Pod Insights Marketing School - Digital Marketing and Online Marketing Tips Will Hardware Companies Turn Into Ad Companies? HP Is Launching an Ad Business With Laptop-Targeted Ads About this episode In this episode #3009, Eric Siu and Neil Patel discuss the future of hardware companies shifting toward advertising and Apple's current innovation challenges. They explore how monetizing user data could shape the industry while examining the financial trade-offs between renting and owning property. The conversation also highlights why personal experiences and memories matter beyond financial decisions. TIME-STAMPED SHOW NOTES (00:00) The Future of Hardware and Advertising (04:29) Apple's Innovation Dilemma (09:32) Renting vs. Owning: A Financial Perspective To suggest a topic, go to https://www.marketingschool.io. For more content from Eric and Neil, check out Eric’s Leveling Up with Eric Siu YouTube channel and Neil’s Neil Patel YouTube channel. Connect with Us: Single Grain << Eric's ad agency NP Digital << Neil’s ad agency X @neilpatel, @ericosiu Instagram @neilpatel, @ericosiu Drop Us a Review If You Enjoyed the Episode!
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0:35 Speaker 01 I'm curious on your thoughts on this, and I think this will be a fun topic to discuss, is do you think hardware companies are going to turn to ad companies? Because I saw how HP's launching an ad business with their laptop-targeted ads. You know, like, imagine just using your laptop and then you're trying to see more and more ads.
0:50 Speaker 00 I think everything's gonna change. I don't know, like, so I'll kick it back over to you, but like, what I mentioned that's kind of related, but I'm like, okay, software will become agencies, agencies will become software, and vice versa. So I'm looking at this, I'm like, you're gonna try to maximize your shareholder value wherever you can, so.
1:07 Speaker 01 I don't like the concept of hardware companies turning into ad companies unless there's a deal for us and users. I'm not saying we should get a cut of the ad revenue, but the hardware should be cheaper. When I go to places like Brazil, people always ask me to bring them like iPhones, and I don't want to break the law because they're trying to avoid like tariffs and stuff, and they want me to like smuggle in iPhones.
1:30 Speaker 00 Yeah.
1:31 Speaker 01 Because iPhone in Brazil costs way more than it does in the United States. I forgot what the rate was, but like, at least 20, 30% more.
1:38 Speaker 00 Wow.
1:39 Speaker 01 So like, keep in mind their currency exchange is worse. People make less money.
1:43 Speaker 00 Yeah.
1:43 Speaker 01 And then iPhone costs more.
1:44 Speaker 00 You can't afford it.
1:45 Speaker 01 You can't afford it.
1:45 Speaker 00 It's a huge luxury there.
1:46 Speaker 01 Huge luxury.
1:47 Speaker 00 Yeah.
1:48 Speaker 01 Ultra-lit have them, you know, middle-class.
1:51 Speaker 00 Yeah.
1:51 Speaker 01 To poor people, they tend not to buy them, or they get older models.
1:55 Speaker 00 Yeah.
1:55 Speaker 01 Because Apple reduces prices.
1:58 Speaker 01 But I know there's a lot of people, including me, that'd be willing to buy hardware if it was a lot cheaper. Like if my iPhone was free, but I got ads all the time.
2:10 Speaker 00 I would take it.
2:11 Speaker 01 I would take it.
2:11 Speaker 00 Yeah.
2:12 Speaker 01 And it could be on my home screen or whatever. I would, I would really take it. Now, if there was an ad before I would make a phone call, I would not take it. That's just causing me more time.
2:20 Speaker 00 You're just saying there has to be a win for the consumer. It can't just be, you're just trying to like maximize shareholder value.
2:26 Speaker 01 Yeah, but I think Apple would make more money if they just made their iPhones free and they made revenue from ads. At least in specific regions like the United States where the ad revenue can be high.
2:35 Speaker 00 Who knows? They might. I mean, they haven't been innovating recently, so.
2:38 Speaker 01 It's the easy way to juice more revenue without the innovation. I would slowly do a trial run.
2:43 Speaker 00 You know, this app, this version of Apple doesn't feel like the nineteen nineties quite yet, but it feels like it's kind of going in that direction. Not quite yet, right? I think it's still a ways out and they have a lot more infrastructure. But I just remembered the slip in the nineties where Apple just started to go straight down.
2:56 Speaker 01 Yes.
2:56 Speaker 00 And then the PC went straight up. So, um, we'll see what happens. But to me, it's like, sure, they're part of the magnificent seven. We'll, we'll, we'll come back to this. But like, when you look at the companies who are innovating right now, like Meta's pushing quite a bit in terms of how they're poaching talent, right? And then you look at Nvidia, they're, they're innovating, right?
3:12 Speaker 01 Even Google, they're poaching talent, paying an arm and a leg.
3:14 Speaker 00 Yeah. And so like, they're pushing, but I'm like, where's Apple pushing, right?
3:17 Speaker 01 Microsoft's pushing.
3:18 Speaker 00 Microsoft's pushing. Amazon, you could say Amazon's pushing too.
3:21 Speaker 01 Dude, heavy, I'm pretty sure, uh, Apple has released AI features on their iPhone.
3:27 Speaker 00 I could be wrong.
3:28 Speaker 01 I don't use them, do you?
3:29 Speaker 00 You know what you can do? You can make an emoji. You can make an AI-generated emoji from it. That's all I know you can do.
3:34 Speaker 01 And then with.
3:35 Speaker 00 Siri is still dumb as a rock.
3:36 Speaker 01 Yes. And then with the typing, I just use Grammarly on my iPhone.
3:40 Speaker 00 You use Grammarly on your iPhone?
3:41 Speaker 01 Uh huh.
3:42 Speaker 00 Why, why do you need Grammarly on your iPhone?
3:44 Speaker 01 So when I'm scheduling out tweets, like if I'm on a plane and stuff and it's really long.
3:48 Speaker 00 Uh huh.
3:48 Speaker 01 Because I got the smaller phone, so sometimes I mistype or like push buttons. Uh, Grammarly helps catch it and fixes it.
3:55 Speaker 00 You know what's weird? Do you use autocomplete on your phone? I don't use autocomplete or anything like.
3:59 Speaker 01 I don't like it.
3:59 Speaker 00 And you know how you can like slide the thing that I type really quick?
4:01 Speaker 01 I can't do that. Where you're squiggling your hand and the, so you're not going up.
4:05 Speaker 00 But I think also, I also think because we're older, we just like to type it out.
4:08 Speaker 01 I, I, I do see the young, quite a few younger people using the thing where they're zigzag with their finger instead of lifting it up.
4:15 Speaker 00 Yeah.
4:15 Speaker 01 Um, they're more efficient than people like you and I. We're actually getting, we're middle aged.
4:18 Speaker 00 We're getting old. Yeah. Yeah.
4:19 Speaker 01 Yeah.
4:20 Speaker 00 I'm still not forty yet, but anyway.
4:22 Speaker 01 Okay, back to you. But yeah, I genuinely believe like looking at these companies like Apple. I agree. They're not really innovating like the iPad really hasn't changed. A lot of their products haven't changed over the years. I don't know if I'll upgrade my iPhone in the future. Like, what am I really getting at this point? They're not doing anything new. A lot of these hardware companies that have the usage should just start showcasing ads. Like, imagine Tessa. There's this big screen. Why doesn't Tesla put more screens in the robot taxi and just make it even cheaper?
4:56 Speaker 00 Yeah.
4:56 Speaker 01 Like, usage would go through the roof.
4:58 Speaker 00 I think the thing Apple has going for them right now is the ecosystem lock-in. And so it's still very convenient, but how much longer are they gonna have that for?
5:05 Speaker 01 Yeah, but you, I agree with that, but I think if they can start integrating into more home products, you know, like automotive and stuff like that, I do believe there will be, um, they'll still be able to keep the lock-in. They just need to partner with other people who have the software and just integrate that software within their organization. Like I said, Apple building a search engine, they just partnered with Google, right?
5:25 Speaker 00 Yeah.
5:26 Speaker 01 They're partnering with ChatGPT as well. The problem is they just need to execute on some of this kind of stuff.
5:31 Speaker 00 Yeah.
5:32 Speaker 01 The big opportunity for Apple is to figure out how to just monetize all their users. And I believe the ad ecosystem is probably one of the best ways. I look at the same thing with Google. Their ad ecosystem makes them so much money. If they just figured out a way to get their Waymo costs even lower and they just, I know they're losing money, but break even on Waymo and make it where people are getting served ads. They would make way more money from that than anything else.
5:56 Speaker 00 Yeah.
5:57 Speaker 01 They already have your email address. You're using the app. They already have all your Gmail info.
6:00 Speaker 00 They're gonna integrate ads in there because that's a little screen in the middle.
6:03 Speaker 01 Yeah.
6:03 Speaker 00 Right? You can either pay to not have ads or you can just leave the ads there.
6:07 Speaker 01 Yeah, I would pay to have ads everywhere. I don't mind ads.
6:11 Speaker 00 Well, we're also in marketing.
6:12 Speaker 01 No, but even then, like, um, some of my subscriptions, you know, like for the television streaming, I have ads and I'd rather have the ads and get the cheaper rate.
6:24 Speaker 00 Dude, as a gamer, I used to hate ads on gamers block all ads. I had every ad block everything. I was like totally locked in. So, and speaking of gaming, I was watching the Video of Elon playing Diablo yesterday. He's number one in the world in hardcore now for Diablo. What that means is.
6:39 Speaker 01 What is that, yeah?
6:39 Speaker 00 So if you, so you know how like in a game, if you die, you can just respawn and go get your gear and like you can just keep going, right?
6:45 Speaker 01 I do now.
6:46 Speaker 00 Okay, now you know. Well, no, any game, right? If you die, you can usually respawn.
6:49 Speaker 01 Okay, so.
6:49 Speaker 00 If you die.
6:50 Speaker 01 Let's go back. So if I'm at level five, not level one, I don't know what levels these things go up to. And I had all these tricks and gears and, you know, trinkets, whatever you wanna call them. And I die, do I just go back to level five and I can just pick up all the stuff?
7:03 Speaker 00 Yeah, yeah, you stay at level five, you go, you can pick up your stuff, right? You have to go find your corpse and pick it up, right? That's how it works in Diablo.
7:09 Speaker 01 Can someone else pick it up for you before you?
7:11 Speaker 00 Uh, no, well, depends. If you're playing PvP, which this is totally different. If you're playing PvP where I can kill you and then I, if I kill you, then your gear might come out and I'll steal your gear, right?
7:20 Speaker 01 But normally people can just pick up their own stuff and they don't have to worry about getting jacked.
7:23 Speaker 00 Yeah, exactly. So it's, it's very safe, right? So he's number one in the world on hardcore. Hardcore means if you die, you lose it all, right?
7:31 Speaker 01 Including your level?
7:32 Speaker 00 Everything, everything's gone. You have to start a new character.
7:34 Speaker 01 From level zero or one?
7:36 Speaker 00 Yeah, all the way down to level one.
7:38 Speaker 01 So what level is he?
7:39 Speaker 00 He's, he's maximum level, number one in the world. He has the best gear. But the reason I even bring this up is one, how does this guy have time for games? People are wondering that, like? What I've read is he, he blocks his days into like five day, five minute increments, right? He's doing like the highest leverage things per five minutes, right? The other thing is, when you look at, he always reasons from first principles, right? So I'm like, okay, I was thinking about this yesterday in the shower, right? I was like, Elon plays like Diablo. I'm like, he's, if he was reasoning from first principles, he understands that all he needs to do is spend a ton of his money on the richest gear, cause you can buy the gear, right?
8:09 Speaker 01 How much can gear cost? Like five bucks?
8:11 Speaker 00 Oh dude, I've, when I was 13 years old, I sold a helmet in a game for $3,000.
8:16 Speaker 01 Wait, 13? How much is a silly helmet? This is not even.
8:18 Speaker 00 $3,000.
8:19 Speaker 01 A real helmet or a virtual helmet?
8:20 Speaker 00 Virtual helmet.
8:21 Speaker 01 This is a waste of money.
8:22 Speaker 00 Whatever, somebody, some, some guy bought it for me.
8:24 Speaker 01 If your mom knew that you're.
8:25 Speaker 00 She did know, she did know.
8:27 Speaker 01 That you're buying stuff for $3,000?
8:28 Speaker 00 I didn't, I didn't buy, I sold stuff. I never bought anything, cause I thought people were idiots for buying it, right? But if you value your time like Elon does and you're the richest man in the world, you just buy the best gear. How much is it gonna cost you? Like 20 grand at most? Maybe 10? Something like that, right?
8:40 Speaker 01 So he's, you think he spent like 20 grand on gear?
8:42 Speaker 00 I think he spent a ton of money on the gear and then you, you can basically like you're unstoppable, right? And that, that is a very simple way of first principles. I just need the best gear and then I'm unstoppable. And that's how he's.
8:52 Speaker 01 So it's kinda like a cheat code?
8:53 Speaker 00 Yeah, basically.
8:54 Speaker 01 So if I spent like a million dollars on gear, I would, I could beat Elon.
8:59 Speaker 00 Yeah, well, I mean, you have to, you have to play at a high level too. So when I, when I see him playing, he's playing on a 55 inch screen and he's like, you can see his, his actions are like, he's moving very quickly, right? And he's like hitting his keyboard, a bunch of shortcuts really quickly. Now, guys, you can correct me if I'm wrong here, but I think directionally, I'm correct because I played many versions of Diablo.
9:14 Speaker 01 So there's more than one version of this silly game?
9:16 Speaker 00 He's playing Diablo four, yeah. I played Diablo one when I was like eight, nine years old and there's Diablo two to Diablo three and Diablo four.
9:22 Speaker 01 Oh, it's like one of my favorite games. There's a lot of versions.
9:25 Speaker 00 What's your favorite game?
9:25 Speaker 01 Monopoly.
9:27 Speaker 00 Oh, yeah.
9:28 Speaker 01 Real estate and money.
9:30 Speaker 00 I love Monopoly.
9:31 Speaker 01 Makes sense. I even paid for it.
9:34 Speaker 00 Dude.
9:34 Speaker 01 On my phone, it's like a few bucks.
9:36 Speaker 00 Before we move on here, like talking about, um, I was debating yesterday with, um, with a friend and then we were talking about like, oh, you're throwing money away renting or whatever, right? And then I actually, you, you used to own a bunch of property, right?
9:49 Speaker 01 It's, it's a waste of money. You're better off renting.
9:51 Speaker 00 Yeah. Talk, talk about how your philosophy changed over, because the way we were brought up, there's a little investing lesson that our experience here was our moms and dads told us that you should buy, you should always buy a home. You're throwing away money renting. You're always going to make money. And then, and then I had my reasons, but I want to hear your reasoning and then we can move on from here. Frictionless Growth Marketing hosted by Sonya Thompson is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Frictionless Growth Marketing hosted by Sonya Thompson shows how modern brands grow by removing the friction in their marketing and customer experience that pushes customers away every single day, often without leaders even realizing it. Each episode delivers practical insights, real brand examples, and conversations with marketing leaders,
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10:42 Speaker 01 Sure. So I'll, I'll use one of my homes as an example because I know the numbers quite well. Property tax, a little bit less than 20 grand a month. So let's just round to 20.
10:52 Speaker 00 A month.
10:53 Speaker 01 A month.
10:53 Speaker 00 Yeah.
10:53 Speaker 01 Uh, mortgage, 39. It's, it's not too leveraged. It's really actually very under leveraged. Yeah, 39 grand. So let's just round up to 40 to keep the math simple. So you're at 60. Maintenance, gardening, pool, property manager, which is a contractor because no one wants to deal with it. And electricity, water, roughly five grand a month. I'm just rounding. I'm, I'm probably off by like no more than three, four grand on the whole thing. So let's call it 65 grand a month. All right.
11:24 Speaker 01 Now, the home is a $30 million home at this point. We've spent a lot on renovations. So let's call it, I have $23 million in equity, $7 million mortgage. Technically, the home's probably worth closer to 30 to 35. But let's just go with 30 and we're just going with my rough costs. So when you're looking at the math there, that's $23 million sunk costs that's put into the house that I'm not getting back because that was the equity, the cash I had to put in. Then you have, still with that, you have the monthly payments of roughly 65. And again, I'm off by a few grand, call it two, three grand, but let's just go with easy numbers.
12:08 Speaker 01 On the $23 million, you know, because I was talking to my wife, I can go rent a house, like a nicer house. It won't be as nicely done up, but it'll be bigger, land will be bigger, it's worth more, but it'll be older. It's still in Beverly Hills. And let's say I can rent easily three-year contract, 120, 140 grand a month, I could just negotiate that. Now, you may look at that as, let's say I get it for around 130, we'll go to middle point. And I'm at 65, that's roughly double what I'm paying.
12:39 Speaker 00 Yep.
12:40 Speaker 01 But the 23 that I have down.
12:42 Speaker 00 Opportunity costs.
12:43 Speaker 01 That 23, I can, I wouldn't say easily, but I would say I'm probably like 80 to 90% certain that I can ink out, call it four, five million dollars. Four on the worst-case scenario, five on a good-case scenario without any growth, just like buy businesses and ink out that much in profit. Plus, there's opportunity to grow, but some could decline. But if you just keep it simple, but just say four on the really low end, which would be a terrible deal for me and I usually wouldn't spend 23 to only make four million in profit. But even at four million, it's just like, okay. Hundred and thirty a month, you know, you start looking at that. That's less than two million dollars a year.
13:27 Speaker 01 And you're just like, I'm making foreign profit.
13:31 Speaker 00 Plus that those businesses scale too over time.
13:34 Speaker 01 Yes.
13:35 Speaker 00 Cause the other thing too is if you look at the real estate returns, oh, well, you're going to get a return. Okay. What are you getting like four or five percent a year on real estate? Maybe, maybe, maybe a little better, but on business, what is your return that you're getting on it?
13:45 Speaker 01 That that I'm getting on my business?
13:47 Speaker 00 I'm just talking about like in general for people, your return is going to be a lot better than four or five percent a year.
13:52 Speaker 01 Well, not just that, if I spent that money buying the businesses, the businesses are probably were double when I integrate them in. So if I spent twenty three, I'm probably inking out conservatively thirty five, forty million, just right there off of thin air, just from the purchase. But we usually don't buy stuff unless we know we can cut costs and grow it. So I would hope to twenty three turns into at least fifty and turns into at least something like
14:17 Speaker 01 on the low end, five, six million in profit, if not more.
14:19 Speaker 00 My point is your internal rate of return is going to be a lot higher. The other thing too, is if you buy homes and things like that, then, then, then you have to actually manage it. It's, it's like when Sam Oven's like, well, if I buy a TV, then I have to watch it. So like it's like, it's stuff. It's cognitive load.
14:34 Speaker 01 Yes. And that's why I end up believing that we shouldn't own any homes and we should just rent them all.
14:41 Speaker 00 I believe, okay, and I think you're doing this, but like, I believe owning a home for your family is fine. But I think owning a bunch of homes just is a pain in the ass for me. So.
14:50 Speaker 01 So Eric and I were having this conversation because the economy is really bad. I'm like, dude, do I sell the home and just put all that money into business? And Eric was going through some tough times with his mom. She passed away recently and it gave him a different or a unique, a new perspective on life, I would say. And we were talking, he's just like, you know, he's like, you've made, I'm not the richest person, but he's like, you've done okay in business. Your life is decent. He's like, Are you really gonna die and remember you making, you know, taking that 23 and turning it into 50 or 60 million dollars? Or would you rather have a really nice house with amazing furniture?
15:32 Speaker 01 And like, when I say amazing furniture, I think our furniture bill is like 1.7 million dollars just for furniture on a-
15:38 Speaker 00 Which Neil didn't pick, by the way.
15:39 Speaker 01 I didn't pick any of it. I would have picked Ikea furniture if it was up to me. Some decisions, and I'm not hating on it, you know? There's other things that I spend money on that are a waste too. But Eric's like, would you rather have your kids really happy and have things like a theater or whatever they want in a house? And a big backyard where they can play and play basketball with them and have those experiences? Or would you rather just have more net worth? And the old me would have had more net worth, but I think Eric was spot on because I now will have better memories with my kids because right now we don't have a yard and they want a yard.
16:18 Speaker 00 And you'll pay anything for those memories down the road.
16:20 Speaker 01 Correct. And the furniture and stuff like that, I think that's a pure waste. But the only reason I did it is I'm like, if I want to sell it, it actually makes it easier to sell the house, believe it or not.
16:30 Speaker 00 Yeah. No, I believe it. Yeah.
16:32 Speaker 01 So then you just get a premium.
16:35 Speaker 00 It's a product, just like the cookies.
16:37 Speaker 01 Correct.
16:37 Speaker 00 Yeah. Anyway, that's what I was saying. A jack of all trades, guys, is better than a master of one. See you tomorrow.
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