Negative CAC: How to make money off your marketing

How to build a business with negative customer acquisition cost

Author

Matt McGarry
November 23, 2024

DEEP DIVE

Negative CAC is media’s moat.

With negative CAC (customer acquisition cost) you make money off your marketing.

Craig Fuller coined the term. Here’s how it works:

  • Negative CAC is a content-to-commerce business model.

  • By using advertising-supported media or selling information products, you can drive the top of the funnel for another business model.

  • You build an audience profitably (by monetizing that audience with ads and/or info products), then sell non-media products to that audience.

When this is done, you have negative customer acquisition costs.

Craig Fuller calls this “a once-in-a-generation opportunity for the right entrepreneur."

Imagine owning your audience, rather than renting it.

By combining a media business with an adjacent business that serves the same audience, you can turn your marketing into a profit center.

Essentially, the cashflows from the media business offset the advertising and marketing costs of the adjacent business.

You acquire customers and make money on advertising.

I've coined this concept "Negative CAC."

— Craig Fuller

For the right entrepreneurs, negative CAC works brilliantly:

  • Russell Brunson used negative CAC to bootstrap clickfunnels into a $360 million SaaS business.

  • Greg Fuller used it to grow FreightWaves SONAR into a $30 million SaaS — built on the back of their media operation.

  • MeatEater used negative CAC to reach $100 million in revenue.

  • Doug DeMuro used his YouTube audience to grow Cars and Bids — a car auction marketplace — and sell it for $37 million.

  • Kevin Espiritu has grown Epic Gardening into a content-to-commerce machine, which recently received a $17.5 million investment from The Chernin Group.

And there are many more amazing examples.

Let’s break a few down:

Russell Brunson — ClickFunnels 

ClickFunnels is a sales and marketing software that helps founders market their products and sell more with funnels. 

Russell Brunson started ClickFunnels completely bootstrapped in 2014. 

Brunson started by creating educational products (like courses, newsletters, coaching programs, and events) on how to use marketing funnels to sell more. 

Each educational piece required the use of ClickFunnels. 

People couldn’t fully execute the strategies he taught unless they used ClickFunnels. 

By 2023, ClickFunnels made over $265 million in annual revenue and had 150,000 customers. 

Reportedly, Brunson had a multi-billion dollar exit.

Jason Yanowitz — Blockworks

Blockworks is a crypto media business founded in 2018.

The founders started by hosting events, bringing together a valuable community of people interested in crypto. 

They made money from day one because institutional crypto companies — like Coinbase — wanted to get in front of their community. 

Eventually, they got into content and built a successful podcast network with 20 shows, including "The Pomp Podcast" with Anthony Pompliano. 

  • They made $3.5 million in ad revenue in 2020. 

  • In 2021, they launched their news site and ad revenue doubled. 

  • By 2022, Blockworks was doing over $20M in revenue. 

The same year, they launched Blockworks Research, a SaaS crypto and DeFi research product for investors. 

Blockworks was entirely bootstrapped until this point. 

Blockworks raised $12M at a $135 million valuation in 2023.

This money was used to build Blockworks Research — a subscription data product they’re selling to their existing audience they built profitably.

Craig Fuller — FreightWaves

FreightWaves was founded by Craig Fuller — the guy who coined “Negative CAC.” 

FreightWaves is a B2B media company that covers the freight industry. It's been around since 2017.

  • FreightWaves is an authority in the freight space.

  • They have  ~1.5 million web visitors per month. 

This might not seem like a lot of web traffic, but it’s actually quite a lot for this lucrative niche. 

Then, they launched SONAR in 2018. 

SONAR is an informational SaaS product that provides real-time data and insights into the global freight and supply chain market.  

They marketed SONAR to their existing FreightWaves audience, which they built profitably on the back of advertising.

  • In 2021, FreightWaves had less than $3M in revenue.

  • Now SONAR is projected to be a $30M business (built with negative CAC)

Kevin Espiritu — Epic Gardening

Kevin Espiritu started the blog Epic Gardening to share gardening techniques and tools. 

He cultivated a ton of website traffic, a huge social media following, and a YouTube channel with over 1 million subscribers. 

Epic Gardening grew 300% YoY from 2016-2019. 

Kevin started selling physical products in 2019. This was a critical move to create a negative CAC for Epic Gardening.

By 2020, Epic Gardening grew revenue by roughly 450% to around $2.8 million.

In 2021, Epic Gardening grew revenue by 160%, reaching $7.3 million. The team had 5 members. 

The company was still fully bootstrapped.

Then, in 2022, The Chernin Group (TCG) invested $17.5 million in Epic Gardening. 

Kevin used this money to grow his negative CAC business even bigger by:

  • Scaling their blog, newsletter, social, and YouTube audiences profitably by selling ads and sponsorships

  • Selling even more physical gardening products to that audience

Doug Demuro — Cars & Bids

Doug launched his YouTube channel in 2013. 

Prior to that, he was writing for Jalopnik — a car blog — where he built a loyal following who later watched him on YouTube. 

His YouTube channel took off and grew to millions of subscribers. 

Doug launched his car auction site Cars & Bids in 2020. 

Cars & Bids sold over $230 million worth of special-interest cars.

In 2023, the Chernin Group (TCG) invested $37M into Cars & Bids.

A big part of that $37M figure went to Doug’s pocket, and the rest went into the growing auction business.

The thesis behind TCG’s investment was negative CAC:

  • Doug’s YouTube audience grows profitably via ads

  • Doug drives those views to Cars & Bids to monetize them further

Doug and Cars & Bids never spend a penny on customer acquisition costs for Cars & Bids. Instead, they make money from their marketing via YouTube ads.

Motley Fool

Motley Fool was founded by two brothers in 1993. 

Now, it’s a private media empire with over $100M in revenue.

Here are a few businesses that the Motley Fool built profitably from their newsletter and website audience: 

1) Motley Fool Asset Management Actively Managed Funds.

Motley Fool makes money by taking a fee of .85% on AUM.

2) Passively Managed Funds.

Motley Fool makes 0.5% in fees for passively managed funds. 

3) Wealth Management Service.

Motley Fool offers active stock picking and professional portfolio management for individuals with a minimum of $300K. The management fee is .95% 

4) Motley Fool VC fund.

The AUM is $250M. They have a 2% fee and 20% carry, which means $5M in annual management fees for the fund. 

Final thoughts

These are just a few of the hundreds of incredible businesses built on the back of negative CAC.

For this list, I focused on digital media companies. However, negative CAC applies to other types of media companies as well.

Like Disney, one of the largest companies in the world.

Disney generates $90 billion in revenue annually and has a market cap of $209 billion.

  • Disney has built one of the world’s largest audiences profitably with movies and TV shows.

  • They further monetize that audience with theme parks, merchandise, licensing, video games, and more.

I hope you found this helpful.

If you’re building a negative CAC business and need help with newsletter and info product growth, get in touch with me here.

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