A lot of people read blogs, books, articles and other materials from so-called 'gurus' that made it big. Readers are hoping to do the same but I know that no one will match success by simply following a guru’s advice. I am not saying this because I think those gurus are necessarily dishonest or are holding back (though most are), but because I've learned that you don't become successful by following a specific formula—especially not a formula that somebody else gave you.
Why? Because success is in many ways all about competition. If you learn things from other people's playbook, they already have the first-comer advantage. You too need to be the first somewhere. You need to find unexploited opportunities of your own.
In this post, I want to tell you about my personal experiences with pay-per-click (PPC) and what I’ve learned over the years. I started my first profitable site back in 2002 on borrowed credit with a CAD$3,000 limit. I turned that $3k in $4.5k with PPC and affiliate commissions—a 50% ROI. It was my first time as an online marketer, an online baby step. And now, several years later, I own a 7-figure per year business, I employ several talented individuals and have time to post on this blog!
The first-comer advantage
The barriers to entry to most profitable online markets are low. They are so low in fact that it is difficult to find a virgin market that doesn't get saturated within a few months. I've been doing business online since 2002 and I can recall changing business models at least 15 times!
Starting off search marketing with PPC gave me a results-seeking mindset that most SEOs lack. You don't spend money on Adwords just to show off rankings or to get traffic that doesn't convert. You also get the added benefit of testing ads, positions, landing pages, and so on to find the best combinations. Once you move your optimized sites, titles and descriptions to organic rankings, the numbers look incredibly good 🙂
After you successfully become number one in a good market you face another challenge: the market starts to saturate and your profits reduce dramatically. Nobody talks about how to address this, but let me tell you my strategy. Somehow you need to leverage your pioneering position as the first one on the scene.
Earn super affiliate status. The way I try to strengthen my position is that I try to drive as much business as possible to the most reputable merchants. Forget sky high commissions, think EPC (Earn Per Click). After all, if a merchant offered to give you 100% commission, it would still mean absolutely nothing if his conversion rate is 0%.
Seek exclusive deals. As a super affiliate I always approached my merchants personally and tried to build relationships to get exclusive super affiliate deals—usually a higher commission rate or exclusive coupons. The idea is to have something that newcomers don't. If you can offer lower prices to your customers, you can afford to bid more aggressively in Adwords. This is fundamental to prevent newcomers from eroding your position.
After a while, if there are a lot of PPC advertisers or Google keeps playing up and down with your profitable rankings, your earnings can be affected. When I was faced with this challenge I tried a completely different strategy: I created pseudo-merchant sites.
A pseudo-merchant site (this is my own term for it) is a site that looks and feels like a merchant site, but is operated by a super affiliate. You have an order processing engine and your own affiliate system just like a merchant does, but in the end your software forwards the orders to the real merchant. You don't need to deal with inventory, suppliers, merchant processors, FedEx, etc.
Again, for this strategy to be successful you need access to higher commissions than regular affiliates so that you can offer at least the same deal they would get from the real merchant. The beauty of this strategy is that other affiliates are doing the marketing for you. If some of them lose their rankings, others will take over and you still get business. Once you are set up, all that is required is that you pamper your affiliates and stay in close communication with them.
Eliminating the middleman
In my experience with online marketing, I encountered another, more serious problem: dealing with unreliable merchants. After jumping ship several times and facing angry customers and affiliates, I decided to become a real merchant. For me the process was simple as I had already built up the most important parts: the customer base and the affiliates. Getting suppliers, credit card processors, etc. was no problem. And best of all, my profits doubled as I had effectively cut the profits from my previous merchants.
Another important lesson is to invest your profits in other businesses and not put all your eggs in one basket. At this stage it is wise to build and explore more business ideas as long as they make sense. I started Nveevo with a partner this year and the business is just starting to pick up. Businesses have ups and downs and you need to be prepared to move to safer ground if your current business becomes unprofitable.
I am no self-proclaimed guru, but I do hope you found this useful. I plan to share more of my experiences with you all over time. Let me know what you think!
August 6, 2007 at 11:04 am
I totally agree with you here Hamlet. The only truly successful businesses I have dealt with so far have all been the first to do what they did. As you say, then other people jump on the band wagon and start chipping in to the market and again as you say, you need to find new pastures. Before I became involved in the web full-time, I ran a site that provided huge amounts of information that was NOT available anywhere else on the web and was highly sought after by a hardcore niche market. Although I knew next to nothing about SEO at the time, I was getting a trickle of traffic to the site with huge conversion rates. Even though the site just had a Pay Pal subscribe button, I was converting through nearly 25% of the traffic. Now I have moved over to a ridiculously competitive market (web design & development) I am up against 10,000 companies who are wheeling out osCommerce with a $40 template for £500. How can you compete with that? Unless you have a unique angle, you will quickly crumble in these types of markets. I would be interested in hearing about your experiences with affiliate marketing in future posts :)
August 6, 2007 at 1:43 pm
<blockquote>How can you compete with that? <strong>Unless you have a unique angle</strong>, you will quickly crumble in these types of markets.</blockquote> That is the key
August 6, 2007 at 11:11 am
One thing I forgot to mention with niche markets is that they can be so unprofitable that you would have to spend years working on them before you can make them profitable.
August 6, 2007 at 1:44 pm
believe it or not. there are still rich untapped markets out there. You just need to know how to find them ;-)
August 7, 2007 at 3:20 am
Certainly, I have a great big list of markets that are waiting to be exploited. The best I ever found was 'weddings' - i'm not sure how you would cater for this though.
August 7, 2007 at 12:43 am
Good post, I agree with what you say about guru's, for the most part they are selling a dream rather than anything of value. Often there is still something to be learned from those guys though, take John Chow for example, in terms of 'making money online' there is little of real value on that site that is not available elsewhere, but if you want to learn about reader manipulation it is essential reading...
August 12, 2007 at 5:01 am
<blockquote>if you want to learn about reader manipulation it is essential reading…</blockquote> I can't argue with that :-)