Diorex

I am very frequently asked “what is the best niche for a newbie?” or “What is the best niche to expand to once I have had some success?” or even “What is the next hot niche?”

I feel like I have been writing about this almost since the start, but it seems people just seem to miss it or I am getting senile.

The best niche is one that no one else is in and there are literally thousands of them left.

If you start by looking on CJ or ShareaSale then that is better than looking on a CPA network where apparently there are only like 5 verticals - credit, diet, dating, auto, and zip submits… (or so it seems). Even better would be to go the local flea market or hobbyist convention and see what people there are talking about or selling - maybe even check out the obscure listings in Ebay - look around for the booths or listings with people at them (or bids) - is it gumballs or bowling shoes or designer picture frames who cares as long as it does not scream affiliate marketing…

If you can do a search and find 2 or 3 paid ads, none of which are affiliate links now you may have found your niche. It means there is enough online interest in the product for people to be doing business, but not so much that CPC is bid up to unprofitable levels. Find a local company that can provide the product cheaply - or maybe you are aggressive and go straight to a national distributor and arrange a drop ship arrangement or even start as an affiliate of an existing business (after you explain what that is to the 45 year old guy running the company).

Retail markups are typically fairly large and in a less competitive space you dont have to give away all that much to be a good price, plus the inefficiencies of your competitors when it comes to internet marketing mean that even though you might not have the best prices you will still outmarket them if you have half a clue, because most of them arent even aware there are clues to be had.

Once a decent product with decent search volume is located, immediately begin seeking out the best domain name possible don’t buy TheBest-Niche_website.biz when you can be Niche.com for a few thousand dollars. The domain name lends instant credibility and allows you to be more professional than the guys you compete with.

It is my opinion that you can almost certainly learn 85% as much about the niche as those who have been doing it for decades in a matter of months while at the same time out marketing these Niche specialists by a huge margin. You will understand technology and the importance of tracking analytics and testing (if not please unsubscribe from my blog), understand Google and Yahoo and MSN plus have heard of Facebook and MySpace. You will understand Ebay and possible Amazons marketplace. You will have a clue on how to best collect and use email, plus maybe have some insight into the idea of coupon codes and Free Shipping or design of web pages or any of a dozen other things that increase sales. In no time at all you should own that niche and be the major player, with no competition.

Face it, almost no one reading this blog has a shot at starting a mortgage lead company or building a competitor to proflowers or cars.com making tens of millions a year. Just because you cannot own a $100 million dollar niche does not mean you cannot own a $5 million one… or even own several of them.

Bottom line, if you are looking for your path to fame and fortune through internet marketing and are starting on a CPA network you have probably already lost the game.

Lots of marketers, both affiliate and otherwise have been encouraged, bribed, cajoled or otherwise convinced to use Google Analytics to track their campaigns. I actually suspect that Google reps are incentivized to get advertisers to use the product.

The main selling point is that it ties into Adwords and uses tracking to determine your cost per lead/sale/whatever back to each keyword with little or no effort on your behalf. If you know which keywords perform good or bad you can then improve your ROI and become more efficient in managing your campaigns. The pitch is perfect for affiliates since they are typically both lazy and like the pricepoint of free.

Google recently bought Doubleclick and there was this huge uproar that they might be in the business of selling rankings via their Performics unit (which they said they would be selling that part of the company), but it turns out performics is also an affiliate marketing network.

Yesterday Google announced that they had renamed the affiliate network to the Google Affiliate Network.

Seems innocuous enough… NOT!

Heres why I think this is a major red flag… If you are an affiliate marketer using Analytics for a product through another network where you are driving traffic via search and Google also has that or a similar offer on their network, then they can simply arbitrage your conversion data and use it to identify the best converting keywords etc.

Say you sell Widgets and Google’s free analytics tool say that the keyword ‘blue widgets’ converts for you at a cost of $6 a sale, yet the widget manufacturer has an affiliate listing through Performics
paying $12 a sale. Your 100% ROI profit is in danger of becoming a $12 profit for Google.  Why should they share that with you? afterall it was their visitor in the first place. Your free analytics tool has now cost you 100% of your profit!

Think Google will not do it? The last time I read their terms and conditions, there is nowhere that it says they cant do this. They will make oral statements saying things like “If we did that we would lose the trust of our advertisers and go out of business”, but they have refused to put that in writing in any way, shape or form. In other words, they can do it.

Something to think about next time you take the easy way out and throw Google Analytics on your pages. There is no such thing as a free lunch.

It is Father’s Day weekend and as part of my gift, my kids and I went to see KungFu Panda. Pretty funny movie that I enjoyed and so did my kids.

Like many of the kids movies, this one had a pretty simple moral underlying the humor. That moral was basically that “there is no secret ingredient”.

Again and again in life, I have seen people who are on the outside of an industry trying to get inside looking for the secret to how to do something.

Affiliate/Internet marketing is no different. Read on boards or blogs and it seems that most people are looking for the secret of how to make money out of nothing with no effort.

The truth of life and internet marketing is that there are rarely secret ingredients. The people who succeed do so as a result of hard work, perseverance, intelligence and a little bit of luck - not because they have some secret keyword list or way to scam Google or that hidden niche that noone knows about.

Cannot tell you how often I get a PM or email or AIM message from someone who says they just cannot figure out how to scale or make any money, that all the campaigns seem so saturated, <insert excuse here>.

First thing I always ask is what kinds of things they are they testing - not the offer, but rather A/B type tests? Invariably the answer is a variation of “I plan to start once I find something with a really good conversion rate.”

I am here to say that Conversion rate is not born, it is grown - very slowly over time, with hard work.

Lets take an example of how someone can make a difference by testing.

• Start with a 3% CR which is considered about the industry average…
• Assume $.60 CPC which seems absurdly low to me, but lots of you guys are paying a lot less…
• Assume a payout of $20 per sale - seems fairly generic, lots of products pay more, lots less…
• If these numbers seem totally wrong to you, just set something up at breakeven for what you are seeing and build a spreadsheet…

After 100 clicks, you would expect to have 3 sales with $60 in revenue and $60 in cost - a total waste of time, right? Just move on to the next thing is what almost all people would do.

But the affiliate who likes to test might try a new headline, maybe some new ad copy, different hero shot or calls to action or any of 100 other things…

Say that this affiliate was able to increase conversion through testing by just 5% each month. Just to show how possible this is, we are often looking for 10-15% increases and seem to find at least one if not several every month! So 5% seems like you are not really trying hard to me…

So the 2nd month, you would earn $3 more than you spend for each 100 clicks - a 3% ROI. Not going to quit the day job, but positive progress. At the end of the year, just finding one 5% increase each month the ROI on this “breakeven” campaign works out to be 42% which is almost certainly worth keeping.

This assumes that you do not manage to increase your CTR or quality score or otherwise lower your CPC which is very doable through testing.

Now say, we have a very clever affiliate who manages to find 10% conversion rate increases each month rather than 5%. At the end of the year, this guy has a 185% ROI from the campaign most of you would have walked away from.

Now if you are getting that kind of ROI, you have probably passed up the affiliate network and gone direct, which will be a free 10% lift, plus increased their payout above where they started, potentially significantly, which allows you to pay more, thus increasing your position, your test bandwidth and frequently your conversion rate in a beautiful cycle.

When you are starting out it is not ridiculous to think you might get 20% or more lifts from some tests, and trust me when I say that front loading the conversion increases significantly improves the end results.

All of the above being said, I am not trying to say that any campaign can be a winner. Nor am I saying that you should stick with a loser. I am merely saying that most people fail because they do not test their way into being a winner ad discard lots of things that would have worked with a proper test plan.

Not to get too nerdy, but when I used to play Dungeons & Dragons type games on the computer, I was always asked to determine my characters alignment, which indicated how I would generally react to a situation.

Paladins always had to be the good guys. Assassins were typically evil. You could also be a troublemaker and be chaotic or totally neutral etc. Essentially you could be good or evil and lawful or chaotic with neutral combinations of each. I usually chose Chaotic Good because even then I was an outside the box non-conformist who was basically good.

Anyway, as I am getting more into the affiliate management space, I am starting to realize that the same holds true for affiliates.

• There are the affiliates who only care about themselves, often using fraudulent or misleading methods to drive traffic, confuse consumers or outright scam advertisers - these would be the chaotic evil alignments - out for only themselves and noone else.
• There are the people who are pushing the limits (think Google takeover Scams, or someone using Splogs to game the SERPS) - I would categorize these guys as Chaotic Neutral. They are gaming Google, but in general are not misleading consumers nor advertisers.
• There are the guys who go out of there way to provide quality leads and make sure that the leads are quality for both the consumer and the advertiser. Often this is the way in which they protect themselves. This is the model Lawful Good paladin.
• There are of course combinations of all of the above. They guy who bids on trademarked terms in violation of an affiliate agreement who do not scam consumers but are intentionally breaking the advertisers rules. The company who has a valid unsubscribe in their Can-Spam compliant emails, but then just mails that consumer from a different domain or for a different product.

As an affiliate, I subscribed to the theory that the fastest way to higher payouts, stronger relationships and overall more predictable earnings was the Lawful Good affiliate character. I was always cognizant of the fact that if I provided bad leads or otherwise unprofitable business to my partners, then my long term viability could be compromised. It was certainly not the only way to achieve my goals, just the way I chose.

Now that I am running a large affiliate team, I am dealing with characters from all walks.  Some are focused on the highest possible payout - to heck with my profitability. Others are slimeballs who consistently mislead consumers and draw unwanted regulatory attention. Still others are very focused on long term relationships and although want a high payout, they also want to make sure their traffic quality is good and that my profits are stable - these are also often the guys who understand that payout is merely one side of the equation - and that conversion rate can be far more important.

I am not trying to condemn any of the affiliate types (well maybe the Chaotic Evil ones who intentionally screw us and our customers), but rather bringing to light that there are many shades of affiliate marketing other than the color of your hat.

Having been on both sides, I do not have a preference for one type over another - I just know that some types of alignments tend to wear a different color hat with higher frequency - Green, for the money they make and the envy they attract from others.

So what is your affiliate alignment? Is that part of the reason for your success? or is that what might be getting in your way from building a sustainable business? Have you ever stopped to think about the ultimate value of your traffic? or are you focused on how much money you can make? have you ever worked with a partner with a lower payout because they pay more reliably or convert better?

Assuming that you have a somewhat mature PPC lead based (not products) campaign within a vertical that has all appropriate keywords with properly set bids etc. I can think of three simple ways to earn more profit from that campaign.

1. Pay less for each visitor - most people attempt this by lowering bids dramatically - this seems to be the most common and least profitable, since you typically also sacrifice volume. You can also improve your quality score (think SEO on landing pages) hoping to get a reduction, but this is sometimes problematic and certainly not a slam dunk process. Another idea is to find areas where your max bid is significantly higher than your actual CPC. Say you are bidding $3.00 and the CPC is $1.75 - try lowering the bid to $2.50. 9 times out of 10 your CPC will go down without a change in position.

2. Convert more of the existing visitors you have - Optimize your landing page to convert at a higher pace. Change things subtly (button text to “order now”, or “Continue” or “next”) or dramatically (New hero shots, totally different layouts etc) and take the same pool of visitors you have now and convert more of them into sales. If you control the form, be sure to optimize that as well. Since you have already paid for the visitors each additional sale is 100% pure profit. Small tweaks can result in huge gains.

3. Get paid more for each sale - Go directly to the vendor and ask for higher payouts. Cut out affiliate network middlemen. Do not allow others to profit off of your work. If they will pay $25 a lead, they will probably pay $30, especially if you turn the faucet off for a day or two.

Simple Numbers to illustrate this point (totally made up…)
Assume 1000 visitors a day at a $1.00 CPC with $2.00 max bids.
5% of those visitors convert = 50 sales.
Payout per sale/lead = $35

So you are making $750 per day from this campaign (($35*50)-($1*1000))

Now assume you:
+decrease CPC by $.10 a click without losing position by reducing bids to $1.50 for a CPC of $.90
+Increase Conversion rate to 6% = 60 sales
+Increase Payout to $40

You are now earning $1500 a day (($40*60)-($.9*1000))

3 relatively small improvements doubled your daily profit.

Once you get something that is modestly successful, really small tweaks have dramatic consequences.

****There is a 4th lever which many fail to consider which is that you can increase your bids, move up in position, get more clicks and earn less per click, but probably improve conversion rate as well, for more total profit. This is risky and not for the feint of heart.****

I get asked the question “what would you do if you were just starting out?” at least once each week by a reader and I have tried to offer advice where I can, but I just figured I would blog about since this seems to be a popular query.

Since most of my knowledge is PPC - let me focus mostly on that, I am not a good resource for SEO or Social media or building a community, other people are far more qualified to talk about that than I am.

A few things I would not do first:
1. I would not spend any money on e-books or other guru lessons. While they can be useful, there is just too much good information out there for free.
2. I would not spend too much time on forums - nothing against forums, but many of the people there are far from being experts and are probably not far from being in the same boat as you. Wicked Fire had the infamous Chris Lingle who turned out to be a fraud, yet hundreds followed his advice. The other reason I would avoid forums is because you will get a ton of conflicting ideas (many of them good) but if you are always off starting new projects and never finishing the old ones, nothing ever gets done.
3. I would not spend any serious money on domain name purchases. While there are bargains with great traffic, people who know far more than you about valuing domain names have probably already passed it over. Besides you can usually get a reasonable domain name for $10 from GoDaddy or other registration places.
4. I would not try to compete in ringtones, mortgages, blockbuster, porn, gambling or any other highly competitive PPC space. In general, if you have read about how lucrative it is on a forum or a blog post, then it is probably not a good area to pursue. You want to be the only affiliate in a space (or one of a very few) if the page is full of affiliate ads, you are going to have to be better in some other way. I have accumulated skills, knowledge and experience to pull this off and I still avoid most of these verticals, the average person just getting started has no chance.
5. I would not focus on zip submits or email submits. They can look enticing with $.05 clicks and 30-50x that payout. There is some ROI to be had, but the hassle is huge. It is hard as heck to scale. I cannot tell you how many times I have heard people say - I made $5 on this one zip submit, if I can just do that 20 more times I will be good. A lot easier ways to make $100 a day on the internet than that…
6. I would not put any faith at all in what someone from Google or another engine says. After dealing with their reps for years, I have come to the conclusion that most are guessing at best. They have no insight at all into their algorithms or what will or will not work. The vast majority do not even really understand how their system works anywhere near as well as they think they do.

Things I would do:
1. I would join lots of affiliate programs and dabble in different PPC for lots of different merchants. I would not necessarily avoid retail or brand names, nor would I avoid seemingly obscure spaces. If you can be the only person bidding on a highly relevant keyword that earns you money in an undiscovered space you can do very well for yourself. Some of my most lucrative verticals started almost by accident.
2. I would not be afraid of being in a space where it seems like 2-3 major name brands own the space. There are spots for 10 ads on the page and they can only have a few of them, you can sometimes get highly relevant traffic for very low costs in medium positions. This is becoming less common, but there are still plenty of opportunities. Stay away from online only businesses even without brand names - Satellite and InkJets are 2 that can be brutal. One opportunity is a review/comparison site of 2-3 major brands. With affiliate links to them.
3. I would focus on Content - It is a fickle and ever changing game. Most major brands and even SEM firms are just not going to put the time in to optimize this. You can often land directly on a merchants page without having to focus on building landing pages or owning domains. Plus you can find a lot of cheap traffic this way. Try the major keywords in combinations of 1,3,5, or 10 keyword combinations or all of those and more. You never know what is going to work. Focus on brand names and otherwise prohibited keyword sets. Since there is no way to police exactly what you are bidding on, you can get away with bidding on the brand names in content, which can be very lucrative. (someone will probably make $1000 next month off that tip alone)
4. I would start with Google - they are the most difficult nut to crack, but the rewards for cracking that nut are worthwhile. Stay away from Yahoo Content! MSN is going to have 1/10 the traffic at 10x the hassle.
5. I would start to focus on what is working. Slowly leverage what is working, add volume, ask for larger payout. Start to reach out to affiliate managers at the merchant themselves, dont get buddy buddy with your Network manager. The goal is eventually to go direct in one product. This will remove middlemen, offer you the chance to get higher payouts, better tracking all the way around a good deal.

If you think for a minute you can be a hermit crab and sit in your study and not make personal contacts and be a huge success in this business you are wrong. Pick up the phone and talk to the important people. The merchants affiliate managers always want volume. Dangle the prospect of volume in exchange for higher payouts. It is amazing how often you can raise bids, get aggressive and actually pay less for a higher position than you did for a lower one. It has to be done smartly and gradually, but it can be done with impressive results. Conversion will also improve as you go higher. You might even be able to completely replace the merchant in PPC, but it will never happen until you talk to them a few times, meet them at a trade show, and establish a personal relationship.

This is not an easy business, you will most likely lose your shirt many times before you start making it big. Just remember that you pay for bad ideas once, you reap the rewards from good ones over and over again. If you are not testing, you are leaving money on the table. If you are not pushing for a higher payout you are leaving money on the table. If you are not testing other vendors you are not being diligent. If you are happy with your affiliate manager at your network, then you are never going to break through.

It is nearly impossible to ask me how I would start over. I probably would not. The low hanging fruit is long gone. The days of spending a few hundred and getting back thousands right off the bat are few and far between for rookies. The rewards are amazing, but the rewards are in line with both the risks and time and effort put in. I work 50-60 hour weeks just to stay on top of what we are doing. Many days I feel like a total failure and like I have no clue at all, other days I own Google. On balance they seem to be winning of late. There are many more failures than successes. And the brutal truth is that by the time it gets blogged the idea is probably past its prime.

I know you are looking for a step-by-step process on how to get started, one does not exist. If I had one it would not be in a $97 e-book.

In the last week E-Bay has stopped displaying ads on Google (not even gonna link to it since every blogger seems to have already written about it…) and just today I see where Wal-Mart has decided to drastically cut affiliate commissions.

Combine that with my recent post about a major company who admitted to me they dont care about their affiliates, blockbusters recent pullback on payouts and I am seeing a pattern start to emerge.

Major name brands do not really need you for traffic, at least they have some data that makes them think that. Ebay does not turn off Google ads in response to a stupid party, they had a well thought out hypothesis that the ads did not pay for themselves in the long run. I suspect that Wal-Mart (which has one of the world’s largest databases and loves to mine it) sensed the same thing. They were paying too much to affiliates for the traffic, that much of the traffic would still come at lower payouts or that they could actually make more from less sales…

People will continue to argue about the logic of these moves, but multi-billion dollar companies are like glaciers. They move slowly. They are not making a rash decision. This was most likely well thought out and tested. It may not work, but they have thought through the downside. Anyone who has ever worked for a big company knows how stupid they are, but it is usually a stupidity from inaction rather than taking action.

When I worked for a Fortune 500 company - worst 9 months of my life - we got a ton of sales from our brand name. We intentionally decimated our affiliate program by not letting others bid on our trademarks, and saw a huge percentage increase in profit from that traffic - we went from paying something like $50 a sale to less than $20 without any drop in sales, we just moved them from one bucket (affiliate) to the other(brand search). Took months to get the change authorized and days to see the benefits.

If you then take the other side of the equation - traffic generation - and look at how hard Google is squeezing people on quality score you quickly realize that the internet is quickly transforming from a wild-west marketplace where anything goes and anyone can make money to a very corporate “brand is king” type of market. As someone who makes my living from affiliate marketing I see 2 outcomes for our breed - extinction (which will be the result for most) and scaling to a level where companies want to work with you and thus give you negotiating power, the status quo is a diminishing opportunity.

Not saying it is ending tomorrow, I just urge all of you out there making a nice comfortable 25k a month from 2-3 verticals to reassess the long term viability. I was once young and making a fortune every month I thought would never end and in the space of 60 days in 1999 everything evaporated. I will not make the mistake of being unprepared again and urge you not to as well.

Shoemoney has opened up his blog to guest posts, which not surprisingly turned into an opportunity to Spam a little.

I have no idea who Big Daddy Lawson is, but he writes an open ended glowing review of Miva - the former stink pile known as FindWhat.

He talks glowingly about his particular niche and how Miva gets him clicks for half price, then hints that Ringtones or Home Equity loans would be worth trying there. Then ends with it “being all about the Money”

Got me to thinking that I know not a soul who has ever received any kind of ROI from this company. I have used them at 4 different companies that spend over $1 million a year for search (most far more). Each time giving them a try, setting a very low budget, very low CPC’s and still getting my entire budget depleted within a few hours and always with no conversions, despite enough traffic to have generated several at a minimum.

Now some might say, I had a bad landing page or bad ad copy or that even my server might have had issues that day, Miva reps certainly tried to make that point. They even went so far as to claim that what works for the other engines is not likely to work at Miva, because the audience is a little more sophisticated.

The last time it happened, I pulled server logs and realized that I was billed for hundreds of clicks despite showing only a few visits from Miva. Miva countered that the visits are from partner sites and would show up differently on server logs. We had set-up a unique URL just for them for tracking purposes and that was the data…Bottom line they were fraudulent clicks, Miva knew it and was trying to gloss it over.

Then a few months later, I get an email from a guy at Miva with a memorable enough name that i recognized it immediately when I got another note 9 months later at my new company. He sent the same exact 3 paragraph email to me at 2 different companies, even with a fake datapoint being the exact same data with the name of the industry changed. Slimy. He signed it “The traffic speaks for itself and results don’t lie.” Which is exactly what i thought about when I read the post on shoe’s blog.

I had a long conversation with someone yesterday who did not realize that Click through rate is important. he made the comment “Even on google?”. This made me think that there are lots of naive new affiliate marketers out there who are gonna read this post on Shoe’s blog and go throw some money at Miva.

Please save your time and money.

Please!

Last night, while sitting in the bar at the W in New Orleans waiting for my wife to get dressed for a night out. I got to thinking about something I read on the plane ride here and realized how it applies to affiliate marketing. Pardon me if it does not come out crystal clear, it was much more lucid last night.

I dont agree with everything Seth Godin writes, but in his new book The Dip, I think there is some great hidden wisdom. For $10 or so, I have gotten my money’s worth.

I keep reading it, and taking away things from it that are very subtle. The underlying theme of the book is that if you cannot be the best at something in your world, then you either need to work harder or you need to quit and focus your energies on something where you have the ability to achieve greatness.

This applies to affiliate marketing. Too many of the people who I talk to are scattershot affiliate marketers. They do 4-5 different verticals, but they all seem to have hit a wall. They cannot seem to figure out how to get past there current level of income. (Many of these guys are earning well over $25k a month, but just cannot seem to scale..)

All of these guys tend to play in the tail of keywords. When I share my average CPC they gulp, and wonder how the heck I can make that work.

In my mind, the short (and thick) head is where the money is at. Sure you can get $.10 clicks and lots of them in the tail, and we pursue those too, but volume is a fraction of what you can get from the more expensive head terms. SEO_mike wrote about this a few days back in many of you guys favorite vertical.

Best advice I can give any budding affiliate marketer - dont be a sheep and follow the crowd. If you are running ringtones or blockbuster or whatever the flavor of the month is, you are not going to be that successful.

Pick a competitive but unknown industry. Go gangbusters on the top 5 keywords. Drive a lot of volume. Test the heck out of your landing pages and ad copy. Then cut out the networks that earn more than most of you realize and go direct to the merchant. Show them your volume, your desire to work directly with them, and dangle the prospect of even more volume if the payout is good enough. There is some relationship building involved, but the affiliate networks are getting rich because affiliate marketers are too lazy too negotiate directly with the ultimate buyer of the lead/sale.

Lots of people focus on ROI. Focus on total profit. Would you rather make $5.00 100 times a day and invest $500 a day to do that or make $1.50 1000 times a day, but invest $5000 a day. Overall return is lower, but the IRS and your banker will like you more with the lower ROI. (Chicks think total profit is sexier than ROI too…)

Hedge Fund managers would kill for 1% daily returns and affiliate marketers are turning their backs on 50% ROI’s, if you have the program but need cash to scale it, let me know I can solve that problem. The head is where the low margin low ROI profits are.

Direct relationships with the buyer of your traffic combined with the volume you get from head terms is where the obscene profits are.

Back to drinking…sorry if this was a jumbled mess….