Diorex

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….

OK - it has been awhile since my last post. Not sure if I plan on being a regular blogger again, but I had something I wanted to get off my chest so here goes….

Affiliate marketing has a dark side. Sure lots of people, myself included make a very nice living from driving traffic to merchants, lead providers etc. But it is not always wine and roses.

As part of what I do, I am consistently looking for new lines of business for both my personal marketing and the super affiliate firm I am a partner in. I talk to lots and lots of people and have what I think of as pretty good insight into the industry.

Over the weekend, I attended a dinner party with about 15 couples and in the course of the conversation I came across someone who ended up being the CEO at a major name off-line corporation (you have heard of this company!) with a huge affiliate program. Thinking I might have hit pay dirt, I steered the conversation to the affiliate program which the CEO replied something that has really been bugging me. (before you ask, we were traveling in my wifes social circle not mine…CEO’s at dinner parties is pretty common)

He basically stated that they had spent millions optimizing the website with multi-variate testing, spent millions testing banners, paid search and other traffic generation tools. Basically they had not been cheap about their website. Then he told me that the affiliate program was designed to lose money for the affiliates. He basically said that although margins were about 4x what the payout was, that unless an affiliate was generating free traffic that they were not supposed to make money.

The company does zero PPC on their own (except on brand name) but knows exactly what it costs to generate a sale. They pay about 90% of that level and it is one of their most profitable divisions. I asked him how he kept affiliates long term. His response was he did not care about them long term. They have been part of many different affiliate programs, they have worked with many super affiliates, and gotten ringing endorsements from name-brand affiliate marketers but they don’t care that these people are spending money to drive essentially risk free traffic. They only care that the brand name is strong enough that every “sucker” in affiliate marketing(the CEO’s words) is willing to throw a $100 or so at their program because it is such a strong brand.

His statement was basically they get $75 back, we earn $300 and then hope they throw another $100 at it and see if they can make a go at it. These suckers are making our affiliate program a gold mine $100 at a time. A few hundred new suckers every single day.

Now I recognize that not every affiliate program is like this. It was just very disheartening to hear a CEO of a major online and offline company think of affiliates as a one-way meal ticket. As an affiliate, just realize that not all affiliate programs are everything they are cracked up to be.

Before you ask - I thought about posting the name of the company, but after looking at the angles, I have decided that the general warning was enough. I spoke with a lawyer friend and he said I would open up a huge can of worms if I said anything other than very vague information that could not identify the company. It would essentially be my word against the CEO and his lawyers. Just not worth the hassle. Take this as a cautionary tale rather than XYZ company is a bad affiliate partner.

First things first, what is a white label program?

It is where you host all aspects of the conversion process on your own site prior to handing the customer off to your partner only after the sale has been completed. It will work for just about anything other than retail. It is especially conducive to lead generation or subscriptions.

A lot of people host the landing page and then redirect the customer to the affiliate landing page. Google considers this a bridge page, and in many competitive fields this will get you removed from Google listings.

Why would you want to go to this extra hassle?
(more…)

Affiliate Summit was held in Vegas over the last few days. A few general observations.