's really hard to bullshit that.

• 9:32Speaker 01

  So then when I hit him up again, I'm going through it and I'm like, one, you have client concentration is too heavy. Two, this company is going to see price compression because they just cut a lot of staff. They're using AI to do a lot of stuff and they're pocketing the money. They're going to get competition and the margins are going to drop. They're like, yeah, they're already starting to see it. And I'm like, yes. So the, the banker's like, yeah, maybe you can buy this company for eight times. I was like, eight times for something where I believe half the profit's going to go away. So now I paid 16 times. They have client concentration, so a little bit more of the profit's going to go away. I think the business was realistically run correctly when they were doing around three to four in profit. And at that point, I would have paid eight times that business.

• 10:16Speaker 00

  It's funny, you could actually reverse the math and say, hey, if we take away your other profits and everything, you actually divide it. So whatever he's, he's, he's asking for like 20 times or what, you divided by two, divided by another two, right? You had to pay like five times or something.

• 10:30Speaker 01

  Yes, and, and when I was willing to pay years ago, I would have given them four times their money upfront. And then did a few year earn out where they can get the other four. Right? Cause you just want to make sure the business doesn't go backwards, especially when everything's not recurring contracts and.

• 10:45Speaker 00

  And then these businesses are very founder driven too.

• 10:47Speaker 01

  It's very founder driven. So you have to be careful on that, but their clients are a lot of repeat. And then on top of that, when I looked at it and I told the guy this, cause I remember talking to him two years ago. And I was at Javier's, which we're going to later today. I talked to him when I was in Javier's.

• 11:01Speaker 00

  The same one?

• 11:02Speaker 01

  Same one in Century City. I, I was on the phone call while I was at Javier's. And I remember him saying, oh, we're part of a agency network and we get a lot of business from that. And I was like, well, we're not going to get the business from that network because we're a competitor to almost all those agencies. Well, you only offer creative services, so people of course will push you business. And on top of that, he gets a good chunk of his business from other competing large holding companies like the WPPs, the Densus, the Publicis. I'm like, they would never drive us any revenue because we're direct competitors and we do a majority of the services that they offer. And a lot of the countries that they focus on, while you only offer creative services in the United States. So I was like, you start wiping out all that revenue.

• 11:44Speaker 01

  I'm like, I can't pay what he was looking for, but because they have such solid brands and do such good work. I would have gave him eight times his profit, call it two years ago, when the economy was bad. And even with the AI disruption, because I knew I could take that business and grow globally into something that was like four or five times the size.

• 12:02Speaker 00

  But also these things take, the, the, the unseen point Neil's making here as well as these, these things take time. Cause Neil might check in with him in a year or 24 months or 36.

• 12:11Speaker 01

  He will not sell this company for the deal he's looking for.

• 12:13Speaker 00

  A lot of these things take time, whether it's recruiting an executive or doing a deal, you just need to keep checking it.

• 12:17Speaker 01

  Dude, at every single M and A deal we did, how many do you think happened from the first conversation?

• 12:24Speaker 00

  Zero.

• 12:25Speaker 01

  Only one.

• 12:26Speaker 00

  Yeah.

• 12:27Speaker 01

  All the other ones happened years after we originally reached out. It doesn't mean that the businesses didn't grow or there was something wrong with them back then, or when we bought them. It's more so, it was hard to align.

• 12:40Speaker 00

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• 13:15Speaker 01

  Fine.

• 13:16Speaker 00

  All right. So I wanted to take a moment to tell you about my podcast co-host Neil's agency called MP Digital. And they work with a whole host of global companies or a global organization. Also Neil has SEO tools such as Uber Suggest and Answer to Public. All you have to do is go to npdigital.com to learn more and we'll see you on the other side.

• 13:36Speaker 01

  Expectations with what the market's willing to pay and what some of these founders want. I find that in almost every single deal, I reach out to tons of companies and I end up buying them three, four years later.

• 13:46Speaker 00

  Do you know what the equation is?

• 13:48Speaker 01

  Actually two years later.

• 13:49Speaker 00

  Do you know what the equation is for happiness?

• 13:50Speaker 01

  What?

• 13:51Speaker 00

  It's your expectation minus reality is your happiness. So if your expectation's too high and reality is this, then you end up depressed. You're not happy about it, right? And this is the situation, like they've gotten, they've gotten told that the multiples are just supposed to be this and that, that you just keep following up with them until their expectations drop. Because then they start to realize what the reality is, right? And I'll, I'll tell you how I'm thinking about M and A for, for us in the next few years. For, for us right now, right? I'm thinking more so, how are we selling all this stuff? Cause we're, we're on conversation with these, like, what do we do about, uh, uh, data hygiene, data security, permissioning, all these things, right? That we're building with the AI implementation stuff. So for us, it's still much more about signal for the next 12 months or so, right? Then we can figure out, okay, once we have, once we have more or less product market fit on this stuff, then we can go out to market.

• 14:35Speaker 00

  And plus the market will have matured a little more, right? And cause I think going out there to buy, um, at least for, for us right now, agencies. Cause chances are we're probably, they're not going to be aligned from an AI standpoint, right? Chances are you're going to have to cut. You look at what vending spoon is doing, private equity model, where they're just buying companies, just cutting a lot of headcount, right? I'd rather focus more on, hey, what have we figured out? What do we need to plug in? And then 12 months into it, once we figured it out, we, we go out there and, and we go to market and, and then we can say, okay, we know exactly what we want. But we're going, going in right now, because this stuff is so nascent, it's a little too early. So.

• 15:09Speaker 01

  Dude, you want to know what my favorite thing about M and A is?

• 15:12Speaker 00

  What?

• 15:12Speaker 01

  I get to talk.

• 15:13Speaker 00

  You like the negotiation? I'll tell you that much.

• 15:14Speaker 01

  Yeah, I do like the negotiation. I talked to so many entrepreneurs, I learn a ton. I would probably say I do two, at least two new call, or not every day. Cause I don't really do them Saturday and Sunday, because people don't want to talk then. But I, but I do at least 10 new M and A calls a week with brand new companies. That I'm hitting up, forget my team, this is just me, right? It's even more if you count my team. And I remember I was talking to a guy in, in the UK and his agency operates all over Europe. So I hit him up to see if he was interested in buying his company. I asked him for numbers, he wouldn't tell me the numbers.

• 15:59Speaker 01

  I told him what we pay and I'm very direct, because I don't like wasting time. So he wanted me to sign NDA, I signed the NDA and then we jumped on a call this week. So when I jumped on the call, he landed from his flight, it was an hour late, um, which I didn't care for, because I wanted to learn more about the business and they had a good amount of employees. And I'm like, man, if I plug them in, they can help us in multiple markets all at once. And he tells me about the business, like, yeah, this is the perfect time to sell. I don't want to keep working on this business, I'm over it. So one, I never want to hear that. If you, if I'm buying you and giving you money and you're telling me you're just done with it, I'm like, okay, then why would I give you money? But I never stopped the conversation. I asked why and I tried to dig in.

• 16:45Speaker 01

  So then he tells me, oh, I sold 70% years ago and he sold it for a good amount of cash. The business, let's say was, uh, smaller at the time. I, I don't know what he got, but let's call it $10 million, it was something like that. It's different currency, it was in pounds, but let's, let's round with roughly $10 million. And when he was telling me about this, so he still owns the remaining chunk, maybe his team owns some percentage, I didn't ask him.

• 17:18Speaker 01

  Even though he operates in a lot of different countries in Europe, I was like, why are your investors in you looking to sell? You must have grown. He's like, well, we're struggling, valuations are down, so I'm over it and I'm just willing to take a loss. I'm like, but what about your investors? He's like, oh, I can talk to them. I'm like, well, the decision is up to you because they own majority, that's the first thing. So then I was like, this guy's not going to even be able to sell. It's not up to him, it's up to the investors. Two, I don't want this business because the guy running it doesn't even want to be here. So then three, I start diving in to all the countries they're in. And he's telling me and how he has this model in which you can run an agency for one country, but service many countries all at once. We haven't been able to do that.

• 18:02Speaker 01

  We actually have offices and people in a lot of different countries, which just increases costs drastically and just makes economics less efficient. I was like, this guy's model must be better. He's growing, because you can look at LinkedIn and look at headcount, but a lot of times it's off. So when he's breaking it all down and he's breaking down his revenue and his churn, I quickly see that the economics aren't working out by being in all these countries and not having too much of a physical presence. He's getting some business, but he can't scale and actually get the big clients. Because when he's telling me the issues that he's facing, such as, oh, we can have meetings here and there,

• 18:42Speaker 01

  but it's hard for us to build relationships, because then you need salespeople, you need account managers on the ground, you can't be centralized. So our model's better. And I'm like, wait, that isn't better because you're not closing all the accounts and you're telling me why you can't close the other accounts. But I learned from that call that buying an agency that does multiple regions may not be the best. And the original approach we had, it was validation that even though it's expensive and it takes a long time to break even, it is probably the better financial move for the long run.

• 19:12Speaker 00

  Yep. So here's what I outlined with my thesis here, then we can move on. So I actually created an entire document when I was flying back and forth with Arizona, right? So the goal right now for us, you look at Sequoia, Andreessen Horowitz and Y Combinator, right? So Sequoia calls its thesis, "The Service is the New Software." That's the blog post that they wrote. So basically, they distinguish tools from completed work. So a copilot sells a tool and autopilot sells the work. Its playbook starts with outsourced, intelligence-heavy tasks, then expands towards in-source, judgment-heavy work as the AI compounds. And so you can do this for marketing, you can do this for accounting, you can do this for a series of different services. Andreessen Horowitz, the other venture firm, uses two distinct formulations.

• 19:55Speaker 00

  So you have vertical SaaS, now with AI inside, argues that AI lets vertical software take on tasks previously too complex for software, and describes a third wave of cloud plus fintech plus AI. So software is eating labor is one of their arguments, right? And then YC, finally, last but not least, the accelerator, calls the opportunity "vertical LLM agents," right? So you can have agents again for like finance, or for marketing, or sales, and things like that. And so the whole idea here is that still, if we don't establish the thesis on our own first, and establish over the next 12 months or so, what things should look like internally, then we cannot define what the buy box looks like, the underwriting standards, the diligence process, integration model, founder compact, scoreboards, all these things, right?

• 20:39Speaker 00

  And so, at least for us, as quickly as I want to move, I think it's more prudent to establish it more aggressively, because we're learning so much as we're getting on these calls right now. And I think it's still very early days right now. So I'm very much the executive sponsors on these. But this whole memo talks about who else is included, what the lesson is with all this stuff over here. But the cool thing too is I had this breakout, looking at Bending Spoons, looking at Jellyfish and Acorn, looking at S4 Capital.

• 21:07Speaker 01

  Jellyfish, the agency? Who's Acorn?

• 21:10Speaker 00

  So let me read this to you. So I think you enjoyed this, because it says two agencies in here, okay? So Brand Tech acquired 100% of Jellyfish, the agency. Jellyfish founder, Rob Pierre, moved to chair while Nick Emery took day-to-day CEO authority, and Pierre stepped down months later to a different path. Acorn Eye founders, Claire, Leon, and Roque, this is another company, Ross Cavillelli, remained founders and directors while becoming global leads at the combined Jellyfish commerce capability. So this is like an agency buying an agency, buying an agency situation. And the core lesson here is founder retention is not one structure. Brand Tech shows founder transition and retain capability founder tasks. Single Grain must specify whether each founder is operating vertical CEO, portfolio capability leader, or about transition executive. So there's all these lessons here, there's all these different models, like S4 Capital and Monks, right?

• 21:55Speaker 00

  Remember they named it Media Monks?

• 21:57Speaker 01

  Uh huh, now it's monks.

• 21:58Speaker 00

  Yeah, now it's monks. So this describes the operating model as one brand with unified systems and a single P and L. So in fiscal year 2025, reported net revenue declined 10.8%, while marketing service operational EBITDA margin improved from 14.2% to 15.1%. So the lesson for this one, Neil, is one P and L centralization can improve coordination and cost control, but margin improvement can coexist with revenue decline. Single Grain must track retention, organic growth alongside efficiency, not treat cost reduction as proof of successful integration. So my point of saying this is like, you look at Bending Spoon, like they're all about buying these successful SaaS companies, cutting, and that works for them. There's all these mini lessons from each one that you can integrate into these playbooks. And I think that the meta lesson is you have to figure out what works for you, so.

• 22:43Speaker 01

  Yeah, to figure out what works for you.

• 22:45Speaker 00

  So anyway, that's it for today, and we'll catch you later.