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Here’s the program.
Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Today’s guest is a Mixergy fan who e-mailed me over a year ago about his amazing side business accomplishment, and he asked me not to talk about it until today.
Here’s an excerpt from an e0 mail from Mike Colella. He said, “I noticed that you have quite a few interviews on affiliate marketing topics. I have a personal story in this space myself. I did $2.2 million in affiliate commissions in 2008. This was done without any website of my own, without any employees, and for the first six months of the year I was working full-time at Intel as a engineer.”
Today we get to find out how he did it. One more thing before we start the interview, before I get angry e-mails and comments on the blog from people who say that he’s lying, that this can’t be true, he and I, even back then, about a year and a half ago, went through all of the affiliate registers where he was pulling in money and he showed me exactly where the money was coming from so I can confirm that the numbers are real.
So we’ll find out about that, how he did it back then. We’ll find out how he’s still doing it today. I also want to find out his new company AdBeat, which is in beta. Mike, it’s been a long time. Thanks for doing the interview.
Mike Colella: Hi, Andrew. Thanks for having me on.
Andrew: So what’s a simple way to explain what you were doing back in 2008 for people who don’t know the business at all?
Mike: What I kind of specialize in is contextual advertising, which has mostly been Google [inaudible 03:06] advertising. So I bought what most people know as AdSense ads. I’m on the buying side of those ads and I place advertisements. I advertise affiliate offers that way.
Andrew: Okay. So the reason you don’t need a website is because you’re buying ads on other people’s websites through Google and other services like them, right?
Mike: Right, and a lot of what I was doing is just sending traffic directly to an affiliate offer through my affiliate link, so there wasn’t even an intermediary website like a landing page that I set up most of the time.
Andrew: Okay. Can you give me an example of an offer that you might have run?
Mike: I’ve done well with a lot of Clickbank eBooks, you know Clickbank.com is a big marketplace for digital products that are often sold basically through this affiliate model. Commissions can be really high because they are digital products, and so there’s essentially no cost to deliver the product. Commissions can be up to 75%, which gives you a lot of money to play with as far as buying advertising.
I’ve also done well with what’s called CPA type offers, which can be like a bottle of pills or something like that in the diet market. There’s all sorts of different offers, lead offers, where you try to get people to submit an e-mail lead or maybe a more complex lead. Any of that kind of stuff can work.
Andrew: Wasn’t there some eBook about how to generate your own electricity or something using solar panels, right? Was that one of the eBooks you were selling?
Mike: One of them on Clickbank, yeah. That market was doing pretty well back in mid-2009 and then through probably the end of 2009. Those products actually still sell pretty well, but it depends on how you can get traffic to those offers.
Andrew: But it was an eBook about how people could set up solar panels in their homes? And that sold well, why?
Mike: Because it’s all in the marketing. I mean if you go to one of those sites and you look at the sales page, there’s a big sales page with some pretty big claims and it’s essentially like a guide on how to develop low cost solar panels for yourself and save money doing it. That particular product is kind of an interesting thing because it’s like a save money which is almost like a make money in a way. It’s like the flip side of making money, which is always a big market. It’s also kind of on the whole green energy kick which a lot of people are really into and I think that makes them feel good about the product as well. I guess they’ve done pretty well.
Andrew: All right. Let’s find out how you got into it and how you built it up, and then we’ll talk about some of the tactics that you used. I’m going too try not to lead you through this because I don’t know what you’re revealing, what you’re not comfortable revealing, and I’ll respect your need for privacy on some issues. Where did you get started with this?
Mike: Jeez. I got started with trying to do something with Internet marketing and trying to find some way to money online in early 2007. I actually had no idea how to make a website. I didn’t understand anything about how money was made on the Internet. I was working as an engineer at the time, and I started trying to make a website about fitness because I had an interest in fitness and I thought I would maybe sell AdSense ads or put AdSense ads on the site and try to make money that way through advertising.
Then I started learning about affiliate marketing that some people use affiliate banners instead of AdSense to try to make money off their site. I kind of stuck with that all through 2007. I didn’t really make any money at all. I think I may have made $5 or $10 total, but I learned a lot of stuff. I learned a lot about HTML and about Photoshop, and things that you kind of need in order to do things online.
Late 2007, around exactly three years ago basically, I first started with some pay-per-click advertising. I had just read that people were using pay-per-click to send traffic to affiliate offers and that some people were doing well with it. I figured why not try it. I had a small budget to get started and basically, on a credit card, and I started spending probably $10 a day on Google AdWords. I picked an offer that I had actually seen because I was looking at a lot of these fitness sites while I was trying to build my own fitness site, and so I was always kind of surfing the Web and looking at fitness sites. And I seen a lot of the ads that were in the diet market because I was always on these sites.
So I just picked the product that I had seen showing up most often that had an affiliate program, and I started advertising that product on Google. And very quickly actually I could tell that it was making money. At first, two days would go by and I wouldn’t have sale. Then I would have a sale. But it would be $20 in ad spend, and the sale would be worth $25 to me. It was just enough to tell me that something is working here and this isn’t . . . I had no idea. When I first started doing it, it was just amazing really. I had no idea if it would work. I had no idea if the sales would actually get credited or any of that stuff.
So when I started seeing the sales coming in, I just started upping my ad spend and trying to find ways to spend more money. If I could put in $20 and get $30 out, then it seemed to me that I wanted to make that as big as possible. I kept trying to scale it up, and over the next few months I think by probably, two months later, I think I did $5,000 profit, which to me at the time was huge. It was getting comparable to my salary at the time as an engineer. And the next month after that I did $25,000 profit.
Andrew: Wow.
Mike: Yeah, it just scaled very quickly. I found some ways to scale, and the month after that it was $60,000 profit, and I think the month after that it was $90,000.
Andrew: Wow.
Mike: Very quickly I was able to scale it up and start making a lot of money, much more money than I would have ever thought would be possible.
Andrew: So $5,000 over the first two months, third month $25,000, fourth month $60,000, fifth month $90,000?
Mike: Yeah.
Andrew: That’s incredible. And this is profit or revenue?
Mike: No, it’s profit.
Andrew: That’s profit.
Mike: Yeah, for $90,000 profit I was probably doing $250,000 revenue a month
Andrew: Okay. What was that original product that you were selling?
Mike: The original product was a product called, “Truth About Abs,” that a friend of mine, Mike Geary, created and is still selling really well. It’s a fantastic business for him.
Andrew: “Truth About Abs.” So this was an eBook?
Mike: Yes, it’s an eBook.
Andrew: And it was teaching people how to really get ripped abs, I guess?
Mike: Yeah. How to get in shape. It’s great information. I have a little bit of a fitness background myself. I was a personal trainer part-time for a while, and that’s what kind of got me started in the whole fitness website and what got me interested in promoting fitness products as an affiliate. So it’s a great eBook. It’s actually really some great information.
Andrew: I remember even in our private conversation I asked you is this BS, and you said, “No, no I know the guy. This is good stuff.”
Mike: Yeah.
Andrew: So how were you promoting it? Was it something about the way that you wrote your ad in Google AdSense that got you so much traffic? At first, I mean the first month or two.
Mike: The first month or two, you mean as I was trying to scale up? I mean I certainly looked at what ads were performing already. I looked at what ads were showing up, and I don’t know if I ever copied an ad exactly, but I definitely modeled my ads off of what was already working and just started. I bought an eBook by Perry Marshall called “The Definitive Guide to AdWords,” or something like that. He’s sort of like an AdWords guru to teach you how to do Google AdWords, and he has all these info products.
I read that book before I got started, and my main take away from that is you just need to split test ads. So I just started split testing ads, and I found some ways to . . . I was pretty familiar with the fitness markets, so I kind of understood, I had a pretty good knowledge base as far as to expand keywords, which is kind of important. I mean you need to understand how you’re going to reach the market. With fitness, it’s probably easier than some other markets because it has such a wide appeal. You don’t necessarily have to be on a fitness site to sell a fitness product, because half of the population probably at any given time might be interested in that product.
Andrew: So you learned from the way that other people were writing their ads. You went and you didn’t copy them, but you followed their model. You split test your ads and you knew what keywords to bid on because you were familiar with the space and you might have found some long tail keywords, is that right?
Mike: It’s a little bit different with contextual advertising. So when people talk about surge, they often talk about the long tail keywords. You have to find these sort of obscure keywords that not a lot of people are bidding on. With contextual advertising, Google requires you to come up with what’s called a keyword theme for an ad group. It’s a group of keywords that determine how they’re going to match whether or not your ad shows up on a page.
Andrew: Okay.
Mike: So you’re not actually bidding at the keyword level. You’re creating what they call ad groups and bidding based on those ad groups. Also you can do placement targeted campaigns were you can just say I want to show up on this site and here’s my bid for this site. So it’s a little different, but the idea of the long tail I would say, yeah, it’s kind of still the same. You want to try to, I would call it, you want to go laterally. You want to try to find things that are related to your market but may not be the most obvious keywords.
If you’re trying to sell a book about abs, to get that kind of traffic, you need to think way outside of abs, stomach, all these really targeted keywords to that. In fact at first, that’s what I was doing. I thought I needed to basically stay really focused around the topic, and I created just a few ad groups and that was enough to give me some traffic. It proved out that the product was going to work, but then to scale out to large traffic volumes you really have to think laterally and try to find other ways to get traffic that may not be so directly related to the product. You have to just experiment and see how far you can push that. Really is what it comes down to.
Andrew: What’s an example for the this product of a lateral set of keywords that you would use?
Mike: I might just think of what are people reading about if they’re dieting or they realize that they want to lose weight, probably carbs. So I might bid on words that were related to carbs, carbohydrates. And then I might try to get some more obscure words that are like specific carbohydrates, or something crazy. The idea is just basically, just try and see what you’ll get traffic on and then evaluate that traffic and see if it’s working for you. Is it converting at the cost per conversion goal that you need to meet? And if it is, it doesn’t really matter what the words are.
In fact, a lot of times I don’t even know what words. Lately, and even back then, I got very quickly into using a lot of automated scripts to help me create campaigns, and so I wouldn’t even know what words were in the campaigns that I uploaded often. There would be some input to these scripts that would of course result in a bunch of keywords and a bunch of ad groups. So I had some input on the front, but the end result I wouldn’t even know what I was uploading. I didn’t really care as long as I got traffic on it. I would evaluate the traffic, and I would see if it was profitable. I would keep it if it was, and if it wasn’t profitable, I would turn it off.
Andrew: Okay. What’s your background? What were you doing at Intel?
Mike: I doing manufacturing process optimization, which surprisingly is actually, in my opinion, is pretty similar to what you need to do to be good at pay per click.
Andrew: How is that?
Mike: You’re evaluating a lot of variables in a manufacturing process and optimizing for an end result. And with pay per click, the variables are totally different, but there’s all these different variables that come into account and you have to optimize for all of them and you’re optimizing for profit. You learn a lot about statistics, as an engineer, and there’s a little bit of that that helps to understand when something is statistically significant.
Not that I do any formal testing with my advertising, but I know enough to know that . . . say a product’s going to pay out $30 and I’m trying to evaluate a traffic channel. I know enough to know that if I lose $30 on that traffic channel without a conversion, it doesn’t necessarily mean I want to turn it off. Maybe the true cost of the conversion for that traffic channel is $20 and it’s profitable, but maybe I don’t see a conversion until I spend $60 or $70, just by chance. Then maybe I get three conversions all in a row, very quickly.
Andrew: I see.
Mike: So knowing just really basic stuff like that about things like statistical significance. Just coming at it with an engineering mind set has been helpful.
Andrew: How did you learn how to write the scripts?
Mike: I didn’t write the scripts. I learned about Elance and I learned about all these outsourcing sites. The first time I ever hired anybody to do anything online was actually a script to create ad groups. I basically wrote down what I needed. I explained with different Excel files and uploaded the whole project to I think it was Elance at the time and found somebody in India that did it. From there, that gave me the confidence that I could create more complex scripts, so I continue to do that.
Andrew: What was the first script that you had them develop? By the way, if you see me looking down, it’s because I’m an obsessive note taker. I want to make sure to hit all the details of this conversation. So when you say something that I know I need to dig in deeper later, I write a note about it here to come back to it. So what was that first script?
Mike: It was literally to create a bunch of ad groups from a group of a big set of keywords, automatically. So it would have to take the first ten keywords and put them into one ad group and take the next ten and put them into another. It’s something I was doing in Excel and spending probably hours a day doing it manually. So that was one of them.
The other script was to get keywords from the Google Keyword Tool, in an automated way. At the time I was querying, putting in single keywords into the Google Keyword Tool, and then downloading the results from that, which was like 200 keywords, putting them into an Excel file, and repeating that like hundreds of times. And literally doing that for hours at a time. And then going through manually in Excel and trying to break these up into ad groups to create the campaigns. It’s just very time consuming, and there’s no reason that it can’t be automated and it should be automated.
Andrew: Okay. When you’re going from $5,000 over two months, to $25,000 in revenue in your third month, is that just working the system that you discovered in the beginning? Did you do anything different to make that big of a leap? I guess that’s what I’m asking.
Mike: I think at that point I was working harder and harder. I was spending basically every waking hour I had outside of work creating these campaigns and analyzing the data and just trying to scale it out. I think what took me from $25,000 a month upwards was automation and getting scripts created for things that I needed done quickly and that sort of thing.
Andrew: Was it all still with the same product?
Mike: I started selling another product in addition to the first one, so that also was a big part of that.
Andrew: Do you remember what that was?
Mike: That was a green tea CPA offer. So it was like a diet green tea CPA offer. Yeah a CPA offer on one of the CPA networks.
Andrew: Wasn’t the abs one CPA too? CPA, cost per action, you get paid whenever you make the sale, right?
Mike: You can consider any of that stuff CPA. But most people consider Clickbank to be cost per sale, because typically it’s always a sale. So when somebody bought that eBook, they paid out $40 immediately. With a lot of the CPA offers, they’re not paying out the money immediately. Maybe it’s like a trial that then converts to a monthly subscription.
And so the owner of the offer, they know what their numbers are, they hope they know what their numbers are, they offer a front end payout because they know they’re going to make the money on the monthly subscription. Cost per action can be anything. It can be filling out a lead. It can be a sale, it could be signing up for a free trial, downloading a tool bar, whatever.
Andrew: That tea offer, if I remember right, I think what they did was they said you get the first one free, plus a few bucks shipping and handling, and then every month after that they were going to send you more tea and charge you for that at full price. I think it was something like that.
Mike: I actually don’t even remember now what the terms of that offer were. Certainly there was monthly rebill involved. It was very expensive tea, probably $60 or $70 a month to get this tea. But I don’t remember actually how the front end of that offer worked.
Andrew: Okay. All right. What’s the next step here? What’s the next thing you did?
Mike: I quit my job. I did pretty well for the next three or four months and continued doing the same thing. Then the market started changing and some of the offers I was able to make money with previously weren’t really working anymore. At the end of 2008, I kind of took a break and didn’t really do any advertising for a while.
In early 2009, I started developing some software that we’ve still been developing over the last 18 months or so. It’s related to all this, and it’s basically competitive intelligence that allows me to see what’s working on the different ad networks. I’ve been using that privately over the last year or two. And that’s what is eventually going to be sold as a product.
Andrew: To automate a lot of what you were doing manually at first and then what you cobbled together lots of different solutions for?
Mike: It’s to automate the process of finding what’s working.
Andrew: Let’s talk about that. How did you find what worked?
Mike: Like I said, I was sort of familiar with what was going on, on all these fitness sites because I was basically browsing fitness sites for probably an hour a day just looking at how different site owners were creating their sites and what they were doing to monetize their sites, because I was building my own fitness site at the time.
I was just seeing ads constantly. At the time, that’s how I picked the first product. Now there’s all sorts of different things. There’s these sort of aggregators of affiliate offers that will tell you what networks you can find different offers on. There’s a site called OfferVault.com. That won’t really tell you what’s working, but it will tell you what offers are out there, and then you can do a little bit of investigating to see if you can figure out if it’s working.
Some things, if you don’t have software like we’ve developed, you can . . . some things that are tell-tale signs I would say if an offer has been running for a while and has a good Alexa rank, meaning a low Alexa rank, and I know Alexa is not the best measure and there’s all these problems with it, but still if the website has a low Alexa rank, it’s getting a lot of traffic. Usually, if it’s getting a lot of traffic, there’s a reason for that.
It’s because affiliates have figured out it’s converting well. The site owner is able to buy traffic in large amounts because it’s converting well, whatever. It basically boils down to the offer is probably converting pretty well. So that’s one way. But that doesn’t really tell you where the traffic is coming from.
To know whether or not you can promote it using certain methods is a little harder to figure out. There’s not an easy way to figure out if it’s running on a particular ad network, other than browsing the ads and trying to find ads. But at that point, even if you find an ad, you don’t know the history. Was it running yesterday? Was it running a month ago? If you find an ad today, that ad could be losing money.
Andrew: What you’re saying is there’s a lot of aggregators like Clickbank that have many offers that you can get a commission on. But what you’re trying to figure out is which of those offers work and what you should just ignore? One way that you’re figuring out if the offer works is by checking out the offer’s Alexa ranking. If they do well on Alexa, then it means that they’re getting a lot of traffic. That’s what you’re trying to figure out here.
The next step is a little bit harder because you’re trying to say, “Okay, it’s doing well on Alexa. Where are those affiliates buying traffic? Where are they placing those ads that they’re sending to the sites that are doing well? To those successful affiliate programs.”
Mike: Yeah or does it even work with advertising? Some offers just don’t work that well with advertising for whatever reason. Maybe more of the traffic is coming from SEO. Maybe it’s coming from a large partner site. So you don’t really know.
You could use a tool like Compete.com, which would tell you where different referral sources are coming in. It’s an pretty expensive tool. It’s $500 a month, I think, for their referral analytics. That still doesn’t really tell you if people are buying advertising necessarily or what ads they’re using, what ad networks they’re buying traffic on, that sort of stuff.
Andrew: So how do you know where they’re buying ads?
Mike: Well, you don’t. That’s the product we’ve developed.
Andrew: How did you know? As you evolved in this business, what kind of systems did you work out?
Mike: One of the things I did was I specialized in Google Content network traffic. I bought traffic on Yahoo. I bought traffic on MSN. I’ve bought banner ads directly from sites and that sort of stuff. But if you have a large enough traffic source, it’s not really even necessary to figure out if it’s working on other traffic sources.
So kind of what I did was I specialized in the traffic source first, I would say, which was Google Content. It’s gotten harder to use Google Content for affiliate advertising over the last year or so. So it’s not as easy to do now, but there’s certainly plenty of affiliates running affiliate offers on Google. I kind of specialized in the traffic source and then tried to find offers that were already working on that traffic source.
Andrew: I see. So you’d find a big website that was running lots of ads, and you said, “What ads are running here over and over again?”
Mike: Yeah.
Andrew: And then you’d go back and get those affiliate programs, and you’d run them on the same site?
Mike: I wouldn’t even know. Sometimes I would see an ad. I would basically figure out if that ad was an affiliate ad. I would click through to the website. I would scroll to the bottom of the website. Do I see an affiliate link? I would search something like OfferVault.com, I just mentioned. You can just put in the name of the product, and it will tell you if it’s an affiliate offer. Then I would figure out that way what was running.
Sometimes I would do it the reverse way. I would go to something like OfferVault or Clickbank, and I would look at what products were in the marketplace or what affiliate offers were available, and then I would just browse related websites and see if I could find ads for those products.
Andrew: Could you give me an example of one of the content sites that you were looking at? What site would you go to, to figure out what ads were working on there?
Mike: One of the easiest tricks to find ads in a lot of different markets would be to us an article site, because they have articles on every topic. So you can stay on the same site and just look at different articles on different topics and then see what ads are showing up next to them.
Andrew: Can you give me an example of an article site?
Mike: Well, EzineArticles is a big one. That’s probably the biggest one, but almost any article directory. One problem with EzineArticles is that it’s such a high traffic site that if that site is not working for an advertiser, they’re going to know it and they’re going to turn it off very quickly.
So even though a product may be out there in the marketplace and selling really well through these sorts of ads, the person doing the advertising may have already weeded out EzineArticles as a bad site if it’s not converting well for them. So because it’s such a high traffic site, I don’t know if that’s the best site, but almost any article directory. There’s just so many article sites. Search for top 10 article sites on Google.
Andrew: So we search for top 10 article sites on Google. We come up with a site that’s similar to EzineArticles.com. We click around through there, maybe through the health section. We start to see over and over that it’s not green tea bags that are being sold, but green tea bag extract or green tea pills. Those we see over and over. So we say, “All right. Is this an affiliate program?”
The way to find out if it’s an affiliate program is to go to a site like OfferVault, and if OfferVault shows that it is an affiliate program, then you sign up for their affiliate program and you try running that ad where? Do you run it on the exact same place where you saw it, because if it worked for them then it will probably work for you? Or do you have to go somewhere else?
Mike: Well, you don’t really know if it’s working unless you track it daily for a month.
Andrew: A month? You need a month minimum of testing?
Mike: It depends on how high traffic the site is. If it’s a lower traffic site, it may take you well over a month to figure out if it’s working or not.
Andrew: But you don’t have that kind of time. So what do you do to speed up your learning? Do you run the ad on multiple sites? Is there something else that you do?
Mike: I wouldn’t necessarily start with where I found the ad. I would start with ad groups. I would just launch a campaign and look at my own data. I’d be willing to spend some money to see if it’s going to work.
Andrew: Gotcha. So if you found the ad on EzineArticles or some other article site, you wouldn’t go back necessarily to that site. You would just say, “All right. I’m going to go buy ads on Google. I’d buy AdSense ads. Test them out big. See what happens. If it works, continue, go even bigger. If it doesn’t, kill it quickly.”
Mike: Right. If it doesn’t, I would kill it quickly unless I have evidence that something I’m doing is not right.
Andrew: What do you mean by that?
Mike: Well, if I’m still seeing this ad everywhere, say I’m browsing the Internet every day for an hour, and I spent $300 bucks and I got $150 in return on commissions, and I cut that test because it just seemed like it wasn’t . . . actually that’s probably a bad example. I wouldn’t cut that test. If there’s $150 that was made within that $300, chances are I just need to figure out, where the right sites were that were converting, and that’s probably going to end up eventually being a profitable campaign. What would be a bad test would be, I spend $300 and return maybe $50 or $30.
Andrew: Okay.
Mike: So if that happened, which that’s happened before, but then I still saw a product. It was showing up everywhere. So then I have to revisit what I did and say something I did isn’t right. People are paying for ads. If the ads are showing up, they’re making money. Nobody’s crazy enough to leave ads up for weeks at a time if they’re losing money, unless it’s a brand advertiser or whatever. If it’s somebody, an affiliate marketer, it’s a good bet they’re making money if the ads stay up. So I would then reevaluate what I did, and I would say, “Okay, maybe I’m approaching this wrong. Maybe the keywords that I started a campaign with are not right. Maybe they’re too direct, or maybe I have the market pegged wrong. Maybe I need to understand more about who would really buy the product and use keywords that are going to be tailored more towards them, whatever.” I would just reevaluate it and I would spend some more money and try to figure out what happened and try to make it work.
Andrew I see. Okay. You’re not writing the landing pages. That’s all being given to you by the affiliate program, right?
Mike: I prefer to just buy traffic and send it directly to the site that owns the offer. I’ve done intermediary pages, a landing page in between and that sort of stuff. I’ve never had huge campaigns that ran my own landing pages. There’s not a good reason for that, although there is a lot of affiliates that will tell you that they get way better results running landing pages. I think I’ve found something that worked on a pretty large scale, and I’ve been a little bit lazy maybe and just haven’t gone down that road, really investigated it fully.
Andrew: I see. Jeremy Shoemaker told me that what he would do is if he had a free offer to give out, one that he got paid for once people upgraded to a paid version of the program, what he would do is . . . in fact, let me give you a concrete example. He said Netflix, he got paid every time he got someone to sign up for Netflix even if it was just for the free trial account. So what he would do is he would say, “Okay, what sports teams are hot in this local market that I want to target? All right. If it’s New York, maybe it’s the Jets. I’ll do an ad about Jets trivia. Can you answer these questions about the Jets?” People would click over, they’d answer the questions and then he’d say, “Congratulations, you won free Netflix.”
Mike: Right.
Andrew: And he found that that got better conversions for him then just sending traffic directly to Netflix. You don’t even bother with that. You’re just really good at finding the right offers and finding the way to get traffic to them.
Mike: Yeah. I mean, it’s just a question of focus and preference, really.
Andrew: Okay.
Mike: No, I won’t say I haven’t tried to do that sort of stuff. I’ve developed some quiz landing pages, something kind of similar to what you’re talking about. The quiz style landing page can work really well. There’s absolutely examples of people running those landing pages right now, for sure. But I just haven’t really focused on it because I’ve done well sending a lot of direct traffic. And I kind of decided in early 2009 that I was more interested in learning how to build a software business then I was, like, really trying to be better at doing the affiliate marketing stuff.
Andrew: Why is that? Why did you decide to stop something that was pumping in so much money?
Mike: Well, I didn’t completely decide to stop it. I’ve still been doing affiliate marketing in 2009, and I did pretty well this year also. But I’m just not that focused on it. I think if I was focused on it, I think I could make a lot more money than I’ve made. I don’t know. I guess I’m an engineer at heart, and I miss the idea of a technical challenge and building something challenging. I think that’s part of it. I also see software as . . . the skills that I’m sort of developing, the team that I’m putting together to build this product out, I could see us going on and building something even bigger later. I think, with affiliate marketing, it’s hard to . . . you can make a lot of money and there’s a lot of people making millions of dollars a year, but unless you really build out something more substantial, it’s hard to make more than maybe a couple million dollars a year, I think. So, I don’t know, just the thought of a bigger business and building something that requires more people. Also, affiliate marketing is actually a pretty lonely business a lot of times. The kind of work I was doing in 2008, this sort of buying traffic and sending to offers, it doesn’t really require interacting with anybody else, and you do it at home in front of your computer. It’s not really an ideal sort of way to spend your day. I don’t know. I enjoy now talking. I have a development team I deal with and I talk to regularly. It’s just feels like more normal to me than just looking at numbers all day and trying to make affiliate offers work.
Andrew: If you were, in fact, I know we are, talking to some amateurs right now in the audience who are listening to your story who are saying, “Hey, you know what, I would just love to just work by myself in a room. Let the world just leave me alone for a few hours a day at least, if not for the whole day.” If we take that amateur and say, we’re not going to make them as good as Mike, but we’re going to make them good enough that they’re profitable. Can you walk them through it right now? What’s the first thing that somebody who has this going on in their head needs to do?
Mike: They need to get familiar with what’s available to promote.
Andrew: Okay. How do they do that?
Mike: They need to spend hours on a site like Clickbank. They need to spend hours on a site like OfferVault. And they need to really start to understand what is out there and how people are making money, and then they need to go start investigating and seeing what ads are showing. And they need to click through and they need to sign up for e-mail lists and see how people are promoting through e-mail to make . . .
Andrew: Let’s break this down. Let’s give them a step by step, if they want to follow your lead. So first step, you’re saying, is go to Clickbank, spend a few hours looking at all the offers that are there. What are they going to be looking for? Are they looking for patterns of offers that keep coming up? I think Clickbank says which offers are doing especially well, right?
Mike: Yeah. So let me back up.
Andrew: Okay.
Mike: I mean, somebody who is not at all familiar with anything in affiliate marketing, I would say a big source of my kind of knowledge when I was first starting out came through online forums. So there are forums out there that are specifically around Internet marketing, making money and creating the web . . .
Andrew: Like which ones? Let’s give them some of those?
Mike: I started at a forum called Digital Point, which a lot of people say is now it’s pretty low quality forum, low quality information. But that’s where I started. And I learned a lot about Clickbank there and just learned about different markets.
Andrew: Okay.
Mike: So I started there. Warrior Forum is another one.
Andrew: Okay.
Mike: There’s a forum called WickedFire.com. That’s another one.
Andrew: That one’s infamous, isn’t it? That’s the one where people talk about some of the evil techniques that they use, right?
Mike: I don’t know if it’s necessarily so evil, but it’s definitely got a very unique flavor to that forum, so it’s not a place where I really participate in the forums there. But there is a lot of high level people there, a lot of good information. There’s a lot of junk you have to wade through also. I mean, you’re going to spend a lot of time wading through a lot of junk and a lot of . . . I don’t know how else to put it. A lot of people asking questions and not a lot of real information, but the nuggets that you’ll find are enough that if you’re motivated, they are enough to get you started in the right direction.
Andrew: I’ll say this, by the way, to the founders of any of those forums, if you want to come here and do an interview, I’d love to have you on. How does my audience know what’s junk and what’s meaningful in those forums? How could they figure out what they should be listening to?
Mike: That’s a tough question. I don’t really know how to answer that.
Andrew: Okay.
Mike: I guess this is what I do. So when I don’t understand anything about a topic, whether it’s affiliate marketing or anything else, I read and I read and I read just incessantly for months on end. I don’t want to minimize the effort involved in trying to get your head around all the markets and understanding what’s going on. I mean, it took me many months of constant reading. If you read enough, you start seeing patterns, right? And this happens with anything. I’ve done this in almost anything I’m trying to learn about. I pick the four best books on the subject and I read all of them and I sort of look for the overlapping parts. What’s the common theme through any of it? And we do the same with forums. And it takes a lot of time. It’s not like you can just read a post and tell whether it’s B.S., right? You need to read a thousand posts, and then you may have a shot at figuring out if one of them is B.S. You know what I mean? I mean, you need to . . .
Andrew: Okay.
Mike: I don’t know. You just have to get experience with what everyone is saying and sort of try and reconcile it.
Andrew: Okay. Fair point. And I’m sorry for going so granular on this. I should probably take a step back and talk bigger picture, but let’s continue with this because I think it’s useful for understanding the process. First step, go into the forums, read as much as possible, get completely absorbed in them. If after a week of doing this intensely, you’re not into it, then this business is probably not for you. If you think the whole thing is too boring, too small, too . . . I don’t know. Right?
Mike: I don’t know . . .
Andrew: Because you’re saying they need to spend months. If after a week it doesn’t . . .
Mike: I’ll tell you. I mean, honestly, when I was first starting and learning about the Internet and everything . . . a lot of people that are watching this are going to be far more advanced then I was when I first started, right? So I really didn’t know anything about the Internet, how keywords worked. I don’t know. I just didn’t understand how people were making money on the Internet at all. And I mean, I probably spent three to six months reading before I could really start to say, okay, some things are starting to make sense. I understand there’s these paths to make money. Some people create sites, then they sell advertising against their site. Some people buy pay-per-click ads. Some people buy these other type of ads. Some people promote these offers. Other people promote these. I started to understand the whole ecosystem. And I don’t think you can really be . . . it’s just going to be luck if you’re successful before you understand kind of the bigger picture on how people are making money and what markets are working and that sort of thing. I think it takes time. I don’t think a week is enough time.
Andrew: Oh, no. What I was saying is if after a week you’re fed up with it and it’s work and not something you’re interested in, then you should give up because it is going to take time.
Mike: It is work.
Andrew: Right. It sounds like it.
Mike: Yeah. It takes work to get into it and to figure out how things work. It takes a lot of reading. It took me a lot of reading.
Andrew: All right. What’s the next thing? First thing, they go into the message boards that we talked about. Next step is they go to the aggregator sites, like Clickbank, and they look at what offers are there. Next step after that is to look at sites that run a lot of affiliate deals, like some of the Ezine sites that we talked about.
Mike: That’s one way to do it. If you’re starting sort of from the top with the offer, you could pick the offer and then kind of go look and see if it’s showing up anywhere with ads. But I mean, unless it’s a really popular offer and it’s working, you’re just going to spend a lot of time finding nothing really. So it’s really more from browsing the sites you may find things. You need to get really good at spotting what an affiliate ad looks like. I don’t know how to describe this, but I mean, I can tell you an affiliate ad from a mile away. I mean, it’s just something . . . some of it is the wording, some of it may be the domains. They are going to oftentimes not use a dot com domain because they can find cheaper domains that are kind of expendable. Maybe I can’t tell directly from the ad, but as soon as I hit the landing page, I know if it’s an affiliate or not. Whereas, most people, it’s not going to be immediately obvious. But once you get into the business more, you’re going to know. So you need to get familiar with that so you can spot things and you can figure out how people are making money.
Andrew: Okay. So they do that. I can see that there’s certain signs that an offer is an affiliate offer. They start to pick up on those. It’s time now to buy their first ad. Maybe spend 20 bucks the way that you did and experiment with one ad that they think is going to do well and do it through Google AdSense because it sounds like that’s the best place to get started?
Mike: I don’t know if I would say that now. Google can still work. It’s a little tougher now.
Andrew: Okay.
Mike: They’ve really sort of kind of come down on the whole affiliate marketing model. It’s hard to say exactly what they think about it. Basically, a lot of affiliates have kind of upset Google by being a little too over the top with their marketing, and so it’s tougher to get things to work on Google right now. Maybe MSN or Yahoo, possibly, would be better places to start. You can negotiate a direct buy on a small site, like a direct banner buy.
Andrew: Okay.
Mike: So if you think you understand the offer a little bit, you think you’ve figured out an offer that’s converting well, you could check QuantCast for demographic information for a site to figure out if that site has a lot of U.S. visitors or is primarily U.S. visitors. Say, for instance, the offer is only a U.S. based offer, that would be important. You could go and just do a small banner buy on a site. It may only be for a really low traffic site, maybe $50 a month, and you could start that way.
Andrew: How long of a test, how expensive of a test do they need to do?
Mike: In general, it depends on your budget, but I would spend at least twice the offer payout before you determine if a traffic source is working. But when I say a traffic source, I don’t mean . . . Google AdSense is a traffic source, right? I mean, this site on a Google network is a traffic source. So if you’re spending $50 or $100 on traffic and it’s spread out over 200 sites and you haven’t spent more than three bucks on a single site, you really don’t know anything at that point.
Andrew: I see.
Mike: I don’t want to say you don’t know anything, but it’s hard to say. There could be plenty of sites in there that work. You know what? I’ll tell you this. This is one thing that’s kind of amazed me. Even with an offer like a diet offer, it’s probably the most widest appealing offer that you can possibly come up with, even on an offer like that, I would see differences in conversion of a factor of 20, between the best sites and the worst sites. So one site might be converting at a $5 cost of conversion, and another site might take $100 to get a conversion.
Andrew: I see.
Mike: Even for an offer that should appeal to everyone, right, but the sites, there’s such a very different profile of people that are on the sites. So that’s a huge thing. And also with your ads, an ad can make a factor of 10 difference in conversion. So when you look at those things and how they multiply together, if you’re off on one of them, or you can have an offer that really works, but you just haven’t found the right combination yet. So you need to spend a little bit of money if you’re going to be spending it on a lot of sites.
Andrew: How much if they’re spending it on one site? It sounds like that’s the best advice.
Mike: Twice the cost of a conversion. So twice what you’re going to get paid out, you know what I mean.
Andrew: I see.
Mike: So if you’re going to get paid out $30 on a conversion, I would spend $60 before I said, “Okay, this probably isn’t a good site.”
Andrew: I see.
Mike: But if your budget’s really limited, you could cut that to $30, but just know that you may be leaving a site that could possibly be a profitable site. You just haven’t given it enough time.
Andrew: I see. All right. Do I have any other questions here? Is there anything else that they need to know about the process before we move on?
Mike: I don’t know. I think that’s about it. There’s a lot more. I would say start with the forums. Try to learn. Go to an event, like a conference, and try to meet people and talk to people. People will naturally want to share what they’re doing or what they’ve heard. Like I’ve said, it’s kind of a lonely business, so people a lot of times talk more than they should about what’s working and what isn’t. So you can talk to people and meet people in person and see if you can get more information that way. That’s another thing.
Andrew: How excited were you when this was starting to happen to you? And then you couldn’t have talked to everybody about it. You can’t go to the tech blogs and say, “Hey, guess what I’m doing online?” What was it like when you hit your first million?
Mike: It was absolutely amazing.
Andrew: Do you remember the day?
Mike: When I’d done a million in revenue, I was still working at Intel at the time.
Andrew: Okay.
Mike: And I just couldn’t believe it. I should also mention that I was $100,000 in debt when I started this whole thing, so it was life changing. Not only was it life changing because it’s just a lot of money, but it completely wiped out an immense amount of stress. That was all from a bunch of bad real estate investments. So it was completely life changing.
Andrew: Did you end up buying something for yourself afterwards?
Mike: Not really. I spent a lot of time traveling. I’ve probably traveled four months out of every year for the last three years.
Andrew: And working while your traveling?
Mike: Sure. I always have my laptop. It’s not that big of a deal to check in online for a few hours at a time.
Andrew: What kind of traveling? Where have you been?
Mike: I’ve spent a lot of time skiing. I spent a couple months in Breckenridge in 2009. I spent about a month in Park City earlier this year. I was in Italy earlier this year. I’ve been learning how to kite board this year. I spent some time in the Dominican Republic, some time in Miami.
Andrew: When you’re in Miami, are you in a nice hotel? Are you going to the Ritz in Miami, or are you just staying at any old hotel?
Mike: In Miami, I was actually at a really nice hotel.
Andrew: Okay. What kind of hotel? I want to know what the life is. If all I do is leave people with the sense that, it’s work, it’s work, it’s work, which is what I focus most of these interviews on, it really just seems like, who the hell wants to work? I should just go find the four-hour lifestyle and forget about all of this.
Mike: In Miami I was in probably the nicest hotel I’ve ever stayed at. I was staying at the Setai there in Miami.
Andrew: What’s that like?
Mike: It was absolutely amazing. I don’t know. It was fantastic.
Andrew: What specifically? Can you give me a few details that made it so amazing?
Mike: I don’t know. You know what? It was the first time I’d ever stayed in a high-rise. It was like on the 25th floor, but I felt like I was living there because it was more like a condo, like owner-owned. I try to book all my travel through VRBO. I love VRBO. I just want to say that to anybody who hasn’t used them. Especially if it’s a week or longer, I try not to stay in a hotel. I try to stay in a condo that’s owned by somebody. It was just fantastic. It had a view of the beach. Great balcony. Really decorated, just awesome. It was great.
Andrew: Okay. Vacation Rental By Owner. I used them in Argentina. It was just great. In fact, even Olivia’s mom, instead of going to a hotel, she just wanted to stay a week in Argentina. She went to VRBO. I think that’s what it is Vacation Rental, VRBO.com. She ended up with this beautiful place. I don’t even know how to describe to you what made it so beautiful. If I describe the details of it, it will sound like any old hotel. But it was way better. A much better experience. And she was in the heart of the city, going to the kiosk across the street to get wine or to go to the empanada store next door. It was a much better way to experience the city. All right I’m back here on my notes to see what else I wanted to talk to you about. A few weeks ago I had a guy named Rob Ross in here on Mixergy to talk about how he made money in affiliate marketing and people ripped into him in the comments.
Mike: I know. I saw that.
Andrew : Are you one of the people in the business who said, “No, no. I’m in. I’ve seen this.” So, you’ve seen this stuff before? You didn’t just believe. You said, “Andrew, what he said, was not that outrageous.”
Mike: Yeah. I don’t know Rob. I have no reason not to believe what he was saying. It’s not out of the realm of possibility for a top affiliate in a big market to make $100,000 a month profit. That only happens in the biggest markets, but it’s totally possible.
Andrew: What do you mean by the biggest markets? What’s a big market here?
Mike: Diet, business opportunity, financial markets . . . I’m drawing a blank but those are all huge.
Andrew: Now he told me that it’s just not possible anymore. That it’s a business that’s short lived. You go in there, you make a lot, but you can’t really build a brand for yourself. You can’t really build a following. You can’t build anything. You’re always starting, not from scratch, but you’re always fighting as if you’re starting from square one.
Mike: So I would basically agree with that. I didn’t mention that before, but that’s also part of the reason why I decided to put a lot more effort into building a software business because I feel like all the effort that I spend is creating an asset and it’s something that I can eventually sell. It would be impossible to sell the affiliate marketing business I have. My income can fluctuate wildly from month to month. I’ve gone from making over $100,000 in a month to within another month or two to not making anything, because something happens with the traffic source or with the offer. So it’s really emotionally up and down. You feel like you’re on top of the world for a while. By the way, when I was staying at the Setai, I was doing really well. So I tend to spend money and I feel like I’m on top of the world. But then, a few months later, I’m probably not going to be staying at as nice of a hotel if things aren’t rolling along really well. So it’s just really up and down. That I don’t like about it either. Luckily the ups can be very up, so, it’s not a big deal if you don’t make any money at all for a few months. But it’s just not the best way to have a business.
Andrew: So tell me about the software you’re building. AdBeat is in beta. What is it?
Mike: Yes. It’s a competitive intelligence tool. So if anybody’s familiar with software like KeywordSpy or SpyFu, it’s kind of in the same ballpark as those. They sort of monitor search based ads. We’re doing the same thing with really high quality of data over many different websites and monitoring contextual and banner advertising. So we plan to eventually cover probably 30 or 40 banner networks or ad networks and hopefully 50,000 to 100,000 websites. So right now we’re in that process of scaling up. The product works as it is. It’s pretty amazing if you get in there and use it and this is your business.
Andrew: Who is your target user?
Mike: Affiliate marketers, ad agencies, in-house advertisers looking to understand what their competitors are doing. If you give me the website, I can basically tell you what your competitor is doing, where they’re buying advertising, what networks they’re buying ads on, what ad copy they’re using. You can even watch them split test ads oftentimes because we’ll pick up when they launch three or four new ads together. You can see them turn off the ads that weren’t working, and the ad that is working stays running. It’s valuable information.
Andrew: Interesting. I see. So if I’m in the shoe business, and I want to spy on Zappos, I can see what ads they’re testing, where they’re testing them, which ones failed, and what language worked for them.
Mike: Yeah and you can oftentimes get information about their whole campaign structure, try to understand how they’re getting more traffic to the site. Some sites will use thousands of ads. A site like Business.com, I don’t even know how many ads, but they have probably 5,000, 6,000 or more unique ads running on Google Content right now. You can basically understand their entire advertising strategy. It’s something that if you’re starting from scratch, will take you a lot of money and testing and a lot of time. And it’s a way that you can jump start yourself into a market. If you’re an ad agency, you can perform better for your clients by understanding the market better.
Andrew: I see. Is it useful for someone like you? How would an affiliate like you use it?
Mike: They would use it like how I described to you at the beginning of this call, except it makes it much easier to find what’s working. You can log in, do a keyword search for . . . say you want to know what ads are using the word “iPad” in it. So you can search for “iPad” and we’ll return all the ads that are currently running on Google Content that use the word “iPad.” Immediately you can look and sort through these ads very quickly and figure out who’s running what and pick out things that may be an affiliate, understand more about their advertising strategy. It eliminates all that time consuming browsing the Web and still just getting partial data. This gives you very exact data in a short amount of time.
Andrew: Wow. I’m looking at the site right now. I’ve got it here in front of me. The one thing that stands out for me is, this isn’t a very slick looking site.
Mike: No. It’s not really. It’s sort of in a private beta. I haven’t been advertising the site, so it’s not really ready for prime time. The product itself, on the back end, is working well.
Andrew: It’s a web app, right? It’s not a downloadable product?
Mike: Yeah, absolutely. It’s a web app.
Andrew: Is this WordPress that you’re running it on?
Mike: The main site is WordPress.
Andrew: The main site is WordPress. I suggest getting a WuFoo theme. You know how they have those themes that look like a Y Combinator product launch page with a big, shiny picture of the product, a big headline that explains what it is, areas on the bottom where you can highlight the features.
Mike: I actually have all the design done, I just haven’t put it up yet.
Andrew: Oh I see so you do have the design done. Where did you get the design done? Someone on Elance?
Mike: Someone I got recommended through a friend, out of Canada. A designer in Canada.
Andrew: That’s probably better. So let’s take a look here. I go to the site. I go to AdBeat.com. There’s a sign up page. Gotcha. Beta membership is $0 bucks?
Mike: Yeah. There’s no fee. It’s free right now.
Andrew: So if I go in there, I get to use this for free?
Mike: Yeah you can sign up right now.
Andrew: Forever?
Mike: No. Until we’re done with the beta?
Andrew: I see. You just want people experimenting with this for now?
Mike: Yeah sure.
Andrew: Gotcha. All right. I kind of feel bad the way that I did this interview. I probably should have brought this up in the beginning of the interview. Just because I think some of the questions that I’ve asked here are going to turn off my more advanced audience. My more advanced audience doesn’t want to know about wizard forums, doesn’t want to know about Clickbank. They hear Clickbank they go, “What the hell’s Andrew talking about?” It’s going a whole other direction.
Mike: It’s funny because I’ve made millions of dollars on Clickbank in revenue. I’ve probably done a substantial amount of money in a few years on Clickbank. So people are turned off by Clickbank, but there’s certainly money to be made there.
Andrew: Not only that, but I just don’t think we should be turned off by anything if it really works. If you were a charlatan, a huckster who was trying to sell a method for doing this, then there’s a reason why my audience should be skeptical, there’s a reason why my audience should maybe turn away from this. But if you’re teaching them what really worked, even if they’re not going to be affiliates of Clickbank and even if they’re not going into these forums, they should understand how the whole process works and maybe bring those ideas into their own business. They may be building a business for enterprise that has nothing to do with affiliate programs, but the way we communicate, the way you find your ads, I know that there’s something they could take away from it and bring back into their business.
Mike: Sure.
Andrew: So being business snobs will never work. You’ve got to be curious and open to as much information as possible. As much information that’s real, that’s solid, that’s not made up.
Mike: Right. I agree.
Andrew: That’s my little bit of feedback there. Any other way for people to connect with you? Are you a Twitterer? Are you a Facebooker? Do you want people to add you as a friend or say hello somewhere?
Mike: They can contact me at Mike@adbeat.com. I’m on LinkedIn. Anybody’s welcome to add me on LinkedIn.
Andrew: Okay. How about this? One action step that people who are listening to this program can take? They listened to you all this way, they want to go do something with what they’ve learned, what’s the first thing they can do?
Mike: Specifically for affiliate marketing?
Andrew: Sure. Affiliate marketing.
Mike: I just have to come back to understanding what offers are out there. Go to OfferVault.com, and you’ll get a very clear understanding of what’s out there, what the payouts are, and what sorts of traffic you can drive to different types of offers. If you’re not familiar with it, it’s going to open your eyes up to all these different offers and different types of offers at all sorts of payout levels. So I would say start there.
Andrew: Well, thanks for doing the interview Mike. It’s great to finally get to see you.
Mike: Thank you for having me on, and thanks for everything you’re doing with your site. I absolutely love the site.
Andrew: You’re a fan. How can I do better work for you? You’re the kind of person who I want to have in my audience. You’re a software developer who also has an understanding of revenue and profits. Most people go one way or the other it seems. So how do I do a better job for you? What have you listened to me do or not do where you say, “God Andrew, come one, you’re so missing it.”
Mike: I personally love when you dive deep and ask all these questions that people think are trivial. I don’t think any of it’s trivial. I think if you can understand everything somebody did . . . I think too many people gloss over the real work and they just say, “Oh well, I did this. I did this.” And it’s all way too high level. I think what you do there is absolutely fantastic. I’ve gotten a lot out of when you have on an attorney or somebody who’s a little bit different. So I think loosen it up every now and then and not just having on entrepreneurs only can be good because I’m looking to learn about all these other areas of business. I knew you were going to ask this question because you always ask it. Honestly I think you are doing such an amazing job, so just keep it up.
Andrew: I appreciate it. I keep looking for negative feedback. I should be much more open to what’s working. I appreciate you saying that. Thanks.
Mike: Sure.
Andrew: All right guys. Thank you all for watching. Come back to the website and give me some good feedback too. Bye.
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