How AG1 actually makes their money (not ads)

Hey, Michael from AdSumo Digital here.

You see AG1 everywhere.

YouTube. Podcasts. Instagram ads. They're spending millions on paid traffic.

And here's the part that'll blow your mind:

Brands like AG1 don't break even on a new subscription customer until after the first year.

Not month one. Not month three. Not even month six.

After a full year.

Same with Skims. Same with most of the 8 and 9-figure DTC brands you're watching scale aggressively.

So if they're not profitable on the front end... how the hell are they scaling so hard?

Because they're not making their money where you think they are.

Here's What's Actually Happening

Most DTC brands are only focused on the front end:

Better creatives. Lower CPMs. New angles. More UGC creators. Cheaper CAC.

And look that stuff matters of course.

But while smaller brands are fighting to be first-order profitable (and usually barely making it), big brands have built monetization engines that turn every customer into 3x-5x their acquisition cost over time.

Especially since you know that your cache on Meta is only going to go up. You should be focusing on how to get more profit in other places, like I’m about to show you.

Let me show you the math.

The Numbers That Change Everything

Let's say you're spending $10,000/month on ads.

You acquire 200 customers at a $40-50 CAC.

Your AOV is $65.

You're barely first-order profitable. Maybe break-even. Maybe slightly negative.

Not enough margin to scale confidently.

So what do most brands do?

They try to fix the ads. Lower that CAC. Find the winning creative. Test faster.

But here's what AG1 does instead:

They don't worry about being profitable on order #1.

Because they've built a system that makes every customer worth way more over time.

What if instead of fighting to get CAC from $50 to $45...

You made that $65 AOV into $85 with a smart bundle offer?

What if 40% of those customers came back within 60 days because you had an actual retention system, not just generic email flows?

What if your cart abandonment sequence recovered 15% more revenue because it was personalized to what they were buying?

Suddenly your unit economics aren't "barely profitable."

They're scalable.

And when your unit economics are strong, you can scale aggressively without sweating every CPM fluctuation.

The 3-Part System Big Brands Use

Here's what they're actually doing on the backend:

1. They convert more of the traffic they acquire

Landing pages optimized for conversion. Strategic checkout flows. Offers that match customer psychology instead of generic discounts.

2. They make customers spend more per order

Bundles. Upsells. Post-purchase offers. AOV optimization isn't an afterthought, it's baked into the entire customer experience.

3. They bring customers back faster and more often

Email flows, SMS, campaigns, segmentation. Not just "doing email marketing" they have a full retention engine designed around actual customer behavior, SKU-specific lifecycles, and reorder patterns.

All three working together. One ecosystem.

Here's The Difference

Most DTC brands: Running ads → hoping for a sale → maybe sending a few emails

Big brands: Running ads → optimized funnel → strategic upsells → behavioral retention flows → targeted campaigns → reorder optimization

They're not better at Facebook Ads than you.

They just understand that acquisition gets you in the game, but monetization wins it.

So Ask Yourself

Look at your business right now:

• What percentage of your site visitors actually convert? (Most brands: 1-4%)

• What's your AOV? Could it be 20-30% higher with the right offer structure?

• How many customers buy once and disappear? (Most brands: 60-70%)

• Do you have flows that are actually strategic... or just templated Klaviyo basics everyone has?

If you're honest, there's probably money on the table.

A lot of it.

And here's the best part:

You don't need AG1's budget to build this.

You just need the right system that makes every customer you're already acquiring worth 30-50% more.

Because once you have that backend dialed in, scaling becomes easy.

Your CAC hasn't changed, but every click is suddenly worth way more.

You can test creatives faster, scale spend harder, and actually be profitable while doing it.

The Real Question

Are you building a real backend monetization system...

Or just hoping your next ad creative works?

Because one of those strategies scales. And the other keeps you stuck on the hamster wheel.

I'm going to break this down deeper in the next few emails – showing you exactly how to build each piece, what's working right now, and where most brands are leaving money on the table.

But for now, just sit with this:

If you're stuck fighting for profitability every month, the answer isn't in your ad account.

It's in everything that happens after the click.

More soon,
Michael

P.S. – We've used this exact 3-part system to generate over $20M in backend revenue for 30+ DTC brands. Including adding $1.2M for Country Life Natural Foods without touching their ads at all.

If you want to see what this looks like for your brand specifically, just book a call here »

Today’s Helpful Links

• Client Interview: From $0 to $265,000 in Email Generated Sales [Klaviyo Email Marketing]

• How to Grow Your Email List for Klaviyo Email Marketing (2025 Pop-Up Form Guide)

• The Only 3 Things You Need To Know About Ecom Email Marketing in 2025