(Reluctantly) Talking About The Six-Figure Ad Business He Built In College

Andrew: Three messages before we get started.

If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker of Walker Corporate Law. If you read his articles on Venture Beat, you know that he can help you with issues like raising money, or issuing stock options, or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at WalkerCorporateLaw.com

And do you remember when I interviewed Sarah Sutton Fell about how thousands of people paid for her jobsite? Look at the biggest point that she made. She said that she has a phone number on every page of her site because, and here’s a stat, 95% of the people who call end up buying. Most people, though, don’t call her. But seeing a real number increases their confidence in her and they buy. So try this. Go to Grasshopper.com and get a phone number that will make your company sound professional. Add it to your site and see what happens. Grasshopper.com.

And remember Patrick Buckley who I interviewed? He came up with an idea for an iPad case. He built a store to sell it and in a few months he generated about a million dollars in sales. Well the platform he used is Shopify. If you have an idea to sell anything, set up your store on Shopify.com because Shopify stores are designed to increase sales. Plus Shopify makes it easy to set up a beautiful store and manage it. Shopify.com.

Here’s your program.

Hey everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. The place, as you probably know by now, where proven entrepreneurs come to tell you how they did it and to teach you so you can do it yourself. Big question for this program is: how does a college student launch a six figure business that’s profitable from day one? Today Ilya Lichtenstein is the co-founder of the Y Combinator backed Mix Rank, which reveals how your competitors ad campaigns are doing, what’s working for them, and let’s you basically crib off of their successes. But a few years ago he was a college student with a very profitable side business. I invited him here to talk about that side business. Ilya, welcome.

Ilya: Thank you. It’s great to be back.

Andrew: Are you doing any of this still or is it just all in the past?

Ilya: It’s all in the past now, but I’m sort of, Mix Rank grew out of the stuff I did as an affiliate so a lot of the same strategies I applied to send traffic to other people I’m now using to send traffic to ourselves.

Andrew: OK.

Ilya: But I’m not doing the lead generation stuff anymore.

Andrew: All right. I want to learn how you did it and as you mentioned it was in the affiliate space. But let’s go back before you figured this all out. Tell me where you were before you figured out what you’re about to tell us.

Ilya: So before I got into this industry, before I knew anything about getting traffic. I thought I would make a ton of money blogging. This was in early 2007, so kind of the first hints of web 2.0 were coming out. It was kind of big boom and you hear all of these success stories that were kind of a narrative where everybody would make money blogging and just throw out a few posts and basically take it easy after writing a few posts generating passive income.

So I started a tech blog, it was like this stupid, little tech blog that nobody read. I thought I was going to be the next Tech Crunch. I definitely was not, but I created this blog and I just started writing posts about tech news and sort of what I thought about start ups in the tech scene and all that. I was looking for ways to monetize it. I signed up for all these ad networks, all of these big ad networks. I signed up for Google AdSense and all that and I started learning how traffic is monetized online, what’s working and what’s not and how you can actually make money online.

The way I got into affiliate marketing was one day, one guy who was an affiliate emailed. Somehow following my blog, even though it got like no traffic, and he said, whatever you’re making on AdSense right now, I’ll pay you five times more just to put up a link to my site in the sidebar of your blog. That’s when it kind of clicked for me a little bit. I was like wow, well I could do that. I could email people and place links on their sites and I noticed that he didn’t even have his own website. He didn’t even have his own landing page. He was just direct linking to an offer and I got really interested in that industry.

The real reason that I wanted to do that and kind of move away from blogging, because having this little tech blog, somehow it got noticed by Pete Cashmore who is the editor of Mashable, which is a big tech blog. So he liked my posts and I got offered a job writing for Mashable, as I was like this college student. It was a very, very brief job. I started writing for it, I wrote a couple posts and he was like OK, great, you wrote all these posts, we pay $15 per post for these posts that I spent hours and hours researching and writing.

I thought, wow, if one the biggest blogs online, the one’s that has the most traffic, the most advertisers can only afford to pay $15 per post, then I’m probably not going to make any money blogging. I need to get closer to the money. I need to figure out why these guys are paying five times more than the AdSense ads just for a little link on the sidebar of the blog. I kind of started researching and started following the rabbit hole following industry blogs and forums and all that. Looking at who was advertising what and that was kind of my introduction to the affiliate marketing or performance marketing world.

Andrew: OK. All right. Skip ahead for a moment here. Tell me about the first $1,000 day and we’ll fill in the blanks in a moment and catch everyone up on how you went from there to a $1,000 day and beyond, but do you remember that first $1,000 day?

Ilya: Yeah, it was pretty amazing. It didn’t feel like real money at the time. It almost felt like play money because it was so sudden. So I literally went from making about $20 a day to having a $1,000 revenue day probably in less than the space of a week. A lot of that was probably luck and timing, but a lot of it was also just testing lots of different things. I changed my mindset in a way. Before I was very cautious. I was running all of these little small tests. I guess we can go back to how I got started with that and I thought OK, well I’m just going to go big. I just want to see how much traffic I can get. How much volume can I get? So that day, that was on Facebook ads. So I was buying traffic on Facebook and arbitraging it to a dating site. I think it was like eHarmony or something and I would get paid for signups to this dating site. It could have been a bigger day actually. The reason it was only a $1,000 day is that Facebook had a spending limit at that time.

If you’re starting out you could only spend like $50 a day and then when you paid them, now you can spend $100 a day and so on because starting out they had a lot of problems with people buying prepaid credit cards at gas stations and running up all these bills that they couldn’t pay. So my spending limit was $500 on that account and I maxed out that spend in about an hour, I would say. Here I was this college student that usually spends like $10 a day on whatever, now I maxed out. I spent $500 in an hour, basically on ads, on nothing, on clicks and I did about $1,000 in revenue off that. That was my first really big success as an affiliate and showed me the potential of the industry and it showed me where I can grow and scale and all that.

Andrew: Let me make sure I understand this. You spent $1,000, excuse me, you spent $500 to generate $1,000 in revenue.

Ilya: Yeah from commissions, from signups.

Andrew: It was signups. Signups to what?

Ilya: To dating sites. I think it was eHarmony that I was promoting and I would pay per click. I would pay 20, 30 cents a click and a certain percentage of those converted and I would get paid $4 or $5 for someone who signs up for a free profile on this dating site.

Andrew: Got it. OK. And that’s essentially the business that you were in. Sometimes you were paying for a click, sometimes you were paying for impressions, but you were basically buying traffic and sending it to advertisers who were paying you on a per result basis?

Ilya: Mm-hmm.

Andrew: All right. And Mix Rank, today, what it does is it enables companies like yours to say, hey I’m running a dating ad, who else is running dating ads? Oh Match.com is, where is Match.com buying their ads? What’s working for them because we see it being repeated over and over. Maybe I should copy or learn from their successes and learn from their placements and learn from their ad copy and etcetera. That’s what Mix Rank does.

Ilya: Yeah, exactly and the way it began is I tried to start automating every part of the marketing process. Everything I did so the first part is always the research. Figuring out what’s working right now in the market, what has been tested before. My thinking was there are already all these big advertisers out on the market, so if I could monitor their split tests closely enough and figure out what works for them and replicate that. That saves a lot of time and money testing. So that’s kind of where it came starting out and eventually we’ll be building a lot more on top of that.

Andrew: OK. One of the reasons I wanted to make sure to say that is because, well first of all I want people to know what your company is, but also a lot of the feedback I get when I tell stories of people who are in the affiliate space is, that doesn’t lead anywhere. That’s just an endless cycle of buying traffic and reaping revenue, but it doesn’t seem to go anywhere, but for you it absolutely did go somewhere. Not only were you bringing in good revenue and profits as a result of it, but you were able to get accepted into Y Combinator, one of the most prestigious accelerator programs in the country, if not the world. You’re building an impressive software here that’s being used by, you’re not going to reveal how many yet. It’s generating revenue.

Ilya: I can reveal.

Andrew: You can reveal the revenue right now? How much?

Ilya: I’ll reveal almost anything. I can’t reveal the exact revenue, but I can reveal the number of users. So we’ve had about 3,500 advertisers sign up in the past few months. So 3,500 businesses using Mix Rank. By the way, I was much more proud of this than anything I ever did as an affiliate. We launched and we were profitable on day one.

Andrew: With Mix Rank?

Ilya: With Mix Rank. So we could pay ourselves and we went from nothing in the space of a few months to being profitable. I think that is what I’m most proud of. Even more than the stuff I did as an affiliate. All the emails I get from people saying this is so useful for me, this helps me so much, this saves me so much time. You don’t get that with affiliates

Andrew: This is 3,500 people who are signed up to Mix Rank. I’m sorry to interrupt, but this number is blowing my mind.

Ilya: No, no.

Andrew: 3,500 people paid?

Ilya: No, not paid.

Andrew: Who are signed up and using it?

Ilya: Yeah and using it.

Andrew: Can you say what percentage of them are paid?

Ilya: I can’t say exactly.

Andrew: Oh, right. Last time you were here you did a course on how to buy ads profitably, which was one of the best courses ever on the site.

Ilya: Thank you.

Andrew: I still get thank you notes from people who took the course. I didn’t do anything with it. I just got to sit back and watch you teach it, but I still get thank you notes from it because it was so frickin’ effective. But at the time, I asked you, why aren’t you charging for any of this, and you said, well we’re building out the business. So if you weren’t charging in the beginning at Mix Rank, where was the revenue coming from so that you could be profitable on day one?

Ilya: I think back then it was sort of custom reports we did on the enterprise side. It wasn’t a self serve model. Since then we’ve launched the self serve products that is about $70 a month and you can try it for a week for a $1, which we split tested extensively. That worked really well. That’s where a lot of the revenue came from, too, but before it was just a few big advertisers that say I’m spending a million dollars a month on AdWords and they can pay a lot for that kind of data that could be really valuable to them.

Andrew: I see.

Ilya: But a lot of the revenue came from the self serve model and just small businesses and start ups signing up. We worked very hard to make sure that we had that coming in before we launched. I think as a start up, I’ve seen a lot of start ups launch and I think a lot of the times when you launch, nobody cares. That’s standard for a start up. There’s a lot of apathy and so that can be very demoralizing for a start up when you spend months and months and months building this product and you launch it and nothing happens. We even had a brief moment like that when we launched Mix Rank where it felt awful. It was so scary to launch it and see no sign ups and no traffic and zero revenue at first. I can tell you why that was. [laughs]

As it turns out so when you do a start up you have no concept of time and so we ended up launching this B2B business product. I think it was at night and it might have been a weekend night for this business product. We launched, we emailed our lists, and nothing, silence. I’m freaking out, like is our server up? Is our credit card processing working? Like, what’s going on? But it was just a stupid thing that I hadn’t even thought of, but, of course, on Saturday night not a lot of businesses are going to be buying marketing software. So a couple days later it picked up and we generated good profit. We became so called Ramen profitable, which is pretty good.

A lot of the times when you launch nothing really happens and it’s a long slog. I was very careful to be sure that we had everything in place and we followed some very specific steps to actually get to the point where we could say when we actually launched, saying we’re going to get feed back, we’re going to get users, we’re going to get revenue. It’s always a process. It always seems easy in retrospect, but it’s always a long process to actually launch something and make a profit.

Andrew: Let me do this. I wrote a note here to come back and at the end of this story to catch people up on the story of Mix Rank. I want to find out some of the specific steps you took to get users of your software on day one and week one and to continue that.

Ilya: A lot of that is the stuff I learned as an affiliate.

Andrew: OK. So let’s find out what you did as an affiliate and I’m glad to hear that it’s not just about revenue, that you did learn a lot about the process. But don’t shy away from the revenue. Don’t shy away from the fact that you are an affiliate. I want you to earn, to own that spot, because you’ve earned it. I also want to make sure the audience gets to hear how you did it.

So, you started monetizing your blog with ads and an affiliate calls you up and says,’ Hey, I’ll buy the ad from you for five-times what you’re getting from Google. You take that. You discover something as a result of that, right? Tell me what happened.

Ilya: So, that was a pure arbitrage thing. So this affiliate had an offer that was paying him commissions and he found my blog which happened to have traffic that did well for that offer, that converted profitably. He was taking the difference between the amount he paid me and the commissions that he got paid. So, this is all transparent. I can see the link. I can see where it’s linking to, I could see what offer. I could look at the redirect to that link and see what affiliate network it’s going through. So, I had the traffic and I had the other side, the advertiser and the offer. So I didn’t need him, at all.

This is a constant fear, an unjustified fear, of affiliates, where they say, “Well, you are middlemen” and you’re always scared, ‘well is this guy going to cut me out, somehow, and go direct’? And that’s what I did. I signed up for this affiliate network. I picked the exact same offer that this guy was running. So he was paying me about $200 a month. This is like a small-time thing, but it also costs me nothing, because I had this blog that had a little bit of traffic. So I said, “OK. Well, sorry, this has been sold to someone else”, or something, and I just, literally, kept the text of his link, kept everything, swapped-out the affiliate ID and the link. It was three or $400 a month in revenue. It paid for my hosting bill for my blog.

More importantly, it, kind of, showed me, that this isn’t some strange arcane art that people do. It’s actually a fairly simplistic and fairly scalable and repeatable process that you can take, you know, if you find 10 or 20 or 30 blogs like this, or a traffic source of any sort. Now you’re making real money, and now it’s becoming something that is a real business versus just a hobby.

And in 2007, it was a very good time because there was a lot of cheap credit around. And so, I got a credit card offer in the mail, for a credit card with a $500 limit. And I go,’ Sweet, free money’. And I got that credit card, and, what the hey, this is my gambling money. I was very conscious that it’s like trading stocks or anything else, you put your money on the line, you gamble, you take a risk. So I go, ‘that’s OK’. I Take $500 that I didn’t I really didn’t have to earn. So I’m going to take it and put it into affiliate marketing, this affiliate marketing thing that I’ve been learning about.

So, right at the time, while I was learning about this in 2007, Facebook Ads was starting to form. If you remember, in the beginning it was called Flyers, and you could pay, like, five bucks, and post a Flyer to a school and get really cheap traffic. So I started with that and then Self-Serve ads came out and I think I must’ve been one of the first affiliate advertisers on Facebook. And that was a tremendous stroke of luck and I regret every day that I didn’t capitalize more on that. I should’ve gotten 10 $500 credit cards. But I was still a lot more risk-averse back then. I came in, and I was putting up these ads and I started learning about advertising and copywriting and all the stuff. I was competing against bands and restaurants, like mom-and-pop businesses that just didn’t have the budget to compete, didn’t have the expertise and didn’t have the payouts. I mean, what’s the margin on a pizza place that’s advertising on there, versus my margins, sending traffic to a lead engine site?

So I was able to do very well, early on, and that was tremendous, that was pivotal. So, I launched this campaign for the dating site, like eHarmony or something. I spent my $500 and I made about $2,000 in revenue, which was phenomenal. That, one, really, showed me that it was possible and that you can, actually, build this kind of business, but two, it all goes back to motivation, morale. Because if I had done this and I spent $500 in clicks and now I would have been none the wiser, but $500 in debt, that would’ve been really bad and I might’ve given up at that point.

It was just luck. All I can attribute it to is luck, luck that there was cheap credit, luck that Facebook came out with Facebook Ads and luck that this guy e-mailed me about a link on my blog, that all of these factors came together. And the result was a profitable campaign. That meant that now I had $2000 that I could reinvest. And now I could afford to lose, $1,000 or $1,500 of that money, or whatever, because it was just all profit and I could reinvest it into the business and grow it and build on that.

Andrew: A moment ago I was thinking, should I have, in the intro, explained what an affiliate program is and then I thought no, everyone knows that an affiliate program is a program where a company pays your per result and you just go and join, often without any approval process, you just go and join commissionjunction.com or any of the other networks.

Ilya: Right. It’s kind of funny with that. The most common one is Amazon and that kind of stuff and that’s one everyone knows about. Amazon pays you a commission when you sell products. Nobody makes money on Amazon though, at least most people don’t. What most people make money on is CPA, which is cost per action, so it’s not a commission on a sale.

It’s a flat rate payout or some kind of revenue share on an action that someone takes, whether that’s signing up for a subscription service like Netflix or sending a lead to a dating site or an insurance company or something. I don’t want everyone to run and sign up for CJ and think that they’ll make a lot of money, but I would definitely encourage them to go for CPA, cost per action offers where you don’t get paid a percent, you get paid the whole thing basically.

Andrew: From where? What’s a good network in your mind?

Ilya: There are a lot of them. One that’s really well known is Epic Direct Network, another one that is really good is called Media Trust. There are a few that are out there and if you search for CPA affiliate network you’ll find a bunch. There are reviews and ranking of them and all that.

Andrew: So the thing I was wondering is, should I even explain what an affiliate program is to the audience and I said no, they all know. But then you told me that you only thought to add an affiliate program to your site when some affiliate called you up and said, or emailed you and said I want to buy an ad on your site for an affiliate program that I’m running. The question I’m wondering is, why didn’t you know about affiliate programming? Why didn’t you consider them the way you considered Google Ads?

Ilya: The industry is becoming more mainstream, but it’s still in a lot of ways sort of very hidden. There’s not a lot of branding that goes on in the industry. First of all, they don’t really want someone who has a blog that gets 20 visitors a day signing up, because that’s not going to drive these affiliate networks revenue, it’s going to drive up support costs because you’re going to start emailing them, how do I do this, what do I use, help me, and all that, so they want the guys that are arbitraging traffic, that already know the industry, that are already successful with maybe some small affiliate program or maybe direct to a single advertiser that wants to take it to the next level.

I will say this though, if you have a blog right now or if you have a content site, look very carefully at who’s advertising on there. If there are affiliates advertising on there right now and the way to tell is to look at their redirect link or for the ad and look at there are tracking variables something like affiliate ID equals or whatever. If there are affiliates advertising on your site right now you’re losing money because you could be capturing that value. You could sign up directly for that ad network.

You could probably create better optimized ads because you know what works for your audience. You could put up a banner or you could write a blog post or something with a link to this affiliate program and disclose that it’s a sponsored post and you could be making a lot more money than you’re getting right now from AdSense because Google is taking a 30% cut, the affiliate is taking a cut, the affiliate network is taking a cut. You’re probably getting 1/3 of the value that you could be if you were going direct or selling ads direct on your site and I know you had a great course about selling ads direct on your site and that’s another way to capture more of that value.

Andrew: To run your own affiliate programs and things like that. Let’s continue with the story now. Now you’ve made your first $1500 in profit. Boom, it works. It’s time for you to just go back in and you do this more and more. You told our pre-interviewer Jeremy that hot girls somehow figured into the next step.

Ilya: That was the key.

Andrew: That was the key?

Ilya: That was the key to everything.

Andrew: OK.

Ilya: Was looking for pictures of hot girls on the Internet, which was a sweet job for a 19-year-old college student.

Andrew: What do you mean? What were you looking for them for?

Ilya: The thing with Facebook is it’s all about the creative, it’s all about the images that you do and I was promoting dating and with dating there’s a lot of competition, a lot of advertisers because it’s such a straightforward campaign. You can go to Facebook and target single males of a certain age that are very likely to convert for these type of sites and you can’t differentiate on the landing page or anything, everyone is pulling the same dating sites. You can’t really differentiate on copy, it’s not something where you can write copy that’s persuasive, that sells. It’s a much more emotional, visceral appeal where someone looks at the ad image on Facebook and they’re like, “I want to meet this girl.’

It’s irrational, it goes right to your reptile brain where he says, ‘If I click here I get to meet this girl that’s in this picture.’ And you sign up for a dating site and it’s a quick sign up so before you even really realize what’s going on you’re already signed up and you’re browsing and you’re engaging with the site.

For about a year after that, my job, everyday, was to wake up and look for more creatives, more pictures of hot girls or even not so hot girls. I put in my creatives to refresh them, to get attention to get clicks because what happens on Facebook is that you can get a ton of volume, the problem with getting a ton of volume is that you saturate the market very quickly.

Everyone’s seen your ad and you picked up all the low hanging fruit that click on a lot of ads so you have to get the attention of everyone else. You have to get the attention of the people that don’t normally click on ads, that’s how you make money because the people that click on all the ads, they already clicked on someone else’s ad for that same dating site before, they already signed up, meaning you’re not going to get paid for that lead because it’s going to be a duplicate lead if they sign up.

So I would go and launch hundreds of these, hundreds of different variations on images and I ended up building some technology to do this. On that note, the really interesting stuff that I noticed was that it wasn’t the most attractive girls that got the most conversions. They got the most clicks sometimes, they didn’t get the most conversions. The ones that got the most conversions were the girls that didn’t seem airbrushed, that didn’t seem fake, that seemed more approachable and realistic.

Because their reptilian brain is thinking, ‘Well, this does seem plausible.’ It passes your BS detector, like this girl actually could be a member on this dating site. That’s what I learned, I would troll all these stock photo sites and find these images and refresh them. Eventually I started using technology to automate a lot of that.

Andrew: To even [??] make the process of finding women?

Ilya: Yeah.

Andrew: Really?

Ilya: Finding images. I would I would look through it manually but even crawling [?] things like Flicker, Creative Comment Search which says, ‘You can use my image commercially.’ Things like that. Free stock photo sites, not professional stock photos but amateur stock photos, people go on iStock photo and sell their photos for a few bucks. I would go to those and automatically have my scripts collect all the thumbnails for the images.

I would look through it manually and click, I want to buy this one and this one and this one. I would go the sites, buy, it’s $1.00 or $2.00 each for the image, buy the image, then I would put it into my other script which was the one that actually got me to the $1,000 a day. What I ended up building was probably the first automated ad poster for Facebook. I would give it 10 images, 10 headlines and 10 body copy, it would generate all the permutations, generate all the tracking for it and deploy all these ads en masse to Facebook.

I could launch, whereas before it took me five minutes to write one or two ads, now I could launch about 1,000 ads in five minutes with all different variations, track everything and go really, really granular on the tracking. I was actually doing fairly sophisticated stuff that I really wish I had built into a product or a start-up of some sort.

Andrew: What language where you coding in? I don’t think at the time Facebook made it easy for people to automate ad time.

Ilya: No. No, no, no. There was nothing . . .

Andrew: So what did you do? In fact, if you don’t mind, I’m going to go off camera for a moment while you explain. What did you use to do this? I’ve got allergies here that are driving me nuts. I’ll go off camera, you tell me but I’m going to be watching.

Ilya: OK. So you still want me to tell you?

Andrew: What?

Ilya: Do you still want me to talk?

Andrew: Yeah. Yeah, yeah. Go ahead. Sorry, I don’t edit anything out but I’ve got to tell you, I think I need to update my whole software here, it’s not going to be that hard but I’m reluctant to do it, or I have been because I say, ‘I want to focus on the conversation, I want to spend my energy thinking, how do I get a better pre-interview in the process? How do I get better research on my guests?’

That’s where I want to spend my energy, I’m realizing if I had just a little bit better technology, if I spent just a little time doing some simple camera work I could sneeze off camera, I could go blow my nose which I’m about to do here off camera and nobody would know.

Ilya: I think it’s good, it authentic. It’s not like a studio kind of experience. I actually really like this.

Andrew: That’s the way I’ve been selling it for a long time saying, ‘This is authentic, we don’t edit, I go off camera.’ But really I think people are starting to get a little sick of my authenticity and they’re saying, ‘Get some better audio quality and maybe go of camera before you sneeze instead of distracting from the conversation by announcing it.’

Ilya: OK. I’ll start talking.

Andrew: Yeah. Go ahead. Tell me how you automated this.

Ilya: I was never that interested in writing software for the sake of writing software. I was never a very good developer. I basically taught myself to code because I had to automate all this stuff because I couldn’t afford to hire a developer and in the middle of Wisconsin, there weren’t a lot of people who were interested in start-ups or starting a business or whatever. So I started to learn basically, just to send http requests back and forth to Facebook book servers. They have no API for this.

I’m sure, like, it completely violated their terms in every way possible, but they didn’t complain because it meant that I could spend on there. But these PHP scripts that basically simulate a browser, go onto to Facebook and filling out all the fields and manually submitting an ad and I would run this multi-threaded and submit thousands of ads at a time. So every ad on Facebook has to be manually reviewed by a reviewer and these were all ads with very small changes, small variations. So something like, one ad is targeting 26 year-old males and one ad is targeting 27 year-old males. We wanted to know exactly what was the age and any other interests of the people that would convert the best for me so I could double down on that.

So I remember thinking, “Oh, these poor interns at Facebook that have to look at a thousand variations of the same ad over and over again and click ‘approve’, ‘approve’, ‘approve’, ‘approve’.” At least it was pretty girls they were looking at, it could have been worse. That is, actually, a sneaky tactic that some people use on Facebook. It’s just kind of an aside, but if you want to be sneaky on Facebook and get things approved that shouldn’t be approved, like maybe an image that’s a little more racy or something, what they do is submit like 100 really, really bland ads and then a few racy ones and then 100 bland ones because they hope that the reviewer will just keep hitting ‘approve’ and not notice. So I know that tactic still continues to work and that’s something that you can’t really beat with technology. It’s just purely a human psychology kind of hack. I didn’t have to do that that much.

Andrew: And so what you were doing was also tracking clicks. You just wanted to know what got you the best clicks. Do you have a way of also knowing?

Ilya: Yeah, so I wanted to know everything. I wanted to . . .

Andrew: So you could say, “25 year-olds are more likely to click, but 26 year-olds are more likely to submit the form on eHarmony”?

Ilya: I would say 25 year-olds, between the time of 3-5 p.m. are more likely to click on a picture of a girl that’s showing her face versus showing one of her whole body and they’re more likely to convert for eHarmony, but less likely to convert for Adult Friend Finder and this is the payouts that I can get from them. So this was still pretty low-key and, sort of, pretty held together by duct tape but a lot of spreadsheets, a lot of analytics, because I wanted to get as much data as possible.

I was a huge data geek, so the number one rule in advertising on-line is track everything. Track as much as possible because the guys that weren’t willing to put in the work, the guys that weren’t willing to track everything, we just throwing up ads targeting people 18-35, everyone was doing that. As I mentioned before, you couldn’t differentiate with their lending pages. You couldn’t differentiate with your product. So that’s how I had to differentiate, with technology and with analytics, basically, and that’s how I was able to scale and build campaigns that were insanely profitable, at times, because I found, like, that one hyper-profitable business niche that nobody else had.

Andrew: So how much of this can be duplicated by the person who’s listening to us right now?

Ilya: That’s a really good question, actually, and it’s a question that probably be most fitting for all of the affiliate guys. I started making all this money in 2007, but for some reason, I decided to not do that anymore and to do something else. The truth is that there are still a lot of people making a lot of money in affiliate marketing, but it’s getting harder and harder for the casual novice to get started. This is something you want to do for 20 minutes a day, just throw up a few ads, find an image you think will do well, sign up for an offer and just throw it up there and see what happens, you’re probably not going to make money.

You had an interview with my friend, Max Teitelbaum recently, and he was very successful, much more successful than me as an affiliate and he’s very, very good at what he does, but the part that you kind of glossed over a little bit, or that he mentioned, was that he said he was working 18 hours a day for years doing this before he reached that level of success. That’s the part that you have to emphasize. It’s not a get-rich quick thing and anyone who promises you a get-rich quick scheme is lying. It’s not something where you can become profitable from day one. It’s something where you have to invest some learning it and it can be incredibly rewarding, and incredibly lucrative because of that, because when you get to the level that you’re actually doing scale and building volume, you’ve built something very defensible there. You’ve built a moat. You’ve built processes or knowledge that you have that the other novices that are coming in and there are many, many of them now, can not replicate.

So, once you have that, you’re going to be doing great. You’re going to have a scalable business. Starting out, you’re competing against very, very sophisticated advertisers now. And it’s, I wouldn’t say impossible, but it’s getting rare to discover a new traffic source like I did with Facebook that has not been exploited yet. So, it does happen. A couple years ago, Plenty of Fish launched their self-service ad campaigns and they were very smart and Marcus, the founder, is very, very smart and very knowledgeable of the industry and so he wanted to make it really, really easy for people to migrate from Facebook to Plenty of Fish. So he offered all the same targeting options. He said your images could be the same size, everything.

So for like a week, it was an amazing traffic source center. Everyone just pored over their Facebook campaigns and it got more competitive. The bids went up and all that. So it just takes time. It’s a slog, you know. There’s no overnight success, I think, in any business, even if it seems that way. Even if people go like I did from $20 to $1000 a day, but the results of months and months of spending $20 a day and struggling and being unable to get more traffic. Even after I had some success, there were a lot of ups and downs. It was very much a roller coaster, and just like any sort of gambling, and this really is educated gambling, in a sense. You can win big and you can also lose big.

Andrew: All right. Let’s continue with the narrative and I’m going to come back later on and ask you why you left if you built that moat and about some of the big setbacks that you had. But continuing with the story, you started out doing dating site advertising and then, as I understand it, you moved onto the financial sites?

Ilya: Yeah. So I was looking because the thing with Facebook and this was still on Facebook, is that you’re bidding against everyone. Whoever is targeting the same demographic you are, you’re bidding against. So that means that you can’t optimize that much for cost-per-click, you have to optimize the other side, which is the CPA. So I was thinking, “Well, OK. Who would pay a really high CPA? Who would pay a lot more than dating sites? Who would have a lot more to gain from getting a lead?”

So that was things like credit card offers, like Visa or something, insurance companies, mortgage stuff. Those leads can be really, really valuable to them and if you go on Google, you go on Google search, you’re paying, so if you going on Google search and you want financial traffic, you’re competing against all the other financial guys, you’re paying $4-5 a click. You go on Facebook, you’re competing against mom and pop shops and fans and dating sites, so you’re paying $0.30, $0.40, $0.50 a click. So that was a very clear arbitrage opportunity in my mind.

The way I always approach this is just thinking intuitively or based on data that I know about the market. Where is traffic under priced right now? Where can I get, sort of, find an inefficiency in the market and sort of squeeze that out, take the margin on that and capture that value? And so targeting things like that on Facebook was sort of a no-brainer and that can get me to the really big scale. So that’s what gets you spending a lot more money with a lot less risk because now, you don’t necessarily have to worry about what everyone else launching the same dating campaigns.

Now, when you’re promoting more complex things, like insurance or something, now you can say, “Well, now you can differentiate on your landing pages. You can differentiate on your ad copy, on your headlines”, and it makes a huge difference if you’re now getting paid $15, $20 a lead. Even a 10% increase in your conversion rate is significant, can make the difference between a campaign that’s struggling to make money and one that’s profitable. Meaning, a campaign you can scale and a campaign that you can’t scale and that’s a big difference.

Andrew: You mentioned Max. You told us how he had to just keep paying off his credit cards within the day, like he’ll max out his credit card one hour, goes and pays it, and then max it out again later on in the day and does the same process. You had something like that too.

Ilya: Yeah. I did. I also, that was probably than he did in the beginning. I couldn’t get a lot of credit and I had a ton of cash flow issues because these advertisers starting out, they would pay you net 30 or net 15 usually a month later, pretty much. Facebook used to be like that and then they realized that a lot of people were stiffing them and not paying so they would charge you daily almost, every few days. So I would be out all this money. I’d max out my credit card and I’d have to run pay it off.

The other thing is I would be out all this money and I haven’t gotten paid yet. I wasn’t, at least starting out, if the advertiser would pay me. They could always turn around and say, well we’re eHarmony and you had all these pictures of girls and this actually happened. So they said, you had all of these ads that were encouraging people to be promiscuous and look for hook ups and we want people who are interested in marriages and long time relationships, so we’re not sure we want that kind of traffic associated with our brand or our site. They were threatening to not pay and this was all of my cash, basically was tied up with eHarmony and at the time it was maybe $10,000 or something.

Fortunately, I went through a great affiliate network and the affiliate manager went to bat for me and he said, look you had a contract, you promised to pay this guy, you didn’t say anything about who was marriage minded or whatever, so you can say that you don’t want to do business with us anymore and you don’t want our traffic, but for what you owe, you have to pay. So that’s why one of the reasons to go through an affiliate network because they’ll fight for you and they’re sending him a ton more traffic and they say, we’ll cut you off on all of our traffic if you don’t pay this guy. And I had a great affiliate manager who was basically a rep at the affiliate network and he helped me out a lot and that made a big difference. That enabled me to get that money and continue and keep scaling and all that.

Andrew: You mentioned Max and you said he did more revenue than you, why? How can he do more revenue when I’m looking at all the scripts you wrote here in my notes. Here’s what you told Jeremy, I could deploy 10,000 ads and my competitors could only deploy 100 ads and the thing just kept growing and growing. How did he do more?

Ilya: I think it was a few reasons. So at least for me, the reason I never reached massive scale. I mean I did well. I think my best day was about a $5,000 day, but that wasn’t consistent. That went for about a week and then I saturated the market, like everyone who was going to convert, converted, but basically it was two things. It certainly could be that I wasn’t smart enough or I wasn’t good enough at advertising. But I think the bigger thing is I got complacent in a lot of ways and I wasn’t hungry enough. I wasn’t hungry as some of these other guys. What happened, guys like Max, they were working 18 hours a day. I was working maybe, like, 2 hours a day and I would wake up at noon and I would see there’s $500 in my affiliate account, sweet. I’d go out drinking with my buddies and that was that. In retrospect, I probably should have tried to scale and see how far I can take it. The other thing is I didn’t have a co-founder. I didn’t have a business partner and I now realize why funds like Y Combinator insist that you have a co-founder. It’s not that it’s impossible to build a business by yourself as a single founder or anything like that. It’s just purely for accountability. So if I was working with another guy as I do now, who’s working 18 hours a day, who I’m accountable to, who’s relying on me to do my part. I wouldn’t slack off and I wouldn’t get complacent. I wouldn’t be happy with where I was and I’d want to keep growing, keep building the business and all that. So accountability was a big piece, probably, too.

Andrew: All right. That’s a good point.

Ilya: It almost seemed too easy. It almost seemed too easy at the time, too. I really was lucky in a lot of ways at that time. We’re getting to the point in the story where I did have some challenges, but at that time it was really easy. I would put in money and I would lose money on some campaigns, but on balance, every month at the end of the day I had a pretty solid profit. I had a five figure profit pretty much every month. That made me a lot less cautious and a lot more complacent. I was just going too well, almost.

Andrew: All right. So you did have a set back afterwards. You go from making $1,000 a day for seven days about straight. You’re pulling in so much cash that you can even afford to get complacent.

Ilya: More than that even.

Andrew: More than that?

Ilya: For a month straight I think I was doing more than $1,000 a day.

Andrew: Oh for a month straight you’re bringing in $1,000 a day and then what happens? What’s the setback?

Ilya: Just a few things kind of came together and I literally, almost overnight, I went from making $1,000 a day to losing $1,000 a day. A lot of that was complacency. I didn’t monitor my campaigns closely enough. You wake up and you see it’s already profitable. I didn’t notice that they were slowly getting less profitable. I didn’t notice that there were other competitors that were hungrier than I was, that were really out-competing me. There’s no other way to say it, they did better than me. They wrote better ad copy, they worked harder, they tested more things and so slowly the conversion rate would slide or slowly I’d get less and less traffic or my bids would go up. What I should have been doing was sitting there nipping that in the bud and saying, ‘Here’s a trend that’s happening and if I extrapolate this kind [?] a month in advance I’m going to be in trouble.’ I didn’t do that, I kind of got lazy and that was one part.

The other part was that I was a little over confident because it really was very easy at that time. I started taking bigger risks, sometimes taking bigger risks pays off, sometimes it doesn’t. What I was getting into was media buys, media buys is when you go play in the big leagues.

That’s where you can really get scaled because you go to a major publisher or you go to an ad network, first of all, they have a minimum budget that you have to spend. Maybe it’s $5,000 a month, $10,000 a month that you have to spend with them but they say, “You spend this with us we’re going to fill you’re budget, we’re going to send to send you this traffic.”

If you get it to convert and you’re able to get that kind of ROI, I’ve had media buys that had 4 or 5, 600% ROI, if you can get that volume you could build up very quickly. It’s very different from search where you have to have a ton of keywords, a ton of campaigns and ads and everything or even Facebook [??].

A media buy, you have one publisher that you find that’s sending you good traffic, that could make you 10, 20, $30,000 a month, it could also lose you. So I took a lot of risks because things were going so well I basically made less educated decisions. I didn’t think through the consumer psychology. I didn’t think through the motivation of the people clicking and that was probably the biggest problem for me with affiliate marketing.

When you’re an affiliate and you’re just shuffling traffic back and forth and you’re just arbitraging, you aren’t really thinking about people, you’re not thinking about customers. They’re just a number, they’re just a conversion rate to you so you’re not thinking, ‘Well, is this providing a good value to the customer?’ You’re not thinking. ‘What’s their motivation? What are their needs and desires? Am I meeting that in my ad copy, in my products?’

It’s just a conversion rate, it’s just a number. You say, ‘I got this many clicks, this many conversions.’ I wasn’t thinking about the deep consumer psychology, I was just thinking about, ‘Where can I get traffic?’ I got traffic but it cost me. I remember one campaign that I launched where I was so cocky. I was like, ‘This media buy is going to be huge, it’s going to make me all this money.’

Fortunately I didn’t have to do it for a month, I ran a campaign for a day, I spent $1,000 and I had one conversion. I make like $20. As an affiliate, as anyone who has a big budget for a business you kind of learn to be disconnected from the money. You don’t take it emotionally, you don’t think, ‘Well, man. I could have eaten for three months off that $1,000 that I just blew in a day.’ But nonetheless it kind of stung and I thought, ‘Why did I do that? If I hadn’t made that one decision, taken that one risk I’d have $1,000 more right now. If I really wanted to burn it I could have given it to charity or something.’

So that was a really big, pivotal moment because I thought, ‘I really have to reevaluate my strategy.’ Reevaluate what I was doing, there were a lot of other trends where campaigns were starting to get less profitable. The market was getting more saturated so I took a huge step back, paused all my campaigns, killed everything and just started reading.

Started reading about copywriting, about marketing, I picked up every book about direct response from the 1920s to the 50s to the 70s, all the great writers and just read and tried to figure out, ‘What was I doing wrong? Why did my ads not convert?’ I was getting traffic, they were clicking, they must have been at least slightly interested but they didn’t convert. I didn’t connect with that traffic, with those people on some level.

So I just started reading and learning about advertising, about writing copy, about conversions for a few months and then I went back and started doing these media buys again and started innovating a lot more in my copies. I would write more long form landing pages. I would focus a lot more on writing copy that hit some deeper drive or some deeper desire in my audience.

I did a lot of research. What I would do is then, for any product that I was promoting, any market. I spent probably weeks at least if not months, researching so I would look at every ad, every landing page, every blog post that’s been written about this topic and I would write down every headline and the bullet points because that’s the heart of any sales copy is the headline and the bullets.

I had this list probably for any market. Before I wrote a single line for copy, before I launched a single campaign, I had a list of 300 headlines that had been written and I tried to condense them into patterns. This one appeals to your need to be more successful, this group of headlines appeals to your need to provide for your family by making money, this appeals to your deep evolutionary drive or whatever.

It’s kind of like poker when you play a big hand and you lose, you’re kind of are a lot more cautious on your next bets. That definitely happened to me. I just thought OK, I have to know what I’m doing before I launch a campaign, I can’t just start throwing things out there. By the time I came back and started building campaigns it was from a lot more thoughtful place and it was a lot more educated and I didn’t really have any big wipe-outs or any big failures.

The flip side of that was I didn’t have successes that were as massive because I wasn’t throwing out these hundreds of thousands of ads a day and I wasn’t testing as much as I could, so I guess the lesson is that there must be some middle ground that you find. There is a real risk and I experienced this, of paralysis of just doing research because that’s safe, that’s easy, you can’t fail at that. You can never fail at researching other people’s headlines, the only thing you can only fail at writing your own headlines.

It’s very easy to sort of get comfortable and just do that, but at the end of the day you have to get things out there and launch things and get traffic in. After all this copy writing, even after I thought I’d crafted the perfect message, the perfect ad copy, it still sometimes flopped and the stupidest thing succeeded and you just have to test and get data. That’s why I’ve always been successful through automation and scaling and that’s when I started writing code that became MixRank to collect all this data.

Figure out what the product of the research that everyone else had done was, figure out what was working very quickly, so that’s the best of both worlds where I had some education, I had some education and it was working, but at the same time I could deploy campaigns quickly and actually get real world data information.

Andrew: I want to break this down and understand what happened. When you said earlier that it was media buys that got you to lose so much revenue, media buys you mean are when you make a direct relationship with the website and you say you will buy a certain amount of traffic or certain placement from them and you have to pay them per month regardless of how many clicks you get.

Ilya: That depends and some of it is like that. So media buys is basically any way to place your creatives or your media on a publisher, so generally not search, generally display advertising is what it refers to and so that could be going direct to a website as we talked about in the course, that could be going through an ad network that does these buys for you and can go to hundreds of publishers.

That was another thing where I got too confident and made a lot of mistakes where I was doing these buys and I thought I was such a big shot with my big budget and everything relatively. I started, whereas before I was going to these niche publishers that were really relevant and paying a few hundred or maybe a couple thousand bucks a month.

Now, I thought well now is the time to put fuel on the fire and scale and so I started going to all these ad networks, display ad networks, where basically the way these ad networks work is they have hundreds of thousands of publishers in their inventory and they place your ad across all of them or a lot of them in a specific channel or whatever and it runs everywhere, spends a lot of money and then they say they optimize for you. They track and they eliminate the publishers that aren’t sending you good traffic that converts and they don’t show ads anymore.

The problem is, that takes a lot of budget. That’s designed for brand advertisers that have big budgets and at the end of the quarter you get another big infusion of cash that you can spend on testing or at the beginning of the next quarter, but for me I only had enough budget to do the initial ad placement where they just spam your ad out to everywhere. That’s what would happen, so they’d place my ad everywhere, I’d lose $1000 and I’d get one conversion. If I had a bigger budget I could say well now I only want to advertise on that site that sent me those few conversions, once you’ve got statistically significant data.

What I was seeing was I went to this ad network and I lost a lot of money and that’s it. I didn’t have the budget to give to them so they could test and optimize. That’s why I lost money. I was going up against these big brands and big advertisers that did do that, but had a huge budget. They had already optimized their creatives and tested. And so, the only way to compete with them was to have some kind of competitive intelligence or have some way to learn from their split tests.

That’s when I realized that, well, I have to learn from them. I can’t compete on a level playing field with their testing budget otherwise.

Andrew: Yeah. You said at one point you burned through a thousand dollars in one ad campaign and made only $20 in revenue.

Ilya: Yeah. That was one conversion.

Andrew: One conversion.

Ilya: One conversion.

Andrew: For a thousand dollars. I know people who are doing this on a regular basis who are struggling to find out why they’re only making $20,000 for every thousand that they’re spending, and they just might give up on all ad buys completely because they can’t figure it out.

Ilya: They’re making $20. You said they’re making $20,000.

Andrew: Oh, excuse me. Thanks. So, right, it’s pretty common. I’m sure you’ve seen some of your friends, maybe some people who have gone through Y Combinator. They go out, they buy ads, they spend a thousand bucks and end up with $20 in business as a result of it.

Ilya: Yeah.

Andrew: Let me ask you this. What’s one piece of advice that you can give someone in that situation. We’ll continue with your story, but I know that there are a lot of people in that situation. Hell, I’ve bought ads and ended up losing that much money. For people in that situation, what’s one piece of advice you can give us?

Ilya: Well, the self-serving piece of advice would be to use my site, but other than that you have to . . .

Andrew: Let’s make a deal. Let’ come back to how to use your site properly but without your site. What else do I want to know about?

Ilya: I think that you have to get a lot of emotional distance from what you’re doing, and that sounds a little abstract, but it’s really important and that I’ve learned applies not just to building ad campaigns but also to dealing with customers, to pitching investors, anything basically where you’re going out and running a lot of experiments. You can’t be invested in the outcome of these experiments. Even pickup artists do the same thing.

You interviewed Neil Strauss, and they have a thing called . . . I think they call it Outcome Independence where your perception or your mood or whatever is not dependent on the outcome. You’re in it for the ride and for the journey. That’s what you have to do in advertising because the truth is you will fail. Everyone fails. You will fail consistently. You will fail a lot.

The way the odds work and just the way the numbers play out, you might never have a success before you have a lot of failures. And so, you have to be distant from that. You have to take it as just these experiments that you’re running. It doesn’t mean you’re a failure or your business is a failure. It means that particular experiment that you ran, testing a very specific hypothesis, that this traffic will convert at this rate at this time for this product.

Andrew: All right. That’s fine though. So, we understand that this doesn’t define us, but we still need a solution for making the next ad.

Ilya: Right. The solution is that once you have that distance to run a lot of experiments and not be particularly invested in each one, run a lot of tests very quickly, try to fail fast, fail as quickly and as cheaply as you can, test a wide range of traffic sources, so don’t feel like . . .

Andrew: Instead of spending $1,000 on one traffic source and one ad and saying, I only brought in $20, you’re saying, spread it out across the board.

Ilya: Spread it out, don’t chase your losses. Basically, cut very quickly the stuff that’s not working. What they tell us at Y Combinator when dealing with investors, and this has been on my mind the last few months, is go for the investors that want to invest in you not the ones that don’t. Don’t go and try to persuade them and whatever, the ones that aren’t interested. Just go for the ones that are interested.

That means go where the traffic is that’s going to work for you. Don’t spend too much time chasing traffic that you see. It’s tough, right, because you can see other affiliates that are in huge volume that are doing well on that traffic source somehow or, at least it looks like they’re doing well. They’re getting a lot of traffic; they’re spending a lot of money, but you have to place a lot of really small bets. Run these experiments and try to get data.

Your objective when launching a campaign should not be to get conversions. That’s a fool’s error because you’re probably not going to get conversions. You’re probably going to fail. Your objective should be to get data and learn and add that to your list of experiments and say, “Well, I learned that this traffic source doesn’t work” or “This traffic source has this much traffic at this cost” because that’s how you build that moat and build something really defensible and try to actually build on top of that into something where you are being profitable.

Andrew: I see. All right. And then with MixRank, how can we improve our response?

Ilya: Yeah. So, with MixRank I basically try to automate a lot of that stuff. We launched a very simple site. It’s this whole story that we probably don’t have a lot of time for, but basically, we launched something that was incredibly small and feature incomplete, but we wanted to get it out there, and get it profitable, and we wanted to make sure that this was [??] and paid for, but you can go to MixRank.com, you can put it in any sophisticated advertiser, and that’s what you have to learn from sophisticated advertisers, so you can go, someone like AppSumo or something, who is a very good advertiser.

If you’re targeting start-ups for your products, you know AppSumo successfully targets start-ups. You go to MixRank. You can look up AppSumo.com. We’ll show you all of their ads that they’ve tested, and we’ll show you what we think are the most successful ones, what we think are the ones that are getting the most traffic, that are getting the highest click-through rate that we estimate, the publishers that are sending in the most traffic, all that stuff. Let them run all the experiments, and you just sort of take the spoils, or take the results. That’s kind of our goal.

Andrew: I wonder how Noah feels about me mentioning AppSumo, and you mentioning AppSumo.

Ilya: I just thought about it. I thought of him as a really good advertiser that I really respect, and as a very successful marketer that targets start-ups, and a lot of people have been asking me recently, ‘I sell to start-ups. I want to get involved in that community, and you obviously target start-ups in some sense.’ That’s what came to mind.

Andrew: Yeah. I bring him up a lot as a guy who we can learn a lot from about marketing.

Ilya: Yeah.

Andrew: The guy is fantastic. I can’t wait ’til ten years from now when I get to have him back on here, maybe five years from now, when I get to have him back on here to talk about what he did with AppSumo, and the kind of marketing that he’s doing right now, that I know he’s never going to talk about. Well, not going to talk about now, will talk about later on…

Ilya: Right. Yeah.

Andrew: … once he’s built his node. All right, so you went back, you studied copy-writing. You rethought your whole process. You are much more deliberate, much more conservative, much more risk-diverse, and things were turning around for you. How much of a turn-around? What happened afterwards to the revenue and the profits that were coming in?

Ilya: It was smaller. It was probably, maybe $200, $300 a day, now, versus $3,000.

Andrew: OK.

Ilya: At the same time, I was also getting a little burnt out on the industry. I was getting frustrated with how unstable it was, but more importantly, I was getting frustrated that there wasn’t a lot of connection between you and the product and the customers. Like I said, you’re just shuffling traffic, so it wasn’t as rewarding as I had hoped, other than financially. I had a good amount of savings at the time, and also, of course, being a young guy, very cheap lifestyle.

It sounds kind of stupid to say, “Well, I wasn’t interested in the money anymore.” Of course, I was interested in the money, but that no longer became the driving force, or the motivation. The motivation kind of shifted. I want to build something cool. I want to build something that people say they love. This was about August 2010. I had just graduated from college. I had a bunch of money, so I had some income coming in. I could live anywhere, so I thought, “All right. I’m going to move to San Francisco and do a start-up.” I got rid of all my stuff. I didn’t know anyone in San Francisco. I’d never been here before.

Everything I knew about it I knew from TechCrunch, but I said, “All right. I’m just going to come here and do a start-up.” My parents and my girlfriend weren’t too excited about that, but nonetheless, it happened, and it’s been an amazing experience so far. I started basically just taking in everything that’s here, going to every tech meet-up. I knew I wanted a start-up. I had these rough scripts that I had. That’s when I met my co-founder Scott, at one of these tech meet-ups here in the city, and we started working together pretty quickly. He’s a brilliant technical guy, so he helped redo this rough script into something that’s a product that works, that we can sell. A few months later we applied to Y Combinator, which was a whole interesting experience, but we applied, and we got it, and we’ve been going through that.

Andrew: Why did you get in? What did Paul Graham and Jessica Livingston, and the other people around the table see in you in that 15 minute conversation?

Ilya: Yeah, hard to say, in that 15 minute conversation. I think a lot of what they like in start-ups is that they like that you don’t need them, paradoxically. They want to invest in people who are going to be successful anyway without them, and so they like when you have domain expertise. They like when you can show that you can build stuff. We had a rough prototype that we built on, but even up to that point, I think the hardest part is not the interview.

I think the hardest part is getting the interview. I’ve looked at a lot of YC applications now, and the biggest problem that most of them have is that it’s not really easy to figure out what the product is instantly. When they review an application, they spend a few minutes on each one. There are thousands of applications. You have to know within the first 10 seconds exactly what the product is very simply. Not the big vision, not what it’s going to be, what it is now that you’re building. Our application was not like that at all starting out. It was pretty awful actually. It was muddled. It was like, well we were building this competitive intelligence analytics for the performance industry, whatever, and I had gotten to know a lot of YC alumni.

The way I did that was I went to Hacker News and I made a post and I said, anyone who’s on HN, I’ve been doing Internet marketing for a while, I will build a free marketing campaign for your startup or I will help you build your marketing campaign, no strings attached. I had about 150 people email me and every single one of them I helped them with marketing, I helped them build a campaign. As it turned out about half of the current Y Combinator batch, so about 20 of those were YC founders that emailed me that I helped, which was awesome.

It was an amazing experience just to get so involved in that community from nothing, just one post that kind of took off. A lot of them, when it came time for us to apply to YC they helped us with our application. They were awesome, really friendly. They took the time, they helped us review our application. I remember very vividly sitting with a friend of mine who was in YC and he was helping us prep for our application and we were sitting in this coffee shop or something and he said OK, what are building? I said, well it’s this competitive intelligence analytics and he said stop, what are you building? I said well, you know, display performance and he said stop, what are you building? I said fine, we download apps and we show them to you.

That’s what was on our application, we let you search apps. That meant that the YC partners saw exactly what the product was and they understood it. That’s the first gate. Once you get past that, now they can actually take the time to read the rest of the application. If they have to expend any cognitive effort to try to understand what it is they’re just going to move on because there’s a thousand more applications that tell you exactly what they’re building and so that was a big piece that really helped. We probably couldn’t even gotten to the interview without the help from everyone from the network and other startup founders have been incredibly helpful.

Andrew: I kind of want to spend another interview with you right now just going through what you did with MixRank after it got off the ground. Maybe we can do a quick set of questions around MixRank to satisfy some of the promises I made early on in this interview.

Ilya: We spent a lot of time with Jeremy. He was awesome and he took a lot of time, but I was always worried that we covered so much stuff and he asked so many good questions that we wouldn’t have time to get through it.

Andrew: How can we make that pre-interview process with Jeremy better?

Ilya: That was really good. I think that he asked a lot of really good questions, but there was a lot of stuff. We didn’t even get through a lot of it here today, so I think that rather than starting at every milestone, I would say find a few and then kind of expand from that because also you never know where the conversation will go and what you’ll pick up on. I really like the structure, but at the same time you can’t have too much structure, you want some time to expand and dig into, as you’re very good at, digging into the details and getting out the actionable stuff and getting out the inside stuff.

Andrew: It does feel like there’s just a lot here.

Ilya: It was a very good conversation. It was like 2-1/2 hours long. He really took the time.

Andrew: You guys spent 2-1/2 hours?

Ilya: Yes.

Andrew: Oh my goodness, I’m sorry.

Ilya: No, no, it was really good. It was a really good conversation and I’m really thankful to him for taking the time for that.

Andrew: My feedback is first of all, we should not take two hours, we should not take even more than one hour from a guest beforehand. Also, I would’ve focused more on just the affiliate stuff that you did before MixRank.

Ilya: That was me. That was all me because I didn’t want to focus too much on the affiliate stuff.

Andrew: Tell me about that. I noticed that too in our conversation before I hit record on this interview that even in the beginning part of this interview you were smiling as you were squeezing more information in about MixRank. That’s an intentional thing.

Ilya: That’s not a self-promotional thing or anything like that.

Andrew: Sure it is. I’m not here to judge you but we’ve got to call it. It was promoting your business. That’s self-promoting.

Ilya: It was, but that wasn’t my motivation and you’ll just have to take my word for it that that wasn’t my motivation.

Andrew: OK.

Ilya: My motivation is that when you hear about these guys that are making these thousands and thousands of dollars a day doing something that you could’ve have done a few years ago that you couldn’t do today, I think that’s not as valuable and I think that’s not as actionable to people who are starting out.

Andrew: Oh I love this. Let’s talk about this for a bit. I know now we’re going really off track and I tend to not like to go off track. But this is an important topic. I do feel that learning how an entrepreneur built his business 10 years ago. Even if the same tactics can’t be used today, is still helpful and it shows you how to think through situations as they present themselves to you. I don’t think that people today are going to find the same opportunity that you did with Facebook, but they’re going to find those little pockets of opportunities and if they remember back to Ilya’s experience in the early days of Facebook and how he wishes that he just doubled down and got more aggressive with it, it’s going to shape their action. If they see that they’re doing well and they remember, wait Ilya’s doing well, but he took his foot off the gas and he went out and got a drink in the middle of the day instead of pursuing it. They’re going to think, oh you son of a b**ch, you better sit down here and really force yourself.

Ilya: Right.

Andrew: Because this opportunity’s not going to be there forever.

Ilya: That’s fair.

Andrew: To hear you talk about a co-founder, they’re going to understand why a co-founder is helpful. I could go on like this forever. I think the important thing is in these kinds of interviews. These bio interviews that we do is not so much to offer tactics that people can imitate, but to show the way that an entrepreneur thinks through a situation and that’s what we’re trying to learn.

Ilya: That’s fair.

Andrew: And I also do these courses. I’m talking too much. I’ll just finish off with this. In the courses, and you’ve gone through our training for the courses, too, where I say, give me tactics that the people can use tomorrow. Let’s focus on that. Those are different, there I want more actual. Here with the bio interviews, I want to go in and understand Ilya’s thought process. How does he think through situations and deal with the setbacks as they come up. Now you tell me the opposite.

Ilya: No, I totally agree with all of that. My fear is just sort of making it seem too easy or glamorizing it and then people will go in and they get frustrated because they don’t see that same level of success. So it’s always more interesting to, at least for me, to delve into the really early days when you have no budget. I know we kind of covered that with the affiliate stuff, but go with something where you have nothing.

Also, the thing with the affiliate industry is they have a lot of stuff that’s done for you. They have the landing pages, they have products that are proven that have already been validated. You have other people who are promoting it, so I want to make this broadly applicable. I don’t want everyone to go jump. OK, I’m going to stop what I’m doing. I’m going to do affiliate marketing. In any business, in any start up, any entrepreneurial venture, I want someone to take something away from this.

So that’s what I was kind of pushing towards. The more general start up stuff, but definitely the affiliate stuff was a big part of my life. That’s where I learned everything I know now, pretty much. It definitely is worth exploring, but the take away should be the stuff you talked about and not well, I’m going to go get a bunch of credit cards and start spending money on ads.

Andrew: Right.

Ilya: Because look at how I could quadruple my money.

Andrew: That’s true. We have to just keep emphasizing the hard work that goes into it and I’ll tell you why. I had this past interviewee sent me a for sale website. Said, this website is for sale and if you look at the description of what it does, it’s exactly like mine. If you look at the description how he came up with the idea, he came up with the idea by copying everything that I said in my Mixergy interview.

So he was showing me how he was copied and if you look at the description of this for sale page about this website, you see that the site failed. I asked him, I said between you and me, I said why do you think this site failed? I’d love to have you on one day in the future to talk about what this guy did wrong, but I’m so curious now. He said, Andrew, he only spent two months on it. The guy spent two months, he put in a lot of hard work and then he backed off.

It takes a long time to make this stuff work and a lot of frustration and a lot of self-doubt. I do try to bring those up in the interviews. The other part, though, about the glamour. I don’t think we talk enough about the glamour of success in this space. You’re one of the successful entrepreneurs in this space. You’re wearing a t-shirt. You’re kind of in a room there without the best lighting and the best background. I’ll tell you why that matters and I’m doing the same thing. I’ve got books in my background. We don’t talk about the fun things that we do because we want to stay humble, we want to stay focused, but I think because of that we’re not giving people a sense of, and this is what I don’t do right, people a sense of how fun it is to hit that. To hit that period of success. Boy I remember when we did I forget how much.

I’ll tell you what it was. I don’t forget, but I didn’t feel like I should bring this up, but I remember when we were doing a couple million dollars a month in revenue and I remember turning to someone who was a close friend of mine saying, you got to really appreciate this, the average person will spend their whole lives hoping to make one million dollars, here you are doing it every couple of weeks bringing it in. And I was doing this like staying at a nice hotel that we were all staying in as a company. I got a lot of freedom and a lot of fun because of it. We don’t talk enough about those times and I think we do the audience a disservice to say, “It’s not just about numbers on a spreadsheet, it’s not just about more revenue, it’s not just about more traffic it’s about, life does become fun.” I’ve been trying to think . . .

Ilya: Yeah.

Andrew: . . . of ways to bring that out and I don’t know how to do it. Every time I try to ask an interviewee about it, like how did life change? They go, “Oh, you know, Andy, nothing really big, I paid my mortgage and that was it.” Come on.

Ilya: Yeah. On that note, at [??] we had Gary Milner come speak and the question I asked him was, ‘How has your life changed now that you’re a billionaire? What’s it like to be a billionaire? And he said, ‘Well you know, it’s more work. I work more.’

Andrew: And that’s . . .

Ilya: I guess that never changes.

Andrew: I think that’s the message they want to leave us with because, I don’t know him specifically and I don’t want to doubt anyone but I want to say that from my point of view it doesn’t feel like that’s true because I feel when people say that to me that they’re trying to reinforce a work ethic in me, which is fine. I feel that when they say that they’re trying to minimize and be humble about their own successes and that’s fine too but what we’re missing is a bit of excitement about it. A bit of . . .

Ilya: Yeah.

Andrew: Hey you know what? Frankly, it’s fun to be able to say to yourself, ‘” want to take a vacation anywhere in the world and I’m going to go there.” It’s fun to be able to walk into a car dealership and say, “I’d love to buy that car.” Or whatever the hell it is, it might even be something small. I can come up with good examples because I’m not in touch with what I’d like to do.

I went out and I bought an iPad. I said, “Andrew, you should spend some money and enjoy yourself, go buy an iPad.” I bought an iPad and I said, “I’m not feeling it.” You know what I feel great about? I feel great about doing more work. There is more fun that we’re not tapping into that I . . .

Ilya: That’s true. I can say a little bit about that. It was basically just an incredible sense of freedom. When you have that mindset where you say, “Well, I’m free to do anything now, I don’t have to stress about paying the bills.” I think that’s the richest you’ll ever feel, when you don’t have to worry about how are you going to make rent, how are you going to pay the bills, how you’re going to pay for whatever.

You don’t just count like, “Oh, I shouldn’t go out with my friends because I can’t afford drinks.” That sense of freedom, you don’t even need to be making millions to do that you just need to have some stable income coming in from some niche business. I think that is the biggest thing and being out of debt. I paid off all my student loans and everything, something like that, I think that’s the richest you’ll ever feel, even more than the luxury stuff.

Andrew: You named it. You know what? You’re absolutely right. The freedom is the best part of it. The idea that you don’t have to worry anymore, you’re still going to worry but you don’t have to worry about being out on the street. All right. OK. Here’s what I’m going to propose to you, I’m going to give you two options here.

We can either do a little bit of MixRank right in here at the end of this interview or if you like, we can hang up, I call you right back and we do 40 minutes on how MixRank got customers in the early days when most people launch businesses can’t get customers for years. You want to do that second option?

Ilya: I like that second option, yeah.

Andrew: We’re going to close this interview out with this, two things, First I’m going to do my little promo and then I’m going to ask you one final question and the final question will be, if somebody wants to be an affiliate what can they do right based on your experience? What can they do to seize whatever opportunity still remains in this space?

I also like to do a little promo for Mixergy Premium where if anyone wants to learn from Ilya how he bought media, how he figured out which websites to buy ads from, how he sent the email, Ilya you actually give people the exact email that you sent out to buy ads from these little websites the way that some guy approached you to buy an ad from you.

You say, “Look, guys, copy this. Make a few edits, copy this and go and buy ads for affiliate program.”

Ilya: And that was, by the way, just to interject really quickly, that was guys that refused to sell ads to anyone before.

Andrew: And you got them to say yes to buy ads, to sell you ads. And what you’re saying is, ‘Here’s how to figure out where you should be buying ads and you show us you’re computer screen, you walk us through it step by step and then you say, ‘Here’s the way you approach them, here’s how you measure it etc., etc..’

People can go and buy those ads cheaply from websites that don’t ordinarily sell ads and consistently and they can send that traffic either to their own sites, for their own offers or they could send it out to affiliates. That’s just one course of dozens. People keep telling me, especially people who took your course Ilya, they keep telling me, “Andrew, you should be charging $500 for one of these courses.”

And I see it. I see that others are charging $500, $700 for one course. We package it all up in one premium program, I don’t know how much you pay, in fact, right now you pay 25 bucks. I was reluctant to say the price because I’ve got to increase the price at some point in the future. For 25 bucks today, maybe it will be 50 or 100 bucks a month in the future, you get all these frickin’ courses and so much more.

Go to mixergy.com/premium and sign up and you’ll get that course and the others.

All right, Ilya, someone wants to grab this bit of opportunity that still exists in the affiliate space, what do they do?

Ilya: It’s so very simple, you go sign up for an affiliate network and just search for CPA affiliate network. You then go find an offer that you know something about. Maybe you feel somewhat knowledgeable about technology or, whatever, gaming or you want to promote something like Netflix or something, like movies. You grab that link, and you can link directly to the offer. You don’t even need to create a landing page. You figure out where do people go that would sign up for this, and you see how you can buy traffic there.

So whether those people are on Facebook and are of a certain demographic or they are searching for certain keywords, or they’re going to specific sites, you just go there. You take a little bit of money, and say, ‘all right, I expect to lose this money but I’m going to learn. I’m going to learn so much’, especially for a first campaign. And you just launch it and you learn by doing. And that’s it. You’ll get better and better with every campaign you launch.

Andrew: And, of course, go check out MixRank.com, the first site that I went and plugged in there. Sorry, Noah. Tell me if you think that you don’t want this kind of attention in Mixergy interview, but the site I typed in there was Appsumo.com. I wanted to see where Noah was buying his ads. I wanted to see what kind of ads he was buying and what his text was like for his ads.

I’m not going to say that you guys should search for Appsumo, but I’m saying think about that one clever guy whose ads you admire, whose marketing skills you admire. Maybe it’s Noah Kagan, like it is for me. Maybe it’s someone else. Plug in their website and see what they’re doing online. You’re going to find the kind of stuff out that they’re never going to share with you, not now. They’re going to tell you 10 years from now, what they did. If you go to MixRank, you’re going to find that out right now.

I don’t get any affiliate commission for saying that. I just have to tell you that it’s fricking fun to see what your competitors are buying. I told you this before, Max. I can’t believe this kind of stuff is even possible. I can’t believe there’s a site out there that I can go to find out what my competitors are advertising and where they’re advertising, but I’m glad that it’s there.

All right. MixRank.com. Thank you all for watching. We’re going to take a small break and we’re going to record a second interview. Thank you all for watching.